Lazard's Adjusted Revenue Rose 11 Per Cent in the Third Quarter. Its Adjusted Profit Fell 35 Per Cent, as Pay Held at 69.9 Per Cent of Revenue.

Lazard's adjusted net revenue rose 11 per cent to $805 million in the third quarter of 2026, but adjusted earnings fell 36 per cent to 36 cents a share because the firm paid out 69.9 per cent of revenue in compensation, the company said in its third-quarter earnings release on 22 October.

Lazard, the New York-based advisory and asset management firm, grew both businesses. The problem is not the top line. It is how much of each new dollar went to staff.

How did revenue grow while profit fell?

Pay rose faster than revenue. The adjusted compensation ratio, the share of adjusted net revenue spent on salaries, bonuses and deferred awards, was 69.9 per cent against 65.5 per cent a year earlier. By this publication's arithmetic, that is about $563 million of compensation on $805 million of revenue, against about $475 million on $725 million a year ago. Compensation rose by roughly $88 million. Revenue rose by $80 million.

Non-compensation costs were better controlled, at 19.3 per cent of revenue against 20.5 per cent. The firm's long-term targets are a compensation ratio of 60 per cent or below and a non-compensation ratio of 16 to 20 per cent, with timing "dependent on market conditions," the release says.

Source: Lazard third-quarter 2026 earnings release.

On a reported basis the fall is steeper. GAAP net income fell 59 per cent to $29 million, or 26 cents a share. The release attributes part of the gap to about $5.6 million of costs for "the departure of certain executive officers," $4.1 million for the pending acquisition of Campbell Lutyens, a private capital adviser, and a GAAP tax rate of 45.8 per cent.

Why is Lazard paying so much now?

Lazard does not say directly, but two facts sit behind it: it has been hiring senior bankers, and it has held its pay accrual steady all year. Tracy Farr, the chief financial officer, said the third quarter's compensation accrual "was unchanged from the first two quarters of this year," according to a transcript of the earnings call published by The Motley Fool. Management said the firm has hired or promoted 80 managing directors in North America over three years and announced 10 more since the last call, though it said the pace of hiring in 2026 will be slower than in 2025.

The release itself gives only a general reason, describing the ratio as "balancing a view of current conditions in the market for talent." Farr said on the call that Lazard is considering lowering the share of pay it defers, which would raise the reported ratio by a few points this year and lower it afterwards, according to the transcript. No decision has been announced.

Peter R. Orszag, chief executive and chairman, said in the release that Lazard's 2030 strategy "continues to progress as planned" and that the firm is "building a more productive, diversified firm positioned for long-term profitable growth."

Is the deal pipeline there to pay for it?

Management says so, and the quarter cannot yet prove it. On the call, management said the weighted advisory pipeline for 2027 is about double what the 2026 pipeline was at the same point last year, and Orszag said conflict clearances, an early sign of new mandates, were up more than 30 per cent by dollar value, according to the transcript. He also said private-equity deal-making remains held back by gaps between buyers' and sellers' valuations, which higher interest rates widen.

The release says the quarter's advisory revenue "includes an amount pulled forward into the period." On the call, management put the pull-forward at roughly $2 million to $3 million, in line with recent quarters, the transcript shows. For the first nine months, adjusted advisory revenue is down 1 per cent at $1.27 billion. The third quarter's 10 per cent gain has not yet made up the first half. Bigger rivals had a stronger quarter in advice: Morgan Stanley's advisory revenue rose to $887 million from $684 million, as this publication reported.

What happened in asset management?

Fees rose and money left. Assets under management were $284 billion at 30 September, up 7 per cent on a year earlier but roughly flat on June. In the quarter, $2.3 billion of net outflows and $0.2 billion of currency losses offset $1.9 billion of market gains, the release says. Over nine months, net inflows were $5.1 billion. Management fees reached a record $321 million in the quarter, up 18 per cent, and gross inflows a record $54 billion for nine months, management said on the call.

Lazard plans to close the Campbell Lutyens acquisition and launch the combined business, Lazard CL, in early November, and Orszag said the unit will generate about $500 million of revenue and add to earnings in 2027, according to the transcript. Lazard has not published a purchase price in the release.

What to watch

The deferral decision, if Lazard makes it this year, will move the reported ratio in the fourth quarter for reasons unrelated to performance. The cleaner test is the first half of 2027. If the doubled pipeline turns into advisory revenue, a 69.9 per cent ratio becomes a stepping stone toward 60. If it does not, the firm will have paid 2027 compensation on 2026 revenue.

Sources

• Lazard third-quarter and nine-month 2026 results (SEC Form 8-K exhibit, 22 October 2026)
• Lazard (LAZ) Q3 2026 earnings call transcript (The Motley Fool, 22 October 2026)

Revenue, net income, EPS, compensation and non-compensation ratios and targets, assets under management and flows, the management-transition and Campbell Lutyens expenses, the tax rate, capital returns and Peter Orszag's quotations are from Lazard's third-quarter 2026 earnings release, filed with the SEC on 22 October 2026. The deferral-rate discussion, the size of revenue pulled forward, the 2027 pipeline and conflict-clearance comments, the Campbell Lutyens closing and revenue expectation, managing-director hiring, record management fees and gross inflows, the unchanged accrual, and the private-equity remark are paraphrased from a transcript of the earnings call published by The Motley Fool on 22 October 2026. The dollar compensation and operating-margin estimates are this publication's arithmetic from the reported ratios. The analysis is our own.

Topics marketsinvestment bankingasset managementcompensationearnings