Executive Summary
Goldman Sachs delivered $14.01 EPS in Q4 2025, representing 27% annual growth and validating management's thesis of an emerging investment banking supercycle. The firm's advisory backlog reached a four-year high with seven consecutive quarters of growth, primarily driven by M&A activity. CEO David Solomon explicitly stated that the base case for 2026 M&A volumes approaches 2021 levels, with potential for a "bull case" exceeding that peak. This positions Goldman's #1 M&A franchise to capture disproportionate wallet share as the $1 trillion sponsor dry powder and $4 trillion portfolio company valuations create a flywheel effect across trading, financing, and asset management. The firm's strategic repositioning away from consumer banking (Apple Card transition) toward capital-light businesses has improved the stress capital buffer by 320 basis points while doubling durable revenues to 37% of FICC/equities. Management's confidence in raising AWM pretax margin targets to 30% and maintaining mid-teens ROE guidance suggests structural improvements beyond cyclical tailwinds. With $32 billion in buyback capacity and 50% dividend increase, Goldman is positioned to benefit from both organic growth and capital return acceleration.
Key Insights
what Dennis Coleman said“Our backlog, which stands at its highest level in four years. M&A transactions often kick off a flywheel of activity across our entire franchise.”
what Dennis Coleman said“The base outcome is pretty close to 2021, and the bull outcome is ahead of 2021. I think the world is set up at the moment to be incredibly constructive in 2026 for M&A and capital markets activity.”
what Dennis Coleman said“The regulatory environment in the last five years put costs and burdens on the firm that we now won't have going forward that actually gives us flexibility to invest over time in other things that drive growth.”
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