How Investment Banks Make Money: Goldman's $58.3 Billion

An investment bank earns fees for advising on deals and for selling new shares and bonds. It also earns money from trading with clients and lending to them. At Goldman Sachs in 2025, trading and lending brought in more than deal fees.

Goldman reported $58.28 billion of net revenues for 2025. Net revenues are revenues after subtracting the interest the bank pays on its funding. Deal fees made up 16.0% of that. Trading and financing for clients made up 53.3%. Financing means lending to clients, for example margin loans that fund their share trades.

This guide uses Goldman's 2025 annual report (Form 10-K). It also uses Reddit's 2024 share sale prospectus, which offers shares to buyers. The third source is Activision Blizzard's 2022 merger proxy statement, which goes to shareholders before a vote.

Other banks report their own lines, so a comparison needs matching definitions. Nothing here is a view on Goldman Sachs shares or any other security.

An investment bank does three jobs for its clients. It advises companies on deals. It sells new shares and bonds for them. It trades securities with the investors who buy and sell them.

Goldman Sachs also manages money for clients, so its books hold more than the investment bank. Chart 1 splits its 2025 net revenues by source.

Market making brought in $17.99 billion, the largest line. It means quoting prices to clients and trading with them. Net interest income came next at $13.56 billion, which is interest earned minus interest paid.

Investment management brought in $11.75 billion, from fees on client money. Investment banking brought in $9.35 billion, from advice and from selling securities. Commissions and fees brought in $4.04 billion, from executing client orders. Other principal transactions brought in $1.59 billion, from the bank's own investing and lending.

Chart 1 sorts revenue by type of income across the whole bank.

The 53.3% for trading and financing sorts it by business instead. It adds Goldman's two trading businesses in Chart 2. Each holds its own market making, interest and other lines. The two views do not match line for line.

Advisory work covers mergers and acquisitions (M&A), sales of divisions, takeover defences and restructurings. The bank charges a fee for its advice. Some or all of the fee can depend on the deal closing.

Activision Blizzard's merger proxy statement shows the pattern.

Its adviser, Allen & Company, was due a cash fee of $65 million for the Microsoft deal at $95.00 a share. Of that, $10 million was payable when the adviser delivered its opinion, its formal view on the price. The other $55 million, 84.6% of the fee, was payable only if the merger completed.

Goldman's filing says it records advisory fees as revenue when the services for the underlying transaction are completed. Advisory revenue therefore mostly follows completed deals.

In 2025, Goldman's advisory revenue was $4,726 million, up 33.7% on 2024. The completed M&A volume it reports rose 35.6% to $1,233 billion. The filing counts a deal's full value for each adviser on it, so Goldman's figure counts a deal's full value even when other advisers shared it.

In 2024, completed volume fell 10.2% while advisory revenue rose 7.1%. The filing says transaction volumes "may not be indicative of net revenues in a given period".

Underwriting means the bank buys new securities from the issuer and sells them on to investors. The bank keeps the gap between the two prices, called the underwriting discount.

Reddit's initial public offering (IPO), its first sale of shares to the public, shows the numbers. The prospectus, dated 20 March 2024, offered 22,000,000 shares at $34.00, a total of $748,000,000.

The discount was $1.70 a share, which is 5.0% of the price. Across the offering it came to $37.4 million. The sellers received $32.30 a share before expenses.

Fifteen banks took part. Goldman Sachs agreed to take 4,136,000 shares, which is 18.8% of the offering.

The prospectus says the underwriters are obligated to take and pay for all of the shares offered.

Goldman also underwrites bonds and loans, which Chart 2 shows below.

Market making means quoting a price at which a client can buy and a price at which a client can sell, then earning the gap. Our explainer on what a market maker does covers the mechanics. The bid-ask spread is the gap itself.

Goldman runs two trading businesses. Fixed Income, Currency and Commodities (FICC) trades government bonds, corporate bonds, mortgages, currencies and commodities. Equities trades shares, options and futures.

Chart 2 sets every line of the Global Banking & Markets segment side by side. That segment holds the deal fees and the trading. It earned $41,453 million, or 71.1% of net revenues. Asset & Wealth Management, the segment that charges fees on client assets, earned $16,679 million, or 28.6%.

FICC brought in $14,522 million and Equities $16,535 million. Together that is $31,057 million, 3.3 times the $9.35 billion of investment banking revenue in Chart 1.

The three orange bars in Chart 2 are the deal fee lines: Advisory at $4,726 million, Debt underwriting at $2,829 million and Equity underwriting at $1,784 million. Other, at $1,057 million, covers lending and transaction banking.

Each trading business includes its own interest. Net interest income was $6,316 million of FICC's total, which is 43.5%. Market making was $7,240 million and other principal transactions $966 million. Goldman judges both businesses on total net revenues, because a gain in one line can be offset in another.

Equities earned $10,765 million from market making. Commissions, interest and other principal transactions made up the rest. Equities financing includes prime financing, which lends to clients for their securities trading through margin loans.

Chart 3 shows Goldman's investment banking revenue for fiscal 2017 to 2025.

Revenue peaked at $14.14 billion in 2021. It fell 47.9% to $7.36 billion in 2022, the largest fall among the eight year-on-year changes from 2018 to 2025. It fell another 15.5% in 2023 to $6.22 billion, then recovered to $9.35 billion in 2025. That is 66.1% of the 2021 peak.

An underwriting can fail on a weak economy, changes in trade policy, hostilities or volatile securities markets. An advisory deal can fail on falling markets, a lack of financing, a problem at one of the parties or a missing regulatory approval.

Our explainer on how the stock market works covers the markets this business sits on.

At Goldman in 2025, trading and financing earned 3.3 times deal fees. Investment banking revenue swung from $14.14 billion in 2021 to $6.22 billion in 2023.

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At Goldman Sachs in 2025, trading and financing earned more than deals. Its two trading businesses made $31,057 million, against $9,348 million of investment banking revenue, which is advice plus selling new shares and bonds. That is one bank in one year. Its investment banking revenue fell 47.9% in 2022.

Partly, in some deals. Activision Blizzard's adviser was due $10 million for delivering its opinion on the price and $55 million only if the merger completed. Goldman's filing records advisory fees when the services for the transaction are completed. It records non-refundable payments when the assignment ends, even without a completed deal.

Market making means quoting both a buy price and a sell price to clients, then earning the gap between them. It was Goldman's largest revenue line in 2025 at $17.99 billion. Our explainer on what a market maker does covers it in full.

Each share sale prospectus states its own underwriting discount, which is the part of the offer price the banks keep. Reddit's March 2024 IPO, its first sale of shares to the public, carried a discount of $1.70 on a $34.00 share, which is 5.0%, or $37.4 million across 22,000,000 shares. That one sale does not set a rate for others.

DISCLAIMER: This article is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.