SCHW · Q2 2026 Earnings

Bullish

Charles Schwab Corporation

Reported July 21, 2026

30-second summary

Schwab delivered Q2 revenue of $7.07B (+21% YoY, +9% QoQ) and adjusted EPS of $1.62 (+42% YoY). Management quantified the FY2026 framework for the first time — 17.5–18.5% revenue growth ($7.54B–$7.76B), full-year NIM 3.0–3.10%, and a 4Q exit NIM of 3.25–3.30% — delivering on the July business update commitment made in Q1 and replacing the prior "tracking higher than $5.70–$5.80" EPS scenario with a through-cycle "mid-teens earnings growth" framing. Core NNA of $119.8B rounded to $120B in the release headline; DATs of 11.9M and the raised FY assumption to 10.6M reset trading as a structural rather than transitory earnings contributor.

Headline numbers

EPS

Q2 FY2026

$1.62

0.0% vs est.

Revenue

Q2 FY2026

$7.07B

+21.0% YoY

+2.8% vs est.

Operating margin

Q2 FY2026

51.9%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$7.07B	$5.85B	+20.9%	$6.48B	+9.1%
EPS	$1.62	$1.14	+42.1%	$1.43	+13.3%
Operating margin	51.9%	47.9%	+400bps	49.2%	+270bps

Guidance

Schwab raised FY2026 revenue guidance to $7.54B–$7.76B (17.5%–18.5% growth) and disclosed full-year NIM range 3.0%–3.10% with 4Q finishing 3.25%–3.30%, signaling strong momentum and confidence in mid-teens earnings growth through the cycle.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

Metric	Period	Guide	YoY
Net interest margin (Full year)	FY2026	3.0% to 3.10%	—
Net interest margin (4Q 2026 average)	Q4 FY2026	3.25% to 3.30%	—
Daily average trades (Full year)	FY2026	10.6 million	—
Market appreciation assumption (Full year)	FY2026	approximately 13%	—
Organic growth rate (Full year)	FY2026	5%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2026	Not explicitly quantified in numeric range; tracking higher than January scenario	$7.54B to $7.76B (17.5%–18.5% growth)	Explicit quantified range now provided; implies ~$6.47B base, supporting +17.5%–18.5% growth vs prior qualitative 'tracking higher' language	Raised
EPS (Non-GAAP)	FY2026	$5.70 to $5.80 (January scenario; company noted tracking higher)	Not explicitly quantified this quarter	Company reaffirms confidence in mid-teens earnings growth through cycle; no new numeric EPS range provided, but qualitative language ('mid-teens') suggests range significantly above $5.70–$5.80	Raised

Segment performance

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Net interest revenue	$3.357B	—	+19.0%
Asset management and administration fees	$1.825B	—	+16.0%
Trading revenue	$1.215B	—	+28.0%
Bank deposit account fees	$0.333B	—	+35.0%
Investor Services client assets	$7.343B	—	+21.0%
Advisor Services client assets	$5.742B	—	+22.0%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Total client assets	$13.08 trillion	—	—
Core net new assets	$119.8 billion	—	—
Daily average trades (DATs)	11.9 million	—	—
New brokerage accounts	1.4 million	—	—
Bank loan balances	$67.0 billion	—	—
Margin loan balances	$165.1 billion	—	—
Return on average common stockholders' equity (annualized)	25%	—	—
Return on tangible common equity (annualized)	44%	—	—

Management tone

Narrative arc: Q3 FY2025 record print with guide left untouched → Q4 FY2025 wallet-share monetization framework → Q1 FY2026 EPS "tracking higher" with July reveal telegraphed → Q2 FY2026 explicit quantification with mid-teens through-cycle claim.

The wealth-monetization thesis has moved through four distinct framings across four quarters. Q3 FY2025 introduced wallet-share as opportunity; Q4 FY2025 quantified the penetration gaps (5% managed investing vs. 31% willingness); Q1 FY2026 reported the +46% YoY flow acceleration; this quarter the framing hardened into structural economics with the anchor quote: "clients in our Schwab Wealth Advisory Offer generate three times the ROCA of our retail clients." The 3x ROCA multiplier is the first dollar-translatable read on why the 5%-to-31% penetration gap matters — not just larger flows, but flows with materially superior unit economics. This shift signals that wealth is no longer a growth-side story but a margin-expansion story, which is what enables the "mid-teens earnings growth through the cycle" claim independent of near-term rate environment.

Two quarters ago banking was a "relationship convenience" feature; last quarter management introduced PAL as a spread-accretive lending engine; this quarter management surfaced the full lending gap with surgical precision: "Today at Schwab, 0.5% of clients use one of our lending products versus 4% on average across the industry...With an average spread to securities north of 100 basis points on PALS as an example, narrowing the lending penetration gap" becomes a material NIM lever. The 0.5% vs. 4% gap is an 8x industry underweight — a larger runway than the wealth penetration gap and, unlike wealth, one that flows directly to NIM rather than fee revenue. This is why full-year NIM guidance of 3.0–3.10% with 4Q at 3.25–3.30% now looks credible without further rate cuts helping.

