Lazard, Inc. (LAZ) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary highlights strong financial performance, promising asset management growth, and strategic expansion plans, including leveraging AI and geopolitical expertise. The Q&A session supports this with expectations of increased M&A and private equity activity, robust hiring, and asset management diversification. Despite some uncertainties around non-comp expenses and AI impact, the overall sentiment is positive, supported by shareholder returns and a constructive market environment. Given the company's market cap, this suggests a moderate positive stock price movement.
Key Financial Performance
Firm-wide revenue $3 billion for the year, up 5% from 2024. Reasons for change: Record revenue in Financial Advisory and a 12% increase in assets under management in Asset Management.
Financial Advisory revenue $1.8 billion for the year, with record revenue for EMEA and Private Capital Advisory Group. Reasons for change: Strong year in restructuring and liability management, and ongoing diversification of the advisory business.
Average revenue per Managing Director (MD) $8.9 million in 2025, an increase of $2.5 million per MD since 2023. Reasons for change: Investments in talent and increased productivity.
Asset Management revenue $1.2 billion for the year, with AUM up 12% year-over-year. Reasons for change: Record gross inflows exceeding $50 billion, enhancements in research and investment platform, and launch of 7 active ETFs in the U.S.
Fourth quarter firm-wide revenue $892 million, up 10% from the prior year. Reasons for change: Diversified Financial Advisory revenue and marquee transactions.
Fourth quarter Financial Advisory revenue $542 million, up 7% from 1 year ago. Reasons for change: Participation in several marquee transactions and diversified revenue across teams and geographies.
Fourth quarter Asset Management revenue $339 million, up 18% compared to 1 year ago. Reasons for change: Higher management fees and incentive fees.
Average AUM for the fourth quarter $261 billion, 12% higher than in 2024. Reasons for change: Market appreciation, foreign exchange depreciation, and net outflows driven by the closure of one U.S. sub-advised relationship.
Compensation expense $2 billion for the full year 2025. Reasons for change: Investments in talent to support long-term growth strategy.
Compensation ratio 65.5% for the full year 2025, compared to 65.9% for the prior year. Reasons for change: Disciplined approach to expenses.
Non-compensation expense $613 million for the full year 2025. Reasons for change: Disciplined approach to expenses as business activity and opportunities increase.
Adjusted effective tax rate 22.7% for the full year 2025. Reasons for change: Not explicitly mentioned.
Capital returned to shareholders $393 million for the full year 2025, including $187 million in dividends, $91 million in share repurchases, and $115 million in satisfaction of employee tax obligations. Reasons for change: Not explicitly mentioned.
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Operating Highlights
Active ETFs: Successfully launched 7 active ETFs in the U.S. in 2025, surpassing $800 million in AUM. Demonstrates opportunity to meet client demand for specialized investment strategies.
Geographic Expansion: Opened new offices in Denmark and the United Arab Emirates in 2025, with plans to explore other countries for further expansion.
North America Focus: Announced new leadership for Financial Advisory in North America to increase large-cap public company coverage, a top priority for 2026.
Talent Investments: Added more than double the net financial advisory Managing Directors compared to 2024, exceeding the goal of 10-15 net additions annually. Productivity per MD increased to $8.9 million, up $2.5 million since 2023.
AI Integration: Accelerated AI adoption in 2025, onboarding new tools and delivering customized AI solutions to enhance outcomes for clients and shareholders.
Lazard 2030 Strategy: Focused on long-term growth with substantial investments in talent, AI, and market expansion. Targeting $12.5 million revenue per Managing Director by 2030.
Asset Management Transformation: Sharpened focus on high-value areas like quantitatively driven strategies, emerging markets, and customized solutions. Positioned to deliver positive net flows in 2026.
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Risk or Challenges
M&A cycle and client demand: The M&A cycle is deepening, but there is ongoing policy and geopolitical uncertainty that could impact activity. Additionally, the dispersion in corporate performance may create challenges for restructuring and liability management.
