Goldman Sachs Group Inc Q2 FY2026 Earnings Call

Thank you, Operator. Good morning, everyone. I know it's a busy morning with all the reports, and so we appreciate you being on our call. Thank you for joining us. We delivered record results for the second quarter and year to date. In the quarter, we generated record revenues of $20.3 billion, record earnings per share of $20.98, and an ROE of 23.5% and an ROTE of 25.5%. Our performance reflects the strength of our global franchise, the depth of our relationships, and our ability to harness the power of one Goldman Sachs in a very strong operating environment. Momentum across our franchise has accelerated as clients continue to pursue greater scale to invest and compete more effectively. This desire for scale has driven a significant increase in strategic dealmaking activity with large-cap corporate M&A volumes up 90% through the first half of 2026. At the same time, the AI investment cycle is expanding capital needs beyond core technology into infrastructure, energy, and data centers, generating a ripple effect across industries. This is creating significant opportunities for Goldman Sachs to provide structuring, financing, risk management, and capital markets execution across both public and private markets. Beyond the infrastructure build-out, companies large and small are working to integrate AI into their operations, increasing demand for advice and execution capabilities as they adapt to a rapidly evolving competitive landscape. Against this backdrop, the trust we have built with clients over decades continues to position Goldman Sachs at the center of their most strategic and consequential transactions. This includes acting as lead left book runner on the record IPO for SpaceX and equity raise for Alphabet, as well as advising Dominion Energy's sale to Nextera Energy and Comcast's spinoff of NBCUniversal. We have further expanded our lead as the number one M&A advisor, and earlier this year became the first bank to cross the $1 trillion in announced volumes over a six-month period. This longstanding leadership, combined with our one Goldman Sachs operating ethos creates a real multiplier effect. Our advisory relationships are often the genesis of client activity across the franchise. What starts as an advisory mandate in the boardroom increasingly extends into opportunities for our capital solutions group, including financing, risk management, capital markets execution, and distribution, as well as investment opportunities for asset wealth management clients. And while we have made considerable progress strengthening connectivity across the firm, we continue to see opportunities to further collaborate across our global banking and markets and asset wealth management franchise. We believe there is a substantial runway to deepen the connectivity between advisory financing and capital markets, investing in wealth management in ways that will enhance value for our clients and drive long-term growth. Given our progress and what we see in our pipelines, we expect this flywheel of activity to continue. Even with very strong investment banking revenues this quarter, our backlog increased to its highest level in five years and its second highest level on record, underpinned by a record advisory backlog and reflecting the strength and breadth of our client engagement. Beyond investment banking, momentum also accelerated across our equities and FIC businesses. Equities produced record revenue amid shifting market dynamics and elevated activity levels as single stock volatility and dispersion remained high. Client activity was particularly strong in Asia, driven in part by robust AI capital formation and investment. This strength also extended into financing, where we generated another quarter of record revenues as we deployed our balance sheet to support clients, with average prime balances rising to another record. We also delivered a very strong performance in FIC, with broad-based strength across both intermediation and financing, as we supported clients globally. In intermediation, performance was driven by robust activity as clients turned to us for principal liquidity and risk management amid ongoing volatility in rates and commodities. In financing, we generated record revenues reflecting the continued strong demand for asset-secured financing solutions. Across asset wealth management, we are relentlessly driving our growth strategy forward with quarterly management and other fees up 20% year over year. We delivered our 34th consecutive quarter of long-term net inflows, including 19 billion in wealth management. Our wealth management client assets reached a record of roughly $2 trillion, and our total assets under supervision surpassed a record $4 trillion. In this cycle of elevated capital formation and strategic activity, the opportunity set for our ultra-high net worth franchise is also expanding. Our high-touch wealth management business has never been better positioned to help founders and executives realize and manage newly created wealth with unique capabilities and solutions, combining trusted advice with access to differentiated investment opportunities across our platform. Since the start of 2025, we've seen nearly 900 referrals to wealth management from investment banking, demonstrating the benefits of our One Goldman Sachs operating approach. With an alternative, despite some pressure in segments of the industry, investor interest across our platform remained incredibly strong, driving a record $59 billion dollars of fundraising in the second quarter and 85 billion dollars of fundraising year-to-date. We raised 31 billion in private credit this quarter alone, a testament to our strong track record of performance and our clients' continued desire to partner with experienced investors like Goldman Sachs. More broadly, demand for private markets remains robust as clients deploy capital across credit, equity, and real assets, and our ability to originate and structure opportunities continues to differentiate our offering. We continue to scale our solutions platform, and last week we were appointed to manage both Verizon's and Lockheed Martin's retirement plans, which collectively represent $70 billion in assets under supervision. These mandates from large, sophisticated corporate pension sponsors underscore the growing demand for comprehensive, integrated OCIO solutions capable of managing complex portfolios across public and private markets. As a leading provider of OCIO services globally, we are well positioned to capture this attractive secular growth opportunity. We are also further accelerating growth across asset and wealth management through targeted acquisitions that are enhancing and scaling our capabilities. Our recent acquisitions, Industry Ventures and Innovator, are both showing solid momentum in the first few months of integration. We will continue to evaluate opportunities to expand our client offering, strengthen our franchise, and accelerate growth. Let me touch on capital and regulation more broadly. We remain very engaged with our regulators to ensure better alignment of regulatory outcomes with underlying risk and look forward to swift progress towards a more balanced framework. As we again demonstrated this quarter, our robust capital position and disciplined dynamic resource management enable us to support clients across market conditions and drive accretive returns. This also allows us to return meaningful capital to shareholders. In line with our priority to sustainably grow our dividend, we recently announced an increase in our quarterly dividend to $5 a share, representing a 25% increase versus a year ago and 150% increase over the last five years. We also repurchased $4 billion of common stock in the quarter. Looking forward, we know that things rarely move in a straight line. While we continue to see a largely resilient economic backdrop in the U.S., risks can emerge quickly and drive periods of disruption and volatility across markets. A keen focus on risk management remains paramount as we support clients across a range of market conditions, but it's also clear that we are seeing broad-based momentum across the franchise and a very strong environment for client activity. The build-out of AI infrastructure remains in its early stages, and we believe this multi-year investment cycle will continue to drive elevated levels of strategic activity, financing, and capital formation across markets. The more expansive and complex this opportunity becomes, the more it plays to our firm's strengths. Very few firms have the global breadth of relationships, the depth of talent, the engineering capabilities, differentiated data, market insights, and financial resources to serve clients and capitalize on this opportunity set. These have been foundational strengths of Goldman Sachs for decades. And just as we are helping clients navigate this period of change, we are also implementing learnings within our own firm. There has been much debate around the broader implications of AI in the workforce. While it will change how work gets done, it will not replace what matters most in driving our business, our extraordinary people. We see AI as a transformational technology that expands the capabilities of our best-in-class talent and our capacity to drive commercial impact for our clients. Reflecting on our record results, I'm proud of our people and our performance. There is no question that a confluence of market tailwinds is supporting client activity and we You will remain disciplined in how we invest and manage risk. I feel very confident about the forward trajectory of Goldman Sachs as a result of years of strategic execution to strengthen our businesses, enhance connectivity across the firm. We are exceptionally well positioned to serve our clients and deliver for our shareholders. With that, I'll turn it over to Dennis to walk through our financial results in more Thank you, David.

