MORGAN STANLEY

Table of Contents

Management’s Discussion and Analysis

Executive Summary

Overview of Financial Results

Consolidated Results—Three Months Ended March 31, 2026

•The Firm reported net revenues and pre-tax income of $20.6 billion and $7.0 billion, respectively.

•The Firm delivered ROE of 21.0% and ROTCE of 27.1% (see “Selected Non-GAAP Financial Information” herein).

•The expense efficiency ratio was 65% for the first quarter, demonstrating operating leverage while continuing to invest in our businesses.

•At March 31, 2026, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.1%.

•Institutional Securities reported net revenues of $10.7 billion, primarily reflecting strong results in our Markets business and higher Investment Banking revenues driven by Advisory.

•Wealth Management delivered net revenues of $8.5 billion and a pre-tax margin of 30.4% reflecting strong Asset management revenues, increased net interest income, and higher Transactional revenues. The business added net new assets of $118 billion and fee-based asset flows were $54 billion.

•Investment Management reported net revenues of $1.5 billion, primarily driven by asset management fees on higher average AUM. The quarter included positive long-term net flows of$3.3 billion.

During the first quarter of 2026, certain Investment Management products were reclassified among asset classes to more closely align reporting with underlying investment strategies. For further information see “Business Segments—Investment Management—Assets Under Management or Supervision Rollforwards” herein.

Net Income Applicable to Morgan Stanley

Earnings per Diluted Common Share

We reported net revenues of $20.6 billion in the quarter ended March 31, 2026 (“current quarter,” or “1Q 2026”), which increased by 16% compared with $17.7 billion in the quarter ended March 31, 2025 (“prior year quarter,” or “1Q 2025”). Net income applicable to Morgan Stanley was $5.6 billion in the current quarter, which increased by 29% compared with $4.3 billion in the prior year quarter. Diluted earnings per common share was $3.43 in the current quarter, which increased by 32% compared with $2.60 in the prior year quarter.

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Management’s Discussion and Analysis

•Compensation and benefits expenses of $8,542 million in the current quarter increased 14% from the prior year quarter, primarily due to an increase in the formulaic payout to Wealth Management advisors and higher discretionary incentive compensation within Institutional Securities, both on higher revenues.

During the current quarter, as a result of a March workforce management action, we recognized severance costs of $178 million in Compensation and benefits expense. The workforce management action was related to an effort to improve operational efficiency and manage performance, rather than a change in strategy or exit of businesses. The action occurred across our business segments and geographic regions and impacted approximately 2% of our global workforce at that time. We recorded severance costs of $94 million in the Institutional Securities business segment, $61 million in the Wealth Management business segment, and $23 million in the Investment Management business segment. These costs were incurred across all regions, with the majority in the Americas.

•Non-compensation expenses of $4,929 million in the current quarter increased 9% from the prior year quarter, primarily due to higher execution-related expenses.

The Provision for credit losses on loans and lending commitments of $98 million in the current quarter was primarily related to certain commercial real estate loans and increased macroeconomic uncertainty. The Provision for credit losses on loans and lending commitments in the prior year quarter was $135 million, primarily related to portfolio growth in secured lending facilities and corporate loans, provisions for certain specific loans, including residential real estate loans related to the California wildfires, and deterioration in the macroeconomic outlook.

Business Segment Results

Net Revenues by Segment 1

Net Income Applicable to Morgan Stanley by Segment 1

1. The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 19 to the financial statements for details of intersegment eliminations.

•Institutional Securities net revenues of $10,721 million in the current quarter increased 19% from the prior year quarter, primarily reflecting strong results in our Markets business on increased client activity and higher Investment Banking results on higher completed M&A transactions within Advisory.

•Wealth Management net revenues of $8,519 million in the current quarter increased 16% from the prior year quarter, primarily reflecting higher Asset management revenues on higher market levels and the cumulative impact of positive fee-based flows, increased Net interest income and higher Transactional revenues on strong client activity.

•Investment Management net revenues of $1,535 million in the current quarter decreased 4% from the prior year quarter, primarily reflecting lower accrued carried interest in our private funds, partially offset by higher Asset management and related fees driven by higher average

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Management’s Discussion and Analysis

AUM on higher market levels and the cumulative impact of positive long-term net flows.

Net Revenues by Region 1

1. For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements in the 2025 Form 10-K.

•Americas net revenues increased 11% in the current quarter compared with the prior year quarter, driven by higher Asset management revenues within the Wealth Management business segment and higher Investment Banking and Fixed Income results within the Institutional Securities business segment.

•EMEA net revenues increased 15% in the current quarter compared with the prior year quarter, primarily driven by higher results in our Markets business within the Institutional Securities business segment.

•Asia net revenues increased 43% in the current quarter compared with the prior year quarter, primarily driven by strong results in Equity within the Institutional Securities business segment.

