The titans of Wall Street investment banking delivered fourth-quarter results that exceeded expectations and signaled the beginning of what many analysts are calling a new golden age for dealmaking. Goldman Sachs and Morgan Stanley both reported on January 15, capping a strong earnings season for the banking sector and providing clear evidence that merger and acquisition activity is surging after years of post-pandemic hesitation.

Goldman Sachs: Record Equities Trading Powers Earnings Beat

Goldman Sachs reported fourth-quarter profit of $4.62 billion, or $14.01 per share, representing a 12% increase from the same period last year. The results handily beat analyst expectations of $11.70 per share, driven by exceptional performance in the firm's markets division.

The headline figure: Goldman set an all-time Wall Street record of $4.31 billion in equities trading revenue during the quarter. This remarkable achievement reflects the firm's dominant position in serving institutional investors navigating volatile markets and capitalizing on AI-related opportunities.

Investment banking fees surged 25% to $2.58 billion, fueled by strong gains in mergers advisory work and debt underwriting. The firm advised on several of the year's largest transactions and benefited from increased corporate activity as confidence returned to boardrooms.

"The environment for dealmaking has fundamentally shifted. We're seeing CEOs who spent years on the sidelines finally moving forward with strategic transactions."

— Industry analyst on Goldman's M&A performance

Revenue dipped 3% to $13.45 billion, which Goldman attributed to the impact of offloading its Apple Card loan portfolio to JPMorgan Chase—a strategic move that removed a non-core consumer lending business from the firm's balance sheet.

Morgan Stanley: All-Time Records Across Key Metrics

Morgan Stanley's results were equally impressive. The firm reported record annual revenue of $70.6 billion and net income of $16.9 billion, demonstrating the success of its strategy to build diversified revenue streams across investment banking, wealth management, and trading.

Fourth-quarter earnings came in at $4.4 billion, or $2.68 per share, compared to $3.71 billion, or $2.22 per share, in the prior year. Revenue for the quarter reached $17.9 billion.

The standout metric was equity underwriting revenue, which hit an all-time quarterly high driven largely by initial public offering work. Morgan Stanley's IPO franchise benefited from a resurgence in technology and healthcare companies accessing public markets after a two-year drought.

Investment banking revenue jumped 22% year-over-year, closely matching Goldman's 25% gain and reflecting the industry-wide recovery in corporate advisory activity.

The M&A Renaissance Takes Shape

The results from both banks confirm what deal advisors have been anticipating: 2026 is shaping up to be a banner year for mergers and acquisitions. Several factors are converging to drive this activity:

  • Regulatory clarity: The Trump administration's deregulatory stance has given corporate boards confidence that large transactions will receive fair consideration from antitrust authorities
  • Private equity pressure: Buyout firms sitting on over $1 trillion in uninvested capital are eager to put money to work
  • AI-driven consolidation: Technology companies are pursuing acquisitions to enhance AI capabilities
  • Financing availability: Debt markets have reopened with favorable terms for leveraged transactions

Market Reaction: Banks Rally on Earnings Beat

Investors enthusiastically received the results, sending both stocks sharply higher. Goldman Sachs closed up 4.6% on Thursday, while Morgan Stanley surged 5.8%. The gains helped the broader financial sector reverse earlier-week declines and reinforced the bullish case for bank stocks in 2026.

The strong performance came after a mixed reception for other major bank earnings earlier in the week, making the Goldman and Morgan Stanley results particularly significant for sector sentiment.

What This Means for the Economy

Record investment banking results have implications beyond Wall Street bonuses. Strong M&A activity typically signals corporate confidence in economic growth and strategic investment. When companies are willing to pursue transformative deals, it often reflects optimism about future business conditions.

Key Implications for Investors

  • Fee revenue acceleration: Investment banking fees are the most cyclical component of bank earnings; their resurgence suggests sustained activity ahead
  • IPO market recovery: Morgan Stanley's record equity underwriting indicates the window for new public offerings has reopened
  • Trading volatility beneficial: Goldman's record equities trading shows that active markets create opportunities for well-positioned firms
  • Wealth management stability: Both firms benefit from diversified business models that provide steady revenue regardless of transaction activity

Looking Ahead: The 2026 Dealmaking Pipeline

Senior executives at both firms expressed optimism about the year ahead. Backlog indicators suggest that the fourth quarter's strong performance was just the beginning, with significant transactions expected to close in the first half of 2026.

Sectors generating the most advisory activity include technology, healthcare, energy, and financial services. Cross-border M&A is also accelerating as companies seek global scale and geographic diversification.

For investors, the message from Wall Street's premier dealmakers is clear: the long-awaited M&A recovery has arrived, and 2026 could mark the beginning of a multi-year cycle of heightened corporate activity. Goldman Sachs and Morgan Stanley are positioned to capture a significant share of the fees this renaissance will generate.