Stonegate Capital Partners has updated its coverage on NZX Limited (NZSE: NZX), following the company's 1H26 results. The report suggests that the results modestly improve the setup, with Smart and Wealth Technologies providing growth 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. Management expects improvement in 2H26 as those costs roll off, despite higher Smart marketing ahead of the Q4 KiwiSaver relaunch. This indicates that current profitability understates the earnings potential of the growing Smart and Wealth businesses.
Wealth Technologies provides the clearest medium-term visibility. Contracted migrations support ARR toward $18.7 million, though elevated capital expenditure and migration timing remain important through 2027. 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. These figures underscore the increasing contribution of these segments to NZX's growth story.
Capital Markets remains the swing factor, with primary issuance and trading activity subdued. However, management is seeing more early-stage listing interest and several IPO candidates waiting for better conditions. Despite this softness, NZX maintained its 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.
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