Good morning, everyone. Let's start with our results on page one of the presentation. In the second quarter, we generated our highest net revenues of $20.3 billion, as well as our highest earnings per share of $20.98, which drove a quarterly ROE of 23.5% and ROTE of 25.5%. Turning to segment performance, starting on page three, global banking and markets revenues were a record $15.5 billion in the second quarter, contributing to a segment ROE of 25% for the first half of the year. Moving to page four, advisory revenues of $1.4 billion rose 17% year-over-year, primarily driven by higher completed volumes. For the year-to-date, we extended our number one league table position for announced and completed M&A volumes. Through the first half of the year, we advised on $1.2 trillion in announced deal volumes, with a lead of approximately $425 billion ahead of our closest peer. In equity underwriting, revenues were $985 million, up 130% year-over-year, supported by robust deal volumes across a broad range of transactions, including the marquee mandates for Alphabet and SpaceX, helping to drive our number one league table position through the first half of the year. In debt underwriting, revenues were $1 billion, up 75% year-over-year, representing our best quarter on record, driven by stronger performance in leveraged finance and asset-backed activity. Year-to-date, we ranked first in leveraged lending and second in high-yield debt underwriting. As David noted, our investment banking backlog increased to its highest level in five years, even with the very strong revenue production this quarter. We remain optimistic on the investment banking outlook as strategic dialogue remains robust. While sponsor volumes are still subdued versus historical averages, this represents a meaningful source of potential upside as activity picks up. FIC net revenues were $4.6 billion, up 32% from the prior year. Intermediation revenues were up 39% on stronger performance across interest rate products, commodities, and mortgages. Financing revenues increased 14% to a new record and included strong performance in mortgages and structured lending. Equities net revenues were a record $7.4 billion for the second quarter. Record equities intermediation revenues of $4.2 billion increased 60% year-over-year, reflecting stronger activity across derivatives and cash products. Equity financing was also a record, up 91% year-over-year, driven by continued strength in Asia and another record for average prime balances. Across FIC and equities, financing revenues of $4.5 billion rose 62% versus the prior year and comprised 37% of total FIC and equities revenues. Let's turn to page five. Asset and wealth management revenues were up 20% year-over-year to $4.6 billion. Year-to-date pre-tax margin was 24%, the ROE was 13.5%. Management and other fees were up 20% year-over-year to a record $3.4 billion, primarily on higher average assets under supervision. Incentive fees were $112 million. We expect these fees to increase materially for the remainder of the year. Private banking and lending revenues were $689 million, and we continue to see strong loan growth, with balances rising to $48 billion. Investments revenues of $441 million were up significantly year-over-year from substantially higher net gains on investments in private equity. Now moving to page six. Total assets under supervision ended the quarter at a record $4 trillion, supported by $91 billion of long-term net inflows across asset classes, particularly in equity assets. This marks our 34th consecutive quarter of long-term fee-based net inflows. Turning to page seven on alternatives. Alternative AUS totaled $459 billion at the end of the second quarter, driving $725 million in management and other fees. Gross third-party alternatives fundraising was a record $59 billion for the quarter and $85 billion for the first half of the year. Given the strength we've seen year-to-date, we now expect full-year fundraising to exceed $125 billion. On page 8, platform solution revenues were $221 million in the quarter. We expect quarterly revenues for the remainder of the year to be broadly consistent with the second quarter. On page 9, firm-wide net interest income was $4 billion in the second quarter. Our total loan portfolio increased 3% sequentially to $261 billion, primarily reflecting growth in other collateralized and residential real estate loans. Our provision for credit losses of $102 million primarily reflected impairments related to wholesale loans. Turn to expenses on page 10. Total operating expenses were $11.7 billion for the quarter and $22.1 billion for the year to date. Through the first half of the year, we generated material operating leverage with an efficiency ratio of 58.8%, improving 320 basis points from the prior year period, helped by a decline in our compensation ratio net of provisions to 31%. Quarterly non-compensation expenses increased from the prior year to $5.6 billion, with the increase driven by transaction-based expenses tied to robust activity levels, particularly in equities. Even in a stronger revenue backdrop, we remain focused on disciplined expense management and driving efficiencies over time. Our effective tax rate for the year date was 18.5%. For the full year, we continue to expect an effective tax rate of approximately 20%. Now on to slide 11. Common equity tier one ratio was 12.9% at the end of the second quarter under the standardized approach, 150 basis points above our current capital requirement of 11.4%. We were pleased with our results in the recent CCAR test, which demonstrated the strength of our balance sheet under a severely adverse economic scenario. Our stress capital buffer of 3.4% remains unchanged and is effective through September 2027. We are encouraged by the direction of the proposed changes to the regulatory framework, including continued efforts to enhance transparency and improve stress test calibration, and we look forward to swift progress towards Basel III finalization. A more balanced and risk-sensitive regulatory approach will be supportive of bank lending and capital formation and ultimately constructive for the broader economy. Our capital management priorities remain unchanged, which are to invest in our business and attract returns, sustainably grow our dividend, and return excess capital to shareholders through buybacks. Our capital actions this quarter reflect our continued discipline approach across each of these priorities to support clients and also enhance shareholder value. We recently announced an increase to our quarterly common stock dividend to $5 per share, and we repurchased $4 billion of our common stock this past quarter. In conclusion, our record results reflect the strength, scale, and diversification of our world-class interconnected client franchises. As we look ahead, the opportunity set remains compelling across the firm, supported by sustained client engagement and a backdrop of elevated capital formation and deal-making activity. Importantly, the progress we have made on our strategic priorities has strengthened our platform, enhanced our risk management capabilities, and approved our ability to capture this opportunity. With a strong operating environment driving a robust flywheel of activity across our franchise, we're confident in our ability to continue to deliver for clients and generate more durable returns for shareholders. With that, we'll open it up for questions.

