Goldman Sachs Q4: The Apple Card Deal's $0.46 EPS Boost vs. the Trading Renaissance

The upcoming earnings report is the specific catalyst that will test the market's narrative. After a rally built on expectations of a trading renaissance, the results will determine if recent strength is sustainable or a temporary mispricing. The setup is a classic tension between top-line growth and bottom-line pressure.

Consensus expects a solid 4.8% revenue increase to $14.54 billion, but the forecast for earnings per share is a decline of 2.2% to $11.69. That divergence signals a potential margin squeeze, where higher activity is being offset by rising expenses. This is the core risk: a slowdown in market activity could quickly unravel the recent gains in trading revenues that have powered the stock.

Yet, Goldman has a history of delivering positive catalysts. The company has beaten the Zacks Consensus Estimate in each of the last four quarters, with an average earnings surprise of 21.28%. That track record creates a tangible expectation for a beat, which could provide a near-term floor for the stock regardless of the broader market backdrop.

Adding to the potential upside is the firm's own research note, which argues that the broader market is likely to exceed consensus. Goldman's analysts see S&P 500 EPS growth of 7% year/year in 4Q 2025 as too conservative, pointing to a pattern of outperformance. A strong market backdrop could support Goldman's own results, particularly in investment banking and asset management.

The bottom line is that this earnings report is a binary event for the trading thesis. A beat on both revenue and EPS would validate the renaissance narrative and likely fuel further gains. A miss, however, would highlight the fragility of the rally and the looming pressure from higher costs. The catalyst is clear; the market's verdict is pending.

The Mechanics: Trading vs. Banking – Which Engine is Hotter?

The real test is in the details of the expected revenue beat. The market is watching to see if this growth is powered by a durable trading renaissance or a cyclical banking win. The first nine months showed the blueprint: strong investment banking and trading drove the top line, but rising expenses were a clear concern. That same dynamic is likely playing out again in the fourth quarter, where higher client activity is boosting revenues but also inflating costs.

The focus is squarely on trading. Goldman's market-making revenues are expected to have risen on solid client activity and high volatility across equity and other asset classes. At the same time, investment banking fees are projected to surge 27% year-over-year, fueled by a rebound in M&A volume and a strong IPO market. This combination suggests a powerful, if expensive, engine is running hot. The key question is whether this trading strength can offset any softness elsewhere, like in asset management, and more importantly, whether it can absorb the rising expense tide.

That leads to the next catalyst: enterprise AI adoption. As Goldman's own analysts note, evidence of earnings contributions from AI will be a "key investor focus." This isn't just about the firm's internal tech spending; it's about whether its clients are using AI to drive deal flow and market activity, creating a self-reinforcing cycle. A visible uptick in AI-driven deal volume would validate the "dealmaking renaissance" thesis and support the trading revenue story. Without it, the beat could look more like a one-off banking win, vulnerable to a market slowdown.

The bottom line is that the composition of the beat matters. A win driven by trading and AI adoption points to a sustainable growth engine. A win driven by a single, large banking deal or a one-time event like the Apple Card transition would be a more fragile foundation. The market will dissect the numbers to see which engine is truly hotter.

Valuation and the Immediate Setup

The market's optimism is clear in the numbers. Analysts have revised the consensus EPS estimate upward by 6.1% in the past 30 days, signaling growing confidence in a strong quarter. Yet, the model's verdict is more cautious: it does not currently predict an earnings beat. This creates a classic setup for a binary event. The stock may not be fully priced for a positive surprise, leaving room for a re-rating if Goldman delivers.

The key watchpoint is the magnitude of any earnings surprise versus the revised consensus. A beat could trigger a sharp re-rating, capitalizing on the firm's history of outperformance. The company has beaten the Zacks Consensus Estimate in each of the last four quarters, with an average earnings surprise of 21.28%. That track record builds a tangible expectation for a beat, which could provide a near-term floor for the stock regardless of the broader market backdrop.

On the other hand, a miss would break the narrative. The revised consensus of $11.69 per share already reflects elevated expectations. Falling short of that figure would highlight the fragility of the rally, particularly if it stems from a slowdown in trading revenues or if expenses rise faster than anticipated. The recent Apple Card transition, which is expected to boost Q4 EPS by 46 cents, is a one-time event that cannot be repeated. The market will be looking for a beat driven by core business strength, not accounting adjustments.

The bottom line is that valuation is a function of expectations. With the consensus revised higher but the model not predicting a beat, the immediate price reaction will hinge entirely on the earnings surprise. A positive gap could fuel further gains, while a negative one would likely trigger a swift repricing. The catalyst is here; the market's verdict is pending.

Catalysts and Risks: What to Watch

The post-earnings setup hinges on two clear paths. The primary catalyst is confirmation that the recent trading activity is more than a cyclical blip. Strong market-making revenues, driven by high volatility and solid client activity, would validate the "renaissance" thesis. This would support Goldman's premium valuation and provide a runway for further gains. The market is already looking ahead to the broader backdrop, with Goldman's own analysts arguing that S&P 500 EPS growth of 7% year/year in 4Q 2025 is too conservative. A beat here would reinforce the positive environment for trading and investment banking.

The main risk is a slowdown in market activity or a failure to control the rising expense tide. The firm's history of beating estimates is built on outperformance, but the revised consensus of $11.69 per share already reflects elevated expectations. A miss, especially if it stems from trading softness or if expenses rise faster than anticipated, would expose the valuation as too optimistic. The recent Apple Card transition, which is expected to boost Q4 EPS by 46 cents, is a one-time event that cannot be repeated. The market will demand a beat driven by core business strength.

For clues on sustainability, investors should monitor the guidance for 2026. A key signal will be the trajectory of capital expenditure. Goldman's analysts forecast that hyperscaler capex growth will decelerate sharply from 75% in 3Q to 54% in 4Q and to 24% by the end of 2026. While this points to a maturing AI cycle, it also suggests a potential slowdown in a major source of deal flow. The firm's own guidance on margin expansion and any comments on cost discipline will be critical. The forecast for 70 basis points of margin expansion in 2026 is a target that must be hit to support higher multiples.

The bottom line is that this event is a binary test. A beat driven by sustained trading and disciplined costs could create a lasting mispricing, fueling a rally. A miss or weak guidance would likely trigger a swift repricing, highlighting the fragility of the current optimism. The catalysts and risks are now in focus.