Grade: C — Some Red Flags, Investigate
Framework: Exchange/data company analysis + Schilit principles + Beneish M-Score
Data: SEC EDGAR 10-K (Filed 2026-02-05) + Yahoo Finance
Auditor: Ernst & Young LLP — Unqualified opinion (1 Critical Audit Matter)
One-line verdict: Intercontinental Exchange is a capital markets infrastructure company — exchanges, fixed income data, and mortgage technology — that delivered strong results: net income of $3.32B (+20%), diluted EPS of $5.77 (+21%), and adjusted EPS of $6.95 (+14%). Total revenues less transaction-based expenses grew to $9.93B (+7%). CFFO/NI of 1.41 confirms cash-backed earnings, and the M-Score of -2.44 clears the manipulation threshold. But the balance sheet carries the massive legacy of the $11.7B Black Knight acquisition: goodwill of $30.6B and net intangible assets of $15.4B — combined $46.0B representing 159% of equity. Cash of $3.6B covers only 18% of $20.3B in debt. Other assets grew 89.1% vs revenue growth of 7.5%, a notable divergence. ICE is not a traditional financial institution — it is an exchange and data monopoly — but its acquisition-driven balance sheet demands the same goodwill scrutiny as any serial acquirer.
| Metric | Result |
|---|---|
| Red Flags (Engine) | **2** (C4: cash/debt 18%, D1: goodwill 159% of equity) |
| Watch Items | **1** (D3: other assets grew 89% vs revenue 7.5%) |
| Checks Completed | **17/18** (1 N/A) |
| Beneish M-Score | **-2.44** (clean; threshold -2.22) |
| F-Score (Fraud Probability) | **1.99** (0.74% probability) |
| Altman Z-Score | **N/A** (not applicable to exchange/financial infrastructure companies) |
| Auditor | Ernst & Young LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
Note on classification: ICE is classified as "Financial Data & Stock Exchanges" within Financial Services. While not a bank or insurer, it operates critical financial infrastructure. The Altman Z-Score is not applicable as the model was not designed for exchange/data companies. The M-Score is computed but should be interpreted with caution given ICE's unique revenue model (transaction-based exchange fees, recurring data subscriptions, and mortgage technology).
Revenue: Three Pillars of Growth
Per the 10-K, ICE operates three segments:
| Segment | 2025 Rev (less TBE) | 2024 Rev (less TBE) | 2023 Rev (less TBE) | Growth '25 |
|---|---|---|---|---|
| Exchanges | $5,411M | $4,959M | $4,440M | +9% |
| Fixed Income & Data Services | $2,419M | $2,298M | $2,231M | +5% |
| Mortgage Technology | $2,101M | $2,022M | $1,317M | +4% |
| **Total** | **$9,931M** | **$9,279M** | **$7,988M** | **+7%** |
The Exchanges segment is the largest and fastest-growing, accounting for 55% of consolidated revenues (less transaction-based expenses). It includes energy futures and options, agricultural and metals futures, equity index derivatives, and CDS clearing.
The Mortgage Technology segment ($2.1B) is the Black Knight legacy business — ICE acquired Black Knight in September 2023 for approximately $11.7B. This segment is growing slowly (+4%) as the mortgage market remains constrained by high interest rates.
Per the 10-K summary:
| Metric | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|
| Total Revenues | $9,903M | $11,761M | **$12,640M** | +7% |
| Net Income (to ICE) | $2,368M | $2,754M | **$3,315M** | +20% |
| Adjusted Net Income | $3,177M | $3,497M | **$3,993M** | +14% |
| EPS (diluted) | $4.19 | $4.78 | **$5.77** | +21% |
| Adjusted EPS (diluted) | $5.62 | $6.07 | **$6.95** | +14% |
The gap between reported net income growth (+20%) and adjusted net income growth (+14%) reflects the declining impact of Black Knight acquisition-related amortization charges.
The Black Knight Burden: $46B in Intangibles
Per the 10-K: "As of December 31, 2025, we had goodwill of $30.6 billion and net other intangible assets of $15.4 billion relating to our acquisitions, including our acquisition of Black Knight in September 2023."
Combined goodwill and intangibles of $46.0B are 159% of total equity ($28.9B). This means if even 40% of these intangibles were impaired, total equity would be wiped out.
The filing warns: "We may in the future be required to recognize impairments of our goodwill, other intangible assets or investments."
Debt totals approximately $20.3B, with total assets of $136.9B. Cash of $3.6B (up from $1.4B in 2024, partially due to commercial paper of $1.0B). Debt/EBITDA of 3.0x is manageable, but the absolute debt level combined with the intangible-heavy balance sheet creates concentration risk.
