Executive Summary
Goldman Sachs delivered a strong third quarter in 2025, with net revenues up 20% year-over-year to $15.18 billion and profits rising 37% to $4.10 billion, driven chiefly by a 42% surge in investment banking fees. Despite this, the stock fell 2–3% after the report, likely due to elevated expenses and concerns about valuation.
Morningstar raised its fair value estimate for Goldman Sachs to $630 per share from $570, citing the improved investment banking outlook and stronger forecast leverage, though it still views the stock as overvalued relative to its price/book multiples.
Analysis
Goldman Sachs’ Q3 2025 performance shows clear signs of business strength, particularly in capital markets and dealmaking. The bank recorded investment banking fees of $2.66 billion, up 42% from the previous year, aided by a robust advisory pipeline including over $1 trillion in announced M&A activity. Equity and debt underwriting also contributed to the expansion in investment banking revenues. Trading and financing revenues grew by 11%, and asset & wealth management revenue increased 17%, largely due to higher fees, lending, and assets under supervision. These results reflect recovering investor risk appetite and improved market conditions.
[source: Morningstar; Reuters] [1]
On profitability, Goldman reported diluted EPS of $12.25 on net revenues of $15.18 billion with an annualized return on average common shareholders’ equity (ROE) of 14.2%. However, operating expenses rose, headcount increased to about 48,300, and there remains concern about margin compression. The bank is emphasizing efficiency initiatives including AI deployment to offset rising costs.
[source: Goldman Sachs; Economic Times] [2]
From a valuation perspective, Morningstar has raised its fair value estimate for Goldman Sachs to $630 per share, up from $570, still characterizing the stock as overvalued based on its price/book ratio of approximately 2.2×. Their updated forecasts suggest a CAGR of net revenue of 3.3% and EPS growth near 4.9%, buoyed by a stronger long-term view of investment banking, especially M&A, given substantial private equity dry powder. Broader expectations include moderating GDP growth through 2026, which could constrain upside.
[source: Morningstar] [3]
Despite the strong fundamentals, the stock’s drop post-earnings signals investor concern around costs and whether current growth momentum can be sustained, especially as trading revenues and fixed income income may soften amid global macro- and regulatory risks. Open questions include: how large cost overruns might become, sensitivity to rate cuts, and competitive pressures in investment banking.
Supporting Evidence
- Net revenues: $15.18 billion in Q3 2025, up ~20% YoY. [1][4]
- Net earnings: $4.10 billion, up ~37% YoY; diluted EPS of $12.25. Return on common equity: ~14.2%. [1][4]
- Investment banking fees surged 42% to $2.66 billion; advisory fees increased ~60%; equity trading revenue up 7%; fixed-income, currency & commodities revenue up ~17%. [1][5]
- Asset & wealth management revenues rose ~17% to $4.4 billion, boosted by higher management fees and lending. Assets under supervision reached ~$3.45 trillion. [1][5]
- Share decline of 2-3% after earnings release owing to concerns over high operating expenses, slowing growth in trading & fixed income financing, and valuation pressure. [1][6]
- Morningstar fair value estimate raised to $630 from $570; expectations for net revenue CAGR of 3.3% and EPS growth at ~4.9%; investment banking industry growth expected to average 2.5% over next decade. [3]
- Book value per share rose to ~$353.79; stock up ~36-37% year-to-date by late Q3. [1][5]
Sources
- [1] www.reuters.com (Reuters) — Oct 14, 2025
- [2] www.goldmansachs.com (Goldman Sachs) — Oct 14, 2025
- [3] www.morningstar.com (Morningstar) — Oct 15, 2025
- [4] fortune.com (Fortune) — Oct 14, 2025
- [5] economictimes.indiatimes.com (The Economic Times) — Oct 2025
- [6] www.ainvest.com (AiInvest) — Oct 14, 2025