2025-01-28 21:02:29
Welcome to the Premium edition of How They Make Money.
Over 180,000 subscribers turn to us for business and investment insights.
In case you missed it:
SoFi (SOFI) recently crossed 10 million members, up 10X in the past 5 years, solidifying its transformation into a full-stack fintech platform.
Following its volatile 2021 SPAC debut, SoFi's stock has more than doubled since September, fueled by consistent profitability, record deposit growth, and product expansion.
Despite Q4 results exceeding expectations, SoFi's stock dropped 10% after the earnings report on Monday. This was likely due to lower-than-expected 2025 profit guidance, as the company prioritizes long-term growth.
SoFi's 'financial super app' vision is materializing, but is the recent stock pullback a reality check or a temporary setback?
Today at a glance:
From student loans to full-stack fintech.
Why did the stock recently double?
How SoFi makes money.
Insights from the latest earnings call.
Is the rally sustainable?
Founded in 2011, SoFi (short for Social Finance) initially disrupted the student loan market with alumni-funded refinancing, offering better rates than traditional banks. It quickly expanded into personal and mortgage loans, positioning itself as a digital-first, community-focused alternative.
Starting in 2017, under CEO Anthony Noto (ex-Goldman Sachs partner, former Twitter COO), SoFi expanded beyond lending, launching SoFi Invest (commission-free trading) and SoFi Money (cash management). The 2020 acquisition of Galileo further expanded SoFi into B2B fintech infrastructure, powering other digital banks.
A game-changing moment came in 2022 when SoFi secured a national bank charter by acquiring Golden Pacific Bancorp. This allowed SoFi to hold deposits, reduce reliance on third-party banks, and improve lending margins—a structural advantage over most fintech peers.
At the same time, SoFi pursued its 'super app' strategy, integrating:
✅ Lending (student, personal, home loans).
✅ Banking (SoFi Money, SoFi Credit Card).
✅ Investing (trading, alternative assets).
✅ Tech Infrastructure (Galileo, Technisys).
The introduction of SoFi Plus, a premium membership tier, further enhanced user engagement and cross-selling. While lending remains a core revenue driver, the rapidly growing Financial Services and Tech Platform segments are on track to become the main revenue source. This dual-pronged strategy—direct-to-consumer finance and fintech infrastructure—has transformed SoFi from a niche lender into a financial powerhouse.
2025-01-25 23:01:25
Welcome to the Saturday PRO edition of How They Make Money.
Over 170,000 subscribers turn to us for business and investment insights.
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Our PRO coverage includes timely updates on the recent big earnings.
📧 Free subscribers get our Friday articles and sneak peeks.
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Today at a glance:
🧴 Procter & Gamble: Volume Boost
💊 Johnson & Johnson: MedTech Weakness
💳 American Express: Holiday Tailwind
🦾 Intuitive Surgical: Surging Growth
⚙️ Texas Instrument: Sluggish Demand
📱 Verizon: Broadband Momentum
🏦 Charles Schwab: Record Inflows
⚡ GE Vernova: Record Orders
🛩️ United Airlines: Demand Takes Off
🦅 American Airlines: Corporate Rebuild
In its December quarter (Q2 FY25), Procter & Gamble’s revenue grew 2% Y/Y to $21.9 billion ($310 million beat), with an adjusted EPS of $1.88 ($0.02 beat). Organic sales rose 3% Y/Y. For the first time since 2019, pricing was flat Y/Y, while organic volume increased 2%, led by healthcare, grooming, and home care—though China’s slowdown weighed on beauty sales.
Despite inflation concerns, consumers are trading up—opting for premium products and bulk sizes, reinforcing P&G’s pricing power and brand strength. The company reaffirmed its FY25 guidance of 2-4% revenue growth and EPS between $6.91 and $7.05. The challenge now is sustaining volume growth of its essentials, from Gilette razors to Tide detergent, as the boost from pricing fades.
2025-01-24 21:03:57
Welcome to the Free edition of How They Make Money.
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In case you missed it:
Netflix (NFLX) added 19 million members in Q4 2024, the largest quarterly gain in the company’s history and more than double Wall Street’s expectations.
