Morgan Stanley (MS) Q2 FY26 earnings call: guidance and Q&A

Is the current NNA growth from the workplace channel, driven by IPOs, at its peak, or can it improve? What inning are we in for this growth, and what's the medium-term outlook?

Sharon Yeshaya stated that the current NNA growth reflects long-term investments, noting MS has 70% of top 100 unicorns in its workplace pipeline. While IPO-driven flows will ebb and flow, the focus is on retaining clients and providing advice through product capabilities and referral models. The goal is a long-term game of migrating flows into fee-based assets and advice.

“We have about 70% of the top 100 unicorns by market cap in terms of our workplace pipeline.”

asked by Ebrahim Poonawala · answered by Sharon Yeshaya

Given the strong 30.5% pretax margin in Wealth Management, is it reasonable to expect it to drift into the low-to-mid 30s over the medium term, and how do investments contribute to future productivity?

Ted Pick stated that while 30% is a benchmark, the firm is not solving for a specific margin number but rather for PBT gains. He noted that the margin will move around and that the firm is comfortable with its current targets, but will reconsider at year-end if the hurdle is not enough, given ongoing investments to gain wallet share.

“It's not a number we're solving for. What we're solving for is a lot of what Sharon just talked about, which is to continue to drive further PBT gains.”

asked by Ebrahim Poonawala · answered by Ted Pick

Why does Morgan Stanley maintain such a high capital base, and why not deploy it given strong returns? Is the firm still actively looking for bolt-on acquisitions?

Ted Pick emphasized the firm's financial strength, having accreted $18 billion of CET1 capital over 10 quarters, resulting in 300-350 bps of excess CET1. He noted high demand for this capital from clients across all businesses. While the bias is towards organic growth and thoughtfully deploying capital to clients, the firm is also reviewing bolt-on acquisition candidates that align with strategy, client relationships, or adjacent capabilities, acknowledging the possibility of doing both.

“We have -- depending on how you measure it, 300 to 350 basis points of excess CET1 capital depending on which test, which period and all that, and we have a real SLR capacity, too.”

asked by Glenn Schorr · answered by Ted Pick

Can Ted Pick provide numbers around the AI CapEx super cycle he previously mentioned, specifically regarding the scale of investment and Morgan Stanley's role in capital raising for it?

Ted Pick stated it's "really early" but provided estimates: 2026 data center CapEx forecasts increased from $575 billion to $850 billion, and 2027 from $700 billion to $1.3 trillion. He suggested the industry is 10-15% through a potential $10 trillion AI compute investment cycle over many years. Morgan Stanley's role is to intermediate capital raising through structuring and creativity, matching sources and uses of capital, acknowledging some capital will be self-funded by hyperscalers.

“you're basically looking at us being around 10% to 15% of the way through the investment cycle.”

asked by Michael Mayo · answered by Ted Pick

How does the current IB pipeline compare historically, geographically, and what's the outlook for sponsor monetization?

Sharon Yeshaya noted that current IB pipeline levels are not yet at historical highs, indicating more room for growth. She highlighted a broadening out of activity geographically beyond the Americas, with building pipelines in Asia. The cycle began with debt, moved to equity, and now strategic advisory is strong. Ted Pick added that regulatory normalization and pent-up demand, coupled with AI considerations, create a favorable backdrop for M&A and IPOs, with sponsors increasingly seeking exit opportunities.

“when we look at our numbers, we're not yet at the levels that we've seen historically in different areas in terms of what's actually been announced or been completed. So there's clearly more to go there.”

asked by Christopher McGratty · answered by Sharon Yeshaya

Given the "Asia House" comments and the early stage of the AI super cycle, how durable is the equities trading activity coming out of Asia, and is there pricing power for financing providers?

Ted Pick confirmed some pricing leverage for financing providers, depending on the product. He linked sustainability to global economic growth, controlled inflation, manageable geopolitics, and appropriate market volatility. He emphasized Morgan Stanley's scale and global reach, particularly in Asia, as differentiators for gaining wallet share. Sharon Yeshaya added that the broadening out of activity across Asian geographies (India, Japan, Korea, Taiwan, not just China) contributes to durability.

“It helps, by the way, to have the kind of scale and global reach that we have, which is why not surprisingly, as we talked about for a number of years, as you know, the very top houses are gaining wallet in this environment.”

asked by L. Erika Penala · answered by Ted Pick

What red flags or indicators is Morgan Stanley monitoring to prepare for potential shifts or downturns in the AI CapEx super cycle, similar to past market bubbles?

Ted Pick stated the firm keeps "eyes on everything" and is "born to think that way," constantly monitoring for frothy conditions. He emphasized the importance of "higher lows" for durability and a healthy PE multiple. He acknowledged the "known unknowns" of geopolitics, interest rates, and uncertainties, which drive client action and advice needs, but stressed constant risk assessment, especially since the beginning of COVID.

“We keep our eyes on everything. I think we're just born to think that way.”

asked by Gerard Cassidy · answered by Ted Pick