MORGAN STANLEY (MS)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. We operate as an Integrated Firm whereby we serve clients holistically across our business segments. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.

A description of the clients and principal products and services of each of our business segments is below. Through the Integrated Firm some of our clients may use the products and services of more than one of our business segments.

Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Markets business, which comprises Equity and Fixed Income, provides sales, financing, prime brokerage, market-making, and Asia wealth management services and holds certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to clients. Other activities include research.

Wealth Management provides a comprehensive array of financial services and solutions to individual investors, including high and ultra-high net worth individuals, and businesses and institutions. Wealth Management supports clients through three channels: Advisor-Led, Self-Directed and Workplace. Wealth Management includes: financial advisor-led brokerage, investment advisory, custody, cash management, and administrative services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential and commercial real estate loans and other lending products; banking; and retirement plan services.

Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.

Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.

The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; legislative, legal and regulatory developments; market and economic conditions; and other risk factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements”, “Business—Competition”, “Business—Supervision and Regulation” and “Risk Factors” in the 2025 Form 10-K and “Liquidity and Capital Resources—Regulatory Requirements” herein.

Executive Summary

Overview of Financial Results

Consolidated Results—Three Months Ended June 30, 2026

•The Firm reported net revenues and pre-tax income of $21.3 billion and $7.3 billion, respectively.

•The Firm delivered ROE of 20.7% and ROTCE of 26.6% (see “Selected Non-GAAP Financial Information” herein).

•The expense efficiency ratio was 65% for both the second quarter and year-to-date, demonstrating operating leverage while we continued to invest in our businesses.

•At June 30, 2026, the Firm’s Standardized Common Equity Tier 1 capital ratio was 14.9%.

•Institutional Securities reported net revenues of $11.0 billion, primarily reflecting strong results in Equity and higher Investment Banking revenues.

•Wealth Management delivered net revenues of $8.9 billion, reflecting strong Asset management revenues, increased Net interest income and higher client activity, generating a pre-tax margin of 30.5%. The business added net new assets of $148 billion and fee-based assets of $39 billion.

•Investment Management reported net revenues of $1.6 billion, primarily driven by asset management fees on higher average AUM. The quarter included positive long-term net flows of $7.5 billion.

Net Revenues

($ in millions)

Net Income Applicable to Morgan Stanley

($ in millions)

Earnings per Diluted Common Share

We reported net revenues of $21.3 billion in the quarter ended June 30, 2026 (“current quarter,” or “2Q 2026”), which increased by 27% compared with $16.8 billion in the quarter ended June 30, 2025 (“prior year quarter,” or “2Q 2025”). Net income applicable to Morgan Stanley was $5.6 billion in the current quarter, which increased by 58% compared with $3.5 billion in the prior year quarter. Diluted earnings per common share was $3.46 in the current quarter, which increased by 62% compared with $2.13 in the prior year quarter.

We reported net revenues of $41.9 billion in the six months ended June 30, 2026 (“current year period,” or “YTD 2026”), which increased by 21% compared with $34.5 billion in the six months ended June 30, 2025 (“prior year period,” or “YTD 2025”). Net income applicable to Morgan Stanley was $11.1 billion in the current year period, which increased by 42% compared with $7.9 billion in the prior year period. Diluted earnings per common share was $6.90 in the current year period, which increased by 46% compared with $4.73 in the prior year period.

Non-Interest Expenses

($ in millions)

•Compensation and benefits expenses of $8,187 million in the current quarter and $16,729 million in the current year period increased 14% compared with the prior year periods, primarily due to an increase in the formulaic payout to Wealth Management advisors and higher discretionary incentive compensation within Institutional Securities, both based on higher revenues.

During the current year period, as a result of a March workforce management action, we recognized severance costs of $178 million in Compensation and benefits expense. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary” in the Form 10-Q for the quarter ended March 31, 2026.

•Non-compensation expenses of $5,715 million in the current quarter and $10,644 million in the current year period increased 19% and 14%, respectively, compared with the prior year periods, primarily due to higher execution-related expenses and increased technology spend.

