Tradeweb Markets

Tradeweb reported solid second-quarter earnings as the firm continues to benefit from strong trading volume growth across its business. Net revenue rose 9% from last year, or 8.3% on a constant currency basis, to $558.9 million. Meanwhile, adjusted net income rose 10.7% to 228.1 million.

Why it matters: Tradeweb's shares are trading sharply lower July 30. While some of the pressure could potentially be attributed to pricing issues in corporate bond trading, we think the news that Intercontinental Exchange will acquire MarketAxess, Tradeweb's largest competitor, is likely the major driver. Tradeweb has been able to benefit from MarketAxess' competitive weakness, steadily gaining market share in corporate bond trading, MarketAxess' core market. Once it becomes part of the exchange giant, a better resourced MarketAxess could prove a more effective competitive threat. That said, we think the market is overreacting here. Neither MarketAxess nor Intercontinental have a meaningful existing presence in treasury or interest rate swap trading, meaning that Tradeweb will still benefit from having a broader product set than its rival.

The bottom line: We are increasing our fair value estimate for wide-moat-rated Tradeweb to $127 per share from $123. After the market's negative reaction July 30, we see the shares as undervalued at the current price as we think the market is underappreciating the long-term growth potential of Tradeweb. The bulk of the upgrade comes from the time value of money since our last update. That said, we are increasing our near-term revenue growth expectations for Tradeweb as its interest rate products segment continues to produce excellent results. Interest rate product revenue rose 9.5% on a constant currency basis and provided the firm with more than 60% of its annual revenue growth. Once again, interest rate swaps were the star performer with the firm setting a new market share record at an estimated 24.1% of global interest rate swap volume.

Tradeweb's credit product segment saw more mixed performance than its interest rate product segment, with total revenue increasing 2.7% on a constant currency basis from last year. Similar to its rival, MarketAxess, Tradeweb is facing headwinds from falling average pricing, though the firm's trading volume did perform better than that of its peers. Average cash credit pricing fell 11.4% to $114.03 per million as an industrywide shift toward more portfolio trading, which carries lower average fees, pressured the trading network's revenue. Weaker pricing was offset by higher volume, thanks to Tradeweb's market share gains. Tradeweb's US investment-grade and high-yield market share were 19% and 8.5%, respectively, up from 18% and 8.2% last year. All in all, we expect pricing pressure to diminish overtime, but we do not expect Tradeweb's average credit fee per million to recover to its old levels as the shift toward portfolio trading is likely permanent.

Along with earnings, Tradeweb left its 2026 guidance unchanged, though the firm did say that it expects to trend toward the upper range of its $1.10 billion to $1.16 billion adjusted operating expense guidance. This makes sense to us, and the firm's expectations for 2026 are in line with our own. This comes with the important caveat that Tradeweb gets the majority of revenue from transactional sources, and we expect the firm to scale its investment spending based on the level of opportunity in front of it.

We are increasing our fair value estimate for Tradeweb to $127 per share from $123, which is equivalent to 36.29 times our 2026 earnings estimate, inclusive of the depreciation expenses associated with pushdown accounting from Refinitiv. This translates to a 2026 enterprise value/EBITDA ratio of 17.98 times. The bulk of the increase comes from the time value of money since our last update—$1 of the positive adjustment comes from higher short-term revenue growth projections, partially offset by higher expense growth expectations.

Our fair value estimate assumes a 7.5% cost of equity. Our fair value estimate is sensitive to projections of long-term bond trading volume and operating margin expectations. Our model does not include any anticipated acquisitions, though we note that Tradeweb has built up a substantial amount of cash and equivalents on its balance sheet, over $2 billion as of the end of December 2025, which is far more than what it needs to finance its day-to-day operations.

We expect that Tradeweb will continue to benefit from the transition to electronic trading and to take market share from traditional voice-based trading. This will help Tradeweb grow its revenue at an average annual rate of 8.9% from 2025-30, though we expect this growth to be front-loaded thanks to volatile market conditions driving high trading volume across the industry. We anticipate that this growth will primarily come from its interest-rate and credit complexes, which generate most of Tradeweb's revenue. Most of this growth should come from higher trading volume, not price increases, as we expect the company’s price schedules to remain mostly unchanged.

We project that Tradeweb will continue its trend toward greater transactional volume, as per-transaction trading fees grow faster than the company’s fixed-fee and data revenue. Tradeweb's growth has increasingly come from additional trading volume from existing clients, as opposed to finding new clients, which should cause transactional revenue growth to outpace its fixed fee revenue.

On the expense side, we see operating expenses growing at around an average annual rate of 6.54% from 2025-30. However, this includes our expectation that the company’s depreciation and amortization will increase only modestly over the next five years as the impact of Refinitiv’s pushdown accounting into Tradeweb is worked through. We project that operating expenses excluding depreciation and amortization will increase at a 8% average annual rate over the same period. As the company’s revenue growth outpaces its costs, we expect Tradeweb’s operating margin to expand to 46.9% by 2030 on an unadjusted basis.