AI moved from "40 use cases" (Q2 FY2025) to "launching in coming weeks" (Q1 FY2026) to operational productivity gains (this quarter): "developer team productivity has improved by 15% to 20%...it is becoming more embedded in all we do, accelerating our strategy and amplifying our competitive advantages." The 15–20% developer productivity number is the first quantified AI benefit Schwab has ever shared. Combined with the framing of AI as relationship-deepening rather than replacement, this signals that AI's contribution to the expense framework is now baked into the FY scenario rather than an unmodeled upside option.

The consolidation thesis moved from aspirational to measurable across four quarters — from "wealth relationships" as a slide, to "31% willingness to pay," to this quarter's structural data point: "Households with $1 to $5 million in assets using only one financial services firm jumped 11 percentage points year over year to 22%." The 11-percentage-point YoY jump is the falsifiable evidence that consolidation is not a thesis but a phenomenon Schwab is capturing in real time. This is what changes the risk profile of the FY2026 guide upgrade — the 5% organic growth algorithm now sits on measurable consolidation tailwinds, not just base-rate demographic assumptions.

Most striking: management now offers explicit rate downside protection combined with the mid-teens through-cycle claim. This is the strongest de-risking language Schwab has delivered in this cycle — moving from Q4 FY2025's "at least 10% EPS growth if Fed funds approaches 2%" to Q2 FY2026's "mid-teens earnings growth through the cycle." The through-cycle framing implicitly says: rates don't matter to the algorithm anymore. That is a very different Schwab narrative than the one investors held in 2023.

Recurring themes management leaned on this quarter:

Financial consolidation as structural tailwind reshaping client behaviorWealth advisory monetization of massive self-directed base (2% market share in $37T TAM)Bank lending penetration gap (0.5% vs 4% industry average) as near-term margin leverAI productivity gains embedding across operations and client experienceScale advantages compounding as platform breadth deepens client lock-inTrading dominance (1/3 of retail trades) as engagement anchor for cross-sell

Risks management surfaced:

Seasonal trading slowdown expected in summer monthsUncertainty around Fed rate path (forward curve pricing 125bp hike)Tokenized securities adoption still unclear with unclear market penetrationMargin compression risk if spreads on lending products narrowCompetitive positioning if peers accelerate wealth advisory adoption

Q&A highlights

Dan Fannin · Jefferies

Asked about sustainability of NNA acceleration, specifically the contribution from new-to-firm clients versus increased share of existing customers.

Management expressed bullishness on NNA sustainability at 5%+ long-term. Highlighted deepening of client relationships across three business segments: advisor services (6%+ NNA growth last four quarters), institutional services (continued investment in financial consultants and AI), and workplace/stock plan business. Emphasized that proprietary wealth offer flows up 86% YTD and power originations up 60% demonstrate clients consolidating financial life with Schwab.

5% or higher long-term NNA expectationProprietary wealth offer flows up 86% year-to-datePower originations up 60%Bank accounts up 12%

Patrick Moiley · Piper Sandler

Asked about sustainability of record trading activity (12M daily average trades), particularly whether driven by market environment or structural shifts, and what should be considered normalized.

Management attributed trading engagement sustainability to broad structural factors: removal of commissions bringing younger investors, growth in options trading familiarity, market environment with good returns, and AI-driven algorithmic trading. Emphasized multiple growth drivers beyond near-term market conditions, suggesting this represents sustained elevated engagement levels.

12 million daily average trades (record)Crypto trading rolled outCommission removal attracted younger investorsOptions trading growth driven by familiarity and hedging use cases

Bill Katz · TD Cowen

Asked for detailed guidance on share count outlook, capital return priorities including loan growth support, preferred stock reduction, common buybacks, and M&A considerations given strong earnings and cash generation.

Management reiterated capital allocation framework prioritizing client needs and franchise expansion first, followed by opportunistic capital returns via buybacks. Noted strong loan growth (pledged asset lines up 59% YoY) driving NIM expansion, with new rate hike assumption not impacting 2026 guidance but potentially benefiting 2027. Indicated preference for organic growth and capability building over M&A but stated they never rule acquisitions out.

Pledged asset lines up 59% year-over-yearOne rate hike assumed in December (not impacting 2026 financials)Additional rate hikes would expand NIM further in 2027Net interest margin expansion year-over-year

Ken Worthington · J.P. Morgan

Asked about long-short tax-loss harvesting strategy sizing, demand trajectory (acceleration vs satiation), and economic attractiveness relative to PAL and margin lending businesses.

Management confirmed continued client interest in long-short strategies with surge now stabilizing into normal growth. Characterized strategy as particularly valuable for concentrated position holders generating losses while tracking index exposure. Argued strategy is accretive financially and strategically: wins household economics, builds RIA relationships, benefits end clients, and drives broader business wins beyond just the long-short product itself.

Long-short currently roughly 1% of revenueStrategy described as accretive to ROEContinued demand in near-term with resources allocated to supportStrategy wins entire household relationships with RIAs

Alex Blosky · Goldman Sachs

Asked to detail Q4 NIM guidance (325-330 bps) unchanged despite favorable rate environment, and reconcile with margin expansion seen in first half.