Thank you. Please stand by as we assemble the queue. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star, then two on your telephone keypad. If you're asking a question and you are on a hands-free unit or a speakerphone, we'd like to ask that you use your handset when asking your question. Please limit yourself to one question and one follow-up question. We will take our first question from Glenn Shore with Evercore.

Hi, thank you. All right, so many good things in there. I'm going to try to pick on one here in equities. So I know it's hard to comment on sustainability. The environment's good. A lot went bright this quarter. So maybe we could talk about wallet share gains and any concentration we should think about, because I saw overall market volumes up 9%, but margin was up 50, and your revenue was up like 86% or whatever, yet somehow RWA is down. So those are all great trends, but maybe you could talk about wallet share gains and what you're seeing in that backdrop.

Sure, Glenn. Thank you for the question. I appreciate that. Obviously, the performance of our equities business in the last quarter is the result of a number of multi-year investments. We obviously identified a long time ago, particularly on the equity financing piece of the equation, a commitment to grow that as a component of our GBM public business. We've been putting in place the talent, the risk management capabilities of making multiple years of technological investments to underpin our capabilities, particularly in international jurisdictions such as Asia. We, on the heels of some of the regulatory capital relief that we received at the turn of the year, identified the people that we were going to deploy more by way of financial resources and try and capture what we viewed as a competitive shortcoming in Asia, where we wanted to, in particular, improve our market share and capture more share in that part of the world, but it required the investment across the board through the people and technology and resources. We've made those investments. We've sustained our commitment to those activities. And over the balance of the first half of this year, we've had a very favorable operating environment that's enabled us to capture that. So, you know, we remain very focused around the world for the equities business, frankly, for all of our activities across the firm, trying to identify pockets where we have bigger opportunities to grow our share with clients, improve our performance, and we'll try to strategically invest in and feed those areas so we can improve our overall leadership positions.

Could, instead of a different fob, can I just drill down on that and ask, can you talk a little bit about the client composition? um parts and i ask because parts of the business have had um bursts of growth across asia and then things cool down um and so maybe you could talk about what kind of clients we're talking about and then if we should be thinking about any concentration risk because at times there's a handful of big clients that that drive that so i appreciate all that color sure no thank you and I appreciate that.

So, you know, the business has different characteristics globally, and it has different client subcomponents. There are many types of clients that sit within the equities franchise. You can, among other forms of characterization, include long-short investors, more client-oriented investors, and their performance and their consequence to the overall wallet and activity changes over time. We have been undertaking an effort to expand our overall share across the client base, deploying, as I said, the human capital technology and financial resources to do that, and being thoughtful about the overall portfolio composition as we grow. And we make choices across a number of different areas where we allocate resources to try and optimize portfolio concentration. We have very big clients in a lot of our businesses, and they are very influential. But this is a highly diversified suite of clients across the world. We are intermediating equity, asset flows in cash, derivative format, financing format for a multitude of clients all over the world.

Yeah, I just think the only thing I'd add, Glenn, that I just think is an important thing to recognize, we really have global scale advantages in that we really have scale and leadership positions across every region of the world in this context. And I think we're in an environment where that's really providing a benefit the real strength of our global footprint and our ability to really connect our activities globally and manage our activities globally is is is an advantage that we're feeling more more directly at this moment thank you we will take our next question from ibrahim punawalla with bank of america hey good morning i guess maybe just uh And sticking with that, David, around the global strength, just if you take a step back, talk to us in terms of this capital allocation

when you're looking through the businesses and through markets. Like, what are the best opportunities? Yes, it's competitive. But in terms of how you're thinking about capital allocation across your markets business in Asia versus Europe versus the United States, market financing versus all the CapEx AI activity that's going on, and then how you think about all of that relative to the buybacks that we did this quarter?

Yeah, I mean, you know, I'm happy to comment on it, Abraham, but I'd start by pointing you back to what Dennis said and articulated, I think, very clearly in his prepared remarks. You know, it is always our desire, you we think about our client franchise it is always our desire to take our capital and allocate it toward supporting our clients and their activities when we can do so in a way that produces you know benefit for our clients and accretive returns for our shareholders that would always be our preference in fact if we could do that and have no excess capital um we would we would you know obviously with a buffer but no x sx capital for buybacks if it's generating creative returns First and foremost, we'd like to get the capital into the business to support our client franchise. We also generate a lot of capital. And so we are extremely disciplined about looking for places where we can invest in the client franchise. I think Dennis highlighted one where over the last six to 12 months we saw a real opportunity, and that was around our business in Asia and Asian equities. And we've benefited from that. But if we don't see opportunities or we're generating capital and we don't see opportunities to deploy it, we're going to nimbly get it back to shareholders as quickly as possible. And I think we've been quite disciplined about that. And so, you know, this was a quarter, given the performance, where we actually created more cushion and more buffer. We delivered a bunch of capital back to shareholders. But you also saw we deployed more into client resources, you know, out of creative returns. And so we always start, where are the opportunities? We're always looking broadly. We have good discipline processes, nimble processes to look at that, change directions quickly. And if we don't see ways to deploy it, we're going to consistently work to get it back Got it.