In our view, Tradeweb has achieved a wide Morningstar economic moat rating as a result of its position as a leading platform for the electronic trading of a wide variety of fixed-income securities. Tradeweb serves the interdealer, institutional, and retail fixed-income markets through multiple trading protocols, each designed to meet different market needs, giving it a broader scope than its competitors. Fixed-income markets globally have been trending toward increased electronic trading, providing the company with substantial revenue growth, as the implicit and explicit cost reductions offered through its trading protocols pull more trading volume to its platform. This tailwind along with the company’s existing network and liquidity pools has provided it with impressive returns on invested capital, expanding margins and a long roadmap for future growth, as many of the fixed-income products that trade on its platform are still primarily voice-traded. As Tradeweb’s trading volume increases, the additional revenue comes with a higher incremental operating margin, as much of the cost structure of a trading network is in the fixed upfront costs, which the company can scale against as revenue grows.

Tradeweb’s competitive position is defended by powerful network effects, as the company has built an impressive network of dealers, institutional clients, and retail volume on its platform. As more buyers and sellers use a trading platform, liquidity improves, making the platform a more effective trading tool. More trading volume generally leads to better liquidity, allowing buyers and sellers to enter and exit their positions with less impact on the price of the asset, reducing their implicit trading costs. Additionally, having more users makes finding counterparties easier, reducing trading time and explicit costs as well.

Depending on the asset being traded, the benefit of receiving a better price on a trade is often greater than any savings that could be achieved by using another trading protocol with lower transaction fees. For example, for a 3% corporate bond with five years to maturity executed with a yield to maturity of 2.8%, even a 1-basis-point difference in yield is worth 4.51 cents, or $451 per million, several times larger than Tradeweb’s average credit bond fee capture rate of $148 in 2024. Tradeweb’s fee schedules are designed to match fee capture with average spread, ensuring that the cost-saving potential of its platform remains high relative to the fees it charges. As a result, there is a tendency for liquidity to pool at a small number of trading systems as higher trading volume leads to lower costs, which in turn leads to even higher trading volume because trading efficiency draws in additional users.

Unlike some other asset classes, explicit transaction costs in fixed income are still a major consideration as many transactions, particularly those done through voice protocols, require a meaningful time commitment from experienced and well-compensated fixed-income traders. Many of the trading protocols designed by Tradeweb and its competitors to improve explicit trading costs, such as portfolio trading and central limit order books, require participation from liquidity providers to function effectively. Acquiring this participation often requires a preexisting user base to attract liquidity providers, making it difficult for new firms to provide this functionality.

Fixed-income trading involves client customers, who are the end investors of the securities themselves, and broker/dealer customers who act as market makers and liquidity providers for fixed-income markets. While there are trading networks that focus on specific parts of the market, in order to address the full market both types of customers need to be drawn onto a platform. Tradeweb has been highly successful in attracting liquidity providers to its network. With more than 2,500 active clients, including 200 liquidity providers, spread out across its product lines, the firm has built a large network that supports smooth trading on its platform, keeping implicit costs low. The company’s network is international, with 38% of its revenue coming from international clients and its international revenue growing faster than its domestic business. This international presence serves multiple purposes, as it pulls in foreign liquidity into its core markets while also creating the opportunity for incremental trading volume from its existing US institutional clients in international securities.

The firm also uses its strong network in existing products to find synergistic benefits in new markets. One of the early selling features of its corporate bond platform was the ability to easily integrate net interest rate hedging with the initial trade, which normally requires a separate transaction. The company’s ability to offer this feature efficiently is supported by its existing strength in the interest-rate swap and Treasury markets, where the company had an estimated market share of 24.1% and 22.5%, respectively, in the second quarter of 2025. This synergy between Tradeweb’s rate and credit product lines is one of the elements that has allowed it to grow its share of the US investment-grade bond market so quickly and highlights that there are competitive advantages to Tradeweb’s breadth of trading products.

In our view, Tradeweb has a wide economic moat as its competitive position is defended by strong network effects. Tradeweb’s moat is supported by secular growth trends as bond and derivative markets move away from voice-negotiated trading. As a result of its dominant position in the electronic bond and derivative trading industry, Tradeweb has steadily taken market share, leading to growing revenue and expanding margins. Many of Tradeweb’s markets are still early in this transition process, creating plenty of opportunity for the company to continue to take market share and drive strong returns on invested capital.

Tradeweb benefits from the secular transition away from voice negotiations toward its electronic trading platforms in fixed-income markets. If this trend accelerates, Tradeweb would enjoy rapid secular volume growth.

Tradeweb’s business features upfront costs and low variable expenses, operating margin expansion could exceed expectations as its revenue base grows.

US corporate bond trading volume industry wide has increased significantly in recent years. If this continues, Tradeweb's credit segment could see faster-than-expected growth.

Tradeweb’s revenue base has become increasingly transactional, as growth in its transaction fees outpaces its fixed fees, which could create more room for volatility in the firm’s results.

Tradeweb may not be able to generate enough growth to justify the premium pricing of its shares.

Tradeweb’s counterparties have incentives to aid new competitors in Tradeweb’s market, which could lead to additional competitors entering the market.