Provision for Credit Losses

The Provision for credit losses on loans and lending commitments of $98 million in the current quarter and $196 million in the current year period was primarily related to certain specific commercial real estate and corporate loans and portfolio growth in corporate loans and secured lending facilities. The Provision for credit losses on loans and lending commitments of $196 million in the prior year quarter and $331 million in the prior year period was primarily related to portfolio growth in corporate loans and secured lending facilities and a macroeconomic outlook reflecting slower GDP growth.

For further information on the Provision for credit losses, see “Credit Risk” herein.

Business Segment Results

Net Revenues by Segment1

($ in millions)

Net Income Applicable to Morgan Stanley by Segment1

($ in millions)

1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 19 to the financial statements for details of intersegment eliminations.

•Institutional Securities net revenues of $11,040 million in the current quarter and $21,761 million in the current year period increased 44% and 31%, respectively, compared with the prior year periods, primarily reflecting higher results in Equity on increased client activity and higher Investment Banking results.

•Wealth Management net revenues of $8,856 million in the current quarter and $17,375 million in the current year period increased 14% and 15%, respectively, compared with the prior year periods, primarily reflecting higher Asset management revenues on higher market levels and the cumulative impact of positive fee-based flows, increased Net interest income and higher client activity.

•Investment Management net revenues of $1,646 million in the current quarter and $3,181 million in the current year period increased 6% and 1%, respectively, compared with the prior year periods, reflecting higher Asset management

and related fees driven by higher average AUM on higher market levels. The increase in net revenues in the current year period was partially offset by lower Performance-based income and other revenues.

Net Revenues by Region1

($ in millions)

1.For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements in the 2025 Form 10-K.

•Americas net revenues increased 22% and 16% in the current quarter and in the current year period, respectively, compared with the prior year periods, primarily driven by higher Asset management revenues within the Wealth Management business segment and higher Investment Banking and Equity results within the Institutional Securities business segment.

•EMEA net revenues increased 11% and 13% in the current quarter and in the current year period, respectively, compared with the prior year periods, primarily driven by higher results in our Markets business within the Institutional Securities segment.

•Asia net revenues increased 71% and 57% in the current quarter and in the current year period, respectively, compared with the prior year periods, primarily driven

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. We operate as an Integrated Firm whereby we serve clients holistically across our business segments. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-K. For an analysis of 2024 results compared with 2023 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K for the year ended December 31, 2024 filed with the SEC.

A description of the clients and principal products and services of each of our business segments is below. Through the Integrated Firm some of our clients may use the products and services of more than one of our business segments.

Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Markets business, which comprises Equity and Fixed Income, provides sales, financing, prime brokerage, market-making, and Asia wealth management services and holds certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to clients. Other activities include research.

Wealth Management provides a comprehensive array of financial services and solutions to individual investors, including high and ultra-high net worth individuals, and businesses and institutions. Wealth Management supports clients through three channels: Advisor-Led, Self-Directed and Workplace. Wealth Management includes: financial advisor-led brokerage, investment advisory, custody, cash management, and administrative services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential and commercial real estate loans and other lending products; banking; and retirement plan services.

Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.

Management’s Discussion and Analysis includes certain metrics that we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.

The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; legislative, legal and regulatory developments; market and economic conditions; and other risk factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements”, “Business—Competition”, “Business—Supervision and Regulation”, “Risk Factors” and “Liquidity and Capital Resources—Regulatory Requirements” herein.

Executive Summary

Overview of Financial Results

Consolidated Results—Full Year Ended December 31, 2025

•The Firm reported net revenues of $70.6 billion and net income applicable to Morgan Stanley of $16.9 billion reflecting strong results across our business segments and demonstrating the strength of our Integrated Firm.

•The Firm delivered ROE of 16.6% and ROTCE of 21.6% (see “Selected Non-GAAP Financial Information” herein).

•The Firm expense efficiency ratio was 68% compared to 71% in the prior year, demonstrating operating leverage while continuing to invest in our businesses.