Management explained Q4 guidance assumes one rate hike in December (not impacting 2026), so incremental benefits would show in 2027. Emphasized strong NIM trajectory from lending activity exceeding securities repricing, with cash building organically despite seasonal 1Q/2Q dynamics. Positioned well for continued expansion if rate hiking resumes, with lending-driven spreads more accretive than securities yield.

Q4 NIM guidance: 325-330 bps (unchanged)One December rate hike assumed for guidanceLending spread drivers more accretive than securitiesOrganic cash build continuing despite seasonality

Answers to last quarter's watch list

The July business update — magnitude of the formal FY2026 EPS guide raise. Management delivered the quantified revenue framework (17.5–18.5% growth, $7.54B–$7.76B) and reaffirmed "mid-teens earnings growth through the cycle" but did not issue a new explicit EPS range, deferring to through-cycle language. H1 EPS of $3.05 annualizes to $6.10 at flat run-rate, materially above the retired $5.70–$5.80.

Resolved positively

Whether DATs in Q2 sustain materially above prior assumption or pull back. Q2 DATs of 11.9M accelerated from Q1's 9.9M, driving the FY assumption to 10.6M and validating the sustainability thesis. Trading revenue of $1.22B (+28% YoY) is now the fastest-growing revenue line.

Resolved positively

Spot crypto rollout pace and any early take-rate disclosure. Schwab Crypto launched with Bitcoin and Ethereum for retail clients; crypto transfers pilot on track for end of month. No specific early take-rate disclosure or asset sizing was surfaced.

Continue monitoring

ETF monetization rollout progression. Management characterized ETF monetization as moving "in line with where the industry either already is or is going" but did not commit to specific P&L timing.

Not resolved

Forge contribution to revenue and any quantification of the private-markets pipeline. Deal closed and included in first full quarter of results; contributes ~100bps to YoY expense growth rate. Not material to 2026 scenario financially; strategic capability framing.

Continue monitoring

Managed investing net flow run-rate after +46% YoY Q1 print. Managed investing net flows grew 53% YoY in Q2, with proprietary wealth offer flows +86% YTD (from Q&A) suggesting the wallet-share monetization algorithm is intact or accelerating.

Resolved positively

Whether core NNA sustains $120B+ in Q2 given normal post-Q1 seasonality. Core NNA of $119.8B effectively met the threshold, rounding to $120B in the release headline. H1 core NNA of $259.8B tracks ahead of the 5% organic algorithm on the $13.08T asset base.

Resolved positively

What to watch into next quarter

Whether Q3 FY2026 revenue meets or exceeds the ~$7.20B implied by the FY midpoint. With H1 revenue of $13.55B and FY midpoint at $7.65B, H2 needs ~$7.10B average per quarter. A Q3 print below $7.00B would suggest the guide captured H1 momentum that normalizes; above $7.20B would set up an FY beat vs. the new range.

NIM trajectory toward the 3.25–3.30% Q4 exit. Q4 target implies ~15–20bps sequential expansion from Q3. A Q3 NIM print above 3.10% keeps the exit target credible; a print at 3.00% or below would suggest the lending-spread thesis is not yet fully materializing.

DATs holding above 10M in Q3 given the elevated 10.6M FY assumption. Q3 typically sees summer trading slowdown that management explicitly flagged; a print of 10M+ validates the structural framing; a step-down to 8–9M would reopen the transitory question.

PAL and lending balance growth from the $33.4B PAL baseline (and $67.0B total bank loans). The 0.5% vs. 4% industry lending penetration gap is the biggest new lever surfaced this quarter; continued PAL growth at or above the +59% YoY pace would demonstrate the gap is closing consistent with FY NIM upside.

Explicit EPS range formalization. The "mid-teens through the cycle" language leaves an open question of whether Q3 or an investor event brings a specific FY2026 EPS range. Absence into year-end would suggest management prefers to keep the range implicit — a break from historical Schwab guidance cadence.

Any quantification of Forge, workplace, ETF monetization, or spot crypto economics. Four separate revenue streams remain unmodeled in the FY guide; a single dollar attribution on any one would re-rate the FY2027 setup.

Long-short strategy sizing beyond the "roughly 1% of revenue" baseline. Management characterized demand as normalizing into steady growth — Q3 disclosure of AUM or flow contribution would validate whether this is a $0.5B or $2B annual revenue lever.

Sources

Charles Schwab Q2 FY2026 press release (Exhibit 99.1, SEC filing): https://www.sec.gov/Archives/edgar/data/316709/000031670926000027/a2q26exhibit991.htm
Charles Schwab Q2 FY2026 earnings call commentary (FY2026 revenue framework quantification, NIM guide, DAT assumption, penetration-gap disclosures, Q&A references to PAL growth, long-short sizing, capital allocation).
Charles Schwab Q1 FY2026 prior brief ("tracking higher than $5.70–$5.80" language, July business update commitment context).

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