Goldman Sachs Group Inc (GS)

How it makes money

Goldman reports revenue net of interest expense, and it arrives through four channels. First, fees for transactions: advisory fees on mergers, and underwriting fees on share and bond issues — $9.34 billion of investment banking fees in 2025. Second, trading income: the spread and the position gains earned by making markets in fixed income, currencies, commodities and equities, which is the single largest block. Third, recurring management fees charged as a percentage of client assets, plus incentive fees when funds beat their targets, and gains on the firm's own investments. Fourth, net interest income from lending to clients and from financing their positions. The first two are transaction-driven and swing with market activity; the third is the steadiest.

Revenue by segment

Goldman's advantage is scale in flow plus a reputation that is hard to rent. In market making, the firm that sees the most orders prices risk best and wins more orders — a loop that favours the handful of banks large enough to stay in it. In advisory, boards hire the name for the deals that matter, and a mandate list compounds. Capital and liquidity rules add a barrier: a newcomer would need a balance sheet of the same order and the regulatory standing to run it. The limits are real, though. Rival banks have the same loop, clients run auctions between them, and the firm's own filing says competitors' efforts to take market share have already produced pricing pressure in investment banking and client execution. Bankers and portfolio managers can also walk out of the door, taking relationships with them.

Demand here is the willingness of other people to act. Merger and underwriting fees depend on boards deciding this is the year to buy a rival or go public, and that decision follows the cost of money, the level of share prices and general confidence — it can halve and double between one year and the next. Trading revenue follows volumes and volatility, which rise in stress but can also dry up when clients stand aside. Net interest income follows rate levels and the size of client balances. The steadiest leg is the management fee on assets under supervision, but it too falls when markets fall, because it is charged on the value of what is managed. Goldman's own 2025 shows the swing: total revenue up 9%, Equities up 23%, while Platform Solutions fell from $2.1 billion to $151 million on a single portfolio decision.

Key risks

• Financial market and economic conditions — The firm states that its businesses have been and may in the future be adversely affected by conditions in the global financial markets and by broader economic conditions, including geopolitical events. Because most of its revenue depends on clients choosing to transact, a downturn shows up almost immediately in results.
• Falling asset values — Declining asset values hurt the firm in three places at once, as it discloses: where it holds net "long" positions, where its fees are calculated on the value of assets it manages, and where it receives or posts collateral against trades and loans.
• Volatility and market-making activity — The filing notes that market-making has been and may be affected by changes in the level of market volatility. Some volatility widens spreads and lifts trading revenue; too much of it, or too little, can both work against the desk.
• Investor and CEO confidence — The firm discloses that its investment banking, client intermediation, asset management and wealth management businesses have been and may be adversely affected by market uncertainty or a lack of confidence among investors and CEOs. When boards postpone deals, the fee pipeline empties.
• Liquidity and access to funding — The firm identifies liquidity risk, including disruptions in the credit markets and a higher cost of obtaining credit. A bank of this kind funds long-dated assets with shorter-dated money, so losing access to funding, or paying much more for it, is a first-order risk rather than a secondary one.
• Credit losses and concentration — The filing discloses credit risk, including counterparty defaults and concentration of exposures. The firm lends to clients, finances their positions and holds derivative exposures, so the failure of a large counterparty can produce a loss well beyond the fee that trade earned.
• Operational failures and cyber attacks — The firm discloses operational risk — process and system failures and human error — and cybersecurity threats and data breaches. Its business runs on systems that settle very large volumes daily, and an interruption or an intrusion carries both direct loss and reputational damage.
• Regulation, capital and compliance costs — The firm discloses regulatory change affecting capital and liquidity requirements and compliance costs, including the revised capital framework whose substantial parts take effect from January 2025 — FRTB market-risk rules, revised credit risk capital, a standardised approach for operational risk and CVA risk, and a floor on internally modelled requirements. Higher required capital lowers the return the same business earns.
• Competition and pricing pressure — The firm states that it competes globally on execution, products, innovation, reputation and price, and that competitors' efforts to gain market share have resulted in pricing pressure in its investment banking and client execution businesses. It adds that it faces pressure to retain share by committing capital on terms that may not be commensurate with the risk taken.
• Inflation — The filing states that inflation has had and could in the future have a negative effect on the firm's business, results of operations and financial condition — through its own cost base and through the rate environment it imposes on clients.

The filing does not disclose the share of revenue coming from any single client or from its largest clients, and there is no customer-concentration figure to report. Its client base is institutional and spread across companies, financial institutions, funds, governments and wealthy individuals in more than 35 countries. What the firm does disclose on concentration is on the credit side: concentration of exposures to counterparties is named among its credit risks, meaning the exposure that matters is who it is owed money by, not who pays it fees.