How Morgan Stanley, as a leader in wealth, sees its investments in AI shaping the future of wealth advice beyond efficiency and productivity.

Ted Pick outlined four differentiators: unique products/capabilities (largest distributor, private markets access), unique data ($8.4T AUM, 21M households for insights), ability to protect client assets (significant investment in security), and the enduring importance of the 'people business' (trusted financial advisors). He emphasized that technology acts as a differentiator, enhancing the advisor's role. “At some level, if the technology is is world-class. Folks want to make decisions with their financial advisers based on the complexity and singularity of their own financial needs at a particular point in life with respect to their parents, their kids, how they want to go about philanthropy, how they want to go about taxes, the whole thing.”

Update on management's thinking about the AI CapEx super cycle, especially regarding the $1 trillion+ figures previously discussed, given headlines about overbuilding, power, financing, and pulled IPOs.

Ted Pick reiterated that the AI CapEx cycle is meaningful, currently at around $1 trillion annually, contributing 50-70 basis points to US GDP. He acknowledged potential for overbuilding or bottlenecks (like power) but stressed that the capital will be provided for this 'once in a multi-generation change.' Morgan Stanley's role is to act as a 'fair hand' adviser, structuring and financing, and throttling activity based on market readiness. He stated the firm is 'double overweight' on AI opportunities. “I don't know that it necessarily accelerates from the $1 trillion that we're at. It could be $1 trillion, it could be $1.2 trillion, but we are at a level where it is meaningful, 50, 70 basis points of real GDP in the U.S., that is no small matter.”

Morgan Stanley (MS) Q3 FY26 earnings call: guidance and Q&A

Q: Understand the contribution of prior vs. current IPOs to NNA and the future tail, and how deposit growth relates to funding ISG operations and future NII benefits.

Sharon Yeshaya explained that IPO-related flows have a 'tail' beyond a single quarter, as assets from employees, endowments, and funds migrate into advice-based relationships. She also detailed the intentional strategy to grow deposits, noting the $30 billion sequential increase, which is expected to provide funding benefits for ISG operations starting next year and strong attachment points for Wealth Management clients. “It is a very intentional decision, a strategic choice that we've made to grow the bank. We saw an opportunity to do so. I'd say that it's twofold, both from an integrated firm perspective. But also from a wealth management perspective.”

Earnings call· Sep 2026 (Q3 FY26)· Financials· Oct 14, 2026

Source: earnings call transcript

Executive summary

Morgan Stanley Q3 FY26 — Strong Performance Driven by Wealth Management and Equities, Record Client Assets

Morgan Stanley delivered robust third-quarter results, driven by strong performance in Wealth Management and Institutional Securities. The firm continues to benefit from its integrated model, attracting record client assets and demonstrating consistent profitability. While market activity moderated later in the quarter due to macro headwinds, strategic pipelines remain strong, and the firm is well-positioned for future growth, particularly in leveraging AI and its differentiated client acquisition funnel.

Highlights

Firm net revenue of $20.3 billion and EPS of $3.03.
Return on tangible equity (ROTCE) of 22.6%, marking the fifth consecutive quarter above 20%.
Total client assets across Wealth and Investment Management grew by nearly $400 billion to a record $10.5 trillion.
Wealth Management achieved record revenues of over $9 billion, with record net new assets of $232 billion and fee-based flows of $80 billion.
Institutional Securities revenue of $10 billion, up 18% year-over-year, led by Equities at $5.8 billion (up 41% YoY).

Concerns

Market volumes were slower across asset classes in September due to renewed Middle East tensions and higher global interest rates.
Net charge-offs were $105 million, primarily related to certain corporate and commercial real estate loans.
Fixed income revenues of $2 billion reflected lower structured activity and credit and commodities compared to a strong prior year period.

