Moelis & Company (MC) Q3 2026 earnings review
Moelis earns bigger fees, but pending deals grow more slowly
Moelis, an investment bank that advises companies on takeovers and debt problems, earned larger fees from fewer clients. Fee revenue rose 19% from a year ago, leaving out a one-time gain that lifted last year's figure. Chief executive Navid Mahmoodzadegan credited takeover work, while advice on raising money weakened as markets swung. Profit per share, excluding one-offs, climbed 10%.
| Fee revenue, excluding last year's share-sale gain | $425.6M +19% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $0.75 $0.68 a year ago |
| Pay as a share of revenue, excluding one-offs | 65.8% 66.2% a year ago |
| Full-year outlook for costs outside pay | Unchanged about 19% growth |
⚖️ Verdict: 🟢 Bullish
The story got better, because fee growth picked up for a second quarter and the bank's debt-restructuring work recovered. By our math, the second half now beats last year even if fourth-quarter revenue falls 14%. One caution: announced deals rose only about 20%, and pay still takes the share of revenue it took all year.
The question now is whether this month's market turmoil delays the deals in Moelis's pipeline. If deals only slip, the fees move into 2027; if lenders pull back from AI projects, some fees vanish. Fourth-quarter revenue will tell.
🐂 Bull Case
Bigger Deals Lifted Fee Revenue 19%
Moelis earns most of its money from fees paid when a deal closes. The bank said revenue rose because of "an increase in average fees earned per completed transaction". Chief executive Navid Mahmoodzadegan added that fees from mergers and acquisitions, or M&A, climbed 40% from a year ago.
Those fees came from fewer clients. Moelis billed 124 clients in the quarter, against 155 a year earlier. By our math, the average client paid about 49% more. Mahmoodzadegan linked the record average fee to "larger and more complex assignments".
The fair comparison is 19% growth. A year ago, the firm counted a $19.1 million gain on selling shares in MA Financial, an Australian company it part-owns, as revenue. The headline 13% rise keeps that gain in last year's base, so it understates the change in fees. Fee growth has now quickened for two quarters in a row, after only 4% in the first quarter.
What to watch: the count of clients paying at least $1 million, in the annual filing. That count fell to 65 from 72 this quarter, so a further drop would mean revenue rests on fewer, larger deals.
Restructuring Advice Is Growing Again
Capital structure advisory, or CSA, is the Moelis team that helps companies rework their debts, from refinancing to full restructuring. Its revenue shrank in the first half, even though Mahmoodzadegan had said in the spring that he expected growth this year.
The third quarter reversed that. Mahmoodzadegan called it "one of its strongest quarters on record, with year-to-date revenue growth in line with the broader firm". Lenders are less willing to extend loans that fall due, so he expects traditional restructurings to rise over time.
What to watch: whether the fourth-quarter call again puts full-year CSA growth in line with the firm. Moelis does not publish CSA revenue, so a second such report would settle a worry that has run for a year.
Positives this quarter didn't test
Two projects that Moelis presents as future sources of growth produced no measurable result this quarter. The bank does not split revenue by type of advice, so readers cannot yet check either one.
- Private capital advisory, which helps investment funds raise money and sell stakes: Mahmoodzadegan said its revenue is "not meaningful this year or this quarter". All seven bankers for stake sales led by fund managers have now joined. A first revenue figure would move it.
- AI tools for bankers: Mahmoodzadegan said "we believe AI will significantly enhance productivity", and the bank lists "investments related to AI" among its rising costs. A measure of revenue per banker would move it.
🐻 Bear Case
Market Turmoil Slowed Capital Markets Fees
Moelis presents its range of services as a strength in any market. Its capital markets team, which helps companies raise debt and equity, posted record revenue in the first half.
Then the third quarter turned. Mahmoodzadegan said capital markets revenues "were softer following a record H1, primarily reflecting the impact of increased market volatility on transaction timing". Finance chief Chris Callesano said M&A made up about 70% of revenue so far this year, above the two-thirds an analyst called typical.
That cuts against Mahmoodzadegan's claim of "the strength of our expanded platform", since results leaned more on M&A. New business and announced deals each rose about 20% from a year ago. In July, announced deals had stood more than 80% higher.
What to watch: fourth-quarter revenue against last year's record $487.9 million. The chief executive said the bank was still "processing the events of the last 48 hours" after Tuesday's US election. By our math, the second half still grows from a year ago if that quarter brings in at least $419 million. Anything less would mean the turmoil pushed deals into 2027.
Pay Still Takes Two-Thirds of Revenue
Moelis spends most of its revenue on bankers' pay. Excluding one-offs, pay took 65.8% of revenue in the third quarter, against 66.2% a year ago. Mahmoodzadegan still expects "a reduction in the compensation ratio" by year-end.
