Cboe's Next Earnings: Expectations vs. Reality on Fee Capture and Volatility

The market has already bought the rumor. Cboe's stock has rallied over 10% in the past month, a clear bet on a continuation of its recent strong performance. This optimism is grounded in a record quarterly result and raised full-year guidance, which analysts have used to justify price target hikes into the high $280s. The consensus narrative is bullish: double-digit revenue growth across all business lines, supported by a data-driven revenue stream and ongoing trading volume strength, suggests the company is executing well on its existing platform.

Yet, even within this bullish camp, a subtle caution is emerging. The analyst price target raises have been accompanied by a slight reduction in the future P/E multiple used in valuations. This is a key signal. It means that while firms are lifting their absolute price targets, they are also dialing back their growth assumptions for the longer term. The market is pricing in a high-quality company, but perhaps not one with runaway, accelerating growth.

The core expectation gap for the upcoming earnings report hinges on one critical metric: fee capture in volatile multi-listed options. Management's recent guidance around this segment showed a reported revenue capture decline of 21% quarter-over-quarter. Bearish analysts have focused on this, interpreting it as a potential trade-off between volume and pricing power that could cap margin expansion. The market's current optimism may be overlooking this specific headwind.

So, the setup is clear. The stock's recent run reflects high expectations for sustained momentum. The critical question is whether reality will meet or exceed that priced-in optimism. The bar is set high, and the whisper number for fee capture in a volatile market will be the first major test of whether the consensus narrative holds.

The Core Expectation Gap: Fee Capture Under the Microscope

The market's optimism is built on volume growth, but the critical expectation gap lies in how that growth translates to fees. For volatile multi-listed options, the data shows a clear tension between strong volume and potential fee compression.

On one side, the volume story is robust. In December, multi-listed options volume surged 24.2% year-over-year. This is the positive signal priced into the stock-a record-breaking year for trading activity that should drive revenue. On the other side, the fee capture projection is a red flag. Management's guidance for the fourth quarter is for a per-contract revenue (RPC) of $0.055. That level is a sequential decline from the $0.075 seen in November and a significant drop from the $0.075 level reported for December 2025.

This creates a precise and troubling gap. The market has baked in the volume strength, but the guidance implies that fee capture will compress further. The whisper number for Q4 is a sequential decline in RPC, which could disappoint if the drop is steeper than expected. The setup is classic "sell the news" risk: strong volume growth is already celebrated, but the expectation is for the revenue per trade to fall. If the actual Q4 RPC lands at or near the $0.055 projection, it will confirm the fee compression narrative and likely trigger a re-rating, regardless of the overall volume numbers. The expectation gap here is the disconnect between volume momentum and pricing power.

The Volatility Factor: A November Pattern and Its Implications

The market's typical November behavior sets a tricky stage for Cboe's upcoming report. Historically, this month has been a powerful force for equities, with the S&P 500 rallying an average of 6.86%. At the same time, the VIX volatility index has collapsed by 30.31%. This pattern is not a one-off; it's a recurring event that reshapes the options market landscape.

The implications for Cboe are direct and potentially negative. A collapsing VIX signals a market environment where investors are less focused on hedging and more on directional bets. When volatility is low, the demand for options as protection wanes, which can pressure trading fees. The recent historical parallel is stark: in 2020, the S&P 500 surged nearly 11% in November while the VIX cratered by 41%. That year, the market's reaction to a major election was one of complacency, not fear. The options market, in particular, experienced a "wet blanket" effect, with the cost of tail-risk protection options declining sharply after an initial spike.

Cboe's fourth-quarter earnings, scheduled for release in February, will be the first major data point after this typical November volatility event. The market's expectation is for a continuation of the strong volume growth seen in December. However, the historical November pattern suggests that this volume may be driven more by directional moves than by the hedging activity that often supports higher fee capture. If the post-November rally in stocks is sustained but volatility remains low, Cboe could face a scenario where volume is high but the per-trade revenue generated from options contracts is under pressure.

This context makes the actual fee capture data from the fourth quarter even more critical. The market has priced in volume strength, but the November pattern hints at a potential trade-off between that volume and the pricing power needed to convert it into top-line growth. The whisper number for the report now includes not just the raw RPC figure, but also the broader market environment in which it was achieved. A strong volume print in a low-volatility context may not be enough to satisfy expectations if it confirms the fee compression narrative.

Catalysts and Risks: What to Watch for the Thesis

The upcoming earnings report is a pure test of expectations versus reality. The market has priced in a strong volume story, but the thesis hinges on whether that volume translates into the right kind of revenue. The primary catalyst is the actual fourth-quarter revenue per contract (RPC) and net revenue capture numbers, especially for multi-listed options. Management has already set a clear benchmark with its guidance for a per-contract revenue of $0.055. If the print meets or beats that projection, it confirms the fee compression narrative is contained. If it misses, it validates the bearish view that pricing power is eroding, and the stock could face a sharp re-rating despite high volumes.

A key risk is a guidance reset for 2026 that fails to raise the bar. The bullish narrative is built on raised full-year 2025 guidance and record results. If management provides 2026 outlook that is merely steady or modestly raised, it could be perceived as "sandbagging." In a market that has already bought the rumor of continued acceleration, a lack of optimism from the source could trigger a classic "sell the news" reaction. The whisper number for the call is for a continuation of the current trajectory; a guidance reset that underwhelms would break that expectation.

On the positive side, watch for commentary on the Data Vantage business. This segment has been a bright spot, with about 11% year-over-year revenue growth. Analysts have flagged this as a positive surprise that supports higher expectations for recurring, data-driven revenue. Strong commentary here could help offset concerns in the trading business and reinforce the premium valuation story.

The bottom line is that the report will confirm or break the current setup. The stock's rally reflects high expectations for sustained momentum. The catalyst is the Q4 RPC figure against the $0.055 projection. The risk is guidance that fails to raise the bar. And the potential upside is a Data Vantage story that strengthens the recurring revenue thesis. This is a straightforward game of expectations versus the print.