SCHW · Q4 2025 Earnings

Bullish

Charles Schwab Corporation

Reported January 21, 2026

30-second summary

Schwab closed FY2025 with Q4 revenue of $6.34B (+19% YoY) and adjusted EPS of $1.39, capping a year of $23.92B revenue (+22% YoY) and 5.1% organic growth, then introduced an FY2026 framework that prioritizes operating leverage over top-line acceleration: 9.5–10.5% revenue growth, 5.5–6.5% expense growth, and $5.70–$5.80 adjusted EPS (+17–19% YoY). The deceleration is real and explicit — Q3's hot-running organic algorithm normalizes — but management's posture is the most offensive in years, with wallet-share monetization (PAL at 9% penetration, managed investing at 5% retail penetration vs. 31% stated willingness to pay) replacing acquisition tailwinds as the growth narrative. Hedge program reduces rate sensitivity by one-third, with management asserting 10%+ EPS growth even if Fed funds approaches 2%.

Headline numbers

EPS

Q4 FY2025

$1.39

Revenue

Q4 FY2025

$6.34B

+19.0% YoY

Operating margin

Q4 FY2025

50.2%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$6.34B	+19.0%	$6.13B	+3.3%
EPS	$1.39	—	$1.31	+6.1%
Operating margin	50.2%	—	49.2%	+100bps

Guidance

FY2026 guidance reflects significant deceleration from 2025 performance: revenue growth expected to slow to 9.5–10.5% YoY (vs 22% in 2025), though adjusted EPS growth of 17–19% YoY demonstrates operating leverage through controlled expense growth of 5.5–6.5%.

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
Revenue	FY 2026	$24.62B to $25.61B	2.8% to 7.0% YoY
Adjusted EPS	FY 2026	$5.70 to $5.80	17.0% to 19.1% YoY
Total Revenue Growth	FY 2026	9.5% to 10.5%	—
Net Interest Margin	FY 2026	2.85% to 2.95%	—
Expense Growth	FY 2026	5.5% to 6.5%	—
Organic Asset Growth	FY 2026	around 5%	—
Daily Average Trades	FY 2026	roughly 7.4 million	—
Pre-tax Margin	FY 2026	low 50s	—

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
Net Interest Revenue	$3.172B	+25.4%
Asset Management and Administration Fees	$1.733B	+14.8%
Trading Revenue	$1.066B	+22.1%

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Total Client Assets	$11.90 trillion
Core Net New Assets (Q4)	$163.9 billion
Full-Year 2025 Core Net New Assets	$519.4 billion
Organic Growth Rate (Full-Year 2025)	5.1%
Active Brokerage Accounts	38.5 million
Total Client Accounts	46.5 million
Return on Tangible Common Equity (annualized)	39%
Net Interest Margin (Q4)	2.90%

Management tone

Narrative arc: Q1 cash-sort hangover → Q2 "playing offense" → Q3 record print with guidance left untouched → Q4 explicit wallet-share monetization framework with quantified penetration gaps.

Three quarters ago the wealth/lending diversification thesis was a slide; two quarters ago it was a directional shift; this quarter management quantified the gap with surgical specificity. The anchor quote from the call: "Approximately 5% of retail households at Schwab engaged with our managed investing solutions, yet about 31% say they are willing to pay for advice." The 26-percentage-point penetration gap is the kind of falsifiable monetization runway that prior calls only gestured at. The shift signals that management now believes the multi-year earnings algorithm rests on installed-base monetization rather than rate-cycle tailwinds — and is willing to be measured against specific penetration targets.

Q2 introduced "playing offense" as a posture; Q3 demonstrated it through unrefreshed guidance running visibly hot; this quarter operationalizes it as a strategic doctrine. "With nearly 12 trillion in assets and more than 46 million client accounts, doing more for our clients is as important a source of growth as acquiring new clients." Two years ago the dominant Schwab narrative was Ameritrade retention; this quarter that integration is treated as a closed chapter and the next chapter is wallet-share. The shift reflects a real change in growth algorithm: a +5% organic growth engine compounding on an 18%-larger asset base produces meaningful absolute NNA — but the incremental earnings growth must come from monetizing what's already there.

Most striking shift: the rate-sensitivity narrative inverted. For three years Schwab's earnings story was a hostage of the Fed funds path; this quarter management proactively dimensioned a downside scenario. "If you were to assume the Fed funds rate moves much lower than the current market expectations, perhaps approaching the 2% level, we would still anticipate delivering year-over-year earnings growth of at least 10%, probably a bit better." The hedge program standing up in 2025 cut rate sensitivity by one-third, and management is now offering investors an earnings floor that previously did not exist. This is the most credible macro de-risking statement in recent Schwab history.

