Goldman Sachs Earnings: Investment Banking Recovery Drives Strong Results

Key Morningstar Metrics for Goldman Sachs

• Fair Value Estimate: $630.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

Goldman Sachs GS reported third-quarter results, highlighted by a sharp acceleration in investment banking revenue as capital markets thaw. Despite quarterly outperformance, shares fell 2%-3% after the release, perhaps attributable to slowing equity trading and fixed-income financing growth.

Why it matters: There’s a lot to like about the narrative at Goldman Sachs, and we saw little in quarterly results (at least qualitatively) that should undermine investor optimism.

• The bank continues to fire across all cylinders, generating 42% growth in investment banking revenues, 11% growth in trading and financing, and 17% growth in asset and wealth management from the year-ago period as investor risk appetite has largely recovered from first-quarter lows.
• As we see it, the current environment is a goldilocks zone for Goldman Sachs, with strong capital markets activity, high but manageable volatility, high asset prices, and the prospect of declining interest rates. Around peak earnings levels, it’s challenging for us to justify a 2.2 times price/book multiple, particularly given our expectation for slowing 2026 GDP growth.

The bottom line: Considering stronger-than-expected earnings, a better long-term outlook for investment banking, and slightly higher forecast leverage, we’ve raised our fair value estimate to $630 per share from $570 for the wide-moat bank.

• We now expect the firm to generate a 3.3% compound annual growth rate in net revenue and 4.9% in earnings per share, incrementally higher than our prior respective 3.0% and 4.7% estimates.
• Much of the uptick in growth is traced to a more constructive investment banking outlook, with our forecasts now calling for geometric mean industry growth of 2.5% over the next decade, from 1.8% previously, underpinned by a stronger M&A advisory outlook with more than $2 trillion in private equity dry powder.