Goldman Sachs Earnings: Strong Quarterly Results, but Shares Priced for Perfection

Key Morningstar Metrics for Goldman Sachs

• Fair Value Estimate: $580.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Goldman Sachs’ Earnings

Goldman Sachs GS reported second-quarter earnings, with investors looking for indications of durable strength in institutional trading and investment banking during a turbulent quarter.

Why it matters: Goldman’s strong earnings show how valuable its brand is in investment banking, helping it stand out from competitors. It experienced impressive growth in fees from mergers and acquisitions, as well as overall investment banking services. Additionally, its trading results were solid, increasing 23% annually as more clients engaged during uncertain economic times.

• While we view trading volumes as likely to retrench, with our index of trading banks looking like they’re overearning by about 20%-30%, market share gains are more enduring. Goldman’s favorable stress test results also mean it can afford to invest behind its financing businesses in its trading segment, deepening key institutional relationships.
• Favorable stress test results free up significant capital for the firm, which maintained a 14.5% common equity tier 1 ratio at quarter-end, comfortably ahead of its likely 10.9% requirement effective in October 2025. Encouragingly, the firm lifted its quarterly dividend by 33%. We’re less keen to see elevated share repurchases at current valuations.

The bottom line: We plan to lower our $580 per share fair value estimate for wide-moat Goldman Sachs by a low-single-digit percentage, reflective of higher levels of value-dilutive share repurchases in 2025. Even in the absence of this, our intrinsic valuation would be unchanged. Shares continue to look expensive.

• A lighter regulatory touch and strong investment banking pipeline are constructive for US banks, but we don’t believe that investors have adequately priced in downside risks from trade policy, commensurately higher inflation, and incrementally lower growth. We currently project a 30-basis-point annual drag on US real gross domestic product growth through 2029, tied to tariff policy.