Very clear. And I guess I just wanted to focus on the durability of it. So there's durability for your shareholder returns. But then talk to us about the durability of the AI CapEx cycle. I'm sure you spend a lot of time thinking through that. I think, David, you were quoted in the press during the quarter about there's more greed than fear in the market. So as investors think about the risk of maybe an investment bubble around AI, you all have used AI at Goldman Sachs. You have your own experiences. When you look at that, when you look at kind of what the investment outlay is for the next few years, just maybe give us a sense of comfort word that you have around how durable this cycle could be when we think about the financing business and what that means for Goldman and Goldman's earnings outlook? Thanks.

Sure. You know, I think we've tried to, you know, in a balanced way, if you listen to, you know, the prepared remarks, you know, we've talked about the fact that the environment at the moment remains extremely active with our clients. And our expectation, Ibrahim, certainly that's going to continue. All the indicators we have is that we are in the relative early innings of a very, very significant, when you're talking about the AI build-out cycle, of an AI build-out cycle. Now, we all know, because we've all been around for a long time, that these things don't go in a straight line, and they can ebb and flow. And I'm not smart enough to tell you whether or not there can be recalibrations in the short term, you know, sometime in the next six months, the next 18 months. But I will tell you that when you look over a, you know, a three-year period or a five-year period, we're investing in long-term growth to support this, and we're going to continue to be very consistent about that. We see lots of opportunities to deploy capital to our clients to finance this infrastructure build-out. We're very disciplined about the returns we expect for deploying that capital. It feels like that will continue, but I know that it won't be a straight line and there'll be bumps and there'll be recalibrations because there's a lot of uncertainty around how not only is the infrastructure going to be built, but once the infrastructure is built, how enterprises will buy that infrastructure, how it will be priced, how greater efficiencies will come from chips and then the pricing, you know, ultimately of the technology. There's a lot of talk about token spend and the cost of the technology. And so, you know, I think we're early in the cycle to build out, but it won't be without bumps and recalibrations as people can understand just what the ultimate demand is for this technology and enterprises. And so we're excited about it. We see lots of opportunities. And, you know, those opportunities are very correlated to Goldman Sachs. That cycle is contributing to our earnings momentum, but I also just highlight the breadth, depth, and diversity of the firm, its franchise, the scale of our management fees, across the firm of our more durable revenues. Those are all things we've been investing in over the last seven or eight years that have made the firm broadly much more diverse. And this management team is not focused so much on next quarter. We're focused on how we're going to grow earnings from here over the next three to five years. and we have a high level of confidence that we can deliver on that.

Thank you. We'll take our next question from Erica Najarian with UBS.

Yes, thank you. I wanted to just unpack the equities number more. It was such a big number. I think there was a collective chuckle across the street given the outperformance here. So two-part question. Number one, you know, how much is the Asia hyperscale trade driving the equities revenues at Goldman? And does the sort of recent correction, is that any cause for concern? And secondarily, you've also heard it given the balance sheet demand in Asia, that prime capacity has been more limited. And I'm wondering, given your financing number, you know, sort of how that played out for Goldman Sachs And whether or not sort of in prime, you're starting to see a little bit of pricing power, you know, given, you know, the global demand for balance sheet.

Sure, Erica, thank you. So the activity for our equities business has been very broad based. It's across intermediation and financing. In intermediation, it's across cash activities and derivative activities. And there's a dynamic in the marketplace right now where we're seeing single-name equity dispersion relative to index, and we're seeing that dispersion relative to index while the market's going up. And that sort of, you know, concoction is very supportive for the activity that clients are undertaking to manage their own portfolios and their own returns. And it is causing them to come to us to assist them in managing that dynamic. On the prime side of the equation, it is always the case that we try to grow that in a strategic, disciplined fashion and think about where the best opportunities are to support our most important clients and also grow our franchise. We identified Asia. We identified it a while ago. We made the decision to start ramping that up in the first quarter, gave rise to questions as to, you know, could we sustain that investment? You obviously see we're at the end of the second quarter, and we have revenues that are resulting from those investments that we made, and we're entering the second half with a capital cushion that's even larger. So, you know, we feel like we're on plan to support clients and help them take advantage of that. We do see opportunities for pricing leverage. There are some participants in the market that are also, I'll say, being more disciplined. And there's a lot of desire from our clients to engage. So we're going to remain selective and careful about how we grow the business. But there's a big demand from clients.

There's a secular growth opportunity that, given the multi-year set of investments we've made, it's something that we can capture. thank you thank you we'll take our next question from christian blue with autonomous research uh good morning david and dennis um just on capital ratios and it probably ties into the financing question earlier on um you know here you on the and the ct1 rising but slr did fall 40 bips uh 0.3 so so clearly there's a lot of growth in sort of um low rwa leverage intensive financing like Prime. Your SLR ratio is now the lowest among peers. So how much does SLR govern constraints on growing the financing business? And then maybe give us a sense of how low you're willing to run that ratio.

So as you've heard us say, you know, multiple times before, we have a number of different, often oscillating, you know, binding constraints as a firm. We manage to all of them. We're managing the CT1. We're managing the SLR. You're right that we have facilitated some balance sheet expansion to facilitate client activity. Ultimately, there will be a limit to our appetite to expand that. And, you know, I think as we've proven over time, we have the word David used is nimble, which I think is appropriate. We will look at the opportunity set that our clients are presenting to us and then make choices about the relative resource allocation to try to continue to drive sustained franchise and performance for the firm. But we'll look at all of those various constraints on a very dynamic basis.

