Goldman Sachs is poised for Q2 FY2025 upside, driven by strong Global Banking & Markets momentum, cost discipline, and a turnaround in Platform Solutions profitability.

($GS) Banking Momentum and Margin Upside Drive Q2 Outlook

# Goldman Sachs Q2 FY2025: Cautious Optimism with Upside from Banking Momentum

## Executive Summary

We maintain a **Bullish** outlook for Goldman Sachs (GS) heading into Q2 FY2025, underpinned by **robust Global Banking & Markets (GBM) momentum** and record client asset flows. Q1 FY2025 revenue of **$15.06B (+9% QoQ)** and a stable **operating margin of ~39.4%** set a strong foundation for the upcoming quarter. Management’s focus on cost discipline and operational efficiency, alongside a $40B share repurchase program, further supports the case for earnings resilience. However, the market may be underestimating the **margin upside from Platform Solutions’ return to profitability**, which could provide incremental support to Q2 results.

## Recent Trends Signal What’s Next

GS’s last two quarters have demonstrated a clear acceleration in revenue and margin performance, primarily driven by GBM. Q1 FY2025 saw **total revenue rise to $15.06B (+9% QoQ)**, with GBM contributing **$10.71B (+26% QoQ)**. Operating margin held steady at **~39.4%**, while the efficiency ratio improved to **60.6%**. Asset & Wealth Management, however, experienced a modest sequential decline, highlighting the importance of GBM as the primary earnings engine.

### Quarterly Financial Trend Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS ($) |
|--------------|--------------|------------------|----------------------|---------------|---------|
| Q2 FY2024    | 13.37        | 68.2             | 36.1                 | 22.5          | 11.47   |
| Q3 FY2024    | 13.80        | 69.0             | 37.2                 | 23.1          | 12.02   |
| Q4 FY2024    | 13.82        | 69.5             | 37.8                 | 23.5          | 12.32   |
| Q1 FY2025    | 15.06        | 70.1             | 39.4                 | 24.2          | 14.50   |

**Trend:** Revenue and margins have improved sequentially, with Q1 FY2025 marking a notable inflection point.

## Management’s Forward Tone and Positioning

Management’s Q1 FY2025 commentary was **“cautiously optimistic”**, emphasizing “strong client activity” and “record AUS.” The CEO stated, *“We are seeing early signs of normalization in demand, particularly in investment banking,”* signaling confidence in the pipeline. The CFO highlighted, *“Expense discipline remains a top priority, with planned severance charges of approximately $150M in Q2.”* This marks a shift from the more defensive tone of prior quarters, reflecting greater confidence in both revenue growth and cost control.

Compared to Q4 FY2024, when management focused on macro headwinds and risk mitigation, the current tone is more constructive, with explicit targets for efficiency and profitability in Platform Solutions.

## KPI Trends & Upcoming Quarter Drivers

The most relevant KPIs for Q2 FY2025 are:

- **Assets Under Supervision (AUS):** Reached a record **$3.17T** in Q1, up 7% YoY and 2% QoQ, supporting fee-based revenue growth.
- **Investment Banking Backlog:** Expanded for the fourth consecutive quarter, indicating sustained client engagement and future deal flow.
- **Headcount:** Increased to **46,600 (+3% QoQ)**, reflecting investment in operational capacity.

### KPI Movement Table

| KPI                        | Q1 FY2024 | Q4 FY2024 | Q1 FY2025 | YoY Change | QoQ Change |
|----------------------------|-----------|-----------|-----------|------------|------------|
| AUS ($T)                   | 2.96      | 3.11      | 3.17      | +7%        | +2%        |
| IB Backlog (Index)         | 100       | 112       | 120       | +20%       | +7%        |
| Headcount (000s)           | 44.8      | 45.3      | 46.6      | +4%        | +3%        |

**Implication:** These KPIs point to continued revenue momentum and operational leverage, with the potential for positive earnings surprise if client activity remains robust.

## Missed by the Street

A key overlooked signal is the **return to profitability in Platform Solutions**, which posted **$21M net income in Q1** after several loss-making quarters. This operational turnaround, not widely highlighted in consensus commentary, could provide incremental margin support in Q2. Additionally, management’s explicit mention of **planned severance charges** signals a proactive approach to cost control, which may help offset any revenue volatility.

## Scenarios for the Upcoming Quarter

### Scenario Table

| Scenario  | Total Revenue ($B) | EPS (Approx.) | Operating Margin (%) | Key Assumptions                                              |
|-----------|--------------------|---------------|----------------------|--------------------------------------------------------------|
| Bull      | 15.4               | 15.0          | 40                   | GBM strength continues, FX stable, cost efficiencies realized |
| Base      | 15.1               | 14.0          | 39                   | Steady client activity, moderate FX impact                   |
| Bear      | 14.8               | 13.0          | 38                   | Slower fee growth, FX headwinds, client pullback             |

**Most Likely Scenario:** The **Base case** is most probable, given current evidence of strong client activity, stable margins, and management’s focus on cost discipline. Upside risk exists if GBM outperforms or Platform Solutions’ profitability accelerates.

## Appendix – Data Tables & Management Quotes

### Quarterly Revenue, EPS, and Margin Trends

| Quarter      | Revenue ($B) | EPS ($) | Operating Margin (%) |
|--------------|--------------|---------|----------------------|
| Q2 FY2024    | 13.37        | 11.47   | 36.1                 |
| Q3 FY2024    | 13.80        | 12.02   | 37.2                 |
| Q4 FY2024    | 13.82        | 12.32   | 37.8                 |
| Q1 FY2025    | 15.06        | 14.50   | 39.4                 |

### KPI Movement Table

| KPI                        | Q1 FY2024 | Q4 FY2024 | Q1 FY2025 | YoY Change | QoQ Change |
|----------------------------|-----------|-----------|-----------|------------|------------|
| AUS ($T)                   | 2.96      | 3.11      | 3.17      | +7%        | +2%        |
| IB Backlog (Index)         | 100       | 112       | 120       | +20%       | +7%        |
| Headcount (000s)           | 44.8      | 45.3      | 46.6      | +4%        | +3%        |

### Key Management Quotes

1. **“We are seeing early signs of normalization in demand, particularly in investment banking.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Pipeline strength likely to support near-term revenue.*

2. **“Expense discipline remains a top priority, with planned severance charges of approximately $150M in Q2.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Proactive cost management to protect margins.*

3. **“Record AUS and strong client activity position us well for the coming quarter.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Fee-based revenue likely to remain robust.*

4. **“We expect Platform Solutions to achieve pre-tax breakeven by year-end.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Ongoing improvement in a previously loss-making segment.*

5. **“We remain committed to returning capital to shareholders, as evidenced by our new $40B repurchase program.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Shareholder returns are a strategic priority.*

6. **“Macroeconomic and FX volatility remain key risks to our outlook.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: External headwinds could impact earnings stability.*

7. **“We are focused on maintaining an efficiency ratio near 60%.”**  
   *Q1 2025 Earnings Call*  
   *Interpretation: Margin discipline remains central to management’s strategy.*

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**Bottom Line:** GS enters Q2 FY2025 with strong momentum, disciplined cost management, and underappreciated margin levers. While macro risks persist, the setup favors a positive earnings surprise if current trends hold.

($GS) Banking Momentum and Margin Upside Drive Q2 Outlook

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