Guidance & targets

Category	Target	Timeline	Confidence
Net interest income	modest increase medium materiality	Q4 · FY26	Medium
Tax rate	slightly above the third quarter's tax rate medium materiality	Q4 · FY26	High
Net interest income	expand high materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Institutional Securities The year-over-year increase was driven by the leading Equities franchise and a pickup in advisory. Exit momentum from Q2 carried into July before client activity in markets moderated through September. Boardroom dialogue remains strong, supporting strategic pipelines. Investment Banking revenue: $2.2 billion (up 2% YoY)Advisory revenues: $887 million (increase YoY)Equity underwriting revenues: $525 million (down YoY)Fixed income underwriting revenues: $747 million (strong)Equity revenues: $5.8 billion (up 41% YoY)Fixed Income revenues: $2 billion (lower vs prior year)ISG provisions: $141 millionNet charge-offs: $105 million	$10 billion	18%	—	—
Wealth Management The business delivered records across key growth indicators, reflecting the strength of its multichannel model and ability to connect clients with trusted advice. The pretax margin shows consistent strength as the firm invests in technology, marketing, and banking capabilities. Net new assets: $232 billion (record)Fee-based flows: $80 billion (record)Net new assets (first 9 months): ~$0.5 trillionFee-based flows (first 9 months): ~$175 billionAsset management revenues: $5.5 billion (up 16% YoY)Transactional revenues: $1.2 billion (up 6% YoY, excluding prior year's DCP benefit)Bank lending balances: up $5 billion sequentiallyTotal deposits: $465 billion (up nearly $30 billion sequentially)Net interest income: $2.2 billion (down modestly sequentially)Client assets: $8.4 trillionRelationships served: nearly 21 million	$9.1 billion	—	—	$2.8 billion pretax profit (record), 30.4% pretax margin
Investment Management Consistent strength from parametric and fixed income contributed to long-term inflows. Revenues reflect steady growth in asset management and related fees, though carry reversal related to two private fund investments muted overall results. Long-term inflows: $15.8 billion	$1.5 billion	—	—	—

