Goldman Sachs Earnings Call Signals Stronger, Durable Growth

Goldman Sachs Group ((GS)) has held its Q4 earnings call. Read on for the main highlights of the call.

Goldman Sachs Leans Into Record Results and Growth Targets Despite Near-Term Headwinds

Goldman Sachs’ latest earnings call struck a notably upbeat tone, underscored by record 2025 results, stronger returns, and visible progress in reshaping the balance sheet toward more durable earnings. Management highlighted powerful momentum in Global Banking & Markets (GBM) and Asset & Wealth Management (AWM), rising capital returns, and a deep investment banking backlog that supports optimism heading into 2026. At the same time, they were candid about near‑term noise from the Apple Card transition, pressure on net interest margins, elevated non‑compensation costs, and an equity capital markets backdrop that remains well below the 2021 boom. Overall, the bullish message on earnings power, franchise strength, and medium‑term targets clearly overshadowed the identified risks, with the caveat that outcomes still hinge on macro and geopolitical conditions.

Stronger Earnings Power and Returns Across the Franchise

A central theme of the call was the step-up in earnings power and returns. For the fourth quarter, Goldman delivered earnings per share of roughly $14.01, with return on equity (ROE) at 16% and return on tangible equity (RoTE) at 17.1%. For the full year, EPS came in at $51.32, up 27% year over year, while ROE reached 15% and RoTE 16%, representing roughly 230–250 basis points of improvement versus 2024. Management framed these numbers as evidence that the firm has moved to a structurally higher level of profitability after several years of portfolio clean‑up and strategy shifts, and they see further room for improvement as efficiency initiatives take hold and higher‑margin businesses scale.

Sustained Multi-Year Performance Outperformance Since 2020

Beyond the latest quarter, Goldman emphasized the durability of performance gains since 2020. Firm‑wide revenues are up about 60%, EPS has surged 144%, and returns have improved by roughly 500 basis points over that period. Perhaps most striking for investors, total shareholder return exceeded 340% versus peers since 2020, underscoring management’s argument that the transformation strategy and risk derisking are translating into clear value creation. The message to equity holders was that this is not a one‑off earnings spike, but part of a multi‑year trend of improved operating leverage and capital efficiency.

Global Banking & Markets: Record Revenues and Wallet Share Gains

Global Banking & Markets remains the growth engine of the firm. GBM generated record revenues of $41.5 billion in 2025, an 18% year‑on‑year increase. Investment banking fees in the fourth quarter reached $2.6 billion, up 25% from last year, even though the IPO market remains subdued compared with 2021. Goldman highlighted its #1 position in M&A advisory for the 23rd consecutive year and more than $1.6 trillion of announced M&A in 2025—roughly $250 billion ahead of the nearest competitor. The firm also pointed to a 350‑basis‑point gain in GBM wallet share since 2019, reinforcing its claim that scale, global reach, and client connectivity are driving structural share gains rather than cyclical spikes.

Record Equities and Durable FICC Financing Support High Returns

Trading and financing activity, particularly in equities, were another bright spot. Full‑year equities net revenues hit a record $16.5 billion, more than $3 billion above the prior year. In the fourth quarter, equities revenues were $4.3 billion, with equities financing alone at a record $2.1 billion, up 42% year over year. On the fixed income side, the bank emphasized the more “durable” components of FICC and equity financing, which together generated a record $11.4 billion of revenues for the year and delivered returns above 16% for the segment. Management framed this as evidence that the firm has shifted away from highly volatile trading revenues toward more recurring financing and activity-based revenue streams, which should support more stable returns through cycles.

Asset & Wealth Management: Scale, Profitability and Alternatives Momentum

Asset & Wealth Management continues to scale, with assets under supervision reaching a record $3.6 trillion. AWM revenues for 2025 totaled $16.7 billion, supported by a 25% pretax margin and segment ROE around 12.5%, with management noting mid‑teens returns on an adjusted basis. Management and other fees in the fourth quarter hit a record $3.1 billion—up 5% sequentially and 10% year over year—highlighting the growth in fee‑based, recurring income. Alternatives remain a key pillar: Goldman raised a record $115 billion in alternatives in 2025, with alternative AUS reaching $420 billion and associated fees totaling $645 million for the year. While incentive fees grew 24% to $489 million, they still sit below the long‑term $1 billion goal, leaving a clear runway for future upside as more funds season and performance crystallizes.