The previous record was 16 million in Q1 2020—fueled by pandemic lockdowns. 👀
So, how did they pull it off? Let’s review.
Today at a glance:
Netflix Q4 FY24.
What caused the surge?
Key quotes from the earnings call.
What to watch looking forward.
Netflix's revenue growth depends on two main factors:
👨👩👧👦 Paid memberships: Number of users paying for the service.
💵 ARM (Average Revenue per Membership): How much revenue they generate per subscriber.
Total paid memberships grew 16% year-over-year and reached 302 million.
Netflix’s password-sharing crackdown since Q2 2023 fueled rapid member growth (see visual). But even after considering this tailwind, the Q4 surge was a massive outlier by historical standards.
Regional breakdown:
APAC: +4.9 million, the fastest-growing region, with members up 27% Y/Y (compared to mid-teens growth for all other regions).
LATAM: +4.1 million, bouncing back from a Q3 slowdown—as expected—with price changes and a stronger content slate.
EMEA: +5.0 million, mostly in line with last year’s Q4 net adds.
US/Canada: +4.8 million, far exceeding estimates of ~1.8 million, and impressive compared to the 2.8 million added in Q4 last year.
ARM grew 1% year-over-year or 3% in constant currency. The ad-supported plan continues to take a larger share of overall memberships, but ad monetization is still ramping up, which continues to weigh on ARM growth. For now, the growth is primarily member-based.
Revenue: $10.2 billion (+16% Y/Y) ($140 million beat).
Operating margin: 22% (+5pp Y/Y) (1pp beat).
EPS: $4.27 (+102% Y/Y) ($0.07 beat).
Operating cash flow: $7.4 billion (19% margin, -3pp Y/Y).
Free cash flow: $6.9 billion (18% margin, -3pp Y/Y).
Cash and short-term investments: $9.6 billion.
Debt: $15.6 billion.
Revenue of $43.5-$44.5 billion or +12%-14% Y/Y ($0.5 billion raise).
Operating margin: 29% (+1pp Y/Y).
Best quarter ever: Revenue, operating margin, and earnings all exceeded guidance. In constant currency, revenue growth was 19% Y/Y. The record new members could bring more upside later through price hikes and ad monetization, leading to a large guidance raise for FY25.
Strength in (fewer) numbers: Netflix will stop reporting subscriber counts, shifting focus to revenue and operating margin. This signals a maturing business model, where engagement and ad monetization—not raw subscriber growth—drive performance.
Ad tier is a major growth driver: Ad-supported memberships jumped 30% sequentially, with 55% of new sign-ups choosing the ad plan in available markets. Netflix is rolling out its first-party ad tech platform in the US this April—setting the stage for ad revenue to double in 2025.
Operating leverage is real: The margin expansion story remains intact, with a 29% FY25 target. Thanks to Netflix’s highly scalable model, revenue from new members flows through the P&L with minimal incremental costs—driving continued margin expansion.
Content remains king: The combination of original hits (Squid Game S2, Carry-On) and live events (NFL games on Christmas Day, Jake Paul vs. Myke Tyson) drove engagement to new highs. Netflix spent $17 billion on content in 2024 and plans to spend roughly $18 billion in 2025. The 2025 lineup is packed with blockbusters, including Squid Game S3, Stranger Things S5, Wednesday S2, and Knives Out 3.
Big picture: Netflix is entering 2025 with serious momentum. FY25 revenue guidance jumped by $1.5 billion after factoring in headwinds from a strengthening US dollar. The ads business is scaling fast, engagement is at an all-time high, and margins continue to expand.
Netflix members vote with their time. No matter what you might think of the quality of specific programs, if people spend hours watching them, they are good for business.
Management often uses the proxy of Nielsen’s Top 10 view hours, where Netflix programs are prominently featured.
They highlighted in 2024:
The most streamed sporting event ever.
The two most streamed NFL games ever.
More #1 shows than all other streamers combined.
More view hours than all other streamers combined.
Six of the 10 most searched TV shows globally, in the US and the UK.
