Jefferies’ quarterly profit beats estimate as dealmaking rebound drives record advisory fees

By Prakhar Srivastava and Lananh Nguyen

(Reuters) – Jefferies has reported third-quarter profits that surpassed analyst expectations on Monday, with a resurgence in deal-making propelling advisory fees to unprecedented levels. This performance offers investors an early glimpse into the potential trajectory of Wall Street’s investment banking sector during this earnings season.

After a brief lull in April due to tariff apprehensions, enthusiasm surrounding mergers and acquisitions (M&A) has remained robust. Corporations have moved forward with significant transactions across multiple industries, signaling a strong confidence in growth prospects and a readiness to invest capital despite a somewhat turbulent policy landscape.

Industry experts indicate that the M&A pipeline for 2026 appears promising, buoyed by expectations of forthcoming Federal Reserve interest rate cuts, which are likely to enhance financing conditions.

“Interest rates are beginning to decline, the economy is stable, and business confidence is fairly solid. Consequently, M&A activity is on the rise,” Jefferies President Brian Friedman remarked in an interview with Reuters. “We anticipate this trend will persist.”

In terms of financial performance, Jefferies experienced a remarkable 20.3% increase in total investment banking net revenues, rising to $1.14 billion compared to the same period last year.

Upcoming results from major competitors, including Morgan Stanley, Goldman Sachs, and JPMorgan Chase, are expected next month and could provide greater insight into the overarching recovery of Wall Street’s deal-making machinery.

Following these announcements, Jefferies’ shares experienced a slight decline of 1.6% in after-hours trading.

DEALS REVIVAL

Global deal-making activity has reached an impressive $2.6 trillion in the first seven months of this year, the highest level since the peak during the pandemic in 2021. A strong demand for growth within corporate boardrooms, along with a surge in artificial intelligence initiatives, has helped to mitigate the uncertainties created by U.S. tariffs.

“Recent trends have shown notable strength in corporate M&A, although the M&A market for private equity and sponsor-backed ventures has yet to gain the same momentum,” Friedman explained. “Our current backlog suggests an uptick in sponsor-backed M&A activity, and I believe we will witness increased engagement well into 2026.”

Advisory fees earned by Jefferies surged by 10.7%, reaching a record high of $655.6 million for the quarter.

Additionally, Jefferies reported substantial growth in its equity and debt underwriting revenues, rising by 20.7% and 36.3%, respectively.

“Our equities segment continues to show strong performance, and we are witnessing increased market share. We expect this trend to persist,” Friedman noted, referencing the strength of Jefferies’ equity research and advisory services, as well as its expansive footprint in derivatives, swaps, and prime brokerage.

During the quarter, Jefferies played a crucial role as bookrunner for several noteworthy U.S. IPOs, including Firefly Aerospace and the cryptocurrency exchange Bullish.