Ratcheting Up AWM Ambitions with New Medium-Term Targets

Management used the call to significantly raise the bar for AWM’s medium‑ and long‑term contribution to the group. The pretax margin target for AWM was increased to 30%, with an eye toward driving high‑teen returns in the medium term. The firm also set a new long‑term wealth target of 5% annual fee‑based net inflows, signaling a push to deepen relationships with existing clients and win new ones. In alternatives, Goldman now aims to sustain $75–$100 billion of fundraising per year and reach $750 billion of fee‑paying alternative AUS by 2030, supported by a $1 billion annual incentive‑fee target. These goals underscore management’s view that AWM can become a larger, more profitable, and more stable earnings engine alongside GBM.

Capital Strength, Funding Mix, and Shareholder Payouts

The call devoted significant attention to capital and shareholder returns, which remain central to the investment case. Goldman reported a Common Equity Tier 1 ratio of 14.4% on a standardized basis, well above regulatory minimums and giving the firm strategic flexibility. Deposits climbed to $501 billion, making up around 40% of total funding, while bank assets account for 35% of firm assets, reflecting a more balanced and diversified funding profile. The board approved a quarterly dividend increase of $0.50 to $4.50, a 50% year‑over‑year jump, and the firm has $32 billion of remaining share repurchase capacity. In the fourth quarter alone, Goldman returned roughly $4.2 billion to shareholders—$3.0 billion via buybacks and $1.2 billion via dividends—signaling continued confidence in capital generation and valuation.

Risk Profile Transformation and Greater Resilience

Goldman underscored the scale of its balance sheet derisking over recent years. Historical principal investments have been cut from about $64 billion to roughly $6 billion, a reduction of more than 90%. At the same time, more durable revenue streams have doubled, and the firm’s stress capital buffer under CCAR has improved by roughly 320 basis points, reflecting lower capital intensity and a less volatile earnings mix. Management argued that this repositioning makes the firm structurally more resilient to market shocks and better able to sustain higher through‑the‑cycle returns without the same level of risk as in prior cycles.

Robust Backlog and Client Activity Point to 2026 Upside

Another key bullish data point was the health of the investment banking backlog and client engagement. Goldman’s investment banking backlog increased for a seventh consecutive quarter to its highest level in four years, driven primarily by advisory mandates. This pipeline strength, coupled with the bank’s leading share in M&A and growing wallet share in GBM since 2019, supports expectations for accelerating activity into 2026. While the equity capital markets and IPO environment remain below the 2021 peak, management sees growing client dialogue and a steady normalization that, if sustained, could unlock further fee upside.

Apple Card Exit: Accounting Noise Now, Cleaner Base Later

The transition of the Apple Card portfolio was a major source of quarterly noise and a focus of investor questions. The exit created a $2.3 billion revenue reduction in the quarter, which was more than offset by a $2.5 billion reserve release, producing a net positive $0.46 contribution to EPS and a 50‑basis‑point boost to ROE in Q4. Management stressed that the move will reduce future platform revenues but also simplify the business mix and risk profile. However, because it lowers the revenue base, the transaction complicates headline efficiency metrics—pushing the efficiency ratio higher even as underlying costs are controlled—adding short‑term confusion to investors analyzing operating leverage.

NIM Pressure and Deposit Dynamics Weigh on Near-Term Trends

While markets and fee businesses are performing strongly, the deposit and lending businesses face headwinds from a shifting rate environment. The Marcus deposit portfolio experienced net interest margin (NIM) compression that partially offset growth in private banking and lending revenues. Management expects potential further NIM compression in 2026 as the interest-rate cycle evolves, suggesting that rate-sensitive income could drag on overall growth even as other segments expand. The firm’s growing deposit base remains strategically important, but investors were cautioned not to expect the same NIM tailwinds that supported results earlier in the rate hike cycle.