Squid Game S2 reached 166 million views in December, already enough to be the third most-watched TV season ever on Netflix. For context, the only two seasons doing better are Squid Game S1 (265M views) and Wednesday (252M views). Live events like the NFL games and the Paul vs. Tyson boxing match were massive subscriber magnets—further fueling the record quarter.
Top Q4 Shows:
Squid Games S2 (166M views).
Black Doves (47M views).
Outer Banks S4 (37M views).
Top Q4 Movies:
Carry-On (160M views).
Our Little Secret (84M views).
The Six Triple Eight (64M views).
Top Q4 Live Events:
Jake Paul vs. Mike Tyson (65M concurrent streams).
Beyonce Bowl (50M views).
Two NLF Christmas Day games (31M views).
The performance of the recent live events could set the tone for many more to come. There are 52 weeks of WWE programming scheduled for 2025, and Netflix already secured the US rights for FIFA’s Women’s World Cup in 2027 and 2031.
The ad plan is now the most popular for new members, making it a critical factor in the large member increase in Q4. After this week’s price hike in the US ($7.99/month for the ad plan and $17.99 for the standard plan), the price difference is even more compelling. Let’s recap the main Q4 insights about advertising:
The ad plan crossed 70 million members in November, just two years after its launch, and now nearly a quarter of all members globally.
The ad plan accounts for over 55% of sign-ups in available markets (compared to 50% in Q3 and 45% in Q2).
Ads tier memberships grew 30% quarter-over-quarter (up from 35% in Q3 FY24), showing continued momentum.
‘Extra Member with Ads’ will be a new option starting this week.
Netflix has taken full control of ad serving in Canada. Next up? A US rollout in April—giving advertisers better targeting, reporting, and measurement.
On the drivers behind 19 million net adds:
“We had an incredible fight, two NFL games, we had one of our biggest TV series ever in Squid Games Season 2, all very successful events and titles that we are thrilled about.
Our estimates for subscriber adds driven by those titles combined represent a small minority of our total member acquisition in the quarter. So, it's really the whole service that's working that delivered the upside that we saw this quarter.”
The engagement from Q4 sign-ups aligned with past trends, suggesting these new members aren’t just here for a single show. While growth attribution is always subjective, the key takeaway is clear: new members drawn in by big releases tend to stick around just as long as any other cohort.
On the ad plan:
“View hours per member on the ads plan is similar to engagement on our standard non-ads plan in our ads country, which is a really good marker that we're excited about.“
Now that the ad-supported plan makes up the majority of new sign-ups, Netflix is virtually guaranteed to reach an enormous scale over time and increase its relevance for advertisers. Retention and engagement were the other unknown, and it looks like they’ll match the industry-high standard Netflix is known for. Now comes the second part: filling this growing inventory.
“We exceeded our ads revenue target in Q4, which was an exciting milestone to get. We doubled our ads revenue year-over-year last year. We expect to double it again this year.”
Building an ad platform isn’t rocket science once you have a large engaged audience. So, it should be only a matter of time before this side of the business becomes meaningful.
On the adtech built in-house:
“The biggest initial benefit we have of using our own ad server is just enabling us to offer more flexibility, more ways of buying for advertisers, fewer activation hurdles, just improving the overall buyer experience. […]. We're already seeing the impact of those benefits in the revenue growth in Canada.”
It’s a critical soundbite. If the new ad platform is boosting revenue growth through its testing phase in Canada, there is no reason it wouldn’t benefit other territories once it expands in 2025.
On games:
“We already see positive impacts in acquisition and retention from our game playing members. Now, those effects are relatively small currently, but frankly so is our investment in games relative to our overall content budget. And we're going to stay disciplined about scaling that investment as we see continued scaling and member benefits. […] We look forward to continuing to launch bigger and bigger games every year.”
In July 2024, former Epic Games’ EVP of game development Alain Tascan took the top job at Netflix’s game division, reporting to Greg Peters. Netflix has acquired a series of small studios like Night School and Boss Fight, but the initiative remains relatively small for now.