•At December 31, 2025, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.0%, and its Supplementary Leverage Ratio was 5.4%.

•Institutional Securities net revenues of $33.1 billion, primarily reflecting strong performance in Equity on higher client activity and higher underwriting and Advisory revenues within Investment Banking.

•Wealth Management delivered net revenues of $31.8 billion, primarily reflecting higher Asset management revenues on higher market levels and the cumulative impact of strong fee-based flows. The pre-tax margin was 29.3%. Fee-based asset flows were $160 billion and the business added net new assets of $356 billion.

•Investment Management reported net revenues of $6.5 billion, primarily reflecting higher asset management fees driven by higher average AUM on higher market levels.

Net Revenues

($ in millions)

Net Income Applicable to Morgan Stanley

($ in millions)

Earnings per Diluted Common Share

2025 Compared with 2024

•We reported net revenues of $70.6 billion in 2025, which increased by 14% compared with $61.8 billion in 2024. Net income applicable to Morgan Stanley was $16.9 billion in 2025, which increased by 26% compared with $13.4 billion in 2024. Diluted earnings per common share was $10.21 in 2025, which increased by 28% compared with $7.95 in 2024.

Non-Interest Expenses

($ in millions)

•Compensation and benefits expenses of $29,216 million in 2025 increased 12% from the prior year, primarily due to an increase in the formulaic payout to Wealth Management advisors and higher discretionary incentive compensation within Institutional Securities, both on higher revenues, and higher salary expenses.

In 2025, as a result of a March workforce management action, we recognized severance costs of $144 million, included in Compensation and benefits expense. The workforce management action was related to performance management and the alignment of our workforce to our business needs, rather than a change in strategy or exit of businesses. The workforce management action occurred across our business segments and geographic regions and impacted approximately 2% of our global workforce at that time. We recorded severance costs of $78 million in the Institutional Securities business segment, $50 million in the Wealth Management business segment, and $16 million in the Investment Management business segment. These costs were incurred across all regions, with the majority in the Americas.

•Non-compensation expenses of $19,126 million in 2025 increased 8% from the prior year, primarily due to higher execution-related expenses and increased technology spend.

Provision for Credit Losses

The Provision for credit losses on loans and lending commitments of $349 million in 2025 was primarily related to portfolio growth in corporate loans and secured lending facilities and provisions for certain specific commercial real estate loans. The Provision for credit losses on loans and lending commitments of $264 million in 2024 was primarily related to certain specific commercial real estate loans and growth in the corporate loan portfolio, partially offset by improvements in the macroeconomic outlook.

For further information on the Provision for credit losses, see “Credit Risk” herein.

Business Segment Results

Net Revenues by Segment1

($ in millions)

Net Income Applicable to Morgan Stanley by Segment1

($ in millions)

1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 22 to the financial statements for details of intersegment eliminations.

•Institutional Securities net revenues of $33,080 million in 2025 increased 18% from the prior year, primarily reflecting higher results in Equity driven by increased client activity and higher average client balances, and higher underwriting and Advisory revenues within Investment Banking.

•Wealth Management net revenues of $31,754 million in 2025 increased 12% from the prior year, primarily reflecting higher Asset management revenues on higher market levels and the cumulative impact of positive fee-based flows, and higher Transactional revenues on higher client activity.

•Investment Management net revenues of $6,525 million in 2025 increased 11% from the prior year, primarily reflecting higher Asset management and related fees driven by higher AUM on higher market levels and higher Performance-based income and other revenues.

Net Revenues by Region1

($ in millions)

1.For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements.

•Americas net revenues in 2025 increased 13% from the prior year, driven by higher results across all business segments.

•EMEA net revenues in 2025 increased 16% from the prior year, primarily driven by higher Equity revenues within the Institutional Securities business segment.

•Asia net revenues in 2025 increased 23% from the prior year, primarily driven by higher results in Equity and Investment Banking within the Institutional Securities business segment.

Selected Financial Information and Other Statistical Data

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