- Pay and benefits: 65.8% of revenue in each quarter this year
- Other operating costs: 14.4% of revenue, up 0.4 percentage points
- Senior bankers, called managing directors, signed this year: 24
Pay and other costs moved by similar amounts in opposite directions, so cost control added nothing. Mahmoodzadegan called this the firm's "most active recruiting year on record", and new bankers draw pay before their deals close.
What to watch: the full-year pay ratio in the fourth-quarter results. A figure below 65.8% would show the hiring wave has started to pay for itself.
Europe Rebounded Against a Weak Year
Moelis offices outside the US lost ground in the first half. By our math, revenue booked in Europe fell 28% from a year earlier, and offices in the rest of the world booked 44% less.
The third quarter reversed that. European offices booked $33.7 million, up 88% from a year ago. But the base was low: Europe brought in only $18.0 million in last year's third quarter. Over the year so far, Europe still trails by 9%, and the rest of the world by 34%. The bank notes that office location may differ from where clients sit.
What to watch: Europe's full-year office revenue in the annual filing. It will show whether the region has stopped losing ground or only passed a weak quarter.
Risks this quarter didn't answer
Several standing worries drew comments from Moelis executives but no new figures this quarter. Each item below names the figure that would settle it.
- Software deals: Mahmoodzadegan said M&A among software companies is "not broad-based yet". A count of completed software deals would move it.
- Buyout firms, or private equity sponsors: he called their activity "a little sluggish, a little muted". Fees from these sponsors would move it.
- Share dilution: buybacks slowed to $18.7 million in the third quarter, from $140.8 million in the first half. The year-end share count would move it.
- Unpaid bills: the reserve for client fees Moelis may not collect rose to $4.3 million, from $2.4 million. Annual write-offs would move it.
- Pipeline size: Moelis has given no dollar figure for its deal pipeline since early 2025. A dollar figure would move it.
👓 Other Themes
Tax Rule Change Will Lift 2027 Tax Rate
An analyst on the call noted that a change to Section 162(m), a US tax rule on executive pay, takes effect next year. Finance chief Chris Callesano said Moelis "can imagine adding a few points to our tax rate". He called it a first estimate, give or take a point or two, and promised more detail on the next call.
💲 Other KPIs
Cash and short-term government bonds rose to $658.7 million at the end of September, from $481.1 million in June, and Moelis has no debt. The balance follows a yearly pattern: it drops in the first quarter when bonuses go out, then rebuilds. It stood at $848.8 million at the end of 2025.
The tax rate held near 29%, slightly below 29.4% a year ago. It dropped to 10% in the first quarter, when bankers' share awards vested and gave the bank a tax benefit. That benefit added about $0.11 to profit per share this year, against $0.28 a year earlier.
Deferred revenue, fees clients have paid or owe before the firm finishes the work, fell to $9.9 million at the end of September. It had climbed to $13.6 million in June, so the first-half rise has now reversed.
The full share count, which assumes partners swap their units for shares, rose 0.2% from a year ago. That is slower than the 1.0% rise in the second quarter. Buybacks of 2.6 million shares this year offset part of the new share awards.
🔮 Guidance
Unchanged. Finance chief Chris Callesano still expects non-pay costs to rise about 19% this year. By our math, that leaves about $71 million for the fourth quarter, above the earlier quarterly range. The third quarter ran light on quieter summer travel and fewer underwriting costs, he said, so some spending moves into the last quarter.
Unchanged. Chief executive Navid Mahmoodzadegan still expects the share of revenue paid to staff to fall by year-end. The ratio has sat at 65.8% for three quarters, so any drop must come in the fourth quarter. Last year the firm made the same move, from a 69% starting level.
New. Callesano expects a change to a US tax rule on executive pay to add a few points to next year's rate. He gave no exact figure and promised more detail on the next call. By our math, three extra points would cut profit per share by about 4%.
Raised. Moelis now has 11 senior bankers signed to join, against six in July. Seven joined during the quarter. This year's arrivals reach 13, and the new signings cover technology, media and telecoms, banks and insurers, and European industrial companies.
❓ Key Questions
How large is the deal pipeline in dollars?
Moelis gives growth rates for its pipeline but no dollar level. Growth in announced deals cooled sharply since July, so readers need the size to judge revenue in 2027.
How much did private capital advisory earn this year?
The bank is building this business with many senior hires but calls its revenue not yet meaningful. A figure would show whether the hiring is starting to pay off.
How far did capital markets revenue fall?
Mahmoodzadegan called third-quarter capital markets revenue softer but gave no number. The size of the drop would show how much market swings hurt the newer businesses.
How much will the tax change cost per share?
Callesano said a US tax rule change could add a few points to the 2027 rate. A firm range would let readers judge next year's profit per share.
What drove Europe's third-quarter rebound?
European offices booked far more than a year ago, but revenue there still trails over nine months. One large fee and a broad recovery would mean very different things for 2027.