MORGAN STANLEY

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Management’s Discussion and Analysis

Executive Summary

Overview of Financial Results

Consolidated Results—Three Months Ended June 30, 2026

•The Firm reported net revenues and pre-tax income of $21.3 billion and $7.3 billion, respectively.

•The Firm delivered ROE of 20.7% and ROTCE of 26.6% (see “Selected Non-GAAP Financial Information” herein).

•The expense efficiency ratio was 65% for both the second quarter and year-to-date, demonstrating operating leverage while we continued to invest in our businesses.

•At June 30, 2026, the Firm’s Standardized Common Equity Tier 1 capital ratio was 14.9%.

•Institutional Securities reported net revenues of $11.0 billion, primarily reflecting strong results in Equity and higher Investment Banking revenues.

•Wealth Management delivered net revenues of $8.9 billion, reflecting strong Asset management revenues, increased Net interest income and higher client activity, generating a pre-tax margin of 30.5%. The business added net new assets of $148 billion and fee-based assets of $39 billion.

•Investment Management reported net revenues of $1.6 billion, primarily driven by asset management fees on higher average AUM. The quarter included positive long-term net flows of $7.5 billion.

Net Income Applicable to Morgan Stanley

Earnings per Diluted Common Share

We reported net revenues of $21.3 billion in the quarter ended June 30, 2026 (“current quarter,” or “2Q 2026”), which increased by 27% compared with $16.8 billion in the quarter ended June 30, 2025 (“prior year quarter,” or “2Q 2025”). Net income applicable to Morgan Stanley was $5.6 billion in the current quarter, which increased by 58% compared with $3.5 billion in the prior year quarter. Diluted earnings per common share was $3.46 in the current quarter, which increased by 62% compared with $2.13 in the prior year quarter.

We reported net revenues of $41.9 billion in the six months ended June 30, 2026 (“current year period,” or “YTD 2026”), which increased by 21% compared with $34.5 billion in the six months ended June 30, 2025 (“prior year period,” or “YTD 2025”). Net income applicable to Morgan Stanley was $11.1 billion in the current year period, which increased by 42% compared with $7.9 billion in the prior year period. Diluted earnings per common share was $6.90 in the current year period, which increased by 46% compared with $4.73 in the prior year period.

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Management’s Discussion and Analysis

•Compensation and benefits expenses of $8,187 million in the current quarter and $16,729 million in the current year period increased 14% compared with the prior year periods, primarily due to an increase in the formulaic payout to Wealth Management advisors and higher discretionary incentive compensation within Institutional Securities, both based on higher revenues.

During the current year period, as a result of a March workforce management action, we recognized severance costs of $178 million in Compensation and benefits expense. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary” in the Form 10-Q for the quarter ended March 31, 2026.

•Non-compensation expenses of $5,715 million in the current quarter and $10,644 million in the current year period increased 19% and 14%, respectively, compared with the prior year periods, primarily due to higher execution-related expenses and increased technology spend.

The Provision for credit losses on loans and lending commitments of $98 million in the current quarter and $196 million in the current year period was primarily related to certain specific commercial real estate and corporate loans and portfolio growth in corporate loans and secured lending facilities. The Provision for credit losses on loans and lending commitments of $196 million in the prior year quarter and $331 million in the prior year period was primarily related to portfolio growth in corporate loans and secured lending facilities and a macroeconomic outlook reflecting slower GDP growth.

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 $11,040 million in the current quarter and $21,761 million in the current year period increased 44% and 31%, respectively, compared with the prior year periods, primarily reflecting higher results in Equity on increased client activity and higher Investment Banking results.

•Wealth Management net revenues of $8,856 million in the current quarter and $17,375 million in the current year period increased 14% and 15%, respectively, compared with the prior year periods, 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 client activity.

•Investment Management net revenues of $1,646 million in the current quarter and $3,181 million in the current year period increased 6% and 1%, respectively, compared with the prior year periods, reflecting higher Asset management

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Management’s Discussion and Analysis

and related fees driven by higher average AUM on higher market levels. The increase in net revenues in the current year period was partially offset by lower Performance-based income and other revenues.

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 22% and 16% in the current quarter and in the current year period, respectively, compared with the prior year periods, primarily driven by higher Asset management revenues within the Wealth Management business segment and higher Investment Banking and Equity results within the Institutional Securities business segment.

•EMEA net revenues increased 11% and 13% in the current quarter and in the current year period, respectively, compared with the prior year periods, primarily driven by higher results in our Markets business within the Institutional Securities segment.

•Asia net revenues increased 71% and 57% in the current quarter and in the current year period, respectively, compared with the prior year periods, 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 $382 billion and $350 billion as of June 30, 2026 and December 31, 2025, respectively, 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

The economic environment exhibited strength in the second quarter of 2026, characterized by active capital markets supported by the adoption of AI and improved investor sentiment. Geopolitical risk, inflation, rising asset prices, the rate of economic growth and the future path of monetary policy represent ongoing uncertainties which could continue to impact the capital markets and our businesses.

We continue to monitor the developments in the Middle East and their impact on the regional economy, global economic conditions, and financial markets. Our direct exposure to the region remains 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 periods, 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 period.

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 revenue trends. Accordingly, we 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.