Okay, thank you. On expenses, you know, pretty impressive. You know, I think efficiency ratio for the first half is only a 60% target. And I think you're still investing in kind of cloud and AI under GS3.0, GS1 GS3.0. So just curious about kind of how much of the expense or efficiency gains you've had so far is a function of, you know, just a strength in the markets business versus kind of what you've already taken out from a structural cost perspective.

Sure. I appreciate that question. We'll continue to have this discussion over the ensuing number of quarters. So, you know, obviously, we've just developed a tremendous amount of operating leverage given the performance of the firm. We've been able to, you know, grow our revs at about 40 percent, revs at a PCL slightly higher. And, you know, comp expense is only growing at 30 percent and non-comp at 22 percent. So there's been disciplined growth on the expense side relative to top line. We expect that we will have the capacity to continue to invest and fuel, you know, productivity opportunities that arise from AI and from general firm. process rewiring. I think one of the greatest benefits from our launching our 3.0 initiative is that we have galvanized the entire firm to understand that making efforts to scale our company and build more resilient, more automated platforms that can help us capture the significant growth in client activity that we've seen, that has been an enormous benefit. So we're developing marginal levels of revenue production and sort of not growing our human capital footprint quite the same way, but recognizing instead that we need to have sort of quality of capabilities and technology to scale. And that's been a learning that I think is one of the big pieces of the driver to our efficiency ratio.

I would not say that there's been any structural change in our expense base um at this point thank you we'll take our next question from mike mayo with wells fargo securities uh hi um one simple question um i guess you said uh your merger lead advising unannounced deals is 50 higher than the next largest and that you have record advisory backlogs. So what is the multiplier effect for every dollar of merger fee that you generate? How much more do you get in all those other activities from financing and risk management and execution and all those other things that you say? What's the multiplier effect? Is it like 10% elsewhere, 20%, 50%?

So I appreciate the question, Mike, and it's something we think a lot about. I'm not going to give you a specific percentage. And to be honest, I don't know if I could give you an exact percentage that I could underwrite on a public call. But let me try to give you a framework for how to think about it. Because I do think this is one of the most powerful things about our franchise. And it starts with the fact that the advisor relationships and the position of the advisory franchise is really rooted in an extraordinary number of senior people that have deep, deep trusted relationships with CEOs and boards across the corporate infrastructure. And when you get an environment like this where there's a lot of strategic activity, you obviously get benefit in the advisory line and you see our market share performance in the advisory line. But you get it spilling through in so many other things because that advice and that trust leads them when they think about financing, they think about hedging. They think about how it all integrates. We're finding ourselves in these discussions earlier and alone and without other banks. And that allows us to command more of the wallet, you know, structurally. I think it also spills over, given our 1GS approach into asset wealth management. And we get it by giving asset management and our clients in asset management the opportunity to invest in a lot of this stuff. And we get earlier looks. And then in addition, as people trust the firm, they more and more want to leave their wealth at the firm, and there's a lot of wealth being created. So the multiplier effect is across the firm. It's significant, and it's a very, very virtuous flywheel. When we step back as a leadership team and we look strategically at some of the things we've been focused on for a number of years and we continue to focus on, the amplification of this coordination over the firm, taking these trusted relationships and really levering different ways we can serve these clients kind of core to what we're doing. It's something I think we're getting right. And so it's leading to benefits. That flywheel is powerful. I can't give you a percentage, but it's a meaningful part of the integrated performance of the firm and our 1GS operating ethos.

Your prime finance is up, you know, a gargantuan amount year over year. What's your capacity versus the demand?

So in the case of Prime, also in the case of FIC financing, as has been the case, there continues to be far more demand across the client segment than we're willing to engage when we sort of balance our objectives of serving our clients, driving market share, but also being balanced, diversified, and focusing on risk management. So we're at a moment in time where the demands for the provision of financing are outstripping what we think is the appropriate quantum. That should come as no surprise. We are in the middle of an AI CapEx super cycle where there are demands on financing into every single financing instrument in every region of the world and across every single industry. So it's a function of deploying our resources as efficiently as we can to serve our clients as best we can. but we're at a moment in time where there's more demand right now.

Thank you. We'll take our next question from Manan Gasalia with Morgan Stanley.

Hey, thank you. Maybe just on a related question, you know, can you just talk about the strength in loan growth in the global banking and markets business? I guess how much of that is from, you know, the financing side that you're calling out? How much of that is from just general deal-related financing? And I guess, what is the outlook for how much balance sheet you can allocate there, just given the strength we've seen on the M&A side in the second quarter?

Sure. Thanks, Manan. Yeah, so there's a couple areas across GVM that we have been fueling. One area that we called out in the first quarter is we called out deploying capital into our deals book. And so that obviously dovetails with some of the advisory comments that David was talking about, you know, in addition to call it regular way financing of investing client activities and provision of clients to our wealth franchise, there's event-driven demand for financing, M&A linked demand for financing. That's an activity we've historically been, you know, one of the leaders in. So we are prioritizing deployment of capital into our deals book. And then as you talk about the growth that you're recognizing in terms of loans on a sequential basis, that the other collateralized largely relates to what we report as fixed financing, which connects to the prior question where we're growing that, but we continue to be disciplined in terms of how we grow that. And increasingly, with the formation of our capital solutions group, again, to this point that there's sort of more demand than necessarily availability, we are using our origination capabilities where we can originate and structure very high quality investments in fixed income space. And we're routing it to our asset and wealth management business. There are clients that we have in asset and wealth management that are very interested in getting exposure and investing in the same kinds of products that we used to invest only for ourselves on our balance sheet. And so we're harnessing the same origination capabilities facing off against all the clients around the world and helping source opportunities and serve clients, some of which will go to the balance sheet and show up in FIC financing. Some will now get routed to AWM and help drive some of the growth in that business. And then some of it will underwrite and distribute to institutional clients who are also interested in the exposure. So we have a different sourcing, origination, and distribution strategy for different types of instruments and different client bases.

