What drove GS's earnings surprise in 2024?

Goldman Sachs' (GS) earnings surprise in 2024 can be attributed to several key factors:

1. **Strong Revenue Growth**: Goldman Sachs reported a net income of $14.28 billion for 2024, with a significant portion coming from the Global Banking & Markets segment, which contributed a total revenue of $34.9 billion, accounting for 67% of the total revenue. This segment's performance was a major driver of the overall earnings growth.
2. **Strategic Shifts and Cost Management**: The company's strategic shifts, such as increasing the percentage of first lien positions in its portfolio to 96.3% by year-end 2024, have enhanced portfolio security and improved net investment income. Effective cost management, including reducing the fee from 20% to 17.5% for the incentive structure starting Q1 2025, has also contributed to the bottom line.
3. **Demand for AI Infrastructure**: Goldman Sachs remains selectively positive on artificial intelligence infrastructure builders, expecting demand to remain robust in 2025/26. This continued momentum in underlying AI infrastructure demand is a catalyst for growth in related sectors. The firm's top stock picks for AI infrastructure builders further underscore its confidence in this space.
4. **M&A Activity and Strategic Investments**: The M&A environment is expected to open up in 2025, which could lead to additional investment opportunities and potential gains from strategic investments. The company's private equity arm is also actively seeking opportunities, as evidenced by its interest in acquiring a majority stake in HR tech services provider PeopleStrong.

In summary, Goldman Sachs' earnings surprise in 2024 can be attributed to strong revenue growth, strategic shifts, demand for AI infrastructure, and potential gains from M&A activity and strategic investments. These factors combined to drive the company's financial performance beyond market expectations.