On live sports:
“We are constantly trying to broaden our programming and live events […] It doesn't really change the underlying economics of full season big league sports being extremely challenging.”
The Christmas Day NFL games were the two most streamed ever, but it was first and foremost a once-a-year affair. The ROI would be hard to replicate with full-season coverage.
On WWE:
“WWE is off to a great start. Our first week, we drew about 5 million views, which is about two times the audience that Monday Night Raw was getting in linear television. Pretty consistent with how we modeled it, how we'd hope to build the audience for the league.”
The success with WWE is encouraging for future live-event initiatives and confirms the appetite across the streaming audience and the relevance for IP owners such as the UFC to secure deals with Netflix.
On being able to spend less on marketing:
“Netflix can talk to our members where they are, which is on Netflix, to tell them about a great new movie they're going to love. We have our social channels with over 1 billion subscribers that keep that conversation going.”
The movie Carry-On was able to reach 160 million views with very modest marketing, illustrating once more Netflix’s ability to capture the Zeitgeist by being the leading streaming platform alongside a savvy social media strategy.
Management measures engagement via view hours per member. This metric has improved to 2 hours a day per paid membership in 2024, indicating a happy and engaged audience across all tiers.
Engagement bleeds into all performance metrics:
🔒 Retention (people keep coming back).
🗣️ Acquisition (word of mouth & awards).
💰 Monetization (price hikes & ad impressions).
According to Nielsen, streaming accounted for 43.3% of US TV Time in December, up from 35.9% a year ago and an all-time high.
Netflix accounted for 8.5% of US TV time in December (up from 7.7% a year ago)—nearly as much as Prime Video, Hulu, and Disney+ combined. However, market share can fluctuate based on live events and seasonality, and December benefited from the combination of Squid Games S2 and two Christmas Day NFL games.
YouTube increased its market share to 11.1% (up from 8.5% a year ago), excluding YouTube TV. While YouTube is taking an increasing share of US TV time, it hasn’t come at the expense of Netflix. Instead, it’s eating away at Cable, a segment now representing a 24% market share, down from 28% a year ago.
Netflix still commands less than 10% of TV viewing in every country—leaving massive room for growth. Management also estimates the entertainment market at $650 billion—for TV/streaming, theatrical, and gaming software (excluding China and Russia)—of which Netflix only captured ~6% in 2024.
Netflix’s biggest advantage? Laser focus.
Big tech is juggling multiple bets—from cloud infrastructure to AI to cutting-edge hardware.
Traditional entertainment giants are dealing with declining linear networks and mounting debt.
Meanwhile, Netflix stays locked in on what matters: delivering top-tier content and optimizing monetization. And it’s working. With 302 million members streaming 2 hours a day, the future looks bright.
Stay tuned for updates on other streaming giants in the coming weeks. 🍿
That’s it for today!
Stay healthy and invest on!
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Disclosure: I own NFLX, GOOG, AMZN, AAPL, and ROKU in App Economy Portfolio, where I share my ratings (BUY, SELL, or HOLD) with members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2025-01-21 21:03:44
Welcome to the Premium edition of How They Make Money.
Over 170,000 subscribers turn to us for business and investment insights.
In case you missed it:
Last week, I asked you to name your favorite investment for 2025.
One stock stood out: AppLovin (APP).
After a blockbuster IPO in 2021 and a rough 2022, AppLovin has staged a spectacular 700% rally in 2024, pushing its valuation past $100 billion.
While AI hype played a role, AppLovin’s business transformation is the true catalyst. Once focused on helping app developers grow, AppLovin has become a digital advertising powerhouse. After dominating mobile gaming, it’s now expanding into e-commerce—a far bigger prize.
But is this remarkable surge sustainable, or is it a case of inflated expectations?
Today at a glance:
From gaming to ad tech.
What caused the 2024 rally?
How AppLovin makes money.
The expansion into e-commerce.
Is the rally sustainable, or is it a bubble?
Co-founded in 2012 by Adam Foroughi, AppLovin started as a bootstrapped startup focused on user acquisition, analytics, and marketing tools for mobile app developers. Instead of relying on venture capital, Foroughi chose debt financing to maintain control, an unconventional move that shaped the company’s financial strategy.
