10-Q: Goldman Sachs Q3 2025 Earnings Soar on Strong Banking

Goldman Sachs reported a significant increase in net earnings and diluted EPS for Q3 2025, driven by strong performance in Global Banking & Markets and Asset & Wealth Management.

Summary

• Net earnings for the third quarter of 2025 were $4.10 billion, a 37.1% increase compared to $2.99 billion in the third quarter of 2024.
• Diluted earnings per common share (EPS) for Q3 2025 was $12.25, up 45.8% from $8.40 in Q3 2024.
• Total net revenues for Q3 2025 reached $15.18 billion, a 19.5% increase from $12.69 billion in Q3 2024.
• Annualized return on average common shareholders equity (ROE) was 14.2% for Q3 2025, compared to 10.4% for Q3 2024.
• The efficiency ratio improved to 62.3% for Q3 2025, down from 65.5% in Q3 2024.
• For the first nine months of 2025, net earnings were $12.56 billion, a 23.5% increase from $10.17 billion in the same period of 2024.
• Diluted EPS for the first nine months of 2025 was $37.33, up 30.3% from $28.64 in the same period of 2024.
• Total net revenues for the first nine months of 2025 were $44.83 billion, a 13.1% increase from $39.64 billion in the same period of 2024.
• Provision for credit losses decreased to $339 million in Q3 2025 from $397 million in Q3 2024, primarily reflecting net provisions related to the credit card portfolio.
• Operating expenses increased by 14% to $9.45 billion in Q3 2025, mainly due to higher compensation and benefits, transaction-based expenses, and litigation provisions.
• Book value per common share was $353.79 as of September 2025, a 5.1% increase from December 2024.
• The firm returned $3.25 billion of capital to common shareholders in Q3 2025, comprising $2.00 billion in common share repurchases and $1.25 billion in common stock dividends.
• The Common Equity Tier 1 (CET1) capital ratio was 14.3% under Standardized Capital Rules and 15.1% under Advanced Capital Rules as of September 2025.

Sentiment

Score: 8

Explanation: The firm delivered strong financial results with significant growth in key profitability metrics, driven by robust performance in its core banking and asset management divisions. Efficiency improved, and capital returns to shareholders were substantial, including an increased dividend. Strategic initiatives and acquisitions are underway to support future growth. While some segments are still in transition and macroeconomic uncertainties and legal risks persist, the overall outlook is positive.

Positives

• Net earnings for Q3 2025 increased significantly by 37.1% year-over-year, demonstrating strong profitability.
• Diluted EPS for Q3 2025 saw a substantial rise of 45.8% year-over-year.
• Total net revenues grew by 19.5% in Q3 2025, with increases across all business segments.
• Investment banking fees surged by 43% in Q3 2025, driven by a significant increase in completed mergers and acquisitions volumes and debt underwriting activity.
• Asset & Wealth Management reported higher management and other fees, along with significantly higher net revenues in Private banking and lending.
• The efficiency ratio improved to 62.3% in Q3 2025 from 65.5% in Q3 2024, indicating better cost management relative to revenue generation.
• The firm increased its quarterly common stock dividend from $3.00 to $4.00 per share, reflecting confidence in future performance and commitment to shareholder returns.
• Strong regulatory capital position with CET1 capital ratios of 14.3% (Standardized) and 15.1% (Advanced) as of September 2025, comfortably above requirements.
• Platform Solutions significantly reduced its pre-tax loss from $559 million in Q3 2024 to $39 million in Q3 2025, showing progress towards its breakeven target.
• Announced a strategic collaboration with T. Rowe Price and an agreement to acquire Industry Ventures, signaling strategic growth initiatives in Asset & Wealth Management.