MS operating KPIs by quarter

MS operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	This call Sep 2026 Q3 FY26	Change vs prior quarter
Return on tangible common equity (ROTCE)	20.2% For the fourth quarter, ROTCE was 20.2% and EPS was $2.22. Source: earnings call transcript	23% The Firm delivered a very strong quarter with $17.7 billion in revenue, $260 in EPS and a 23% return on tangible. Source: earnings call transcript	18.2% For the quarter, the Firm delivered $16.8 billion in revenue, $2.13 in EPS and an 18.2% return on tangible, completing a very strong first half of 2025, $34.5 billion in revenue, $4.73 in EPS and a 20.6% return on tangible. Source: earnings call transcript	23.5% Robust returns on tangible of 23.5% reflect the operating leverage of the integrated firm. Source: earnings call transcript	21.8% Alongside fourth quarter ROTCE and EPS of 21.8% and $2.68, respectively. Source: earnings call transcript	—	26.6% Our ROTCE was 26.6%. Source: earnings call transcript	22.6% In the third quarter, Morgan Stanley delivered strong performance on the top and bottom lines with Firm net revenue of $20.3 billion and earnings per share of $3.03, with a return on tangible equity of 22.6%, this quarter marks our fifth consecutive quarter above 20%, speaking to the consistent strength of our global franchise. Source: earnings call transcript	-4 pt
Net new assets Wealth Management	$57B Net new assets for the quarter were $57 billion. Source: earnings call transcript	$94B Wealth added $94 billion of net new assets, bringing the Firm total to $7.7 trillion. Source: earnings call transcript	$59B Net new assets of $59 billion were strong despite higher seasonal tax payments. Source: earnings call transcript	$81B We added $81 billion of net new assets and $42 billion in fee-based flows in the quarter. Source: earnings call transcript	$122B Additionally, net new assets for the quarter were robust at $122 billion with contributions across all channels. Source: earnings call transcript	$118B Our client acquisition funnel remains unrivaled in driving industry-leading growth with $118 billion of net new assets and $54 billion of fee-based flows. Source: earnings call transcript	$148B Wealth Management added a record $148 billion in organic net new assets. Source: earnings call transcript	$232B Wealth had a record quarter with revenues of over $9 billion with milestone levels of net new assets of $232 billion and fee-based flows of $80 billion. Source: earnings call transcript	+56.8%
Long-term net inflows Investment Management	$4.3B Long-term net inflows were $4.3 billion in the quarter, driven by continued demand for our fixed income strategies and Parametric customized portfolios. Source: earnings call transcript	$5.4B Long-term net inflows were $5.4 billion in the quarter. Source: earnings call transcript	$11B In Investment Management, our leading -- industry-leading Parametric platform as well as strong fixed income strategies have successfully positioned this business to achieve consistent long-term inflows, generating a positive $11 billion in the second quarter. Source: earnings call transcript	$16.5B Long-term net inflows were $16.5 billion in the quarter. Source: earnings call transcript	~$2B Long-term net inflows were approximately $2 billion in the quarter. Source: earnings call transcript	$3.3B Long-term net flows were $3.3 billion, driven by ongoing demand for our Parametric solutions and fixed income strategies, which help offset equity flows. Source: earnings call transcript	$7.7B Long-term net inflows were $7.7 billion for the quarter, driven by ongoing demand for alternatives and solutions, including Parametric as well as our fixed income strategies. Source: earnings call transcript	$15.8B Consistent strength from parametric and fixed income contributed to long-term inflows of $15.8 billion. Source: earnings call transcript	+105.2%
Common equity tier 1 ratio (CET1)	15.9% During the year, we accreted over $5.5 billion of Common Equity Tier 1 capital and our standardized CET1 ratio ended the year at 15.9%. Source: earnings call transcript	15.3% With a CET1 ratio of 15.3%, our excess capital position and financial strength give us ongoing flexibility in support of clients and shareholders. Source: earnings call transcript	15% With a CET1 ratio of 15%, we are 200 basis points plus above our forward capital requirement, which affords us ongoing flexibility to deploy capital. Source: earnings call transcript	15.2% Our standardized CET1 ratio stands at 15.2%. Source: earnings call transcript	15% Our standardized CET1 ratio ended the year at 15%. Source: earnings call transcript	15.1% Our reported CET1 ratio of 15.1% against the capital requirement of 11.8% translates into a capital buffer of over 300 basis points. Source: earnings call transcript	14.8% We repurchased $1.5 billion of common stock, and our standardized CET1 ratio ended the quarter at 14.8%. Source: earnings call transcript	14.9% We repurchased $1.5 billion of common stock in the quarter and our standardized CET1 ratio ended at 14.9%. Source: earnings call transcript	+0.1 pt
Efficiency ratio	—	68% The first quarter efficiency ratio was 68% and strong revenues and a continued focus on creating capacity to invest in longer-term initiatives contributed to results. Source: earnings call transcript	—	—	—	65% For the quarter, our efficiency ratio was 65% reflecting strong operating leverage and disciplined execution as we continue to invest strategically across the firm. Source: earnings call transcript	—	—	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Risks & headwinds

Market volumes slower due to geopolitical tensions and higher interest rates Q3 FY26 (September)

Market volumes were slower across asset classes in September.

Mitigation:Firm's integrated model and financial strength allow it to support clients and remain well-capitalized.

Persisting conflicts and higher benchmark interest rates Q4 FY26 and H1 FY27

Elevated asset prices in a fourth year of a bull market for equities and uncertain electoral and policy responses.

Mitigation:Financial strength and focus on consistent strategy to deliver higher highs and higher lows through the cycle.

Net charge-offs from corporate and commercial real estate loans Q3 FY26

$105 million

Mitigation:Primarily related to certain corporate and commercial real estate loans, which were largely provisioned for in prior periods.

Fixed income revenues declined against strong comparative period Q3 FY26

Lower structured activity and credit and commodities.

Mitigation:Diversified business model, strength in other areas like Equities and integrated markets offering.

Potential for overbuilding or bottlenecks in the AI CapEx super cycle Ongoing, multi-year

Hyperscaler CapEx running at $1 trillion annually.

Mitigation:Morgan Stanley acts as an adviser, structuring and financing partner, throttling activity based on market readiness and ensuring rigorous risk capital allocation.

