Evercore's Q3 2025 Earnings Call: Contradictions Emerge on M&A Momentum, Regulatory Outlook, and Deal Pipeline

Date of Call: October 29, 2025

Financials Results

• Revenue: $1.0B adjusted net revenues, up 42% YOY
• EPS: $3.48 adjusted EPS, up 71% YOY (GAAP EPS $3.41)
• Operating Margin: 21.8% adjusted operating margin, up from 18.2% in the prior year (≈360 bps improvement)

Guidance:

• Expect continued market strengthening and momentum into year-end and into 2026; fourth-quarter seasonality likely less pronounced than in prior years.
• Full-year compensation ratio expected generally in line with current levels; Q4 comp ratio anticipated modestly lower than Q3.
• Adjusted non-comp expenses expected to be up year-over-year as the firm continues targeted investments (tech, occupancy, travel).
• Backlog and pipelines across advisory, ECM/DCM and PCA are building; government shutdown may cause short-term slowdowns but is expected to be temporary.

Business Commentary:

• Record Revenue and Market Momentum:
• Evercore Inc. reported record adjusted net revenues of over $1 billion for Q3 2025, up 42% year-over-year and marking the second-best quarter in its history.

• The growth was driven by the strength of diversified revenue streams, strategic hiring and promotions, and a steadily improving market environment.

• Investment Banking Recovery and Talent Acquisition:

• Evercore has increased its Senior Managing Director hiring by nearly 50% since the end of 2021, now featuring 168 investment banking SMDs.

• This strategic expansion is attributed to the firm's commitment to talent acquisition and development, positioning it well as market conditions strengthen.

• Strong Performance Across Business Segments:

• The European Advisory business achieved its best quarter on record, with robust activity across sectors, products, and geographies.

• This performance is supported by Evercore's focus on broadening its client coverage and expanding product capabilities in strategic regions.

• Government Shutdown and Market Conditions:

• Evercore anticipates a potential slowdown in transactions due to the ongoing government shutdown, but expects a quick recovery once resolved.
• Market conditions suggest a more conducive environment for deal-making, with a significant backlog and strong client activity.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a "record third quarter" with over $1B in adjusted net revenues (up 42% YOY), adjusted operating income of $228M (up 69% YOY) and adjusted EPS of $3.48 (up 71% YOY), and repeatedly cited strong backlog, broad-based activity and optimism into 2026.

Q&A:

• Question from Devin Ryan (Citizens JMP Securities, LLC): Congrats on the strong quarter. I wanted to just ask a question about the current environment and kind of the trajectory, obviously, really good trends in the quarter and you talked about kind of some larger strategic transactions leading the recovery, but now sponsors are steadily picking up. So can you maybe just explain kind of what you're seeing in terms of the breadth of activity, how that's evolved over the last few months and just expectations here as we exit the year relative to maybe where we were in the earlier where it seems like you guys maybe disproportionately benefited but now things are broadening out and that's helping you as well. So love to get some color there.
  Response: Market activity is broadening across sectors with large deals earlier and mid‑market builds; backlog is at record levels and activity should continue through year‑end into 2026.

• Question from Brendan O'Brien (Wolfe Research, LLC): So I just want to ask on comp leverage and the top line results have been very impressive year-to-date. However, despite the strong revenue growth, you've only been able to lower the comp ratio by about 70 bps, implying an incremental comp margin of about 63% versus historically in the low 50s. I understand that you've been leaning into recruiting quite a lot this year and have had a lot of success adding talent to the platform. But I just want to get a sense as to how you're thinking about the incremental comp margins in the coming years and whether you expect to see any improvements from the current levels if the pace of hiring slows relative to this year's record level?
  Response: Comp ratio has improved materially (down ~260 bps vs two years ago) but further improvement will be gradual as the firm prioritizes recruiting and long‑term value; not a quick return to historical low‑50s levels.

• Question from Brennan Hawken (BMO Capital Markets Equity Research): I'd love to drill into those comments, Tim, because I hear you that you're adding -- I hear you that the level of competition for talent is intense. And you've made reference to the fact that it falls about recruiting and retention given the caliber of bankers that you have. So it's clearly the environment is challenging. I doubt that's going to change. I mean, you guys have spoken regardless of 4Q and timing and all that other ones. The environment is getting better, and it seems like the bulge brackets are punching back in a really sort of strong way. So that doesn't seem like it's going to fade. But do we need to give up the ghost on the low 60s right? Because you did 40% revenue year-over-year comp leverage 100 bps. Yes, it's improved from the really bad levels of 2023. But like in order for us to be thinking about -- the really investments you're talking about it is like where are we going to get to in 2027. And most of that underwrites low 60s comp ratios. Given what you noted, is that realistic? Or do we need to re-underwrite things in a more meaningful way?
  Response: No quick return to prior low‑50s/low‑60s comp ratios; management expects incremental yearly progress and a modestly better Q4, but improvements will be gradual.

• Question from James Yaro (Goldman Sachs Group, Inc., Research Division): John, you touched on this a bit, but perhaps could you expand a little bit on the impact of the government shutdown on your business in terms of time line and whether any of the effects will be permanent? And then could you differentiate between the impacts on the equity capital markets and M&A.
  Response: If the shutdown is short it will be a temporary blip; longer duration would slow processes (SEC/FCC/Justice) and delay ECM and M&A timing, but management does not expect permanent impact and anticipates a rapid recovery when resolved.