Got it. Very helpful. And then as my second question, can you talk about some of the puts and takes in the CET1 ratio this quarter? You know, VAR was up in the quarter, not a surprise given the environment, but RWAs were actually down quarter on quarter. So So, you know, I guess the question is what drove that and how should we think about the range in which you can manage your CET1 ratio over the next year or so?

Sure. So I appreciate that. I think the punchline, you know, we remain committed to an operating model that's sort of called plus 50 to 100 basis points. We're obviously in excess of that. There were elements of our market risk RWAs that relate to VAR that actually came down about 20 basis points of the increase is attributable to that. And then we improved some of our credit risk RWAs around certain funding and lending activities, which contributed to some of the gain. And then the balance of the delta is really just the earnings generation relative to the dividend and the buyback. You know, we feel good that we are able to deploy as aggressively did in the first quarter on behalf of clients, generate the results that we have now in the second quarter, and as we move forward, we have 150 basis points of cushion that we can use for more of the client-based deployment that David was referencing. And as we see opportunities, we'll fill that, and the extent we don't, we'll return capital. We returned a record amount of capital by share buybacks in the first half. So, you know, that continues to be something that we're focused on. So you should expect that cushion to be deployed for the client franchise and then some return of capital. And we'll land ourselves with the appropriate cushion to manage the firm.

Thank you. We'll take our next question from Brennan Hawken with BML.

Good morning. Thanks for taking my questions. You know, despite really robust revenue growth, headcount was down 2% quarter over quarter. Dennis, I know you spoke to the fact that you didn't see the expense base as structurally changing, but is this decline in headcount a function of some of the efficiency efforts you've been focused on, whether it's via AI or one Goldman Sachs 3.0? And how should we think about headcount going forward?

So I think those numbers are an output of the efforts that we're undertaking, and it's not the result of some specific target. By the way, you're getting second quarter numbers. We have a whole bunch of people that join the firm every single year in the third quarter. So you're looking at an interesting point in time where headcount's up year over year, but it's down slightly over the course of this calendar year. I think what's interesting and exciting, and I would dovetail with David's comment on the power of AI, some of the technology is letting our people do more and be more productive. And that's the way we're thinking about investing. We want our world-class people to be more productive and do more for clients. As they become more productive, they may feel less need to replace people that in the ordinary course flow through the system. But right now, it's not a moment for a structural rework of our human capital footprint. It's a moment to invest and utilize this new technology and learn how to deploy it in the best possible way for our people and our clients.

Great. Thanks for that, Culler. And then for my follow-up, you know, backlogs of both quarter-over-quarter and year-over-year, certainly encouraging given how robust revenue growth was this quarter. Could you speak to maybe some trends in the backlogs, whether you're seeing early signs of sponsor reengaging? You guys also flagged leverage finance as a contributor in DCM. So is that an indicator of activity levels improving, or is that still heavily skewed to refinancing?

Yeah, I mean, I'll start, Brennan. And Dennis can add, you know, I think the most important thing that's driving the backlog, you know, activity is really, you know, strategic M&A. And, you know, we're just in an environment where if you think about what's going on with technology change and scale broadly, if you're running a big business, you have to be focused strategically on scale advantage. And that means you have to be open to thinking about how you enhance your competitive position. And we're now also in a regulatory environment where when the question's asked, you know, could I, you know, inorganically enhance my competitive position, you know, the answer is maybe after a period of time where the answer would have been, you know, absolutely no way, whatever the question was. And so we're finding, and I'm seeing it directly in a lot of the dialogues I'm having with CEOs, CEOs are dreaming and thinking about, you know, really large, structurally scale-enhancing opportunities, and that's leading to, you know, just a lot more strategic activity. I'd say while there is more sponsored dialogue, the sponsor stuff still has not accelerated, and candidly, it's going to come at some point, and that's still a big upside in these flows. if the strategic dialogue, you know, takes hold. You know, the leverage finance activity to some degree is around some of the AI infrastructure build. And it's also around kind of recapitalization and refinancing because one of the ways that the sponsor clients can advance or get capital out of businesses is to recap them. And we're seeing a little bit more of that. But the big driver is this is an environment where people want scale advantage and CEOs are dreaming more kind of large-scale opportunity because they think that they've got a multi-year window here where they can potentially execute on it.

Thank you. We'll take our next question from Dan Fannin with Jefferies.

Thanks. Good morning. So lots of momentum within your alternatives business given the fundraising this quarter. But as you look at the first quarter levels and then the addition to this quarter, you have fee-paying AUM, or I should say non-fee-paying AUM that's well north of $100 billion. I was curious about how to think about the pace of when we should see that kind of flow into management fees over a reasonable time period.

So thank you for the question. And look, you're right to point out that there's a time period, there's a timeframe between which we raise the capital and then ultimately deploy it. And we're only we're only recognizing the revenues when it's deployed. But this is also it's like a laddered portfolio. I mean, this is continuous over time. So while we may have just raised a substantial amount of money and it may take some time for our investors to find the right way to deploy it, they're working with the monies that have been raised in prior periods and deploying that into the processes that would have started before this version of capital raising. So I think the way we think about it, look at it over a multi-year period of time, is we think about, you know, we have a target of $75 to $100 billion of annual, you know, fundraising, and we want our teams set up to sustain that growth on the fundraising side so that then they can pick their spots to deploy it.

Sometimes that'll be quickly, sometimes that'll be more slowly, they'll make the right decisions based on the investment opportunities to present to them so there is there is a lag it's not a formula you can't formulaically um uh predict it understood and then as my follow-up uh dennis you mentioned incentive uh income to increase materially for the remainder of the year so hoping maybe you get a little bit of a quantification around that or some numbers and then is this based upon you know deals that have already been announced or you know movement in values or things that are already kind of transacted by?

