Report Date: Tuesday, July 21, 2026 (before market open) — Q2 2026 Earnings Call
SCHW shares have been volatile in 2026 — falling from the low-$100s in January to a trough near $85-88 in late May, before rallying sharply back to roughly $102.57 as of July 20, essentially flat year-to-date but up more than 20% off the spring lows. Management explicitly flagged that narrative-driven pressure — around AI-enabled "cash optimizer" tools and fears that Schwab's cash-sweep economics could be disrupted — had been a stock overhang, arguing at May's Investor Day that this concern is overblown.
Sell-side expectations are bullish heading in. Consensus estimates (per FactSet, via Barron's) call for Q2 EPS of $1.56 vs. $1.14 a year ago, while another compiled consensus points to EPS of roughly $1.51 (+32.7% y/y) on revenue of about $6.78B (+15.9% y/y).
Schwab entered 2026 with record momentum. Revenue increased 16% year-over-year to a record $6.5 billion for 1Q, including another quarter of double-digit year-over-year growth across all major line items. Strong asset gathering and client interest in Schwab's wealth and asset management offerings drove 15% year-over-year growth in asset management and administration fees to a record $1.8 billion. Trading revenue for the quarter was up 20% versus 1Q '25 as our best-in-class retail trading platform supported record levels of engagement, including 9.9 million daily average trades.
Profitability hit records too: record quarterly revenue, combined with balanced expense management resulted in an adjusted pretax profit margin of 51.4% and first quarter adjusted earnings per share reached a record $1.43, a year-over-year increase of 38%.
Client growth was exceptional, led by a historic March: clients opened 1.3 million brokerage accounts, up 10% over last year. Excluding a onetime mutual fund clearing outflow, we attracted $158 billion in core net new assets, a first quarter record that brings total client assets to $11.8 trillion. March was our second highest month of NNA ever behind only December of 2021. Wealth and lending also surged: managed investing net flows were up 46%, reaching an all-time record. Bank lending was up 29% year-over-year with bank product balances and pledged asset line balances reaching all-time records.
Importantly, management guided that the pace of growth was running ahead of its prior full-year plan: given our strong performance in 1Q and based on what we see today in terms of the expected path of rates and strong client engagement, we are tracking higher than the $5.70 to $5.80 EPS range implied by the scenario we shared back at the winter business update in January, which excluded the impact of buybacks and Forge. We'll provide a more comprehensive update on our full 2026 financial scenario at the next business update in July. That "next business update" is effectively this Q2 call — a full-year 2026 guidance refresh is the single most important deliverable to watch for.
1. Net interest income / NIM trajectory. Q1 NIM was 2.88%, up from 2.53% a year ago, aided by maturing lower-yield fixed-rate assets rolling into higher yields and a lack of expected rate cuts. On the Q1 call, CFO Mike Verdeschi noted the forward curve had shifted toward "no cuts," which he called more favorable for NII, and flagged possible upside to the NIM outlook to be detailed in the July update.
2. Client cash and the tax-season seasonal drawdown. Management explicitly guided that for the second quarter, we still anticipate the typical drawdown in client cash due to tax payments in April... we expect this activity to impact both transactional sweep cash as well as other liquid cash alternatives such as money market funds. Watch transactional sweep cash levels and whether the AI/"cash optimizer" competitive narrative (which management pushed back on hard at the May Investor Day) shows any tangible impact on cash mix or NIM.
3. Trading activity and revenue-per-trade mix. Q1 saw record 9.9M daily average trades but a decline in revenue per trade to $1.80 (from $2.05+ in prior quarters), as management explained clients were taking smaller positions, holding them for less duration because they have less conviction... trading more frequently as a result. But because they're smaller trades, they're generating less revenue per trade. Watch whether elevated engagement persisted through Q2 and whether that dynamic reversed as volatility evolved.
4. Net new assets & organic growth cadence. After a record Q1 (even excluding the one-time mutual fund clearing outflow), investors will want confirmation that April–June NNA held up, particularly split between Investor Services and Advisor Services (RIA channel), which grew NNA 36% y/y in Q1.
5. Expense discipline / operating leverage. Adjusted expenses grew 5% y/y in Q1 versus 16% revenue growth, driving the 51.4% adjusted pretax margin. Continued investment in AI, financial consultants, wealth advisers, and new branches (about a dozen planned for 2026) should be weighed against scale benefits.
6. Capital return. Schwab repurchased $2.4B of stock and raised its dividend 19% in Q1, with adjusted Tier 1 leverage at 6.8% (within its 6.75%-7.0% target band). Watch for continued buyback pace and commentary on preferred stock redemption decisions as securities become callable through the year.
7. New growth initiatives / monetization progress. - Spot crypto: The employee pilot began in Q1, with client rollout starting in the following weeks/at the May Investor Day (Bitcoin and Ether, priced at 75bps). Watch for early adoption metrics. - Forge Global (private markets): The acquisition closed in early March; watch for revenue contribution and roll-out of private share access/PIES (Private Issuer Equity Services). - ETF monetization: Management targeted having an ETF monetization strategy in place and live by year-end 2026 — an incremental, high-margin revenue lever analysts (e.g., Goldman's Alex Blostein) have pushed on. - AI rollout: Portfolio Insights, an Investor AI assistant, and adviser/relationship-management AI tools were slated to launch through the summer — watch for updates on efficiency gains and any early monetization signals.
8. Balance sheet funding. Schwab issued $1 billion of fixed-to-floating rate senior notes on June 29, 2026 — a reminder that continued balance-sheet growth (bank loans +29% y/y in Q1, margin loans +13% q/q) is being funded partly via capital markets, which is worth tracking alongside net interest margin discussion.
At its Institutional Investor Day, CEO Rick Wurster pushed back forcefully on the market narrative that AI-driven "cash optimizer" tools threaten Schwab's economics, arguing there's been an AI narrative in the market that I think has been a significant overhang for our stock and detached our stock from our fundamentals... more recently, it's been about how our cash strategy is not going to work in the world of AI. And I wanted to take a few minutes... because I think it's incredibly misfounded. He emphasized that Schwab actively promotes higher-yielding cash alternatives and that we have no plans to have a cash optimizer, citing extensive client feedback. Management also reiterated confidence in through-the-cycle earnings growth, expansion in Workplace Services, RIA "ecosystem" monetization (banking, alternatives, trading, wealth), and AI as a net accelerant to both growth and efficiency rather than a disintermediation risk.
Given the strength of Q1, high but achievable Street estimates (~$1.51-$1.56 EPS, ~$6.7-6.8B revenue, both up sharply y/y), and management's own signal that full-year guidance would move higher than the initial $5.70-$5.80 scenario, the bar is elevated. The print itself likely continues to show strong NNA, trading engagement, and wealth/lending growth. The more market-moving elements will likely be: (1) the updated full-year 2026 EPS guidance, (2) NIM/NII trajectory commentary given the shifting rate-cut outlook, (3) any read-through on cash sweep behavior amid the ongoing "AI cash optimizer" competitive debate, and (4) early progress metrics on crypto, ETF monetization, and Forge as new growth/monetization levers.