Goldman Sachs on Tuesday reported a strong quarter that should help stem the stock’s brutal decline since the summer. Revenue in the third quarter rose 23% year over year to $18.68 billion, the second-highest in company history and well ahead of the $16.71 billion consensus, according to the analyst estimates compiled by data provider LSEG. Earnings per share (EPS) in the three months ended in September surged 39% to $17.01, also a huge beat versus the $13.02 per share consensus, according to LSEG data. GS YTD mountain Goldman Sachs YTD Shares of Goldman were up more than 4% shortly after the open before giving up much of those gains. We think the quarter was strong enough to justify stepping in to take advantage of the weakness since the stock’s record-high close of $1,152 on July 15. However, material upside from here likely has more to do with the Iran war, U.S. interest rate dynamics, and the pace of AI funding than anything fundamentally going on at the bank. From an execution perspective, Goldman appears to be firing on all cylinders. Bottom line The strong showing from Goldman Sachs would have looked even better if not for the impact of an accelerated charitable contribution made in the quarter, which weighed on earnings and return on equity results. The bread-winning Global Banking & Markets division delivered strong results, which was very much behind the relatively positive reaction in the stock. This group houses investment banking, which should see a nice boost from the upcoming Anthropic initial public offering (IPO). “Our investment banking backlog remains very robust as strong revenue realizations in advisory were largely offset by solid replenishment and equity underwriting,” CFO Denis Coleman said on the post-earnings conference call. A nice showing in Asset & Wealth Management has demonstrated that the world’s premier investment bank can also make a lot of money away from initial public offerings (IPOs) and mergers and acquisitions (M & A). More broadly, Goldman CEO David Solomon spent time on the call talking about the importance of artificial intelligence — both the benefits and the risks to business at the bank. “In our conversations with clients, demand for compute significantly exceeds supply at the moment, creating opportunities to help develop financing structures to meet that capacity shortfall. Our differentiated financing, distribution, and investing capabilities position us to play a meaningful role in the mobilization of capital and supporting client activity.” He added, “As we support our clients, we are highly selective about the risk we underwrite and the capital we commit, particularly as client financing needs become larger and more complex.” Goldman was named as one of the six financial institutions partnering with Nvidia on AI infrastructure financing. “Beyond these financial risks, we also recognize the broader concerns around the accelerating pace of AI technology and the unchecked advancement of…
Read More: We’re upgrading our Goldman Sachs rating after a strong quarter bodes well