Selected Financial Information and Other Statistical Data

1. The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.

2. ROE and ROTCE represent annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.

3. Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.

4. Pre-tax margin represents income before provision for income taxes as a percentage of net revenues.

5. For a discussion of Liquidity resources, see “Liquidity and Capital Resources—Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.

6. Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet.

7. Book value per common share and tangible book value per common share equal common equity and tangible common equity, respectively, divided by common shares outstanding.

8. Client assets represents the sum of Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets, totaling $350 billion as of March 31, 2026 and December 31, 2025, are invested in Investment Management products and are therefore also included in Investment Management’s AUM.

9. For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein.

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Management’s Discussion and Analysis

Economic and Market Conditions

In the first quarter of 2026, the economic environment remained resilient, with strong client engagement against a backdrop of increased economic uncertainty and market volatility. Geopolitical risk, inflation, elevated asset prices, the rate of economic growth, and the future path of monetary policy present ongoing uncertainties which could continue to impact the capital markets and our businesses.

We are monitoring the ongoing military conflict in the Middle East and its impact on the regional economy, global economic conditions, and financial markets. Our direct exposure to the region is limited.

For more information on economic and market conditions, and the potential effects of geopolitical events on our future results, refer to “Risk Factors” and “Forward-Looking Statements” in the 2025 Form 10-K.

Selected Non-GAAP Financial Information

We prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and capital adequacy.

These measures are not in accordance with, or a substitute for, U.S. GAAP and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the U.S. GAAP financial measure and the non-GAAP financial measure.

For the prior year quarter, we present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses on DCP investments from net revenues and compensation expenses. The impact of DCP is primarily reflected in our Wealth Management business segment results. These measures allow for better comparability of period-to-period underlying operating performance and revenue trends, especially in our Wealth Management business segment. By excluding the impact of these items, we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses for the prior year quarter.

Beginning in the first quarter of 2026, derivatives were designated as cash flow hedges of the equity price risk associated with the majority of unvested DCP awards within our Wealth Management business segment. Changes in fair value of these cash flow hedging derivatives are recorded in OCI and subsequently reclassified into compensation expense in the same period that the related DCP award vests and is recognized in compensation expense.

Additionally, in the first quarter of 2026, we commenced the use of derivatives as economic hedges of the equity price risk primarily associated with the vested DCP awards within our Wealth Management business segment. The Firm presents changes in the fair value of these economic derivative hedges in compensation expense.

Previously, the Firm economically hedged DCP awards primarily with cash instrument hedges whereby changes in the fair value of such hedges, net of financing costs, were recorded in net revenues.

The use of derivatives as cash flow hedges of certain DCP awards is expected to substantially mitigate timing differences between the recognition of changes in the fair value of the hedging instruments and the deferred recognition of related DCP compensation expense over the vesting period. The expected mitigation of these timing differences, alongside the associated income statement changes described above, enables us to better present the operating performance and revenues trends. Accordingly, we will no longer present non-GAAP financial measures excluding DCP.

For additional information on DCP, refer to “Other Matters” herein and Note 2 to the financial statements.

Tangible common equity is a non-GAAP financial measure that we believe analysts, investors and other stakeholders consider useful to allow for comparability to peers and of the period-to-period use of our equity. The calculation of tangible common equity represents common shareholders’ equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction. In addition, we believe that certain ratios that utilize tangible common equity, such as return on average tangible common equity (“ROTCE”) and tangible book value per common share, also non-GAAP financial measures, are useful for evaluating the operating performance and capital adequacy of the business period-to-period, respectively. The calculation of ROTCE represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity. The calculation of tangible book value per common share represents tangible common equity divided by common shares outstanding.

The principal non-GAAP financial measures presented in this document are set forth in the following tables.

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Management’s Discussion and Analysis

Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures

1. Net revenues and compensation expense are adjusted for DCP for both Firm and Wealth Management business segment. Beginning in the first quarter of 2026 we use derivatives to hedge our DCP awards and no longer present non-GAAP financial measures adjusted for mark-to-market gains and losses on DCP. See “Other Matters” herein and Note 2 to the financial statements for more information.

Non-GAAP Financial Measures by Business Segment

1. Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see “Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent Company equity.

2. The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment, annualized as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment.

Return on Tangible Common Equity Goal

We have an ROTCE goal of 20%. Our ROTCE goal is a forward-looking statement that is based on a normal market environment and may be materially affected by many factors.

See “Risk Factors” and “Forward-Looking Statements” in the 2025 Form 10-K for further information on market and economic conditions and their potential effects on our future operating results.

ROTCE represents a non-GAAP financial measure. For further information on non-GAAP measures, see “Selected Non-GAAP Financial Information” herein.