Goldman Sachs vs. Morgan Stanley: Which Stock Has More Upside?

It is earnings season and next week, two of the leading players in investment banking and mergers and acquisitions -- Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) -- will report their first quarter results.

Banks typically report first in each earnings season and are seen as bellwethers for the state of the economy. Goldman Sachs and Morgan Stanley are often viewed as bellwethers for the state of mergers and acquisitions (M&A).

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Both of these companies are expected to post strong results, as M&A activity in Q1 was robust. In fact, the first quarter set a record with some $1.2 trillion worth of deals worldwide -- a 42% increase over the first quarter of 2025.

As two of the three largest investment banks, Goldman Sachs and Morgan Stanley should reap massive benefits from the M&A boom.

Analysts expect to see earnings per share of $16.22 for Goldman Sachs when it reports on April 13. That would be up 15% year over year. Revenue is projected to hit $16.9 billion, which would be up 12% year over year.

Morgan Stanley reports earnings two days later on April 15. Analysts anticipate EPS of $3.02, which would also be a 15% increase year over year. Revenue is projected to hit $19.6 billion in Q1, which would be an 11% year-over-year gain.

Turbocharged by M&A

Both Goldman Sachs and Morgan Stanley get a significant chunk of their revenue from M&A, certainly more than their other rival, JPMorgan Chase (NYSE: JPM). With investment banking making up a bigger portion of their overall revenue pie, both of these stocks could surge higher than their competitors after Q1 results.

In Q4, Goldman Sachs made roughly $2.58 billion in investment banking revenue, accounting for approximately 19% of total revenue. Morgan Stanley generated $2.41 billion from investment banking last quarter -- that's about 13% of total revenue.

So in this type of market, when M&A is hot, Goldman Sachs will have an advantage because strong M&A should spur bigger revenue gains. That has borne out over the past year, as 2025 was the best year for investment banking since 2021.

Goldman Sachs has outperformed Morgan Stanley, and most financial stocks over the past year or more. Goldman Sachs stock has returned 85.3% over the past year and is down 1.8% YTD. Morgan Stanley stock is up 66.2% over the past 12 months and is down 5.5% YTD. Goldman Sachs also beats Morgan Stanley over the past three- and five-year periods. However, Morgan Stanley has the better 10-year track record, averaging an annualized return of 21.3% to Goldman Sachs' 18.7% annualized 10-year return.

Which is the better buy?

These are two great stocks and both are buys, given their dominance in their respective markets. Goldman Sachs has been the better performer in recent years and probably has the tailwinds to continue to soar in the near term.

The M&A market should continue to be strong, fueled by an expectation for rates to go down, albeit more slowly than initially expected, and the need for companies to compete in the artificial intelligence boom, among other factors.

Morgan Stanley, however, might be the better all-around stock, because of its diversity of revenue streams and strength in multiple markets. Morgan Stanley is not only a dominant player in investment banking, but is a leading wealth manager and brokerage firm. In fact, most of its revenue comes from its wealth management and institutional trading businesses.

Morgan Stanley stock is also a tad cheaper, trading at 14 times forward earnings, while Goldman Sachs is trading at 15 times forward earnings.

But, both are in the buy zone, given their earnings power. While Goldman Sachs may have more short-term upside from its investment banking results, Morgan Stanley stock should also bounce after Q1.

While I think both are buys, I'd give the slight edge to Morgan Stanley as a long-term holding for its more diversified revenue streams, cheaper valuation, and long-term track record.

JPMorgan Chase is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool has a disclosure policy.