• Question from Ryan Kenny (Morgan Stanley): I have another government-related question, which is on regulatory environment. Can you update us on what you're seeing there, especially on time to close deals? And are you seeing an improved environment across the board? Or are there some industries where scrutiny is higher.
  Response: Regulatory scrutiny is focused (e.g., Big Tech) but deals are still progressing; overall environment is becoming more benign and time‑to‑close is generally improving.

• Question from Nathan Stein (Deutsche Bank AG): I wanted to ask about potential impacts related to some unexpected losses at, let's say, traditional banks and private funds in recent weeks, call it, tricolor first brands, et cetera. I guess just combined with the government shutdown, you started -- you sounded like that was more transitional, but are these headlines making clients in general, more hesitant to transact?
  Response: Those losses are viewed as isolated; clients remain willing to transact and credit markets are not believed to be broadly impaired.

• Question from Alexander Bond (Keefe, Bruyette, & Woods, Inc.): Wondering if you could just share your outlook for DCM business more broadly here for the fourth quarter. The IPO market is obviously still heating up, but you mentioned some of the impact or I guess, the still unknown impact of the government shutdown here. So yes, maybe if you could just share how you're thinking about how your pipeline is shaping up for the back end of the year here.
  Response: DCM/ECM pipeline is strengthening with significant deals and a growing backlog; shutdown may slow timing but workarounds exist and management is optimistic deals will proceed.

• Question from James Mitchell (Seaport Research Partners): Maybe you could talk a little bit about Europe. You had a record year and a record quarter in the third quarter. Obviously, that doesn't include Robey Warshaw yet. So can you, I guess, number one, give us a lay of the land of Europe and the environment? And secondly, even after Robey Warshaw, how much white space in terms of investment do you see?
  Response: Europe momentum is strong across sectors; Robey Warshaw enhances capabilities and coverage, and significant white space remains as Evercore expands country coverage and targets new corporate relationships.

• Question from Brennan Hawken (BMO Capital Markets Equity Research): You guys have spoken to the non-M&A piece reaching half on a TTM basis, which is great and very encouraging to see. As M&A turns back on, where would you expect that share of non-M&A revenue to drift to? Is it reasonable to think it will go from like half to about 40%? Or are you more thinking maybe it's more like 1/3. What's the right way to think about that?
  Response: As M&A strengthens, non‑M&A percentage may decline but likely not much below ~40% given strong, record performance across PCA, PFG and restructuring businesses.

Contradiction Point 1

Outlook for M&A Activity and Market Engagement

It involves differing perspectives on the pace and extent of M&A activity and market engagement, which are crucial for understanding the company's growth trajectory and revenue projections.

Can you detail the market activity breadth, its evolution over the past few months, and expectations for year-end? - Devin Ryan(Citizens JMP Securities, LLC)

2025Q3: There is a continued strengthening in the market across all sectors. Larger deals started earlier, followed by midsized deals, and now across industries. There is high engagement with Boards and management teams, and backlogs are at record levels. Sponsor activity is picking up, with increased bake-offs. The momentum is expected to continue into 2026. - John Weinberg(CEO)

What services does Robey Warshaw offer besides M&A advisory services? - James Yaro(Goldman Sachs Group, Inc., Research Division)

2025Q2: While we anticipated a more robust recovery in M&A activity in the second quarter, our deal environment remains choppy with lack of visibility and volatility continuing to impact the timing and pace of deal activity. Some progresses were made on a few large deals and the overall backlog of deal discussions continues to build. - John Weinberg(CEO)

Contradiction Point 2

Regulatory Environment and Deal Processing

It involves differing views on the regulatory environment and its impact on deal processing, which is essential for understanding operational efficiencies and potential challenges in the deal pipeline.

Can you provide an update on the regulatory environment and deal closing timelines? - Ryan Kenny(Morgan Stanley, Research Division)

2025Q3: The regulatory environment is more benign, with a general loosening expected. Deals are moving through the system well. There's optimism about the current environment, and the art of the possible is broad. - John Weinberg(CEO)

Are tariffs still impacting potential transactions? - James Yaro(Goldman Sachs Group, Inc., Research Division)

2025Q2: While the macro backdrop has improved, the regulatory environment remains a significant hurdle, which has impacted deal timing and the pace of deal execution. That said, we continue to see progress on a few large deals. - John Weinberg(CEO)

Contradiction Point 3

M&A Activity and Momentum

It involves differing perspectives on the pace and breadth of M&A activity, which is crucial for understanding the company's growth trajectory and investment opportunities.

Can you explain the breadth of market activity, its evolution over the past few months, and expectations for the remainder of the year? - Devin Ryan(Citizens JMP Securities, LLC)

2025Q3: There is a continued strengthening in the market across all sectors. Larger deals started earlier, followed by midsized deals, and now across industries. There is high engagement with Boards and management teams, and backlogs are at record levels. - John Weinberg(CEO)

How is the M&A environment evolving for large deals in Evercore's pipeline post-election? - Devin Ryan(Citizens JMP)

2024Q4: We see robust activity, with large deals in our backlog. The regulatory environment should loosen, enhancing deal-making. Market conditions are positive, and dialogues with clients remain high. - John Weinberg(CEO)