Charles Schwab's third-quarter 2026 results show the kind of operating leverage that value investors look for in a financial services franchise: revenue grew about 17 percent from a year earlier while noninterest expense grew about 9 percent. In its 10-Q for the quarter ended September 30, 2026, filed November 6, 2026, the company reported net revenues of $7.17 billion, up from $6.14 billion in the third quarter of 2025. Noninterest expense rose to $3.39 billion from $3.11 billion. The gap between those two growth rates is what drove pre-tax income up about 25 percent.
The quarter in reported figures
| Metric (three months ended Sept. 30) | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Net revenues | $7.17B | $6.14B | +16.9% |
| Net interest income | $3.48B | $3.05B | +14.0% |
| Noninterest expense | $3.39B | $3.11B | +9.0% |
| Income before taxes | $3.78B | $3.02B | +25.0% |
| Net income | $2.91B | $2.36B | +23.2% |
| Diluted EPS | $1.62 | $1.26 | +28.6% |
| Diluted weighted-average shares | 1.733B | 1.811B | -4.3% |
Net interest income is the largest single contributor to the top line. At $3.48 billion, it was up from $3.05 billion, and it accounted for roughly half of third-quarter net revenues. The balance of revenue, which includes asset management and administration fees, trading, and other income, grew faster than net interest income in percentage terms on the reported figures.
Expense discipline against a faster-growing top line
For the first nine months of 2026, the company reported net revenues of about $20.73 billion, against about $17.59 billion a year earlier, a gain of roughly 18 percent. Noninterest expense for the same period rose about 8 percent, from roughly $9.31 billion to $10.09 billion. Over the nine months, then, the company has added revenue at about twice the rate it has added cost.
The quarter-over-quarter pattern is also worth noting. Net revenues rose from $7.07 billion in the second quarter of 2026 to $7.17 billion in the third, while noninterest expense edged down from $3.40 billion to $3.39 billion. Expenses were essentially flat while revenue continued to rise.
What to weigh against the headline
Several points temper the picture. First, the largest revenue line is rate-sensitive. In its 10-K for fiscal 2025, the company reported that a simulated 100-basis-point rate increase would move net interest revenue by 4.1 percent, down from 4.6 percent the prior year, reflecting hedging on its floating-rate assets and additional Senior Notes hedges. A change in the rate path would therefore feed directly into the comparison.
Second, funding costs are moving in both directions. In the third quarter, interest expense on long-term debt rose to $272 million from $207 million a year earlier, while interest expense on deposits fell to $139 million from $248 million. The net effect is embedded in the reported net interest income figure, but the mix matters for reading how durable the margin is.
Third, the expense growth in the quarter, about 9 percent, sits above the 5.5 to 6.5 percent range that management gave for 2026 expense growth, excluding Forge costs, in the fiscal 2025 MD&A. The company's 10-Q is the authoritative source for how much of the third-quarter increase reflects Forge and other items; the figures reviewed for this report do not break that out.
Fourth, a portion of the per-share improvement comes from the share count. Diluted weighted-average shares fell about 4 percent, to 1.733 billion from 1.811 billion. Net income grew about 23 percent, while diluted EPS grew about 29 percent. Buybacks are a legitimate use of excess capital, but the reader should separate the operating gain from the share-count effect when judging per-share growth.
Reading the operating leverage
The central question for a long-term owner is whether the third quarter reflects a sustainable spread between revenue growth and cost growth, or a favorable moment in rates and client activity. The reported figures make a strong case for the former in the near term: revenue has grown in each of the last several quarters on the company's own numbers, and expenses have been held close to flat sequentially. The company's MD&A for fiscal 2025 attributed much of that year's revenue growth to client asset growth, higher trading volume, and lower funding costs, and reported core net new client assets of $519.4 billion for the year.
Whether that spread holds depends on rates, on client cash behavior, and on how management manages the cost base as it absorbs new initiatives. The next 10-Q and the company's expense guidance updates will show whether the third quarter's cost discipline is a trend or a single quarter's result.