Talent expansion and productivity: The pace of talent expansion, with a significant number of new Managing Directors, temporarily puts downward pressure on productivity as they acclimate to the platform. This could impact short-term financial performance.
Asset Management net outflows: Net outflows of $19.7 billion were reported in the fourth quarter, largely driven by the closure of one U.S. sub-advised relationship. This could affect revenue stability in the short term.
Geopolitical and policy uncertainty: Ongoing geopolitical and policy uncertainties could impact M&A activity and overall business performance.
Private equity and restructuring activity: While private equity and restructuring activity are expected to grow, they are subject to market conditions and investor sentiment, which could pose risks to achieving revenue targets.
AI adoption and integration: The adoption of AI tools is accelerating, but there is a risk of inefficiencies or challenges in integrating these technologies effectively across the firm.
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Guidance & Outlook
Financial Advisory Outlook: Substantial growth expected in Financial Advisory business. M&A activity anticipated to accelerate in 2026 despite policy and geopolitical uncertainties. Increased restructuring and liability management activity expected due to corporate performance dispersion. Private equity activity and fundraising strength anticipated to grow.
Asset Management Outlook: Positive net flows expected in 2026, supported by a diversified platform, strong research and investment processes, and enhanced global distribution strategy. Anticipation of continued investor reallocation toward international markets, where Lazard has strong presence and performance.
Talent Investments: Continued investment in top talent with a goal of adding 10-15 financial advisory Managing Directors annually. Productivity per Managing Director expected to increase significantly, with a target of $12.5 million per MD by 2030.
Geographic Expansion: Plans to expand Financial Advisory business in North America, Europe, and the Middle East. New offices opened in Denmark and UAE in 2025, with further expansion under consideration.
AI Integration: Commitment to being a leader in AI adoption among independent financial firms. AI tools and customized solutions are being integrated to enhance client outcomes and firm productivity.
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Shareholder Return Plan
Quarterly Dividend: In the fourth quarter of 2025, Lazard returned $98 million to shareholders, including a quarterly dividend of $47 million.
Annual Dividend: For the full year 2025, Lazard returned $187 million in dividends to shareholders.
Declared Dividend: A quarterly dividend of $0.50 per share was declared.
Quarterly Share Repurchase: In the fourth quarter of 2025, Lazard repurchased $50 million in shares.
Annual Share Repurchase: For the full year 2025, Lazard repurchased $91 million in shares.
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Key Q&A
Q:Could you speak to the revenue mix as it stands today among the non-M&A businesses and your outlook for those businesses in the coming year?
A:The revenue mix for the year was just under 60% M&A and a little over 40% non-M&A. Over time, the non-M&A component is expected to rise to 50%, supported by expansions in fundraising, restructuring, and liability management. The advisory business is becoming increasingly diversified across public and private companies, North America, and the rest of the world.
Q:Could you provide additional color around the CFO transition and why it was not telegraphed earlier?
A:The transition is described as normal course and not abrupt. The effective date was facilitated by having an internal candidate familiar with Lazard. Mary Ann will serve as a senior adviser to ensure a smooth transition.
Q:What are your observations on the sponsor side of the M&A market and the potential ramp-up in activity?
A:2026 is expected to see heightened private equity activity due to LPs seeking cash returns and narrowing valuation gaps. Continuation funds and secondaries are becoming a permanent feature of the private equity landscape, with significant growth expected in Lazard's PCA business.
Q:What is the asset mix in the $13 billion of won but not yet funded business, and how should we think about fee rates?
A:The asset mix includes emerging market equities, listed infrastructure, and systematic services. Fee rates are broadly in line with the fourth quarter average, with some variability depending on timing and mechanics.
Q:Have geopolitical tensions and U.S. midterms impacted corporate dialogues or activity?
A:No impact has been observed on corporate discussions. The regulatory environment under the current administration is seen as more accommodating to deals, creating an incentive to complete transactions before potential changes in the next presidential election.
Q:How should we think about incremental comp leverage given robust hiring and potential revenue growth?