What to watch in Q4 FY26

Net Interest Income (NII) trajectory

Q4 FY26

Current $2.2 billion (down modestly sequentially)

Target Modest increase

Why it matters

NII is a key component of bank profitability, and its trajectory indicates the impact of deposit growth and rate environment.

Looking ahead, we expect a modest increase in the fourth quarter, subject to rates and client behavior.

Find out whether MS delivers this. Inve re-checks your case every morning.

Q&A highlights

Inquire about the sustainability of digital infra-related IB fees given the shift to private markets and other overlooked revenue sources from this build-out.

Ted Pick stated that the AI CapEx cycle is still relatively early, with hyperscaler CapEx at around $1 trillion annually. Morgan Stanley's role as an adviser across the full ecosystem (chips, data centers, power providers) remains critical, requiring structuring knowledge and expertise. He emphasized the firm's ability to monetize the corporate finance lifecycle. For net new assets, he highlighted the success of the E*TRADE and Workplace funnel, generating $2 trillion in NNA over the last six years, with fee-based flows to advisors being a key statistic.

“But the hyperscaler CapEx is running as we speak at around $1 trillion a year. And our role as an adviser in all pieces of this will remain to be a critical differentiator.”

asked by Steven Chubak · answered by Ted Pick

3 min read 6 chapters

Detailed narrative

AI Ecosystem and Macro Backdrop

The third quarter unfolded in two distinct phases: July and August saw brisk activity driven by hyperscaler investment in the AI ecosystem, while September experienced moderation due to renewed Middle East tensions and higher global interest rates. Management highlighted that these 'two known unknowns' – AI acceleration and geopolitical conflict – are at a critical juncture and will drive investor and corporate behavior into Q4 FY26 and H1 FY27.

The firm acknowledges both the 'glass is mostly full' perspective, citing AI-driven GDP growth and strong corporate earnings, and the 'glass is half empty' view, noting persistent conflicts, high interest rates, and elevated asset prices.

Wealth Management Growth and Strategy

Wealth Management delivered record revenues of over $9 billion, with net new assets reaching $232 billion and fee-based flows hitting $80 billion. This sustained performance is attributed to the strength of financial advisors, broad capabilities, and trusted partnerships. The firm's multi-channel model, including E*TRADE and Workplace offerings, has proven durable, adding over $2 trillion in net new assets over the past six years.

This client acquisition funnel is expected to continue driving growth and converting assets into advice-based relationships.

Institutional Securities Performance

Institutional Securities reported $10 billion in revenue, an 18% year-over-year increase, primarily driven by a 41% surge in Equities revenue to $5.8 billion. Investment Banking revenues were up 2% year-over-year to $2.2 billion, with advisory revenues of $887 million leading the way.

Banking pipelines remain high, and strategic dialogues are active, supporting a favorable outlook for investment banking activity, particularly in monetizing the corporate finance life cycle. Fixed Income revenues were $2 billion, reflecting lower structured activity and credit and commodities compared to a strong prior year.

Capital Strength and Flexibility

Morgan Stanley maintains a robust financial position with a standardized CET1 ratio of 14.9% and a healthy 300 basis points of excess CET1 capital. This strong capital buffer provides substantial flexibility, allowing the firm to actively support clients and deploy capital strategically.

Management is engaged in ongoing dialogue with regulators regarding the finalization of the bank capital regulatory framework, emphasizing the importance of financial strength in a complex environment.

Technology and AI Investment

The firm continues to make significant investments across its technology stack, actively embracing AI tools to support infrastructure, business growth, and its workforce. These investments are aimed at strengthening competitive advantages, improving productivity, and enhancing client service. AI is seen as a generational jump in technology, fundamentally changing operations from financial reconciliations to sales tools, and is a top priority for the firm as both an adviser and an innovator.

NII and Deposit Strategy

Net interest income (NII) was $2.2 billion, down modestly sequentially, but total deposits grew by nearly $30 billion to $465 billion. This deposit growth is a result of an intentional strategic decision to grow the bank, which is expected to provide funding benefits for ISG operations starting next year.

Additionally, growing the bank creates strong client attachment points, with a significant portion of 'bank of first' clients eventually becoming digital or advisor-based clients, leading to higher net new assets.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.