NZX Limited (NZSE: NZX) reported its 1H26 results, which Stonegate Capital Partners believes modestly improve the company's setup. The results reveal that Smart and Wealth Technologies are increasingly carrying the growth story, while Capital Markets awaits normalization in issuance and trading. The 140 basis points year-over-year margin decline to 35.6% appears to reflect QuayStreet transition costs and investment rather than underlying deterioration, with 2H26 improvement expected despite higher Smart marketing ahead of the Q4 KiwiSaver relaunch.
Smart FUM rose 28.5% year-over-year to $18.0 billion, with operating earnings up 11%. Wealth Technology FUA reached $21.1 billion, and ARR increased 15% to $13.7 million. Contracted migrations imply ARR can reach approximately $18.7 million, giving investors better visibility into medium-term recurring growth. This growth is crucial as it underscores the potential of these segments to offset the ongoing weakness in Capital Markets.
The margin pressure is seen as transitional rather than structural. Management attributed the decline primarily to QuayStreet transition costs and investment, expecting improvement in 2H26 as those costs roll off. This suggests that current profitability understates the earnings potential of the growing Smart and Wealth businesses. The medium-term outlook for Wealth Technologies is particularly clear, with contracted migrations supporting ARR growth, though elevated capital expenditure and migration timing remain important factors through 2027.
Capital Markets remains the swing factor, while guidance provides near-term downside support. Primary issuance and trading activity remain subdued, but management sees more early-stage listing interest and several IPO candidates waiting for better conditions. Despite this softness, NZX maintained FY26 EBITDA guidance of $53.0 million to $58.5 million and is tracking toward the midpoint. This leaves a recovery in issuance, trading, and derivatives as incremental upside rather than something required to make the current earnings outlook work.
Stonegate Capital Partners' update highlights that NZX's diversified business model is beginning to pay off, with technology-driven segments providing growth and visibility. The company's strategic investments in QuayStreet and the upcoming KiwiSaver relaunch are expected to drive future margin expansion. As management tracks toward the midpoint of FY26 guidance, confidence in the near-term earnings cadence is supported, while the potential for a Capital Markets recovery offers additional upside.