Recognizing mobile gaming’s rapid growth, AppLovin launched its own game publishing division in 2018, Lion Studios, and acquired game studios like Machine Zone and PeopleFun, building a diverse portfolio of games. While this raised concerns about conflicts of interest with software clients, the move provided valuable first-party data, crucial for improving its ad targeting capabilities.
AppLovin launched a powerful in-app bidding platform called MAX in 2018. In 2021, it acquired Adjust, a leading mobile measurement partner (MMP), further strengthening its ad tech offering. The same year, AppLovin acquired MoPub from Twitter to consolidate its dominance in the mediation market. This acquisition provided a vast trove of data on ad network bidding behavior in a post-IDFA world (after Apple’s privacy changes).
The introduction of AXON, AppLovin’s AI-powered ad engine, marked another turning point. The company leveraged machine learning (ML) for ad targeting to improve campaign performance and efficiency.
Recognizing the diminishing strategic importance of its portfolio of games, AppLovin announced in early 2022 that it would start running it as a standalone ‘Apps’ division. The company began exploring options to sell or divest pieces of the Apps business, allowing it to streamline operations and focus on its core strength: the rapidly growing Software Platform (more on this in a minute).
2025-01-18 23:02:05
Welcome to the Saturday PRO edition of How They Make Money.
Over 170,000 subscribers turn to us for business and investment insights.
In case you missed it:
Our PRO coverage includes timely updates on the recent big earnings.
📧 Free subscribers get our Friday articles and sneak peeks.
💌 Premium subscribers get:
Tuesday articles.
Access to our archive.
Monthly reports with 200+ companies covered.
💼 PRO members get all of the above, plus our Saturday coverage.
Today at a glance:
⚙️ TSMC: AI Boom Accelerates
💼 UnitedHealth: Medical Costs Pressure
📈 BlackRock: Record Inflows
TSMC delivered a record-breaking Q4, with revenue up 37% Y/Y to $26.9 billion ($0.9 billion beat) and net profit surging 57% to $11.6 billion. High-Performance Computing (HPC) now makes up 53% of total revenue, up from 43% last year, driven by AI chip demand. 3nm technology contributed 26% of wafer revenue, up from 20% last quarter, while 5nm reached 34%, reinforcing TSMC’s dominance in advanced chipmaking.
Looking ahead, management expects AI-related revenue to double in 2025 after more than tripling in 2024. Revenue from AI accelerators was in the mid-teens percentage of total revenue. The company raised its capex forecast to $38 to $42 billion (compared to $30 billion in FY24), signaling aggressive investment in future capacity.
Despite headwinds from US export controls, TSMC sees manageable risks and is securing permits for affected clients. Meanwhile, its Arizona fab has entered high-volume production, ensuring continued supply for leaders like NVIDIA, Apple, and AMD.
2025-01-17 21:03:33
Welcome to the Free edition of How They Make Money.
What’s your top stock for 2025?
I’d love to hear from you—what stock or ETF are you most optimistic about this year? With over 170,000 readers in our community, every vote counts. And it’s completely anonymous.
👉 Click here to share your pick now!
I’ll compile the results and reveal them in next Tuesday’s email. Looking forward to hearing your thoughts!
In case you missed it:
Wall Street ended 2024 on a high note.
Big banks just posted their strongest quarter in years, fueled by soaring trading revenues, rebounding dealmaking, and renewed corporate confidence.
Let’s break down the results.
Today at a glance:
The Big Picture
JPMorganChase: Record Year
BofA: Investment Banking Surge
Wells Fargo: Efficiency in Focus
Morgan Stanley: Trading Dominance
Goldman Sachs: Doubling Down
Citigroup: Momentum Builds
Here’s an updated look at the largest US banks by market cap.
As a reminder, banks make money through two main revenue streams:
💵 Net Interest Income (NII): The difference between interest earned on loans (like mortgages) and interest paid to depositors (like savings accounts). It’s the primary source of income for many banks and depends on interest rates.
