Tradeweb Earnings: Increasing Market Share Supports Solid Revenue Growth

Wide-moat-rated Tradeweb Markets TW reported solid second-quarter results roughly in line with our expectations, as increasing market share in interest-rate swaps and U.S. investment-grade bonds was offset by lower trading volume in mortgage and high-yield bonds. Revenue increased 4.5% year over year but declined 5.7% from a strong first quarter, to $310.6 million. Net income increased 24.9% from last year to $101.9 million, as Tradeweb benefited from higher interest rates on its substantial $1.4 billion cash hoard. As we incorporate these results, we do not plan to materially alter our $84 fair value estimate.

Tradeweb’s rate-based trading products—its largest segment—had another quarter of solid performance, with revenue rising 5.6% from last year. Average daily volume for long-tenor interest swaps rose 23.7% year over year. The increase in volume was driven by better market conditions and market share gains as Tradeweb saw its global interest-rate swap share increase to 16.3% from 15.1% last year (and 15.3% last quarter).

On a less positive note, Tradeweb continued to see more modest results in its other major rate-based categories. Average daily volume for mortgage-backed securities fell 3.1% from last year, as issuance levels in the asset class remain low due to weak mortgage market conditions. While Tradeweb is the market leader in mortgage bond trading, we do not expect much growth from this business until lower interest rates revive refinancing activity and increase housing turnover.

Tradeweb also saw mixed performance in its corporate bond segment, with revenue increasing 0.1% to $84 million, although lower bond trading volume industrywide did play a role in the uninspiring results. The firm’s market share in U.S. high-grade bonds continued to show strong momentum, increasing to 14.9% from 12.9% last year, a record for the firm. On the other hand, Tradeweb’s high-yield market share was flat at 6.2% and remains below its 2021 peak.