Lazard, Inc. (LAZ)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered a clean beat versus Street: diluted EPS $0.52 vs S&P Global consensus ~$0.40 and net revenue outperformed consensus by ~14%, driven by record Financial Advisory revenue and resilient Asset Management fees . EPS/revenue consensus from S&P Global indicated a material beat (see Estimates Context).
• Financial Advisory posted record adjusted net revenue of $491.4M (+20% YoY), with strong activity in Europe; firmwide adjusted operating margin expanded to 14.1% from 11.5% in Q1 .
• Asset Management turned to positive net flows (+$0.68B) and ended AUM at $248B (+9% QoQ), with record gross inflows in H1 and improving fee rate mix as sub-advised outflows continued to be offset by wins in global/international/emerging markets and quant strategies .
• Guidance: CFO now sees FY 2025 effective tax rate in the mid‑20% range and raised non-comp growth outlook to high single digits; dividend held at $0.50/share .
• Stock narrative catalysts: record Advisory revenue, sustained hiring (14 MDs YTD) and a robust private capital footprint (over 40% of advisory revenue tied to private capital), plus visible momentum in Asset Management flows and new ETFs .

What Went Well and What Went Wrong

What Went Well

• Record Advisory revenue with broad geographic strength, including France and Germany; mix now ~60% M&A / ~40% non‑M&A, diversifying earnings drivers (“over 40% of advisory revenue … from private capital”) .
• Asset Management momentum: positive net flows in Q2 and record gross inflows in H1; notable new mandates across U.S. public pensions, Nordic, Korean institutions, and large U.S. retirement providers .
• Management tone constructive on M&A: “significantly improving environment” as tariff/regulatory uncertainty abates and financing remains supportive; hiring pipeline strong with wins versus competitors (commercial/collegial culture) .

What Went Wrong

• Taxes and expenses: adjusted effective tax rate jumped to 36.5% in Q2 (vs 14.0% in Q2’24), and adjusted non‑comp expenses rose 6% YoY; CFO lifted FY non‑comp growth outlook to high single digits .
• Compensation ratio stayed elevated at 65.5% (goal remains ≤60% over time), reflecting continued hiring investments and talent market dynamics .
• Asset Management average AUM still lower YoY (‑3% in Q2), and gross outflows remain substantial, particularly from sub‑advised mandates, despite improving net flows and mix .

Financial Results

Headline Metrics vs prior year and prior quarter

Segment Revenue (Adjusted)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are pleased to report strong performance… Financial Advisory achieved a record first half… Asset Management achieved positive net flows in the quarter and record gross inflows for the first half…” – Peter R. Orszag, CEO & Chairman .
• “Adjusted net revenue was $770 million… Financial Advisory adjusted net revenue was a record $491 million… Average AUM for the second quarter was $239 billion…” – Mary Ann Betsch, CFO .
• “We see a significantly improving environment for financial advisory activity… financing markets are generally constructive… private equity will play an increasingly active role in M&A.” – Peter R. Orszag .
• “Our goal is to deliver an adjusted compensation ratio of 60% or below… timing dependent on market conditions.” – Company statement (press release) and CEO reiteration .

Q&A Highlights

• Advisory outlook and comp ratio: Management held comp ratio flat at 65.5% to remain conservative; timing to reach ≤60% depends on markets, hiring productivity, and revenue mix .
• Asset Management flows and fee rate: Net inflows co-exist with large gross outflows; fee rate slightly increased QoQ and YoY as mix shifts away from low-fee sub‑advised toward higher-fee strategies (global/international/EM/quant/Japan) .
• Regional advisory dynamics: European activity notably strong H1; expecting U.S. pickup in H2; ongoing European hiring and new office expansion support momentum .
• Private equity: Sponsor M&A expected to recover as regulatory/tariff/financing headwinds fade and LP distribution pressure rises; PCA secondaries already accelerating .
• Expense outlook: Non‑comp growth outlook raised to high single digits for 2025 due to FX, business development, and technology investments .

Estimates Context

Values retrieved from S&P Global.

Context: Lazard’s reported diluted EPS was $0.52 and net revenue $796M under company disclosures; S&P’s “actual” revenue figure reflects its normalization methodology and differs modestly from GAAP net revenue reported by the company .

Key Takeaways for Investors

• Quality beat: Strong Advisory revenue and improving AM flows drove EPS and revenue beats vs consensus; margin expansion to 14.1% adjusted underscores operational leverage .
• Mix diversification: Advisory now ~60% M&A / ~40% non‑M&A with >40% tied to private capital; supports durability through cycles and positions for sponsor M&A recovery .
• Asset Management inflection: Positive net flows and higher fee mix suggest momentum; watch for continued reallocation toward non‑U.S. equities and quant strategies .
• Expense discipline vs investment: Comp ratio remains elevated as Lazard invests in senior talent; non‑comp outlook raised to high single digits, but ratios tracked within targets (non‑comp 20.4%) .
• Taxes normalize: Q2 tax rate spike to 36.5% should converge to mid‑20% full‑year per guidance, reducing quarterly volatility vs Q1’s discrete benefit .
• Capital return steady: Dividend maintained at $0.50/share; modest buybacks alongside robust cash position ($978M) .
• Near-term trading: Continued advisory deal flow and visible H2 pipeline could sustain positive sentiment; monitor tariff/regulatory developments and sponsor M&A re‑acceleration .

Appendix: Additional Data Points

• GAAP net income $55.3M; adjusted net income $55.3M; diluted shares 104.9M; adjusted diluted shares 106.7M .
• Shareholder returns in Q2: $60M total ($47M dividends; $4M buybacks; $9M tax-withholding on vesting); H1 returns $235M .
• Cash & equivalents $978M at Q2 end; senior debt ~$1.689B; total assets $4.49B .

Bolded narrative highlights denote significant beats/surprises versus estimates. All company figures and quotes are sourced to Lazard’s Q2 2025 8‑K/press release and earnings call transcript as cited.