👔 Noninterest Income: The revenue from services unrelated to interest. It includes fees (like ATM charges), advisory services, and trading revenue. Banks relying more on noninterest income are less affected by interest rate changes.
Here are the significant developments in Q4 FY24:
📈 Wall Street rebounds: Investment banking and trading delivered blockbuster performances across major banks. Investment banking revenue soared 24% at Goldman Sachs and 44% at BofA, reaching its highest level in three years.
💹 Trading boom continues: Market volatility tied to the US election and shifting rate expectations fueled record trading revenues. Morgan Stanley’s equities division hit an all-time high, while JPMorgan and Goldman Sachs saw substantial gains in fixed income.
🏦 Corporate optimism fuels dealmaking: CEO confidence has driven a resurgence in M&A, IPOs, and private credit demand. Morgan Stanley’s M&A pipeline is the highest in seven years, signaling a multi-year comeback.
📉 NII stabilizes: While net interest income remained a mixed bag, forward guidance across banks suggests modest but steady growth in 2025, aided by loan demand and asset repricing at higher yields.
💳 Rising credit risks: Consumer lending stress persisted, with JPMorgan’s charge-offs rising 9%. Banks are bracing for higher delinquencies in credit cards.
🏢 Commercial real estate remains a slow burn: Office sector stress continues, but banks are managing exposures cautiously with no significant shocks yet.
⚖️ Regulatory and restructuring efforts ongoing: Citigroup lowered its 2026 profitability target as it works through its turnaround, while Bank of America faced scrutiny over its anti-money laundering compliance.
🇺🇸 Resilient US economy: Banks see strong spending, loan growth, and corporate profitability, reinforcing the bull case for 2025 earnings momentum.
Here is the Q4 FY24 performance Y/Y at a glance.
Let’s visualize them one by one and highlight the key points.
Net revenue grew +11% Y/Y to $42.8 billion ($2.1 billion beat):
Net interest income (NII): $23.5 billion (-3% Y/Y).
Noninterest income: $20.3 billion (+15% Y/Y).
Net income: $14.0 billion (+50% Y/Y).
EPS: $4.81 ($0.71 beat).
Key developments:
📈 Record profitability: JPMorgan achieved $58.5 billion in annual net income (+18% Y/Y), doubling its profit since 2020 and setting a new benchmark for US banking.
📊 Investment banking rebound: Fees rose 46% Y/Y to $2.6 billion, with advisory and equity underwriting exceeding expectations. Markets revenue surged 21% to $7.0 billion, led by a 20% rise in fixed-income revenue.
⚖️ Resilient economy: CEO Jamie Dimon highlighted strong consumer spending and business optimism but warned of persistent inflationary pressures and heightened geopolitical risks.
📉 Loan challenges: Consumer banking profit fell 6% Y/Y as net charge-offs increased 9% to $2.4 billion, primarily driven by credit card losses.
🏢 Back to the office: JPMorgan announced a full return to in-office work by March 2025, sparking employee backlash and discussions of unionization within the workforce.
🔮 Future outlook: The bank provided 2025 NII guidance of ~$94 billion ($2.7 billion beat). Adjusted expenses are projected at ~$95 billion, driven by growth initiatives and higher marketing and technology spending.
🔑 Takeaways: JPMorgan’s record-breaking performance highlights its industry dominance. However, challenges like tighter loan margins, inflation, and workforce dissatisfaction could affect future performance.
Key quote: CEO Jamie Dimon:
“The US economy has been resilient. […] However, ongoing and future spending requirements will likely be inflationary [...] Additionally, geopolitical conditions remain the most dangerous and complicated since World War II.”
Revenue grew 11% Y/Y to $25.3 billion ($170 million beat):
Net interest income (NII): $14.4 billion (+3% Y/Y).
Noninterest income: $11.0 billion (+37% Y/Y).
Net income $6.7 billion (+112% Y/Y).
EPS $0.82 ($0.05 beat).
Key developments:
📊 Strong earnings beat: BofA posted its best quarterly profit in over a year, with every revenue stream growing.
