StateStreet shares fall 4% on revenue miss despite earnings beat

On Wednesday, State Street Corporation (NYSE:STT) disclosed that adjusted earnings per share for the third quarter reached $3.69, slightly surpassing the analyst expectation of $3.67. However, revenue for the period fell short, amounting to $4.0 billion, which was below the estimated $4.04 billion. This shortfall led to a 7.52% decline in the company's stock during pre-market trading.

Despite the revenue miss, total revenue exhibited a 13% year-over-year growth. This growth was primarily fueled by an 11% increase in fee revenue, reaching $3.1 billion, and a 21% surge in net interest income, totaling $864 million. Yet, revenue was down 1% compared to the previous quarter. Year-over-year, revenue had grown from $3.5 billion.

The company adjusted its full-year 2026 fee revenue outlook upward, anticipating an increase of approximately 13%-14% YoY, a revision from the previous guidance of 12%-13% YoY. Similarly, net interest income guidance was raised to an increase of approximately 15%-16% YoY, up from the earlier estimate of 14%-15% YoY. Servicing fees achieved a record $1.5 billion, marking a 10% year-over-year increase. Management fees also hit a new high of $797 million, a 20% year-over-year rise.

Assets under custody and administration hit a record $59.2 trillion at the end of the quarter, with new servicing fee revenue additions of $68 million. Total expenses rose by 8% YoY to $2.6 billion, but a 1% decrease from the prior quarter was noted, leading to an operating leverage of 531 basis points. The pre-tax margin expanded to 34.6%, an improvement from 31.1% in the corresponding year-ago quarter.

During the quarter, State Street returned $651 million to shareholders through dividends and share repurchases. The company also updated its full-year 2026 expense outlook to an increase of approximately 8%-8.5% YoY, a slight adjustment from the earlier estimate of approximately 8% YoY.