The PAL framing also stepped up materially. Q2 cited PAL originations +100% YoY; Q3 reaffirmed momentum; this quarter management quantified the penetration gap (9% retail UHNW, 23% advisor) and tied it to spread economics ("north of 100 basis points"). "PAL balances have nearly doubled since 2023... With an average spread to securities north of 100 basis points, this is a win for clients and for our economics." PAL has graduated from a feature to a core wealth-monetization lever with multi-year runway.

The deceleration framing is unusually honest. Management is not pretending FY2026's 9.5–10.5% revenue growth represents continuation; they are framing it as normalization plus operating leverage. The trading volume "slight pullback" to 7.4M DAT is acknowledged rather than buried. This honesty itself is a tonal shift — Schwab has historically preferred to under-promise; explicit acknowledgement of expected 2026 normalization vs. record 2025 is a calibrated risk worth respecting.

Recurring themes management leaned on this quarter:

Deepening client relationships and wallet share expansion across existing 46M accountsWealth solutions (managed investing, alternatives via Forge) as high-ROCA diversification leverPledged asset lending penetration runway with best-in-class digital experienceAI-driven operational efficiency (220+ use cases) enabling reinvestment in growthTrading dominance (10% of U.S. notional volume, 7.7M DAT record) and demographic broadeningBalanced capital return and disciplined financial management through-the-cycle

Risks management surfaced:

Market valuations are high entering 2026Interest rates may differ materially from forward curve expectations (225bp cuts assumed)Client trading activity volatility (slight pullback to 7.4M DAT assumed vs. 2025 record levels)Outcomes may differ from financial scenario expectationsCompetitive pressure in advisor services and wealth management

Q&A highlights

Dan Fannin · Jefferies

What is a reasonable level of penetration for lending offerings across existing clients in the next couple of years?

Management highlighted pledged asset line penetration at only 9% for higher net worth clients and 23% for advisor clients, with significant upside potential. They expect continued strong growth in lending originations (up 85% last year) and plan to expand banking and lending capabilities beyond current offerings to RIA clients.

9% penetration of pledged asset line for higher net worth clients23% penetration for advisor clients85% growth in pledged asset line originations year-over-yearManagement expects further expansion of banking and lending products to RIA clients

Ken Worthington · JP Morgan

What is the current status of the Alternatives platform in terms of engagement, assets, and ability to attract new customers?

Management noted strong early traction with higher net worth clients including a backlog of interest in alternative investment consultants. They are not disclosing asset numbers due to early stage but believe alternatives will be a key growth driver for ultra-high net worth clients, attracting new assets and clients to Schwab through a diversified offering including manager partnerships, fund structures, and individual company access via Forge.

Backlog of demand for alternative investment consultant consultationsAlternatives positioned as part of comprehensive ultra-high net worth offeringNo asset numbers disclosed yet due to early stage rolloutStrategy includes leading alternatives managers, fund-based structures, and individual private company access through Forge

Stephen Churek · Wolf Research

How much further can penetration deepen in tax-advantaged long-short strategies given strong demand, and how do returns compare to PAL and other balance sheet opportunities?

Management emphasized this is a fee-based product with win-win characteristics for the firm and clients, generating diversified revenue without significant balance sheet impact. They expect continued growth in 2026 and are expanding to retail through proprietary solutions like Schwab Personalized Indexing, viewing it as part of broader wealth relationship strategy. Managed investing solutions saw nearly $70 billion in flows (up 36% YoY).

Tax-advantaged long-short strategies are fee-based revenueNearly $70 billion flowed into managed investing solutions last year36% year-over-year growth in managed investing solutionsStrategy includes expansion to retail via proprietary Schwab Personalized Indexing

Bill Katz · TD Cowan

Why is 5% organic growth guidance for 2026 a slight deceleration from 5.1% in 2025, and is 5-7% still the right long-term goal? Also, how should we think about the adjusted T1 leverage ratio target?

Management maintains 5% as realistic near-term target despite being similar to 2025, noting that total client assets grew 18% YoY so the target compounds. They expect above 5% remains possible longer-term with workplace, crypto, and retail expansion investments. The 6.75-7% adjusted T1 ratio target remains unchanged despite potential interim fluctuations from interest rate movements affecting securities valuations.

5% organic growth target for 2026 (near-term focus)5% or higher is right long-term expectationTotal client assets grew 18% year-over-year6.75% to 7% adjusted tier one leverage ratio target maintained

Devon Ryan · Citizens Bank

With supplemental borrowing paydown largely complete and strong capital ratios, what should be the next phase of asset remixing? How should we think about securities portfolio growth timing, size, and duration?

Management indicated securities reinvestment will support strong lending growth while maintaining liquidity. The portfolio will be primarily U.S. Treasuries with shorter duration (2-4 year range overall), with some high-quality asset-backed securities allocation. They expect continued lending momentum in 2026 across bank products and margin lending.