🏦 Investment banking surge: Investment banking fees soared 44% to $1.7 billion, the highest in three years, driven by strong debt and equity underwriting.
💹 Trading stays hot: Sales and trading revenue climbed 10%, fueled by 13% growth in fixed income and 6% in equities, as market volatility drove client activity.
💰 Consumer & wealth strength: Credit card fees and asset management growth supported gains across BofA’s retail and wealth divisions. Client balances hit $4.3 trillion (+12% Y/Y).
📈 NII rebounds: After four quarters of decline, net interest income rose 3%, exceeding expectations, boosted by loan growth and stable deposits.
🔮 Positive 2025 Outlook: The bank expects NII to continue rising through 2025, with projections reaching $15.7 billion per quarter by year-end.
🔑 Takeaways: BofA enters 2025 with strong momentum, benefiting from rebounding dealmaking, trading tailwinds, and stabilizing interest income.
Key quote:
CFO Alastair Borthwick: “Consumers are still spending, and our business clients are profitable and increasingly optimistic. We’re entering 2025 with good momentum.”
Revenue was flat Y/Y at $20.4 billion ($0.2 billion miss):
Net interest income (NII): $11.8 billion (-8% Y/Y).
Noninterest income: $8.5 billion (+10% Y/Y).
Net income: $5.3 billion (+50% Y/Y).
EPS: $1.43 ($0.07 beat).
Key developments:
📉 NII challenges: While NII fell Y/Y, it grew slightly from the prior quarter and is expected to rise 1%-3% in 2025, reflecting higher reinvestment rates on maturing assets.
📈 Cost-cutting progress: Non-interest expenses dropped 12% Y/Y to $13.9 billion, driven by workforce reductions and efficiency initiatives, despite a $647 million severance charge.
💼 Investment banking rebound: Fees climbed 59% Y/Y to $0.73 billion as Wells Fargo capitalized on a resurgent dealmaking environment and efforts to strengthen its Wall Street presence.
💰 Capital returns: The bank returned $25 billion to shareholders in 2024, including a 15% dividend increase and $20 billion in stock buybacks, contributing to a 21% reduction in shares outstanding since 2019.
🚧 Regulatory hurdles persist: The Fed-imposed asset cap remains a constraint, while recent fines against former executives highlighted past misconduct. CEO Charlie Scharf reaffirmed ongoing efforts to enhance compliance and risk controls.
🔮 Future outlook: 2025 guidance includes $54.2 billion in non-interest expenses (down slightly Y/Y) and higher fee-based revenue. Efficiency gains and cost discipline should continue to drive improvements.
🔑 Takeaways: Wells Fargo’s disciplined approach to cost-cutting and revenue diversification helped offset challenges in loan demand and NII. However, regulatory constraints remain headwinds to watch.
Key quotes:
CEO Charlie Scharf: “We are still in the early stages of seeing the benefits of the momentum we are building [...] Efficiency will remain a significant area of focus in 2025.”
Revenue grew +26% to $16.2 billion ($1.2 billion beat).
Net income: $3.7 billion (+142% Y/Y).
EPS: $2.22 ($0.53 beat).
Key developments:
📊 Blockbuster quarter: Morgan Stanley delivered a massive beat on both revenue and earnings, with profits more than doubling year-over-year.
💹 Trading dominance: Equity trading revenue jumped 51% to $3.3 billion, reaching an all-time high for the full year. Increased volatility post-election fueled a surge in client activity, particularly in prime brokerage and re-risking trades.
🏦 Investment banking recovery: Investment banking revenue surged 25% to $1.6 billion, driven by a rebound in stock sales, debt underwriting, and M&A activity. CEO Ted Pick noted that the M&A pipeline is the strongest in seven years.
💰 Wealth management strength: The division saw $56.5 billion in net new assets, bringing total client assets to $7.9 trillion. The unit remains a stable revenue driver as Morgan Stanley pushes toward its $10 trillion asset target.
⚖️ Strategic reorganization: Morgan Stanley launched a new Integrated Firm Management division to streamline services across investment banking, trading, and wealth management.
