Financial Report Outlook | Can giants like Goldman Sachs Group, Inc. (GS.US) deliver strong performance in the face of the "AI disruption everything" in the financial sector?

The Wall Street financial giant, Goldman Sachs Group, Inc. (GS.US), will release its first-quarter earnings before the opening of the US stock market on Monday, followed closely by the largest commercial bank in the US, JPMorgan Chase, which will release its earnings on Tuesday. Wells Fargo & Company and Citigroup will also announce their earnings on the same day, while other financial giants such as Morgan Stanley and BlackRock, Inc. will release their financial reports later in the week. Despite the pessimistic narrative of "AI disrupting everything" causing a major impact on the credit chain and the rising macro uncertainty of a "new round of Middle East conflicts increasing", Wall Street analysts are still expecting strong performance from financial giants like Goldman Sachs Group, Inc. to prove that the fundamentals of the financial sector have not deteriorated as much as the depressed stock prices suggest. The financial sector of the S&P 500 index has fallen by over 15% so far this year, with the first quarter ending with the worst performance since 2020. The pessimistic market narrative of "AI disrupting everything" has led to concerns about the disruption caused by AI agents like Claude Cowork and OpenClaw, potentially replacing certain functional software services at a much lower cost. This has led to a heavy sell-off in global software stocks. Most investors did not anticipate that the impact of the "AI disrupting everything" narrative and the cracks in private credit were the two main negative catalysts in the market, second only to the Middle East war. The financial sector, which has long attracted investors with labels such as "value investing + low volatility + safe-haven", has weakened significantly amidst the severe volatility this year. Investors are now withdrawing from this "long-term value investment" theme. The disruption caused by AI agents like Claude Cowork to the software business models has spilled over to private credit and the broader credit markets. Institutions have been raising concerns about the impact of AI on the $1.5 trillion US loan market since February. The pressure on private credit redemptions has been increasing, with some funds experiencing restrictions on redemptions, and large commercial banks tightening their financing for the industry. This has dampened the risk appetite for the entire financial sector, putting significant pressure on financial stocks. Given this backdrop, the earnings reports from giants like Goldman Sachs Group, Inc., JPMorgan Chase, Citigroup, and Wells Fargo are seen as the first step towards restoring sentiment in the financial sector. Goldman Sachs Group, Inc. is about to announce its earnings! The trading desks are busy, investment banking is picking up, but the challenges of "AI disrupting everything" and political tensions like the GEO Group Inc. conflict are testing the profitability of Wall Street. If the Middle East conflict has only increased market volatility without substantially harming corporate investment sentiment, and the massive sell-off in the software industry has not impacted the growth prospects of Wall Street giants in investment banking and credit business, then they will not only "submit good results" but set a positive tone for the entire financial sector and the US earnings season. However, if their management starts to show signs of caution, especially in loans, corporate financing, and credit quality, then the downturn in the financial sector cannot be simply explained as emotional overreaction. Analysts' average expectations for Goldman Sachs Group, Inc.'s first-quarter earnings are as follows: Expected EPS for Q1: $16.49, compared to around $14.12 in the same period last year; Revenue is expected to be around $16.97 billion, indicating a year-on-year growth of 13%; For the trading business segment of Goldman Sachs Group, Inc., the average expectations for fixed income revenues are around $4.92 billion, indicating a potential 12% year-on-year growth, while stock trading revenue is expected to be around $4.91 billion, indicating a potential 17% year-on-year growth. Investment banking fees related revenue is expected to be around $2.5 billion, indicating a potential 31% year-on-year growth. It is worth noting that the challenges of "AI disrupting everything" and the political tensions like the GEO Group Inc. conflict have led to a lackluster performance by financial stocks in the first quarter. However, since the beginning of the year, institutional investors have been repositioning their portfolios in the cross-industry trading spree dominated by the AI investment frenzy - especially as the AI trend rotates towards the "HALO" heavy asset sectors and popular cyclical stocks, despite the stock market plummeting in March due to the Middle East conflict, trading desks at major Wall Street institutions have remained busy. This is why analysts expect strong performance in the stock and fixed income trading businesses of giants like Goldman Sachs Group, Inc. At the same time, the resurgence of investment banking business is expected to continue. According to Dealogic's latest statistics, the total revenue for the entire investment banking industry in the first quarter is expected to grow by 10%. For Goldman Sachs Group, Inc., whose revenue mainly comes from trading and investment banking businesses, analysts are focused on how the Iranian war outbreak on February 28th has affected the company's fundamentals. Major disruptive events affecting commodity prices, like the conflict in Iran, can sometimes force corporate clients to adopt a wait-and-see approach or shift to holding cash assets, indicating a possible delay in merger activities. The market volatility caused by this could lead to more intensive trading revenue data for leverage institutions like CTA strategies or hedge funds due to the rapid fluctuations in interest rates, stocks, bond prices, and exchange rates. Michael Oroko, Chief Market Strategist at Jones Trading, points out: "In terms of valuation, bank stocks remain one of the most attractive industry sectors in the S&P 500. After a strong performance in 2025, the sector is currently in a consolidation phase in 2026." In a broader sense, Wall Street analysts expect a 16% increase in earnings for financial companies in the S&P 500 index in the first quarter, compared to an overall growth expectation of 12.5% for the other components of the index. However, what is more important than numbers is the comments from Wall Street executives on how AI agents will impact the SaaS software and the entire financial industry, as well as their portrayal of the prospects for private credit, interest rates, and trading activities, along with the impacts of the conflict in Iran on economic growth and inflation - especially discussions on oil prices exceeding $100 will be closely watched.