Sure. So I'd say two things on that. First, on a multi-year basis, we're not sort of readjusting what we think is the medium-term run rate contribution from incentive fees. But because we do expect it to be unusually higher, we thought it was appropriate to call that out to all of you. So we do expect in the third and fourth quarter to have materially higher incentive fees. It is related to specific transactions that are known and out there. And, you know, based on a schedule and some events, we know that there are, you know, incentive fees that we expect to earn as a firm.

Thank you. We'll take our next question from Devin Ryan with Citizens Bank.

Great. Good morning, David and Dennis. Another one on the alts, just the strong fundraising in the quarter, obviously huge momentum. So I just want to dig in a little bit on the demand drivers there. Just get a sense of, you know, is this just kind of continuation of the long-term consolidating share or how much is LPs becoming actually more discerning in this backdrop or even just, you know, kind of opportunistic in areas like private credit where I know you've had some momentum with institutions. Just be good to get some sense of the strength there and kind of the ability to continue that.

Sure, Devin. I mean, I think, you know, candidly, in this case, it's both. First, you know this has been a core part of our long-term strategy to set the firm up, to use our breadth, our scale, and our capabilities to broaden these platforms, and we're successfully doing that. And because of the nature of our asset management platform and the extraordinary, for lack of a better term, manufacturing facility we have across the broad asset management landscape, big institutions find us a very, very attractive partner because we have an ability to put scaled solutions together for them that really are customized for what they want, what they want to invest in. And I think we're getting better and better at that. We're seeing the benefit of that in our fundraising. You know, secondarily, I think there are areas where, you know, our level of expertise and our experience and our differentiation, and there are others like us, where LPs are really saying, you know, we're going to differentiate and go to people where the performance and the capabilities are better. And I think private credit's, you know, an example of that. We've benefited, you know, from that. And so I think, you know, both are factors. You know, there is going to be, you know, some lumpiness in fundraising, you know, where quarters will, because it has to do with as you go out and present the different funds, you know, to the market, there's a lumpiness as to what you see. And so, you know, we kind of gave you some direction to travel for the year, and we're obviously way ahead of that. But I think both those things are contributing, you know, to our ability to continue to perform. And, you know, they're correlated. We've set out growth ambitions for that business, and we're delivering on those growth ambitions, and you can expect us to continue to deliver on those growth ambitions.

Yeah, that's great. And then just to follow up on just the AI build out inside of Goldman, and you obviously touched on 1GS, but as you think about just how fast this technology is evolving, you think about Agentic as well and maybe opportunities. I'm assuming that you guys will be probably on the forefront as you've been with other technologies in the past. So, yeah, how much of an opportunity do you see forming and maybe how far out is it to do more with, you know, Agentic is just one example. And do you see things that could be really interesting, even from a client-facing perspective, to be innovating with where you could be early and could be meaningful?

So, Devin, look, the space is moving very, very quickly. And with the passage of time, I think we get more excited and more confident about what some of the capabilities are. It started with productivity and a more narrow component of the firm called engineering. But based on leveraging the firm's relationships with a number of different sort of large language model providers and investing in sort of very high quality engineering talent, frankly, hiring a bunch of engineers from the outside to complement our already excellent team, we were finding very effective ways to deploy it inside of the firm. I frankly think it's still early. So there are some of the easiest places to generate benefits are what I would refer to as table stakes. They're sort of necessary, responsible process improvements that a leading international corporate should integrate into their firm. And then the question becomes, how do you harness the combined capability of your natural talent that you have in your organization, your engineering talent, the data that you have as an organization. And Goldman Sachs has an enormous amount of highly differentiated data that we have collected and curated over many, many, many years. And we put that all together with the extraction and analytic capabilities of these new technologies and put that in the hands of our world-class talent, and they should be able to continue to offer clients better, faster, more insightful pieces of advice and analysis to continue to make Goldman Sachs the kind of place that clients want to call first when thinking about their most important transactions.

Thank you. We'll take our next question from Gerard Cassidy with RBC.

Good morning. Thank you. Can you guys share with us your thoughts on, obviously, today's numbers are very, very strong, and the market conditions are very positive, particularly when it comes to the AI-related financings and such. Can you compare this period and the influence that AI is having on the business in terms of capital raises, DCM, ECM, et cetera, trading, to prior periods similar to maybe the dot-com era, or even during the 2021 period, which we had such a strong investment banking period there during the pandemic. Can you frame it out where you could give us how big is this tech slash AI contributing to the success versus those prior periods when we had dot-com and obviously in the pandemic I appreciate the question, Gerard.

And it's not surprising that, you know, we get a lot of questions, you know, that kind of look back at history and people want to draw, you know, direct comparisons. You know, I think it's really important to look at history and think about history and, you know, think about, you know, other other waves of technology, investment, et cetera. But I, you know, I think the frame I reframe it to you is I'm not sure that I can do that in a way where I give you a good answer, certainly in terms of the size and the scale of the capital that's being, you know, that's being put forward. You know, it's very, very significant in terms of absolute dollars. But one of the things I just highlight that's interesting, you know, when you think about the IPO market, this was obviously a very robust quarter for IPO activity. IPO volumes in this quarter were kind of at or below the 10-year average. OK, so it's not like when you look in a historical context, there aren't other periods of activity, you know, that are very, very significant for all, you know, for all different reasons. The thing that I think is important, though, when you think about it, you frame that question around the impact of the AI technology, the firm is so much bigger, so much more diverse, has so many more earnings engines, has so much more durable revenue than it had the last time we saw a significant investment cycle like this. And so the investment cycle is, of course, and we said this, it was one of the things I said in my remark, the investment cycle is having an impact on the environment and therefore earnings. But the firm and the earnings are more diverse, you know, more sustainable. Could this ebb and flow? Absolutely. And it will, as it has in any other cycle. I think that's one of the lessons that we can take when you have these accelerations. Ultimately, you will have a recalibration, a reset, you know, a drawdown, and then a further acceleration. That's what the path generally looks like. But we're doing it off a much more diverse, much more significant base. And as we manage the firm, that's something we're thinking carefully about.