Cash Flow: Strong and Consistent
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| CFFO | $3,554M | $3,542M | $4,609M | **$4,662M** |
| FCF | $3,072M | $3,053M | $3,857M | **$3,871M** |
| CFFO/NI | 2.46 | 1.50 | 1.67 | **1.41** |
CFFO has been consistently above net income for four years, confirming cash-backed earnings. FCF of $3.9B provides strong cash generation to service debt and fund dividends. The declining CFFO/NI ratio (from 2.46 to 1.41) reflects net income growing faster than cash flow as acquisition-related amortization rolls off.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 45 days, -1 day YoY |
| A2 | AR vs Revenue Growth | PASS | AR growth 4.2% vs revenue 7.5% |
| A3 | Revenue vs CFFO | PASS | Revenue +7.5%, CFFO +1.1% |
| B1 | Inventory vs COGS | PASS | No material inventory |
| B2 | CapEx vs Revenue | PASS | CapEx growth 5.2% vs revenue 7.5% |
| B3 | SG&A Ratio | PASS | SG&A/Gross Profit = 7.6% |
| B4 | Gross Margin | PASS | Gross margin 56.2%, +0.7pp |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.41. Cash-backed |
| C2 | Free Cash Flow | PASS | FCF $3.9B, FCF/NI = 1.17 |
| C3 | Accruals Ratio | PASS | -1.0%. Low |
| C4 | Cash vs Debt | **FAIL** | Cash $3.6B covers 18% of $20.3B debt |
| D1 | Goodwill + Intangibles | **FAIL** | $46.0B = 159% of equity |
| D2 | Leverage | PASS | Debt/EBITDA = 3.0x |
| D3 | Soft Asset Growth | WATCH | Other assets grew 89.1% vs revenue 7.5% |
| D4 | Asset Impairment | N/A | No write-off data |
| E1 | Serial Acquirer FCF | PASS | FCF positive |
| E2 | Goodwill Surge | PASS | Goodwill change -2% YoY |
| F1 | Beneish M-Score | PASS | M-Score = -2.44 (< -2.22) |
Note on D3: The 89.1% growth in other assets deserves investigation. This could reflect clearing margin deposits, investments, or newly acquired digital asset positions. Per the filing, ICE has an investment in "Blockratize, Inc., doing business as Polymarket" and a total carrying value of $1.6B in equity investments.
Auditor Critical Audit Matter
Ernst & Young flagged one Critical Audit Matter (specific detail per the 10-K filing). For an exchange and data company with $30.6B in goodwill, the CAM almost certainly relates to goodwill impairment testing — the annual assessment of whether the carrying value of acquired businesses exceeds their fair value.
Key Risks
1. Mortgage Technology Recovery
The Mortgage Technology segment ($2.1B revenue) was acquired via Black Knight for $11.7B. This segment's growth (+4%) is constrained by the high interest rate environment suppressing mortgage origination volumes. If rates remain elevated, the segment may underperform the assumptions embedded in the goodwill, creating impairment risk.
2. Regulatory and Antitrust Risk
Per the filing, ICE's ownership of NYSE, multiple commodity exchanges, and dominant mortgage technology platforms creates antitrust and regulatory concentration concerns. Any forced divestitures or fee caps would directly impact revenue.
3. Digital Asset Exposure
The filing mentions an investment in Polymarket and ownership of a "digital currency custody business." While small relative to total assets, digital asset volatility could create unexpected losses.
4. Goodwill Impairment Risk
At $30.6B (106% of equity by itself), goodwill impairment would have an outsized impact on the equity base. The mortgage technology segment is the most vulnerable to impairment given the gap between purchase price and current growth trajectory.
Key Financial Trends (4-Year)
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $9.6B | $9.9B | $11.8B | $12.6B |
| Net Income | $1.4B | $2.4B | $2.8B | $3.3B |
| EPS (diluted) | -- | $4.19 | $4.78 | $5.77 |
| Net Margin | 15.0% | 23.9% | 23.4% | 26.2% |
| ROE | 6.4% | 9.2% | 10.0% | 11.5% |
| CFFO | $3.6B | $3.5B | $4.6B | $4.7B |
| FCF | $3.1B | $3.1B | $3.9B | $3.9B |
| Total Debt | $18.4B | $22.9B | $20.7B | $20.3B |
Summary
Grade: C. Some red flags, investigate. A dominant exchange franchise burdened by acquisition-driven goodwill concentration.
ICE's core business is exceptional: dominant market positions in energy futures, equity derivatives, and fixed income data, with an SG&A ratio of 7.6%, M-Score of -2.44 (clean), and consistently cash-backed earnings. The exchange business is a natural monopoly with high barriers to entry.
The Altman Z-Score is not applicable to exchange and financial infrastructure companies — the model was designed for manufacturing firms.
The concerns are concentrated in the balance sheet:
ICE is not a company with earnings manipulation concerns. It is a company whose exceptional operating franchise is leveraged through acquisition debt and intangible assets. The quality of the exchange business supports the debt; the question is whether the mortgage technology business will catch up.
**Disclaimer**: This report is based on Intercontinental Exchange's fiscal year 2025 10-K filed with the SEC on February 5, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade C means the company has some red flags that warrant investigation.