Charles Schwab's Q3 profit beats estimates as revenue falls short, shares slip
Net interest revenue rose 14% to nearly $3.5 billion during the quarter, Schwab said on its earnings call.
Published
Chart: SCHW, one-minute prices, three sessions
Charles Schwab reported third-quarter adjusted earnings of $1.69 a share, ahead of the $1.66 Wall Street had expected, according to Investing.com. Revenue came in at $7.17 billion, short of the $7.33 billion analysts had forecast.
CFO Mike Verdeschi said the company's diversified business model, its focus on meeting clients' evolving needs and its industry-leading scale drove a 29% year-over-year rise in GAAP earnings per share, to $1.62.
Net interest revenue rose 14% from a year earlier to nearly $3.5 billion, supported by demand for margin loans and the Pledged Asset Line, Schwab said on its earnings call, according to Investing.com. Trading revenue rose 16% to $1.2 billion and asset management and administration fees rose 14% to a record $1.9 billion, the Motley Fool reported from the call. Adjusted expenses rose 9% to about $3.2 billion, reflecting higher volume-related and performance-based costs, the Motley Fool reported, while adjusted pretax profit margin expanded about 350 basis points to 54.8%, MarketBeat reported. Core net new assets for the quarter totaled $190.4 billion, Schwab said in its earnings release. Total margin balances ended the quarter at $187.9 billion and sweep cash balances at $492.8 billion, up $7.1 billion from the prior quarter, MarketBeat reported. Verdeschi said Schwab expects about 800 basis points of positive operating leverage for 2026, roughly double what it anticipated at the start of the year, and 25 to 30 basis points of net interest margin expansion in the fourth quarter from a year earlier, MarketBeat reported. Shares fell after the report, Investing.com reported.
The revenue shortfall alongside a roughly in-line profit print suggests cost and capital management, rather than top-line growth, carried the quarter. Management's attribution of the 29% EPS jump to diversification and scale, rather than any single business line, raises the question of whether the profitability beat can repeat if trading or asset-based revenue cools. For a brokerage whose earnings are sensitive to client cash balances and net interest income, a revenue miss paired with strong earnings growth points to margin expansion doing more of the work than client activity. That balance will shape how durable the earnings trajectory looks heading into the next quarter.