What caused Charles Schwab (SCHW) to drop 9.8% following last earnings report?

Investors in The Charles Schwab Corporation (SCHW) have seen the stock lose nearly 9.8% in value since the last earnings report, marking a period of underperformance compared to the S&P 500 index. Looking forward, the question on investors’ minds is whether this negative trend will persist leading up to the next earnings release or if Charles Schwab is poised for a rebound. To gain a better understanding of the factors influencing the stock’s performance, we can analyze the latest earnings report.

During the fourth quarter of 2025, Schwab reported adjusted earnings per share of $1.39, surpassing the Zacks Consensus Estimate by two cents. This impressive result represented a 38% year-over-year increase in the bottom line. The strong performance was attributed to robust growth in the asset management segment, as well as higher trading revenues. Additionally, increased net interest revenue (NIR) and growing brokerage account numbers contributed positively to the results. Despite these encouraging figures, a rise in expenses did act as a limiting factor.

After adjusting for transaction-related costs, net income for the quarter stood at $2.46 billion, equivalent to $1.33 per share, marking a significant increase from the prior year’s figures. Looking at the full year of 2025, Schwab reported adjusted earnings per share of $4.87, higher than the consensus estimate and representing a 50% growth from the previous year. Furthermore, net income increased by 49% to $8.85 billion.

The growth trend continued with a record total revenue of $6.33 billion for the fourth quarter, surging by 19% compared to the same period in the prior year. Key drivers included a 25% increase in NIR, a 22% rise in trading revenue, and a 15% growth in asset management and administration fees. Similarly, for the full year of 2025, net revenues reached $23.92 billion, exceeding expectations. While expenses saw a slight increase, the pre-tax profit margin improved to 50.2% from 43.3% year-over-year.

Impressively, Schwab saw its total client assets hit a record $11.9 trillion by the end of 2025, growing by 18% year-over-year. The company reported $158.2 billion in net new assets during the quarter, alongside the addition of 1.27 million new brokerage accounts. Active brokerage accounts totaled 38.5 million, banking accounts reached 2.2 million, and corporate retirement plan participants totaled 5.7 million.

Looking ahead to 2026, Schwab’s management forecasts a positive outlook. Expecting a decline in interest rates, stable equity market returns, and increased demand for its services, the company predicts revenue growth in the range of 9.5-10.5%. Additionally, it anticipates adjusted expenses to rise as investments are prioritized for growth and scale, aiming for an adjusted pre-tax margin in the low 50% range.

In conclusion, despite the recent decline in stock performance, Charles Schwab appears poised for growth and continued success based on its strong financial performance and positive outlook for the future. As always, investors should carefully monitor the company’s progress while considering the broader market landscape.