Negatives

• Market making revenues decreased by 6% in Q3 2025, primarily due to significantly lower net revenues in currencies and equity products.
• Other principal transactions revenues declined by 11% in Q3 2025, mainly reflecting lower net gains from derivatives related to funding activities.
• Total operating expenses increased by 14% in Q3 2025, driven by higher compensation and benefits, transaction-based expenses, and increased net provisions for litigation and regulatory proceedings.
• Platform Solutions continued to report a pre-tax loss of $39 million in Q3 2025 and $71 million for the first nine months of 2025, indicating it has not yet reached its breakeven target.
• Net unrealized losses on level 3 derivatives in Q3 2025, primarily due to certain equity derivatives.
• Net unrealized losses on level 3 other financial liabilities in Q3 2025, mainly from hybrid financial instruments due to increased equity prices.
• The firm plans to reduce its historical principal investments portfolio, which was approximately $30 billion as of December 2022, by selling down the vast majority by the end of 2026, indicating a divestment from certain legacy assets.

Risks

• Global economic activity remains impacted by inflationary pressures, ongoing geopolitical concerns, and uncertainty from changes in international trade policies, which could negatively affect asset prices, market-making, and investment banking activity.
• Uncertainty persists regarding the timing and magnitude of central bank policy interest rate cuts globally.
• Deterioration in economic conditions or the creditworthiness of borrowers could negatively impact the provision for credit losses.
• Inherent limitations in Value-at-Risk (VaR) models mean they may not fully capture potential losses over longer time horizons or during extreme market moves.
• Increased reliance on technology and third-party relationships introduces heightened operational risks, including third-party risk, business resilience risk, and cybersecurity risk.
• New AI technologies may increase the frequency and severity of cybersecurity attacks.
• Model risk exists due to reliance on quantitative models for valuation, risk management, and regulatory capital, with potential for adverse consequences from incorrect or inappropriately used model outputs.
• Capital risk involves the potential for insufficient capital to support business activities under normal or stressed conditions, or capital reductions/RWA increases from new or revised regulations.
• Climate-related and environmental risks (physical and transition risks) could lead to declines in asset values or disruptions to operations.
• Compliance risk arises from the failure to comply with applicable laws, rules, and internal policies, potentially leading to legal/regulatory sanctions, financial loss, or reputational damage.
• Conflicts of interest are inherent in the firm's diverse business activities and require careful management.
• Reputational risk from negative publicity, whether true or not, could lead to a decline in customer base, costly litigation, or revenue reductions.
• Ongoing legal proceedings, including 1MDB-related matters, mortgage-related complaints, currencies-related antitrust litigation, and various underwriting class actions, pose potential financial and reputational risks.
• The firm's potential liabilities from legal and regulatory proceedings are difficult to estimate, with an upper end of the range of reasonably possible aggregate loss estimated at approximately $1.5 billion in excess of aggregate reserves for certain matters.
• Domestic minimum top-up taxes under Pillar II legislation in certain non-U.S. jurisdictions could impact future tax obligations, with additional guidance expected from OECD/G20.
• Future decisions regarding the narrowing of consumer-related activities could have a material impact on results in the period such decisions are made.
• Despite efforts, the firm cannot eliminate all cybersecurity risks or guarantee against undetected cybersecurity incidents.

Future Outlook

The firm expects its 2025 annual effective tax rate to be approximately 22%. It anticipates additional guidance from OECD/G20 regarding Pillar II Model Rules and expects domestic minimum top-up taxes in certain non-U.S. jurisdictions. The FRB has set the firm's Stress Capital Buffer (SCB) at 3.4% starting October 1, 2025, which will decrease Standardized capital ratio requirements. The G-SIB surcharge (Method 2) is projected to increase to 3.5% in 2026, with a potential increase to 4.0% by January 2028 based on current financial data. The firm targets a through-the-cycle ROE of 14-16% and ROTE of 15-17%. For Asset & Wealth Management, the medium-term target is mid-teens ROE and mid-twenties pre-tax margins. Platform Solutions aims for pre-tax breakeven by the end of 2025. The firm plans to grow total credit alternative assets to $300 billion by the end of 2028 and expects to raise approximately $100 billion in third-party commitments in its alternatives business in 2025. The historical principal investments portfolio is targeted for a vast majority sell-down by the end of 2026. The OneGS 3.0 initiative, announced in Q4 2025, aims to drive efficiencies and create capacity for future growth, including constraining headcount growth and limited role reductions through the end of 2025. Future decisions regarding consumer-related activities could materially impact results.

