Goldman Sachs Posts Strong Quarter as CNBC Upgrades Stock on AI Financing Prospects

The revenue figure was the second-highest in company history and exceeded the $16.71 billion consensus compiled by LSEG, according to CNBC. EPS beat the $13.02 consensus, also according to LSEG data cited by CNBC.

Shares rose more than 4% shortly after the open before giving up much of those gains. The stock had closed at a record high of $1,152 on July 15 and then fell sharply, CNBC said. CNBC said the quarter was strong enough to justify stepping in to take advantage of the weakness, though it added that 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 with anything fundamentally going on at the bank.

The results would have looked even better without an accelerated charitable contribution made in the quarter, which weighed on earnings and return on equity, CNBC said. The Global Banking & Markets division delivered strong results, driving the relatively positive reaction in the stock, according to CNBC.

Within Global Banking & Markets, revenue rose more than 30% year over year to $13.46 billion, more than $1.5 billion ahead of consensus and the main driver of the quarterly revenue beat. Investment banking revenue was $3.2 billion, up 21% from a year earlier and ahead of the $2.7 billion consensus. Equities revenue surged 72% to $6.44 billion, beating expectations of $5.05 billion. Fixed income, currency and commodities revenue fell 1% to $3.47 billion, missing the $3.7 billion consensus. Asset and wealth management revenue was $5.05 billion, above the $4.67 billion consensus and up about 14% from a year earlier.

CNBC noted that the Global Banking & Markets group houses investment banking, which should see a boost from the upcoming Anthropic initial public offering. CFO Denis Coleman said on the post-earnings conference call, according to CNBC: "Our investment banking backlog remains very robust as strong revenue realizations and advisory were largely offset by solid replenishment and equity underwriting." CNBC said the strong revenue realizations referred to the June IPO of SpaceX, which Goldman co-led, the firm's work on Alphabet's large secondary stock sale in June, and the $67 billion NextEra and Dominion Energy merger announced in May.

CEO David Solomon spent time on the call discussing artificial intelligence, both its benefits and risks to 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," Solomon said, according to CNBC. 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 six financial institutions partnering with Nvidia on AI infrastructure financing, CNBC said. Solomon also said: "Beyond these financial risks, we also recognize the broader concerns around the accelerating pace of AI technology and the unchecked advancement of frontier models. … However, the choice is not between halting progress and moving forward without guardrails. We must enable innovation and also demand responsibility." CNBC said Solomon sided with Nvidia CEO Jensen Huang in the AI safety debate sparked by Anthropic CEO Dario Amodei's September essay, "We Must Pace the Frontier." Huang also said both innovation and safety are needed and that new regulation is not, views also shared by Jim Cramer, according to CNBC.

CNBC said it continues to view Goldman's stock as the best one to own within the broader financial sector, citing the bank's opportunities in AI financing and investment banking. It reiterated a $1,200 price target and upgraded the shares to its buy-equivalent 1 rating, pointing to the favorable risk/reward setup at current levels.