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The Goldman Sachs Group, Inc. GS released its first-quarter 2025 results on April 14, 2025. Since then, its shares have risen 5.2%.
The company’s quarterly top and bottom-line numbers outpaced the Zacks Consensus Estimate. The solid improvement in trading revenues majorly supported Goldman’s performance, while the investment banking (IB) business was subdued.
Following decent quarterly results, is the Goldman stock worth adding to your portfolio? Before checking that out, let us discuss the company’s quarterly performance in brief.
IB Revenues: in the first quarter 2025, Goldman's IB revenues declined 8% year over year due to significantly lower net revenues in Advisory compared with a strong prior-year period. On the contrary, its peers, JPMorgan JPM and Morgan Stanley’s MS IB fees rose 12% and 7.7% in the quarter.
Nonetheless, there are still causes for optimism for GS. Goldman’s CEO, David Solomon, noted an elevated level of client engagement and a growing deal pipeline, suggesting that activity could pick up in the second half of 2025 if economic and geopolitical conditions stabilize.
Notably, Goldman retained its #1 global rank in both announced and completed M&A transactions, as well as equity underwriting in the first quarter.
Trading Revenues: Trading volume and market volatility rose in the first quarter, given tariff-related concerns, benefiting GS. The company’s equities trading revenues grew 27% year over year to $4.2 billion. Fixed income, currency and commodities trading revenues rose 2% year over year to $4.4 billion.
Similarly, JPMorgan’s markets revenues jumped 21% year over year to $9.7 billion. Specifically, fixed-income markets’ revenues grew 8% to $5.8 billion, while equity trading numbers rallied 48% to $3.8 billion. Morgan Stanley’s equity trading revenues soared 45.2% year over year to $4.13 billion, and fixed-income trading income grew 4.8% to $2.6 billion.
A robust revival in merger and acquisition (M&A) activity was expected for 2025, bolstered by a potentially business-friendly Trump administration and expectations for regulatory rollbacks. However, the reality so far has been more complicated.
Instead of a boom in M&A activity, global uncertainty, led by tariff disputes and fears of a renewed trade war, has dampened corporate confidence. These conditions have triggered market volatility, inflationary pressure and hints of a slowdown or recession in U.S. economic data. Despite stabilizing interest rates and substantial corporate cash reserves, many companies are pausing M&A plans, wary of macro risks. As such, deal-making activities are subdued.
Nonetheless, the company’s leading position in deal-making activities indicates enduring client trust and an increased IB backlog that could convert into revenues once the operating backdrop improves, giving Goldman a strategic edge over peers.
GS has made thoughtful moves to exit non-core consumer banking and sharpen its focus on areas wherein it holds a competitive edge — IB, trading, and asset and wealth management (AWM).
Last November, per the Wall Street Journal report, Goldman received a proposal from Apple to end their consumer banking partnership within the next 12-15 months. If GS accepts the proposal, the move can affect two consumer banking products that Apple currently offers — the Apple Card and the Apple Savings account.
In 2024, Goldman finalized a deal to transfer its GM credit card business to Barclays and completed the sale of GreenSky — its home-improvement lending platform. In 2023, the company divested its Personal Financial Management unit.
These moves demonstrate a well-thought-out exit from consumer finance, allowing Goldman to reallocate capital and attention toward higher-margin, more scalable businesses.
A major beneficiary of this strategic shift is the AWM division, which now plays a crucial role in the company’s long-term growth. AWM is expanding into fee-based revenue streams to help offset the volatility of IB business. As of March 31, 2025, AWM manages more than $3.2 trillion in assets under supervision and is experiencing strong momentum in alternative investments and customized wealth solutions for ultra-high-net-worth individuals.
In the first quarter of 2025, Goldman reported significant net inflows into its wealth management platform, providing solid evidence of the segment’s increasing market traction and client confidence.
Goldman Sachs is actively expanding its private equity credit lines to capitalize on the growing demand for private credit solutions. In sync with this, in January 2025, GS unveiled several initiatives to expand its business in private credit, private equity and other asset classes, and better serve its corporate and investor clients.
The company is establishing the Capital Solutions Group to expand and integrate its full range of financing, origination, structuring and risk management solution operations in the Global Banking & Markets business.
Further, Goldman is extending its private equity credit services internationally, focusing on regions such as Europe, the U.K. and Asia. To support this expansion, it has increased staffing in locations like Dallas and Bangalore, aiming to better serve private equity and venture capital clients with capital call facilities and subscription line loans.
GS’s efforts will enable it to provide clients with access to differentiated sourcing and investing capabilities across opportunities in private credit and private equity.
GS maintains a fortress balance sheet, with Tier 1 capital ratios well above regulatory requirements. This financial strength allows it to return capital to shareholders aggressively through buybacks and a healthy dividend yield (2.39%).
As of March 31, 2025, cash and cash equivalents were $167 billion. As of the same date, $71 billion were near-term borrowings.
In July 2024, it increased its common stock dividend 9.1% to $3 per share. In the past five years, the company hiked dividends four times, with an annualized growth rate of 23.6%. Currently, its payout ratio sits at 28% of earnings.
Meanwhile, GS’s peer JPMorgan raised its dividend five times over the past years, with a payout ratio of 27%. Morgan Stanley raised its dividend four times over the past years and has a payout ratio of 43%.
Additionally, Goldman has a share repurchase plan in place. In the first quarter of 2025, the board of directors approved a share repurchase program authorizing repurchases of up to $40 billion of common stock. In February 2023, it announced a share repurchase program, authorizing repurchases of up to $30 billion of common stock with no expiration date. At the end of the first quarter, GS had the remaining $43.6 billion worth of shares available under authorization.
Over the past year, Goldman shares rose 25.6% compared with the industry’s growth of 16.1%. Meanwhile, its peers JPMorgan and Morgan Stanley rallied 24.9% and 21.5%, respectively.
The GS stock also looks attractive from a valuation perspective. The stock is trading at forward price/earnings (P/E) of 11.07X compared with the industry average of 11.46X.
Goldman is also trading at a discount compared with its peers, JPMorgan and Morgan Stanley. Currently, JPM and MS have P/E multiples of 12.72X and 12.55X, respectively.
GS maintains a strong position in the financial services industry, particularly in IB and trading. The company's diversified business model and global reach offer competitive advantages, allowing it to capitalize on various market opportunities. Its strong liquidity position and planned expansion in the private equity credit line position it well for growth.
However, the constantly evolving macroeconomic backdrop, given the uncertainties related to Trump's tariff plans, is likely to dampen deal-making activity in the near term. This will likely affect the company’s IB business. Rising operating expenses are added concerns for Goldman. The company’s operating expenses witnessed a five-year (2019-2024) compound annual growth rate of 3.1%, with the rising trend continuing in the first quarter of 2025.
Adding to this, analyst sentiment is cautious for 2025 and 2026. Goldman’s 2025 and 2026 earnings estimates have been revised downward over the past month. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)
Hence, GS’s performance in the near term will be greatly influenced by its capacity to navigate these challenges to maximize financial performance. Investors should keep a close eye on these issues before making a well-informed investment decision.
Those who already have the Goldman stock in their portfolios can hold on to it because it is less likely to disappoint over the long term, given its strong fundamentals. It carries a Zacks Rank #3 (Hold) now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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