Morgan Stanley (MS, Financial) reported strong Q2 2025 earnings, with both EPS and revenue exceeding expectations. However, compared to Goldman Sachs (GS, Financial), which saw a 26% year-over-year increase in investment banking revenue, MS's results were less impressive, particularly in investment banking. Despite positive shareholder initiatives like a $20 billion stock repurchase program and a dividend increase to $1.00, MS shares faced pressure.
The Institutional Securities segment, MS's largest revenue driver, posted $7.6 billion in net revenues, an 8.5% increase year-over-year. However, investment banking revenue fell 5% to $1.54 billion, with Advisory revenue dropping 14% to $508 million. This contrasts sharply with GS's 71% Advisory revenue surge to $1.17 billion, attributed to a slowdown in midsize M&A and market uncertainties.
Equity underwriting was a highlight, with revenues climbing 42% to $500 million, boosted by strong follow-on offerings and a rebound in IPOs. MS played a key role as lead underwriter in major deals like CoreWeave’s (CRWV, Financial) $1.5 billion IPO.
In trading, equity trading revenues rose 23% year-over-year to $3.7 billion, driven by strong client activity, especially in Asia. However, GS outperformed with a 36% increase in equities revenue to $4.3 billion, showcasing its stronger market positioning.
Fixed Income, Currency, and Commodities (FICC) trading revenues increased 9% to $2.18 billion, matching GS's performance. This was fueled by high client demand for hedging in macro and FX products amid tariff-related stagflation concerns.
The Wealth Management segment excelled, with net revenues up 14.7% year-over-year to $7.8 billion, beating estimates of $7.35 billion. This was driven by a 16% rise in asset management revenues, record client assets of $6.5 trillion, and $59 billion in net new assets. Transaction revenues also increased 17%, supported by robust client activity across various sectors, particularly in technology and industrial stocks.
Overall, MS delivered solid Q2 results, with strong contributions from Wealth Management and trading. However, GS's exceptional performance in investment banking and equities trading has led investors to favor GS, resulting in capital flows away from MS.
