How Electronic Trading Has Made Tradeweb a Lot of Money

When you're buying 100 shares of stock, the difference between a decent trade execution and a perfect one is a few dollars. But for institutional investors making billion-dollar trades, there's a lot more on the line. The importance of taking maximum advantage of the latest technology to facilitate trades has given Tradeweb Markets (NASDAQ: TW) an addressable market to serve, and as you learned in the first article on Tradeweb here, Tradeweb has captured that market admirably.

Helping Wall Street make money only works out well for Tradeweb, though, if Tradeweb is able to make money from Wall Street. This article will look further at how this fintech stock has managed to show the kind of financial performance that many other companies in the industry would love to have.

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The virtues of Tradeweb's balanced business model

Tradeweb gets paid in a variety of different ways. About three-quarters of its revenue is variable, relying on the volume of trades its customers make and the fees that Tradeweb is able to negotiate with those customers. By far, Tradeweb makes the most money from its institutional clients, and its access to the interest rate and credit markets is what those clients want the most from Tradeweb.

However, a quarter of Tradeweb's revenue comes from fixed arrangements. Some of the trading arrangements the company makes involve fixed revenue, and the market data that Tradeweb provides also produces a reliable stream of recurring revenue on which the company can depend. In addition, Tradeweb's roughly 60/40 split between U.S. and international sales adds some geographical diversity to its mix of business.

A profitable combination of growth factors

Increased penetration of its markets and rising levels of trading volume overall have fueled considerable growth in Tradeweb's business over the past decade. Between 2016 and 2024, Tradeweb saw its revenue rise at an average annual rate exceeding 16%. Those gains accelerated in 2025, with the company posting 21% year-over-year gains through the first nine months of the year. Over that stretch of time, average daily volume has gone from $324 billion to $2.56 trillion.

What's even more impressive is the way that Tradeweb has made its business more efficient over time. Between 2016 and 2024, Tradeweb's net income jumped almost sixfold to $695 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA) has grown at an average 21% annual rate. Those outpaced gains have come largely from adjusted EBITDA margin improvements that have taken the figure from 38.7% 10 years ago to 54.2% for the first nine months of 2025.

Tradeweb is financially strong

Tradeweb's business has generated about $1 billion in free cash flow over the past 12 months, and that has helped it maintain a strong balance sheet with $1.9 billion in cash and cash equivalents. Ample free cash flow leaves the company with plenty of room to pursue a balance capital allocation strategy . Some of that capital goes into acquisitions that help grow the business, while some gets invested internally to produce organic growth.

That still leaves ample money left over to return to shareholders. Tradeweb's dividend yield of 0.5% is nothing to write home about, but the company has made modest stock repurchases every year since 2021. And with $180 million in available future repurchases still available in its current stock buyback program, Tradeweb foresees plenty of chances to send more money back to shareholders as smart opportunities arise.

What's ahead for Tradeweb?

Despite Tradeweb's financial success, shareholders have been disappointed with the stock's performance recently. Shares are down almost 20% in the past year. Yet Tradeweb's future growth plans are aimed at reversing that trend. The third and final Voyager Portfolio article in this series on Tradeweb will look more closely at its growth prospects.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.