🔑 Takeaways: Morgan Stanley’s Q4 showcased the power of its trading and wealth engine, with record-breaking performance in equities and strong asset flows. FY25 looks bright based on the M&A pipeline, a resurgence in IPOs, and continued wealth management expansion.
Key quotes:
CEO Ted Pick: “Values in the M&A pipeline are the highest in seven years […] the pent-up activity we’re seeing is starting to release.”
Revenue grew +23% Y/Y to $13.9 billion ($1.4 billion beat):
Net income: $4.1 billion (+105% Y/Y).
EPS: $11.95 ($3.60 beat).
Key developments:
📈 Record equity trading: Equity trading revenue surged 32% Y/Y to $3.5 billion, setting an all-time high as market volatility drove increased client activity.
📊 Investment banking surge: Revenue climbed 24% Y/Y to $2.1 billion, with equity underwriting (+98%) and debt underwriting (+51%) seeing significant gains as capital markets rebounded.
💰 Asset management strength: Management fees in Asset & Wealth Management exceeded $10 billion for the year, driven by rising assets under management (+8% Y/Y to $3.1 trillion).
⚙️ Strategic evolution: Goldman continued to wind down legacy balance-sheet investments, yet these contributed a $472 million gain in Q4. The recently launched Capital Solutions Group aims to capture private credit and alternative financing growth opportunities.
🛠️ Platform Solutions growth: Revenue jumped 16% Y/Y, reflecting improvements in transaction banking and the Apple Card partnership, though Goldman signaled a potential early exit from the Apple tie-up.
🔑 Takeaways: Goldman’s strategic pivot toward fee-based revenue streams and dominance in equity trading and investment banking shined in Q4. However, challenges remain in reducing reliance on legacy bets and navigating regulatory changes.
Key quote:
CEO David Solomon: “I’m encouraged that we have met or exceeded almost all of the targets we set in our strategy [...] CEO confidence and private equity activity signal a strong path forward.”
Revenue grew +12% Y/Y to $19.6 billion ($70 million beat):
Net Interest income: $13.7 billion (-1% Y/Y).
Non-interest revenue $5.8 billion (+62% Y/Y).
Net income: $2.9 billion (compared to a $1.8 billion loss in Q4 FY23).
EPS: $1.34 ($0.12 beat).
Key developments:
📈 Market resurgence: Fixed-income markets (+37% Y/Y to $3.5 billion) and equity markets (+34% Y/Y to $1.1 billion) delivered significant growth, capitalizing on election-driven volatility.
💼 Banking momentum: Investment banking revenue climbed 35% Y/Y to $0.9 billion, fueled by strong corporate debt issuance and improving dealmaking activity.
💰 Buyback announcement: A $20 billion stock repurchase program was unveiled, with $1.5 billion scheduled for Q1 2025, reflecting management’s confidence in future earnings.
📊 Efficiency gains: Operating expenses declined to $13.2 billion (-2% Q/Q), aided by workforce reductions and technology investments. However, the 2026 RoTCE guidance was lowered to 10%-11%, highlighting the ongoing costs of transformation.
🔄 Turnaround progress: CEO Jane Fraser emphasized long-term growth, citing momentum across business lines and improvements in credit quality. The planned IPO of Banamex, Citi’s Mexican retail banking unit, has been postponed to 2026 as part of the strategic overhaul.
🔑 Takeaways: Citigroup demonstrated robust growth across key segments, supported by disciplined cost management. However, regulatory and operational challenges remain as the bank continues its transformation.
Key quotes:
CEO Jane Fraser: “This level is a waypoint, not a destination. We intend to improve returns well above that level and deliver Citi’s full potential for our shareholders.”
Big US banks showed strong momentum heading into 2025.
🔮 What’s next? With a resurgent IPO market, record stock trading, and sustained wealth management growth, banks are well-positioned to capitalize on renewed corporate optimism. The big question: Will the deal frenzy continue, or will macro uncertainties put a lid on the rally?
Stay tuned for more insights in the coming weeks as earnings season unfolds.
That’s it for today!
Stay healthy and invest on.
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Disclosure: I own BAC and GS in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members here.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.