Securities portfolio maintains 2-4 year duration rangeMajority allocation to short-dated U.S. TreasuriesSome allocation to high-quality asset-backed securitiesStrong lending momentum expected to continue in 2026

Answers to last quarter's watch list

Whether Q4 brings a refreshed FY2025 or initial 2026 numeric framework. Resolved decisively: management delivered a comprehensive FY2026 framework — revenue growth 9.5–10.5%, adjusted EPS $5.70–$5.80 (+17–19% YoY), NIM 2.85–2.95%, expense growth 5.5–6.5%, organic growth ~5%, DATs ~7.4M, pre-tax margin "low 50s." FY2025 closed at $23.92B revenue and $4.87 adjusted EPS.

Resolved positively

Whether core NNA sustains above $100B or reverts toward the Q2 ~$80B run-rate. Resolved decisively positive: Q4 core NNA of $163.9B accelerated from Q3's $137.5B, third consecutive sequential step-up, with FY2025 core NNA of $519.4B yielding 5.1% organic growth. The watch threshold of "sustained $100B+" was cleared by a wide margin.

Resolved positively

Pace of bank supplemental borrowing paydown from the $14.8B Q3 balance. Resolved decisively: Bank Supplemental Funding declined by $9.7B in Q4 to end the quarter at $5.1B, which management characterized as "the lower end of our $5 to $15 billion business-as-usual range." Focus has shifted to the next phase of asset remixing (securities reinvestment into 2–4 year Treasuries supporting lending growth). The FY2026 NIM guide of 2.85–2.95% vs. Q4 actual 2.90% confirms the deleveraging-driven NIM tailwind is now largely worked through.

Resolved positively

Whether Q4 brings any quantification of the Q2-telegraphed "meaningful revenue opportunity" or Bitcoin/Ethereum spot trading economics. Partially resolved: management used Q4 to quantify the broader monetization runway (5% managed investing penetration vs. 31% stated willingness, 9% PAL penetration for retail UHNW, $70B managed investing flows at 2x retail ROCA) rather than reveal a single discrete opportunity. Bitcoin/Ethereum spot trading economics were not separately addressed. Status: Resolved positively for the broader monetization framing; Continue monitoring on spot crypto specifics

Trading revenue trajectory if DATV continues softening from Q3's 7.4M. Q4 trading revenue was $1.07B, +22.1% YoY — strong YoY growth driven by record full-year DATs of 7.7M cited by management. FY2026 guide explicitly assumes a "slight pullback" to ~7.4M, framing 2025 as elevated rather than the new run-rate. Status: Resolved (positively for FY2025; cautiously for FY2026 with explicit pullback embedded in guide)

What to watch into next quarter

Whether Q1 FY2026 core NNA sustains a $130B+ run-rate. With FY2025 core NNA at $519.4B (5.1% organic growth) and Q4 alone at $163.9B, a Q1 print materially below ~$130B would suggest Q4 captured year-end inflow concentration; sustaining above $130B validates the ~5% organic algorithm on a larger base.

Whether managed investing flows accelerate from FY2025's $70B / +36% YoY pace. This is the falsifiable test of the 5%-to-31% penetration-gap thesis; FY2026 flows below ~$80B would suggest the gap closes more slowly than the wallet-share narrative implies.

PAL originations and balance growth from the 9% retail UHNW / 23% advisor penetration baseline. Management positioned this as multi-year runway with 100+ bps spreads; Q1/Q2 origination momentum below FY2025's +85% YoY pace would compress the lending earnings contribution embedded in the FY2026 guide.

Q1 NIM trajectory within the FY guide range of 2.85–2.95%. Q4 closed at 2.90%, the midpoint; movement above 2.92% would suggest upside to FY EPS guide, below 2.87% would suggest the Fed-cut sensitivity (225bps assumed) is biting faster than the hedge program offsets.

Whether DATs run materially above the 7.4M FY2026 assumption. Sustained DATs of 7.6M+ in Q1 would create upside to trading revenue vs. the conservative baseline; a step-down toward 7.0M would validate the "pullback" framing as the new floor.

Any explicit quantification of Bitcoin/Ethereum spot trading economics or workplace/crypto contribution to NNA. Management cited workplace and crypto as accelerants that could push organic growth above 5% longer-term; the first concrete sizing would re-rate the FY2027+ algorithm.

Sources

Charles Schwab Q4 FY2025 press release (Exhibit 99.1, SEC filing): https://www.sec.gov/Archives/edgar/data/316709/000031670926000004/a4q25exhibit991.htm
Charles Schwab Q4 FY2025 earnings call prepared remarks and Q&A (FY2026 framework, monetization penetration metrics, rate sensitivity commentary).
Charles Schwab Q3 FY2025 and Q2 FY2025 prior-quarter briefs (cross-quarter trajectory context).

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