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Why is Morgan Stanley stock falling today despite record earnings and revenue beat?
Morgan Stanley stock fell despite record Q2 earnings and revenue. Here's why shares slipped, what drove profits, and what disappointed investors.
Morgan Stanley shares fell around 1.2% in pre-market trading on Wednesday, even though the bank reported stronger-than-expected second-quarter earnings. The bank beat Wall Street's profit estimates for the second quarter, helped by a big jump in investment banking and trading revenue.
Morgan Stanley reported a record quarterly revenue of $21.35 billion, higher than analysts' estimate of $19.64 billion. The bank earned a net profit of $5.58 billion, or $3.46 per share, compared with $3.54 billion, or $2.13 per share, in the same quarter last year.
Morgan Stanley earnings beat expectations
Analysts had expected earnings of $2.94 per share, so Morgan Stanley comfortably beat forecasts, according to Reuters, citing LSEG data. Investment banking revenue jumped 58% to $2.44 billion as more companies went public and merger activity increased. Global merger and acquisition (M&A) deals reached $2.8 trillion in the first six months of the year, the highest first-half total since LSEG records began in 1980.
Morgan Stanley worked on several major deals during the quarter, helping boost its investment banking business. The bank was one of the lead underwriters for Elon Musk's SpaceX IPO, which Reuters described as a record market debut and a sign of the recovery in the US IPO market.
Morgan Stanley trading revenue jumps
Morgan Stanley also helped manage Cerebras' New York IPO and Alphabet's recent equity fundraising. The bank also advised Fertitta Entertainment on its $17.6 billion deal to buy Caesars Entertainment, according to Reuters. Trading revenue also hit record levels because investors traded more during volatile market conditions.
Also read: SpaceX stock falls 33% from peak, slips below $135 IPO price: Here's why
Morgan Stanley's equities trading revenue rose 69% from a year earlier to a record $6.3 billion. The bank said global market volatility, including the US-Iran conflict that pushed oil prices higher, encouraged more client trading. High inflation and changing expectations about interest rates also kept markets uncertain, leading to more trading activity.
Morgan Stanley wealth management grows
Morgan Stanley's Chief Financial Officer Sharon Yeshaya said much of the increase in trading came from Asian markets, including Hong Kong, India, Japan and South Korea. Morgan Stanley also reached its long-term goal of managing $10 trillion in wealth management assets.
The bank added $148 billion in new client assets during the quarter, with more than half coming from employees of companies that went public through stock plans, according to Reuters, citing CFO Sharon Yeshaya. Yeshaya said Morgan Stanley expects this wealth management business to keep growing because it manages stock plans for about 70% of the world's 100 biggest unicorn startups.
Why Morgan Stanley stock fell today
CEO Ted Pick said Morgan Stanley is still looking for acquisitions that could help expand its business, but said the bank will only pursue deals that meet a very high standard, according to Reuters. Other major US banks, including JPMorgan Chase, Bank of America and Goldman Sachs, also reported strong investment banking and trading results this week.
Despite the strong earnings, Morgan Stanley's stock still slipped before the market opened. One reason investors may have been disappointed is that Morgan Stanley bought back only $1.5 billion worth of its own shares during the quarter.
KBW analyst Chris McGratty said the $1.5 billion share buyback was below KBW's expectation of $1.8 billion, making it the only major metric that missed market expectations, according to Reuters, citing KBW analyst Chris McGratty. Morgan Stanley shares have still gained about 28.5% so far in 2026. However, the stock has performed worse than Goldman Sachs, while still beating the broader S&P 500 index.
