MORGAN STANLEY earnings calls

AI data-center financing and related fees

Q (Steven Chubak · Wolfe): Analyst asked if digital-infrastructure fees can keep growing as more equity and debt moves private, and what other non-IB revenue streams exist from the digital-infra buildout.

A: Management said Morgan Stanley advises across the full ecosystem for clients — strategy, capital markets and financing across public and private solutions. They stressed their structuring expertise and long relationships will be critical as deals are complex and markets set timing. They also noted employee and IPO-related flows help net new assets via their integrated funnel.

"We are advising clients on the full ecosystem of their strategic and capital markets alternatives." — Ted Pick (CEO·CHAIR)

IPO-related asset flows and bank deposits

Q (Brennan Hawken · BMO): Analyst asked how much of net new assets were tails from prior deals versus current quarter, and how deposit growth ties to the bank and funding ISG operations.

A: Management explained IPO-related flows often have a tail as employees, endowments, and fund distributions move into advice-based channels over time, so flows can persist beyond the quarter. On deposits, they said the bank growth was intentional and strategic, and funding benefits from moving eligible assets into the bank will show up over time, with additional attachment and fee-based opportunities.

"it is twofold, both from an integrated firm perspective, but also from a wealth management perspective" — Sharon Yeshaya

Technology, AI and wealth advice

Q (Glenn Schorr · Evercore): Analyst asked how technology and AI investments will change wealth advice and the wealth business long term.

A: Management said scale, unique products, and unique data give Morgan Stanley an advantage to tailor advice and deliver it with tech. They emphasized protecting client assets, continuing to invest in resiliency, and that the business remains a people business where advisers and trust matter most. They view technology as increasing operating leverage and helping scale the funnel over many years.

"With $8.4 trillion of assets in wealth management and now getting to 21 million households, we have tremendous insights into what works and what does not when you talk to your financial adviser." — Ted Pick (CEO·CHAIR)

Retaining IPO-driven assets and AI spending

Q (Christian Bolu · Autonomous): Analyst asked whether the firm expects to retain and convert IPO-driven flows into fee-based assets, and what the AI-related non-comp expense spending is for.

A: Management said they are seeing they can retain assets and are building adviser-led relationships from IPOs, which supports fee-based conversion over time. On AI spending, they said companies are redistributing technology dollars into AI to boost productivity, reduce manual reconciliation errors, and convert manual spreadsheets into automated processes across front-to-back operations.

"And we are seeing a pickup in the ability-- this is what I am trying to allude to in the last answer is those IPOs that came to fruition in the second quarter, that we are building relationships, adviser led relationships," — Sharon Yeshaya

Conviction in AI CapEx and capital allocation

Q (Mike Mayo · Wells Fargo): Analyst asked how confident they are in the AI CapEx supercycle given risks, and whether the firm is allocating more or less to AI.

A: Management said the hyperscaler CapEx is meaningful today around $1 trillion a year and could be in a similar range over time, though timing and size are uncertain. They emphasized Morgan Stanley's role as adviser and their disciplined allocation of risk capital, saying they were overweight early and are now 'double overweight' to AI across coverage, banking, and wealth given its existential importance.

"I would say that we were overweight. And in light of it being something that matters not just to our clients, but to us, I would say we are now double overweight." — Ted Pick (CEO·CHAIR)

Fee-based flows versus total flows convergence

Q (Daniel Fannon · Jefferies): Analyst asked whether total flows and fee-based flows will converge as workplace clients migrate to advice, and whether loan-driven NII growth is reasonable for 2027.

A: Management said whether flows convert to fee-based depends on what clients seek and noted many paths: direct fee-based mandates, brokerage balances that later move to fee-based, and stock-plan aggregations. They added that fee-based adviser-led flows are a significant and growing part of adviser flows and they expect NII to expand next year largely from loan growth.

"it is going to depend really on what flows end up you know, seeking what type of advice." — Sharon Yeshaya

Tokenization and digital asset opportunity

Q (Ebrahim Poonawala · BofA): Analyst asked what tokenized equities rules mean for Morgan Stanley and how they are investing to defend and gain share if tokenization scales.

A: Management said tokenization is part of the future of wealth and makes asset movement faster and easier, which increases the need for advice on how to use and move tokens. They view it as another digital opportunity where Morgan Stanley is investing across wealth and institutional services and will continue to lead as clients demand advice.

"The tokenized world is just a portion of that, and the tokenized world means it is faster and easier to move assets around, and you will need advice to think about those" — Sharon Yeshaya

Institutional equities: cyclical vs structural

Q (Devin Ryan · Citizens Bank): Analyst asked how much recent institutional equities strength is cyclical versus a larger structural change and where growth is coming from.

A: Management said equities remain an attractive asset class today and the business benefits from scale, global presence, and integrated cash, derivatives, and prime brokerage capabilities. They highlighted stronger derivatives capabilities built recently, emphasized global footprint including Asia, and noted they keep capital buffers to be able to deploy capital when opportunities arise.

Where to allocate capital geographically and by product

Q (Chris McGratty · KBW): Analyst asked where the firm is most excited to allocate capital next few years: domestic vs international, and by product.

A: Management said allocation is global — they already have long-standing positions in Hong Kong, Tokyo, Europe, and the US and will lean on that global presence. Product-wise they stressed integrated solutions across cash, derivatives and prime brokerage and the importance of close integration among markets businesses and commodities, macro, and equities to serve clients.

Higher rates effect on capital raising decisions

Q (Erika Najarian · UBS): Analyst asked how sustained higher nominal and real rates are affecting clients' capital raising decisions across capital types.

A: Management said higher real rates mean the cost of capital is very different than recent low-rate years and structures must be realistic; some financings will need investment-grade like structures. They said Morgan Stanley will be rigorous in allocating balance-sheet capital, advising on structure and timing, and noted higher rates tied to productivity are different from rates rising from inflation or geopolitical shocks which would dampen appetite for illiquid risk.

"When there is elevated an elevated interest rate world, if interest rates are higher as a function of higher productivity and higher GDP, all is good." — Ted Pick (CEO·CHAIR)

Sponsor mandate backlog and private exits

Q (Scott Siefers · TD Cowen): Analyst asked about backlog in sponsor mandates, why deals are delayed, and how the logjam breaks.

A: Management said some sponsors are choosing to hold assets because they still generate attractive IRRs in a higher-rate world, while others are stuck on marks and MOICs that markets won't support. They expect leading private equity firms to package ready assets alongside winners to bring to market, but acknowledged this is conditional on market and interest-rate dynamics.

"The first 1 is that at some point, the piper must be paid, I. E, the investment portfolio needs to be harvested." — Ted Pick (CEO·CHAIR)

FICC investment opportunity vs equities

Q (Ben Gerlinger · Citi): Analyst asked whether FICC is a large investment opportunity to take share or whether equities offer more expansion opportunity.

A: Management said fixed income was once a weakness but leadership has made it stable and efficient, producing strong returns and integration with investment banking and equities. They view FICC, commodities, macro and securitized lending as integrated strengths of the firm and plan to continue investing there alongside equities.

"Importantly, the business is integrated with investment banking and capital markets on the private side and equities in a way that this institution has never seen." — Ted Pick (CEO·CHAIR)