Lazard’s Q1 Earnings Reveal Cost Discipline Amid Revenue Challenges

Lazard, Inc. (LAZ) reported first-quarter 2025 earnings that underscored its ability to manage costs effectively, even as revenue declined sharply. While lower expenses and a tax benefit propelled a 60% surge in GAAP earnings per share (EPS), the underlying trends in revenue and assets under management (AUM) highlight persistent headwinds in its core businesses.

Revenue Declines Reflect Broader Market Strains

Lazard’s net revenue fell 15% year-over-year to $648 million, driven by a 19% drop in financial advisory services—a segment that accounts for nearly 56% of total revenue. The decline reflects weaker global M&A activity, with geopolitical uncertainty and corporate caution weighing on deal flow. Notable transactions like CD&R’s €16 billion acquisition of Sanofi’s consumer health unit and Pactiv Evergreen’s $6.7 billion buyout by Novolex provided some stability, but they were insufficient to offset broader softness.

Meanwhile, asset management revenue dipped 4% to $264 million (adjusted basis), with AUM dropping 9% year-over-year to $227 billion. Net outflows of $3.7 billion and lackluster market performance contributed to the decline.

Cost Cuts and Tax Benefits Boost Bottom Line

Lazard’s strict cost management shone through. Compensation expenses fell 15% (adjusted) to $421 million, reducing the compensation ratio to 65.5% from 66% in Q1 2024. The firm reiterated its long-term target of 60% or lower, though progress remains uneven.

However, non-compensation expenses rose 10% year-over-year to $148 million, pushing the non-comp ratio to 23%—well above its 16–20% target. This reflects rising operational costs, a potential vulnerability if margins continue to expand.

The adjusted tax rate of -13.9% (a benefit) further buoyed results, though this was a one-time gain tied to stock-based compensation adjustments.

Strategic Moves and Shareholder Returns

Lazard advanced its long-term strategy by launching three active ETFs and forming a partnership with Arini Capital Management to strengthen its private capital capabilities. It also returned $175 million to shareholders in Q1, including $45 million in dividends and $36 million in buybacks. The company’s cash reserves of $909 million remain robust, providing flexibility for future investments or market volatility.

Risks and Challenges Ahead

While Lazard’s cost discipline is commendable, its revenue challenges are significant. The 15% revenue drop and 9% AUM decline signal vulnerability to macroeconomic cycles. Geopolitical risks, such as U.S.-China trade tensions and European regulatory shifts, could further dampen advisory activity.

Moreover, the non-compensation expense rise—driven by technology and compliance investments—may persist, squeezing margins unless revenue recovers. Management’s focus on its “Lazard 2030” strategy, emphasizing global advisory leadership and product diversification, will be critical to turning the tide.

Conclusion: A Resilient Firm, but Revenue Growth Remains Key

Lazard’s Q1 results paint a mixed picture. On one hand, its expense controls and strategic investments—like ETF launches and partnerships—demonstrate operational strength. The 60% rise in GAAP EPS (to $0.56) and strong cash position offer near-term stability.

However, the 15% revenue decline and 15% drop in adjusted EPS (to $0.56 from $0.66 in Q1 2024) underscore the need for a rebound in M&A and asset management activity. With AUM down 9% and non-comp costs rising, the path to sustained growth hinges on stabilizing these metrics.

Investors should monitor whether Lazard can shrink its compensation ratio to 60%, reignite AUM growth, and curb non-comp expenses. Until then, the stock—a proxy for dealmaking and wealth management—is likely to remain tied to macroeconomic conditions. For now, Lazard’s resilience in cost management offers a floor, but revenue recovery will determine its next chapter.