Strong Trading Activity & Rates to Drive Schwab's Q3 Earnings

Charles Schwab SCHW is slated to report third-quarter 2025 results on Oct. 16, before market open. The company’s earnings and revenues are expected to have surged on a year-over-year basis.

Schwab’s second-quarter 2025 earnings outpaced the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business and higher net interest revenues (NIR) and trading revenues. However, an increase in expenses was an undermining factor.
 
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average beat being 5.87%.
 

The Charles Schwab Corporation Price and EPS Surprise

The Charles Schwab Corporation price-eps-surprise | The Charles Schwab Corporation Quote

Before we take a look at what our quantitative model predicts, let us check the factors that are likely to have impacted Schwab’s third-quarter performance.

Major Factors Likely to Impact Schwab’s Q3 Earnings

Trading Revenues: Client activity was solid during the third quarter, with the major indexes experiencing extreme volatility due to the trade policies and a change in the Federal Reserve’s monetary policy stance. In July and August, SCHW’s core net new assets witnessed strong year-over-year growth. Further, the number of new brokerage accounts opened grew in the first two months of the quarter.

Volatility was also high in other asset classes, including commodities, bonds and foreign exchange. Thus, Schwab is expected to have witnessed a decent rise in trading revenues in the to-be-reported quarter. The Zacks Consensus Estimate for trading revenues is pegged at $895.7 million, which suggests a 12.4% increase from the prior-year quarter. Our estimate for trading revenues is pegged at $923.4 million.

NIR: The consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is $419.4 billion, relatively stable year over year. We expect the metric to be $426.4 billion.

The Fed lowered interest rates by 25 basis points to 4.00-4.25% in mid-September. This is less likely to have hurt SCHW’s NIR as rates remained relatively high for a major part of the quarter. Hence, relatively higher yields on interest-earning assets are expected to have more than offset elevated funding costs. The Zacks Consensus Estimate for NIR is pegged at $2.92 billion, indicating a surge of 31.8%. Our estimate for the metric is $2.87 billion.

Asset Management and Administration Fees: Led by robust equity market performance, Schwab is likely to have recorded a rise in asset management and administration fees. For July and August, Schwab’s client assets receiving ongoing advisory services grew from the prior-year periods. The consensus estimate for asset management and administration fees of $1.63 billion implies growth of 10.2%. We project the metric to rise to $1.64 billion.

Expenses: Schwab’s operating expenses have been elevated in the past few quarters. Due to persistent regulatory spending and strategic acquisitions, marketing and advertising, and efforts to enhance business efficiency, expenses are likely to have increased in the to-be-reported quarter. Also, the company’s plan to expand its branch network and hire for branch-related positions is expected to have led to higher expenses.

We project total expenses of $3.05 billion for the quarter, up 1.4% from the prior-year quarter.

What the Zacks Model Reveals for Schwab

According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate for earnings this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Schwab is +1.93%.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q3 Earnings & Sales Estimates for SCHW

In the past month, the Zacks Consensus Estimate for earnings has been revised almost 1% upward to $1.22 per share. The estimate indicates a whopping 58.4% rise from the year-ago quarter.

The consensus estimate for sales is pegged at $5.91 billion, which suggests a 22% jump.

Schwab’s Peers Worth Betting on

Here are a couple of Schwab’s peer stocks that you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model:

The Earnings ESP for Raymond James RJF is +2.00% and it carries a Zacks Rank of 3 at present. The company is slated to report fourth-quarter and fiscal 2025 results on Oct. 22. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Over the past seven days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised north to $2.70.

Robinhood Markets HOOD is scheduled to announce third-quarter 2025 numbers on Nov. 5. The company sports a Zacks Rank #1 at present and has an Earnings ESP of +8.90%.

Quarterly earnings estimates for Robinhood have remained unchanged at 47 cents over the past week.

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This article originally published on Zacks Investment Research (zacks.com).

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