Management Comments

• "We generated net earnings of $4.10 billion for the third quarter of 2025, compared with $2.99 billion for the third quarter of 2024."
• "Our efficiency ratio (total operating expenses divided by total net revenues) was 62.3% for the third quarter of 2025, compared with 65.5% for the third quarter of 2024."
• "During the third quarter of 2025, we returned a total of $3.25 billion of capital to common shareholders, including $2.00 billion of common share repurchases and $1.25 billion of common stock dividends."
• "Consistent with our capital management philosophy, we will continue prioritizing deployment of capital for our clients where returns are attractive and distribute any excess capital to shareholders through dividends and share repurchases, while targeting a 50 to 100 basis point buffer above our capital requirement."
• "We expect that the new operating model will drive efficiencies and create capacity for future growth. We will constrain headcount growth through the end of 2025, in addition to a limited reduction in roles."
• "We expect our 2025 annual effective tax rate to be approximately 22%."
• "We remain committed to supporting the products and servicing customers through the various transition arrangements for our consumer-related activities."
• "Management believes that it is unlikely the firm will have to make any material payments under these arrangements [guarantees and indemnifications], and no material liabilities related to these arrangements have been recognized in the consolidated balance sheets."
• "Management believes that it is unlikely that any circumstances will occur, such as nonperformance on the part of paying agents or other service providers, that would make it necessary for the firm to make payments related to these entities [Trusts] other than those required under the terms of the guarantee, borrowing, preferred stock and related contractual arrangements and in connection with certain expenses incurred by these entities."

Industry Context

During Q3 2025, the global economic environment remained resilient but was influenced by persistent inflationary pressures, ongoing geopolitical concerns, and uncertainties in international trade policies. Central banks' potential interest rate cuts were a key market focus, with the U.S. Federal Reserve making its first rate cut this year. Global equity markets generally saw gains, with some indices reaching record highs. Industry-wide investment banking activity showed an increase in completed M&A volumes and equity underwriting volumes compared to Q2 2025, while debt underwriting volumes were lower. Market-making activity levels decreased quarter-over-quarter. In the U.S., unemployment remained low, and consumer spending growth improved.

