MC Q3 Deep Dive: Large-Deal M&A and Capital Markets Expansion Drive Results Amid Strategic Hiring

Investment banking firm Moelis & Company (NYSE:MC) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 33.9% year on year to $376 million. Its non-GAAP profit of $0.68 per share was 14% above analysts’ consensus estimates.

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StockStory’s Take

Moelis & Company’s third quarter saw revenue growth, but sales fell short of Wall Street expectations. Management attributed the strong year-over-year revenue increase to robust activity in large strategic and sponsor-driven mergers and acquisitions (M&A), as well as continued momentum in its capital markets advisory business. CEO Navid Mahmoodzadegan pointed to landmark transactions across utilities, technology, and sports sectors, stating the firm’s average M&A fee rose due to a higher mix of large transactions. The company also noted a significant increase in managing director hires to strengthen expertise in growth areas.

Looking ahead, management expects deal activity to accelerate, underpinned by a broadening M&A market and a more supportive regulatory environment. Mahmoodzadegan highlighted plans to expand the private capital advisory business and further invest in talent, especially in technology, capital markets, and private asset segments. He cautioned that potential headwinds, such as a government shutdown, could temporarily slow deal closings but said, “from where we sit today, this is not impacting our clients’ appetite for strategic transactions.” The company sees ongoing opportunities in private credit advisory and expects continued expansion in sponsor-driven and middle-market deals.

Key Insights from Management’s Remarks

Management attributed the quarter’s revenue growth to large strategic and sponsor M&A activity, capital markets expansion, and the integration of new senior hires, while also noting expense increases from technology investments and travel.

• Large-deal momentum: The quarter benefited from an increase in sizable M&A transactions, particularly among corporate clients seeking scale and sponsors facing pent-up demand for liquidity. This shift drove a meaningful rise in average deal fees.
• Capital Markets surge: The capital markets advisory business more than doubled year-over-year, as Moelis capitalized on a risk-on environment and the growth of private credit. Enhanced capabilities in both public and private capital raising positioned the firm to capture emerging opportunities, especially in technology and growth sectors.
• Strategic hiring focus: Moelis added 10 managing directors year-to-date, including five since last quarter, targeting expertise in technology, industrials, private capital, and capital markets. Management views ongoing talent acquisition as critical to sustaining growth and filling gaps in key market areas.
• Expense drivers: Higher expenses were primarily due to increased deal-related travel and client events, ongoing technology and AI investments, and rising occupancy costs from headcount expansion. Management anticipates compensation ratios to normalize as revenue growth continues.
• Private Capital Advisory buildout: The firm is investing in its private capital advisory (PCA) business, with early momentum in mandates focused on GP-led secondaries. Management expects PCA to become a meaningful revenue contributor, complementing its sponsor franchise and diversifying business mix.

Drivers of Future Performance

Moelis expects revenue and margin growth to be driven by sustained M&A momentum, regulatory tailwinds, and expansion in private capital markets, while ongoing hiring and technology investments remain priorities.

• M&A cycle broadening: Management expects the current M&A recovery to extend into 2026, with activity broadening from large deals to middle-market and sponsor transactions. The firm’s pipeline is described as near all-time highs, signaling continued demand for advisory services.
• Supportive regulatory backdrop: The company sees a more accommodative U.S. regulatory environment fueling larger and more ambitious transactions. While certain sectors may face nuanced reviews, the overall landscape is viewed as enabling for dealmaking.
• Private capital and credit growth: Moelis anticipates further expansion of private capital advisory, especially in GP-led secondaries and private credit markets. Management believes the rising influence of private credit will generate new advisory opportunities and help diversify revenue streams.

Catalysts in Upcoming Quarters

In the quarters ahead, our analysts will focus on (1) signs that the M&A recovery is extending to middle-market and sponsor-driven transactions, (2) sustained growth and integration of the private capital advisory segment, and (3) further normalization of compensation ratios as revenue and hiring scale. Execution in new talent acquisition and ongoing adaptation to regulatory and credit market shifts will also be closely monitored.

Moelis currently trades at $65.84, down from $66.85 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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