Expense Noise, Operating Leverage, and Investor Scrutiny

Costs and operating leverage were a nuanced part of the discussion. Total operating expenses in 2025 were $37.5 billion, split roughly between compensation ($18.9 billion, including $250 million of severance) and non‑compensation costs ($18.6 billion), the latter up 9% year over year mainly due to increased transaction activity. The compensation ratio, net of provisions, stood at 31.8%. Management argued that underlying efficiency is improving, but Q4 year‑over‑year comparisons were distorted by Apple Card accounting effects and the timing of compensation accruals. This has raised investor concerns about quarter‑to‑quarter operating leverage, even though full‑year metrics show clear progress. Management pointed to the ongoing “One Goldman Sachs 3.0” productivity agenda as a key lever to smooth costs relative to revenues over time.

ECM and Alternatives Still Below Long-Term Aspirations

Despite strong overall performance, management acknowledged that some areas are still lagging long‑term ambitions. Equity capital markets, particularly the IPO business, remain meaningfully below 2021 peak levels and even below long‑term averages, limiting near‑term fee pool upside. In alternatives, while fundraising and assets are growing, the business is still well short of its 2030 aspirations: alternative AUS stands at $420 billion versus a $750 billion fee‑paying target, and full‑year incentive fees of $489 million—though up 24%—are still below the $1 billion annual goal. These gaps were framed not as weaknesses but as sources of future growth if markets normalize and performance continues to attract capital.

Macro and Geopolitical Risks Still Loom Large

Management repeatedly highlighted that the bullish outlook is not immune to external shocks. They flagged risks stemming from changes in global economic growth, policy and regulatory uncertainty, geopolitical tensions, and market volatility. Any sharp deterioration in these areas could quickly slow deal activity, dampen trading volumes, pressure margins, and delay progress toward return targets. The firm believes its more resilient balance sheet and diversified revenue base position it better than in prior cycles, but it stressed that forward performance remains highly sensitive to broader macro and market conditions.

Guidance and Targets Point to Momentum and Higher Structural Returns

Looking ahead, the guidance laid out on the call reinforced the narrative of strong near‑term momentum and ambitious medium‑term goals. For Q4, Goldman reported $13.5 billion of revenue, EPS of $14.01, ROE of 16%, and RoTE of 17.1%. For the full year, EPS of $51.32 was up 27% versus 2024, with ROE of 15% and RoTE of 16%, reflecting a clear step up in profitability. GBM is expected to remain a key driver, with the 2025 revenue base of $41.5 billion (up 18%) and a four‑year‑high advisory backlog supporting further activity. In markets, FICC revenues of $3.1 billion and equities of $4.3 billion in Q4, along with $11.4 billion in more durable FICC and equity financing revenues (now 37% of combined trading revenues and growing at a 17% CAGR since 2021), show a growing foundation of recurring income. In AWM, the firm is guiding toward a 30% pretax margin and high‑teen returns over time, supported by $3.6 trillion of AUS, $16.7 billion in annual revenues, and a long‑term wealth target of 5% fee‑based net inflows per year. Alternatives fundraising is expected in the $75–$100 billion annual range, with a 2030 goal of $750 billion in fee‑paying alternative AUS and $1 billion in annual incentive fees. On capital, the CET1 ratio of 14.4%, a planned effective tax rate of around 20% in 2026 (vs. 21.4% in 2025), and $32 billion of remaining buyback capacity—alongside a higher dividend—underline the firm’s confidence in sustaining elevated capital returns. Management also plans to unveil more concrete productivity metrics under the One Goldman Sachs 3.0 framework over the coming year, signaling continued focus on cost discipline and operating leverage.

In closing, Goldman Sachs’ earnings call painted the picture of a franchise that has emerged from its strategic reshaping with higher and more durable earnings, stronger returns, and a clearer growth roadmap in GBM and AWM. While the Apple Card transition, NIM compression, elevated transaction‑driven costs, and a still‑muted IPO market introduce near‑term noise and some uncertainty, the firm’s capital strength, record backlog, leadership in advisory, and ambitious targets in wealth and alternatives underpin a constructive long‑term outlook. For investors, the key takeaway is that Goldman is leaning into its core strengths, returning substantial capital, and positioning itself to capture upside if macro and market conditions remain supportive, even as it acknowledges that external risks could modulate the pace of progress.