Comparison to Industry Standards

• The firm's Q3 2025 annualized ROE of 14.2% and ROTE of 15.2% are within its stated through-the-cycle target ranges of 14-16% for ROE and 15-17% for ROTE, indicating strong performance relative to its internal benchmarks.
• For Asset & Wealth Management, the first nine months of 2025 ROE was 10.5% and the pre-tax margin was 23%. While the ROE is below the firm's overall mid-teens target, the pre-tax margin is within the mid-twenties target for this segment.
• Platform Solutions reported a pre-tax loss of $39 million in Q3 2025 and $71 million for the first nine months of 2025, indicating it has not yet achieved its target of pre-tax breakeven by the end of 2025.
• The firm's CET1 capital ratios (14.3% Standardized and 15.1% Advanced) as of September 2025 exceed the regulatory requirements plus its target buffer of 50 to 100 basis points, demonstrating robust capital adequacy compared to regulatory benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• 1MDB-Related Matters: Ongoing arbitration with the Government of Malaysia concerning a $1.4 billion asset recovery guarantee, with Malaysia demanding a final payment of approximately $1 billion. The firm believes Malaysia has recovered in excess of the guaranteed amount. A putative securities class action lawsuit is ongoing, with class certification granted in part, and defendants seeking interlocutory review.
• Mortgage-Related Matters: Two complaints filed by U.S. Bank National Association alleging non-conforming mortgage loans in securitization trusts, seeking specific performance or compensatory damages.
• Currencies-Related Litigation: A putative class action alleging a conspiracy to manipulate foreign exchange transactions on an electronic trading platform, with federal antitrust claims remaining after partial dismissal of state common law claims. Plaintiffs filed a third amended complaint.
• Archegos-Related Matters: A settlement was approved in the ViacomCBS Inc. securities class action, which does not require a contribution from GS&Co. Other Archegos-related class actions concerning sales of shares in Baidu Inc., Discovery Inc., Gaotu, iQIYI Inc., Tencent Music Entertainment Group, ViacomCBS, and Vipshop Holdings Ltd. were dismissed with prejudice, and the dismissal was affirmed on appeal.
• Silicon Valley Bank Matters: A putative securities class action is ongoing, alleging material misstatements and omissions in SVB Financial Group's offering documents. The court denied the defendants' motion to dismiss. The firm is cooperating with governmental investigations regarding SVBFG.
• Underwriting Litigation: The firm is a defendant in numerous putative securities class actions related to various public offerings (e.g., Array Technologies, ContextLogic, DiDi Global, Zymergen, Sea Limited, Rivian Automotive, Natera, Robinhood Markets, ON24, Bright Health Group, MINISO Group, Coupang, Rent the Runway, Opendoor Technologies, FIGS, Venture Global, Ibotta, Silvergate Capital, F45 Training Holdings, agilon health). Several of these have seen dismissals of claims against the firm or settlements not requiring firm contribution (DiDi Global, Sea Limited, Opendoor Technologies, FIGS, Rivian Automotive, Silvergate Capital, agilon health), while others are still in various stages of litigation or appeal.
• Investment Management Services: Various civil litigation and arbitration proceedings with clients alleging losses from the firm's investment management services.
• Variable Rate Demand Obligations (VRDOs) Antitrust Litigation: A putative class action alleging a conspiracy to manipulate the VRDO market, with federal antitrust claims remaining and class certification affirmed on appeal.
• Interest Rate Swap Antitrust Litigation: Two antitrust actions alleging a conspiracy to preclude exchange trading of interest rate swaps, with federal and state antitrust claims remaining.
• Corporate Bonds Antitrust Litigation: A putative class action alleging anti-competitive conduct in the secondary market for odd-lot corporate bonds. The second amended complaint was dismissed by the court.
• Credit Default Swap Antitrust Litigation: A putative antitrust class action alleging a conspiracy to manipulate the benchmark price for credit default swaps. Claims against certain foreign defendants were dismissed, and a motion to enforce a prior settlement was granted, with the appeal dismissed.
• Regulatory Investigations and Reviews: The firm is subject to numerous ongoing investigations and reviews by various governmental and regulatory bodies concerning a broad range of business practices and operations, including securities offerings, investment management, conflicts of interest, trading activities, and compliance with regulations like the FCPA.
• The estimated upper end of the range of reasonably possible aggregate loss for matters where a range can be estimated is approximately $1.5 billion in excess of the aggregate reserves for such matters.

Related Party Transactions

• The firm has formed nonconsolidated investment funds with third-party investors, for which it acts as general partner or manager and invests alongside its clients.
• The firm provides voluntary financial support to affiliated funds, including waiving or deferring management fees and expense reimbursements.
• The firm engages in other activities with its affiliated funds, such as securities lending, trade execution, market-making, custody, and acquisition and bridge financing.
• Group Inc. issued junior subordinated debt to Goldman Sachs Capital I, a Delaware statutory trust, which in turn issued Trust Preferred securities to third parties and common beneficial interests to Group Inc.
• Series E and Series F Preferred Stock are held by Goldman Sachs Capital II and Goldman Sachs Capital III, respectively, which are firm-sponsored Delaware statutory trusts and wholly-owned finance subsidiaries for regulatory/legal purposes but not consolidated for accounting.
• Group Inc. fully and unconditionally guarantees the securities issued by GS Finance Corp., a wholly-owned finance subsidiary.
• Group Inc. guarantees the payment obligations of Goldman Sachs & Co. LLC (GS&Co.), GS Bank USA, and Goldman Sachs Paris Inc. et Cie, subject to certain exceptions.
• Group Inc. provides guarantees to Goldman Sachs International (GSI) and Goldman Sachs Bank Europe SE (GSBE) related to agreements each entity has entered into with certain counterparties.