Thank you, David. And then as a follow-up, and this might be a difficult question to answer as well, but obviously you've been very articulate about one Goldman Sachs. You talked about the wealth management referrals this quarter. I think it was 900 folks. When you look at your trading numbers, is there any way of quantifying how much of the success in those numbers has come from one Goldman Sachs versus the market conditions just being so volatile? So, for example, obviously the Middle East conflict breaking out in February contributed volatility, which firms like yours and others benefited from increased volatility in trading. But is there any way of parsing out how much success is coming from that one Goldman Sachs approach and the success you've had in building up those numbers for your best customers?

Yeah, what I can say to you, I can't say it in terms of a quarter, But I think you'll remember, Gerard, if you go back to our first investor day in January 2020, we said that we had meaningful wallet share opportunity with the top 100 accounts. And I think if I remember correctly, don't hold me exactly to this because I'm remembering and I'm now very old, so I'm remembering six years ago. But I think we said we were top three with 44 of the top 100. And, you know, we set out to do better. I think today we're top three with close to 80 of the top 100, but we are top three with 127 of the top 150. So we have, in a concentrated, focused way, worked hard to improve our market share with our FIC and equities clients. And we've materially improved it over the course of the last six and a half years. And that is the number one thing that's driven our relative wallet performance that focus and we continue to do it dennis in his comments made a reference to our you know constantly looking at places where there are gaps or opportunities we run detailed processes in the firm we are when you look at a lot of businesses we're number one but that doesn't mean that we're number one in every little niche and every little corner of that business in fact when you actually take any of these businesses we have very strong wallets here and you pull them apart. And so you start looking at advisory revenues. We're clearly number one, but that doesn't mean that we're number one in biotech, you know, even if we're number one in healthcare. So we, you know, we take a focus and we constantly are looking and saying, where are we falling short? Where can we do better? Why are we falling short? How can we improve those client relationships? And that's a pretty disciplined process that we do across investment banking, across, you know, over time. And that is kind of 1GS. You advance your overall relative wallet position. You know, there are ceilings to that in some places, but we'll continue to remain focused. And so I think that ethos, you know, that kind of market share discipline has been very, very constructive for our performance over an extended period of time. And we're going to continue to be, you know, disciplined and, you know, kind of always being self-critical and saying, where can we better Be better.

Appreciate that, David.

Thank you. We'll take our next question from Chris McGrady with KBW.

Oh, great morning. Just a big picture question. You know, AWM is about a quarter of the revenues. I guess the question is this about where you'd like it to be, understanding the puts and takes of trading normalizing over time? And then secondarily, any potential opportunities to round it out, the franchise, either domestically, internationally, and maybe inorganic considerations? Thanks.

So, appreciate the question. And, you know, I guess if I could paint an ideal, you know, business mix between global banking and markets and asset wealth management, the percentage would be slightly different. But this, you know, things are working pretty well, because we've been able to grow global banking and markets, I think, better than when we kind of laid out the roadmap, you know, six, seven years ago, we thought we'd be able to grow it. Now, I wouldn't trade away that growth, you know, at all. And I think there's a lot of durability in the scale of that franchise. But of course, we see a lot of opportunity to grow asset wealth management. We said clearly in the prepared remarks that we feel good about the acquisitions that have filled gaps and have been able, that have allowed us to accelerate growth, and that we continue to look at interesting things that will allow us to do that. And so we're going to continue to find ways to fill in that franchise, accelerate the growth. We're always going to be disciplined. The bar is always high to do anything inorganic. But when you look at the scale of global banking and markets, you know, it would take very significant things to materially move the business mix. And so we're just going to continue to try to grow this business the way we've outlined. We will find inorganic opportunities. We'll add them when we can. And, you know, I think we've got a pretty good runway.

Thanks for that. And my follow-up, appreciating the strength across the board this quarter. I guess if I were to ask, what's not at your high expectations, whether nuances within a business, strategy, geography, anything that as a management team you're looking at and saying, hey, you know, we're not quite where we should be?

There are lots of opportunities. There are lots of places we can do more. You know, when you say it's not at our expectation, you know, that frames a little bit in a negative. What I would say is there are places where I think we could have invested more sooner and we're investing more now where we think we can accelerate. And one of the most obvious ones is wealth. There's just an enormous, we have a very strong, ultra high net worth, high touch wealth business. and the growth in very, very wealthy people that have investable assets is expanding at an even faster pace. It's a very, very fragmented business where people have fragmented share. There's no big leader, you know, that has more. And, you know, I think that our opportunity, this business scales with people, by the way, and we're investing in those people. We've accelerated our investment. I think the ability, you know, for us to hold ourselves to a bigger client footprint and ultra high net worth is something that we've been very focused on in the last two years and are accelerating that focus. So I point to that as an example, but what I'd like you to take away, you know, again, is this, you know, we try to run the firm with a discipline of always looking at where can we invest? Where can we do more? How do we look at things over three, five, seven years, not quarter to quarter? And, you know, we continue to see a lot of opportunities to grow the firm and grow the earnings of the firm. And that's what the leadership is focused on. We can debate what the right through the cycle base is at the moment. And there's no question, as we said, we're benefiting from the current environment. But we see lots of opportunity. You pick the base to continue to grow the firm, grow the franchise, and grow the earnings over the next three, five, seven years.

Thank you. At this time, there are no further questions. Ladies and gentlemen, this concludes the Goldman Sachs second quarter 2026 earnings conference call. Thank you for your participation. You may now disconnect.