- Goldman Sachs and Morgan Stanley posted standout Q4 2025 results as investment banking and equities trading rebounded sharply.
- M&A advisory fees and elevated market volatility drove big gains, with Goldman setting a record in equity trading and Morgan Stanley reporting a surge in dealmaking revenue.
- Goldman’s refocus on core businesses lifted assets under supervision and wealth/asset-management margins, helping broaden earnings beyond trading.
- Banks cautioned that rising compensation and operating costs, shifting macro conditions, and tougher competition could pressure margins into 2026.
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Recent earnings from Goldman Sachs and Morgan Stanley confirm that the long-awaited resurgence in Wall Street’s investment banking and trading businesses has materialized in Q4 2025. Goldman posted net income of US$4.62B, up ~12% YoY, while MS skillfully leveraged a 47% gain in dealmaking revenues to deliver US$4.4B in earnings, up ~18% YoY.
The key revenue drivers were M&A advisory and equity trading. Goldman saw its advisory business rise 41% YoY, pushing dealmaking revenues to approximately US$2.57B in the quarter, while equity trading fees surged roughly 25% to ~US$4.3B. Morgan Stanley also posted strong gains: equities trading rose 10% in Q4 and 28% for the full year, with investment banking revenue surging 44-47%.
Goldman’s strategy to exit certain consumer businesses (e.g. the Apple Card) and consolidate its core strengths (asset & wealth management, institutional securities) has paid off. Its assets under supervision rose from US$3.14T to ~US$3.61T, and pre-tax margins in asset & wealth management reached ~25%, with medium-term pacing toward 30%.
Macro environment has been supportive: easing regulatory pressures under the current U.S. administration, expectation of lower interest rates, corporate deal pipelines re-opening, and high market volatility have all fueled both advisory and trading income. However, banks are mindful of rising compensation and operating costs, potential regulatory shifts, and uneven deal pacing across sectors and competitors.
Strategic implications include stronger competition among banks for top M&A mandates, leverage of fee-based businesses (asset management / advisory) to stabilize revenue, and a renewed premium on trading talent and infrastructure in equities. Risk management must also account for price overshooting, potential regulatory reversal, and macroeconomic shocks. 2026 is viewed with optimism, but not without caveats.
Open questions remain: Are the current deal pipelines broad-based or concentrated in specific industries (e.g., tech/AI)? Will trading revenues hold as volatility normalizes? How will regulatory and tax policy evolve under changing political pressures? What extent of cost inflation (compensation, compliance, tech) will eat into margins?
Supporting Notes
- Goldman Sachs Q4 2025 net income was US$4.62 billion, or US$14.01 per share—up 12% vs Q4 2024. Morgan Stanley’s was US$4.4 billion, up ~18% YoY.
- Goldman’s investment banking fees rose ~25% YoY to US$2.57 billion in Q4; MS saw ~47% YoY increase in dealmaking revenues.
- Goldman broke its own record for equity trading revenues in Q4: ~US$4.3B, a ~25% YoY increase.
- M&A volumes globally rose to ~US$5.1 trillion in 2025, up ~42% from 2024; Goldman advised on ~US$1.48 trillion in deals.
- Goldman’s wealth & asset management unit posted pre-tax margins in 2025 of ~25%, aiming for ~30% medium-term; its assets under supervision climbed to ~US$3.61T.
- Cost pressures: Goldman’s operating expenses rose ~18% to US$9.72B in the quarter; Morgan Stanley’s compensation costs totaled ~US$7.44B in Q3.