Stakeholder Impact

• Shareholders: Benefited from increased net earnings, diluted EPS, and ROE. Received substantial capital returns through $2.00 billion in common share repurchases and $1.25 billion in common stock dividends in Q3 2025, along with an increased quarterly dividend. Subject to potential impacts from ongoing legal and regulatory matters.
• Employees: Compensation and benefits expenses increased, reflecting improved operating performance. However, the OneGS 3.0 initiative includes constraining headcount growth through the end of 2025 and a limited reduction in roles, following approximately $170 million in severance expense in the first nine months of 2025.
• Customers/Clients: Continued to be served across Global Banking & Markets and Asset & Wealth Management. The narrowing of consumer-related activities (sale of GM credit card program, GreenSky, seller financing loan portfolio) impacts consumer clients. Strategic collaborations and acquisitions aim to enhance client offerings.
• Regulatory Bodies: The firm remains subject to extensive global regulation and supervision, including evolving capital requirements (SCB, G-SIB surcharge, SLR, TLAC) and ongoing investigations, requiring continuous compliance and engagement.
• Creditors: The firm's strong liquidity and capital position, along with diversified funding sources, supports its ability to meet obligations. Credit ratings are a key factor influencing the cost and availability of debt financing.

Next Steps

• Close the acquisition of Industry Ventures in the first quarter of 2026, subject to regulatory approval and customary closing conditions.
• Constrain headcount growth through the end of 2025, in addition to a limited reduction in roles, as part of the multi-year OneGS 3.0 initiative to transform the operating model.
• Continue prioritizing capital deployment for clients where returns are attractive and distribute any excess capital to shareholders through dividends and share repurchases, targeting a 50 to 100 basis point buffer above capital requirements.
• Work towards achieving the pre-tax breakeven target for Platform Solutions by the end of 2025.
• Target growing total credit alternative assets to $300 billion by the end of 2028.
• Proceed with the plan to sell down the vast majority of the historical principal investments portfolio by the end of 2026.
• Monitor the impact of the FRB's new Stress Capital Buffer (SCB) of 3.4% effective October 1, 2025.
• Monitor the increase in the G-SIB surcharge (Method 2) to 3.5% beginning in 2026, and a potential 4.0% surcharge by January 2028.
• Continue the ongoing arbitral process concerning the 1MDB asset recovery guarantee with the Government of Malaysia.
• Address ongoing legal proceedings, including appeals and motions in various class action lawsuits related to 1MDB, currencies, and underwriting activities.

Key Dates

Recommendation

The firm's Q3 2025 results demonstrate robust financial health, with significant year-over-year increases in net earnings, diluted EPS, and total net revenues, driven by strong performance in its core Global Banking & Markets and Asset & Wealth Management segments. The improved efficiency ratio and substantial capital returns to shareholders, including an increased dividend, underscore effective management and a commitment to shareholder value. While the Platform Solutions segment is still in a transitional phase, its losses are significantly narrowing. The firm maintains strong regulatory capital ratios and is actively pursuing strategic initiatives and acquisitions to fuel future growth. Despite ongoing macroeconomic uncertainties and a complex legal landscape, the overall positive trajectory and solid fundamentals make Goldman Sachs an attractive 'buy' for seasoned investors.

Keywords

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