Raymond James' Q4 2025 Earnings Call: Contradictions Emerge in Recruiting Trends, AI Investments, and Margin Expectations

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $3.7B, up 8% YOY and up 10% sequentially
• EPS: $2.95 per diluted share; adjusted EPS $3.11 (adjusted pre-tax margin 20.7%)
• Operating Margin: Adjusted pre-tax margin 20.7% for the quarter; 20% for fiscal year 2025

Guidance:

• Asset management and related administrative fees for fiscal Q1 2026 expected ~6.5% higher vs Q4
• Aggregate NII and RJ BDP third-party fees expected to be approximately flat in Q1 (full-quarter impact of Sept rate cut offset by higher interest-earning asset balances)
• Effective tax rate for fiscal 2026 estimated at ~24%–25%
• Continued consistent share repurchases (repurchased $350M this quarter); capital deployment to keep tier one leverage near current levels with ~$2.6B excess capacity
• Increased AI spending next year; tech investments remain a priority

Business Commentary:

• Record Financial Performance:
• Raymond James Financial reported record net revenues of $14.1 billion for fiscal 2025, representing 10% growth year-over-year, and record pre-tax income of $2.71 billion, up 3% over fiscal 2024.

• Growth was driven by strong performance across diverse and complementary businesses anchored by the Private Client Group, Capital Markets, Asset Management, and the Bank segments.

• Client Assets and Advisor Numbers:

• The firm's client assets reached a record $1.73 trillion, with a record number of financial advisors at 8,943.

• This growth was supported by record recruiting results with advisors having $407 million in trailing 12-month production at their previous firms, reflecting a 21% increase over the previous year.

• Strong Investment Banking and Debt Underwriting:

• Capital Markets segment achieved revenues that represented the third-highest level on record, surpassed only by those observed during the pandemic period.

• This strength was underpinned by solid performance across all Capital Markets businesses, driven by strategic investments and a strong investment banking pipeline.

• AI and Technology Investments:

• Raymond James Financial invested approximately $1 billion in technology, focusing on AI initiatives designed to improve advisor efficiency and regulatory oversight.
• The company filled new technology positions, indicating a commitment to leveraging AI for enhanced advisor and client experience and regulatory compliance.

Sentiment Analysis:

Overall Tone: Positive

• "Very pleased to report record results for both the fiscal Q4 and fiscal year 2025," management noted record client assets of $1.73T and the "fifth consecutive year of record revenues and record net income." CEO: "we are more confident about our competitive positioning and path forward than we have ever been."

Q&A:

• Question from Michael Cho (JPMorgan Chase & Co.): Fleshing out recruiting — which affiliation segments are seeing uplift and what is resonating with advisors today versus 9–12 months ago?
  Response: Recruiting strength is broad-based across employee, independent contractor and RAA/custody channels; advisors are attracted by Raymond James’s combination of stable, client-first culture plus platform, technology and long-term orientation.

• Question from Michael Cho (JPMorgan Chase & Co.): Can you flesh out the objectives for the firm's AI initiatives and how AI spending will affect the ~$1B technology spend?
  Response: AI investments focus on infrastructure/cybersecurity, improving efficiency/consistency of service, and enabling advisors to deliver more bespoke advice at scale; AI expense will increase significantly next year as part of overall tech spend.

• Question from Devin Ryan (Citizens JMP): Expectations for loan demand as rates move lower — can securities‑based loans accelerate and how might mix shift across loan categories?
  Response: Securities‑based loans are expected to remain the fastest‑growing category and could accelerate in a lower rate environment; the balance sheet will continue to be shifted to support PCG via securities‑based loans and residential mortgages.

• Question from Devin Ryan (Citizens JMP): On PCG brokerage strength and debt underwriting — how much was driven by trails, annuities, private placements, or public finance?
  Response: Brokerage strength included outsized annuity/insurance sales (clients locking pricing ahead of cuts); debt underwriting growth was driven by both public and private transactions, including a few large private placements and increased public finance capacity.

• Question from Dan Fannon (Jefferies): Are the stronger net new asset levels a timing/onboarding effect or the new normal going into fiscal 2026?
  Response: The higher net new assets reflect record recruiting and relatively fast onboarding, though timing and industry M&A create both inflows and occasional outflows; recruiting momentum is extremely strong entering fiscal 2026.

• Question from Dan Fannon (Jefferies): How should we think about 2026 spending priorities versus 2025 and areas of greater or lesser spend?
  Response: Continue to invest in growth (recruiting, sub‑advisory/fee expense) and technology (notably AI); maintain discipline on controllable expenses and will begin breaking out upfront recruiting amortization in disclosures.

• Question from Bill Katz (TD Cowen): How will you fund earning asset growth — bring third‑party sweeps on‑balance, run down securities, or other sources — and any pre‑tax margin guideposts?
  Response: Funding options are diversified (third‑party bank capacity, deposits, selective securities runoff); firm stands ready to fund growth and maintains adjusted pre‑tax margin target above 20%.

• Question from Brennan Hawken (Bank of Montreal): How should we think about non‑comp expense growth into 2026 and sustainability of securities‑based loan growth?
  Response: Non‑comp expenses will increase in support of growth initiatives but remain managed; securities‑based loan momentum is sustainable and may accelerate if rates decline.

• Question from Craig Stanley (Bank of America): How has the recruiting pipeline been impacted by bank M&A and what should we expect from the Greensledge acquisition (accretion)?
  Response: Industry M&A creates recruiting opportunities; Greensledge is strategic (adds structured credit/securitization capability) but management did not provide near‑term accretion metrics, viewing it as a longer‑term synergistic play.

• Question from Michael (on for Alex Blostein) (Goldman Sachs): Clarify the slower pace of buybacks this quarter — related to Greensledge or signaling larger M&A — and criteria for larger deals?
  Response: Buybacks paused briefly (senior note offering) but $350M was repurchased; capital deployment target unchanged and firm remains an active buyer with M&A criteria focused on cultural fit, strategic one‑plus‑one benefit, and sensible valuation.

• Question from Michael Cyprys (Morgan Stanley): What is advisor/client appetite for digital assets and how can they access them today; and will AI/investment spending accelerate?
  Response: Digital asset access is limited today (e.g., certain Bitcoin ETFs available on a limited basis) and advisor/client interest is present but measured; AI investment is accelerating with the AI portion of IT spend growing substantially.