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Earnings analysis · 10-Q

MS earnings analysis

Filed August 4, 2026 · Our reading of the company's report

The latest report

Morgan Stanley delivered a strong Q2: net revenues rose 27% year over year to $21.348B, diluted EPS climbed 62% to $3.46, and pre-tax margin expanded 6 percentage points to 34%. Institutional Securities was the…

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Morgan Stanley delivered a strong Q2: net revenues rose 27% year over year to $21.348B, diluted EPS climbed 62% to $3.46, and pre-tax margin expanded 6 percentage points to 34%. Institutional Securities was the principal growth engine, while Wealth Management produced $148.1B of net new assets and a 30.5% pre-tax margin. The primary offsets are a $9.845B six-month operating cash outflow, rapid balance-sheet expansion, and lower leverage-ratio headroom, though liquidity resources remained substantial at $404.077B.

Read the original on SEC.gov

Where revenue came from

The business segments reported by the company.

Institutional Securities 51.2% Wealth Management 41.1% Investment Management 7.6%

Shares of the segments disclosed in this filing, largest first.

How we read each report

Our analysis across the last few reports.

Read as bullish Read as bearish Feb 2026 Aug 2026

Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.

Reported figures

Earnings per share
$3.46

What stood out

  • Strong top-line and EPS acceleration

    Q2 net revenues were $21.348B, up 27% from $16.792B a year earlier; net income applicable to Morgan Stanley rose 58% to $5.581B and diluted EPS increased 62% to $3.46 from $2.13.

  • Material operating leverage

    Pre-tax margin expanded to 34% from 28% and the expense efficiency ratio improved to 65% from 71%. ROE increased to 20.7% from 13.9%, while ROTCE rose to 26.6% from 18.2%.

  • Institutional Securities drove the upside

    Institutional Securities revenue increased 44% to $11.040B, led by a 69% increase in Equity revenue to $6.300B and a 58% increase in Investment Banking revenue to $2.437B.

  • Wealth flows and fees remained strong

    Wealth Management revenue grew 14% to $8.856B and pre-tax margin reached 30.5%. The segment added $148.1B of net new assets, including more than half from Workplace-channel IPO-related inflows, and fee-based assets rose to $3.022T from $2.753T at year-end.

  • Investment Management returns to growth

    Investment Management revenue rose 6% to $1.646B as average AUM increased to $1.952T from $1.672T; long-term net flows were positive $7.5B in Q2 and period-end AUM reached $2.004T.

  • Liquidity and capital return remain robust

    Liquidity resources averaged $404.077B in Q2 and the LCR was 129%, above the 100% minimum. The firm also returned $1.500B through Q2 share repurchases and announced a $1.15-per-share quarterly dividend.

What to watch

  • Cash flow remains negative despite earnings

    Operating cash flow was an outflow of $9.845B for the first six months of 2026, versus a $12.147B outflow a year ago, as trading assets, securities borrowed, and customer receivables/other assets consumed cash. Premises, equipment and software spending was $1.573B.

  • Loan growth raises credit-risk exposure

    Loans net of ACL increased to $315.653B from $289.038B at December 31, while total loans and lending commitments increased by approximately $44B. The ACL increased to $2.040B from $1.930B, and Q2 credit-loss provision was $98M.

  • Balance-sheet growth reduced leverage headroom

    The firm’s supplementary leverage ratio declined to 4.9% from 5.4%, only 1.4 percentage points above the new 3.5% requirement. Borrowings increased to $392.556B from $348.935B as total assets expanded to $1.675T from $1.420T.

  • Rate cuts would pressure wealth NII

    Wealth Management is asset-sensitive: management estimates a 200-basis-point rate decline would reduce next-12-month net interest income by $515M, versus a $413M benefit from a 200-basis-point increase.

  • Investment-management fee-rate pressure

    Investment Management reported continued Equity-asset-class net outflows of $13B in Q2, and its average management fee rate declined to 28 bps from 31 bps a year earlier as asset mix shifted.

  • Legal exposure persists; no formal risk-factor update

    No new standalone Item 1A risk-factor update was included; the filing incorporates the 2025 Form 10-K risk factors. However, it discloses a July 16, 2026 consolidated complaint in the E*TRADE cash-sweep litigation seeking unspecified compensatory and treble damages.

Management's outlook

The 10-Q provides no numeric revenue or EPS outlook. Management reiterates a forward ROTCE goal of 20% in a normal market environment, while noting that geopolitical risk, inflation, asset prices, growth and monetary policy remain uncertainties.

Earlier filings 2

10-Q · May 5, 2026

Morgan Stanley reported strong financial results for Q1 2026, with net revenues totaling $20.6 billion, a 16% increase year-over-year, and net income rising 29% to $5.6 billion. The diluted EPS increased 32% to $3.43,…

10-K · February 19, 2026

Morgan Stanley reported a strong operating quarter with Q4 2025 revenue of $29.99B and diluted EPS of $2.68, both reflecting improvement versus Q4 2024 (revenue $27.16B, EPS $2.22). Operating margins expanded to 19.2%…

This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.