A:Additional operating leverage is anticipated in 2026, driven by revenue growth, productivity increases, and operating efficiencies in corporate functions.
Q:What trends are you seeing across geographies in M&A, and how does domestic activity compare to international?
A:U.S. CEOs appear more confident than non-U.S. CEOs, but there is significant interest in transactions globally. European companies, despite being headquartered in specific countries, operate globally and are affected by global trends.
Q:What areas in asset management need significant change, and where is there healthy momentum?
A:Focus areas include delivering strong investment performance, scaling existing products, exploring growth in traditional markets, private markets, and wealth channels, and driving efficiency through AI and cost control.
Q:Can you provide more granularity on asset management verticals and their growth or shrinkage?
A:Record gross inflows were achieved last year, with elevated outflows due to a large sub-advised mandate closure. Growth is expected in emerging markets, systematic platforms, listed infrastructure, and alternatives. Diversification away from the U.S. is also a trend.
Q:What is the outlook for the secondaries business?
A:The secondaries business is expected to continue growing, with penetration rates still relatively low. It is becoming a permanent feature of the private equity landscape.
Q:How do you view the restructuring cycle, and is there more growth ahead?
A:Restructuring activity is expected to continue due to increasing disparities in corporate performance. Companies at the lower end of the performance spectrum require liability management and restructuring assistance.
Q:How does AI relate to comp leverage, and when could it impact the comp ratio?
A:AI is expected to raise productivity per managing director and allow for smaller teams, providing upward mobility for junior staff. This could lead to a lower non-MD comp ratio over time.
Q:Review of Unclear Management Responses
A:Management avoided providing specific non-comp expense guidance for 2026, only indicating a mid- to high single-digit increase depending on FX rates. Additionally, while AI investments were discussed, the exact timing and magnitude of their impact on comp leverage remain unclear.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AUM inflow
AUM opportunity
Advantage addition
Advantage market
Advisory asset
Advisory cycle
Advisory team
AkzoNobel combination
Ale result
Asset CFO
Asset outlook
Asset repositioning
Atlas Holding
Axalta Investindustrial
Brands Group
CFO effort
CFO question
CFO role
CVC Capital
Calpine Cloud
Capital Partners
Capital structure
Cloud acquisition
Cognizant transaction
Financial Advisory
appreciation
banker
client demand
compensation ratio
increase
investment platform
market equity
outlook result
productivity
restructuring liability
share repurchase
talent term
LAZ Transcript
Lazard, Inc. (LAZ) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call summary highlights strong financial performance, promising asset management growth, and strategic expansion plans, including leveraging AI and geopolitical expertise. The Q&A session supports this with expectations of increased M&A and private equity activity, robust hiring, and asset management diversification. Despite some uncertainties around non-comp expenses and AI impact, the overall sentiment is positive, supported by shareholder returns and a constructive market environment. Given the company's market cap, this suggests a moderate positive stock price movement.
Lazard, Inc. (LAZ) Presents at Goldman Sachs 2025 U.S. Financial Services Conference Transcript
Neutral12-10
Lazard, Inc. (LAZ) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call summary and Q&A reveal several positive indicators: strong talent acquisition, optimistic asset management inflows, and balanced advisory services. Despite some uncertainties in achieving specific financial goals, the overall sentiment is positive with strong M&A prospects, especially in Europe, and a promising secondaries business. The market cap suggests moderate sensitivity to these factors, supporting a positive stock price movement prediction in the range of 2% to 8% over the next two weeks.
Lazard, Inc. (LAZ) Q2 2025 Earnings Call Transcript
Unknown7-24
The earnings call summary presents a mixed picture: positive strategic initiatives and shareholder returns, but uncertainties in the advisory business and high attrition in asset management. The Q&A reveals optimism in future M&A activities and asset management progress, but lacks specifics on achieving key financial goals and AI implementation. The market cap indicates moderate stock sensitivity. Overall, the neutral rating reflects balanced positives and negatives, suggesting limited stock price movement in the short term.
LAZ Slides
LAZ Report
Frequently Asked Questions
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