Executive Summary / Key Takeaways

• Diversified Growth Engine: Piper Sandler is demonstrating robust financial performance, achieving eight consecutive quarters of year-over-year growth by Q3 2025, driven by strategic diversification across investment banking, institutional brokerage, and specialized advisory services. This broad platform provides resilience against sector-specific headwinds and market volatility.
• M&A and Capital Markets Momentum: The firm is experiencing significant tailwinds in M&A advisory, particularly in financial services and healthcare, alongside a strong rebound in corporate financing. Management anticipates continued growth in advisory revenues for 2025, with Q4 2025 advisory revenues expected to be similar to Q4 2024, and a moderation in corporate financing from a strong Q3.
• Strategic Talent and Technology Investments: PIPR is actively expanding its talent base, notably in its technology investment banking group, with a long-term goal to double its Managing Director headcount in the sector. Coupled with investments in electronic trading and analytics, these initiatives aim to enhance market share and drive productivity across its capital-light business model.
• Disciplined Capital Management: The company maintains a strong focus on operating discipline, evidenced by an improving compensation ratio (60.3% in Q3 2025) and a commitment to returning capital to shareholders through consistent dividends and share repurchases, effectively offsetting dilution.
• Outlook Amidst Macro Uncertainty: While macroeconomic and geopolitical uncertainties persist, Piper Sandler's robust pipeline, particularly in specialty sectors and private equity-related advisory, positions it for continued growth. Key risks include potential impacts from U.S. trade policy, a prolonged government shutdown, and sustained market volatility affecting client confidence and deal flow.

The Foundation of a Specialized Powerhouse

Piper Sandler Companies, tracing its origins back to 1895 in Minneapolis, Minnesota, has evolved into a formidable investment bank and institutional securities firm. Operating as a single reporting segment, the firm strategically leverages deep sector expertise and broad client relationships to deliver comprehensive investment banking, institutional sales, trading, and research services. This foundational strategy emphasizes maximizing client value through a diversified product suite, a characteristic that has become increasingly vital in volatile market environments.

The company's strategic journey has been marked by a series of calculated acquisitions designed to deepen its sector coverage and broaden its product offerings. Key historical milestones include the 2020 acquisition of Sandler O'Neill Partners, L.P., which significantly expanded its financial services footprint, and the 2022 acquisition of DBO Partners, doubling its technology franchise and bolstering cybersecurity and software capabilities. More recently, the 2024 acquisition of Aviditi Capital Advisors added crucial private capital advisory capabilities, enhancing services for financial sponsors. This continuous expansion culminated in September 2025 with the acquisition of G Squared Capital Partners, further scaling its investment banking technology sector, and a definitive agreement in October 2025 to establish a Middle East hub with MENA Growth Partners. These strategic moves underscore Piper Sandler's commitment to growth through targeted expansion and a focus on specialized, high-value services.

Competitive Positioning and Differentiated Technology

In the dynamic landscape of financial services, Piper Sandler carves out a distinct competitive niche, primarily focusing on mid-market transactions and specialized sectors. While global giants like Goldman Sachs (GS) and Morgan Stanley (MS) command the largest, most complex international deals, Piper Sandler excels in areas requiring deep, localized expertise and personalized client relationships. For instance, Piper Sandler consistently ranks as a top three advisor on announced U.S. M&A deals under $1 billion, demonstrating its strength in the resilient middle-market segment. The firm was also the number-one advisor in U.S. bank M&A based on the number of announced transactions in 2024, advising on three of the five largest bank M&A transactions completed that year. This contrasts with the broader, more standardized approach of larger competitors, where PIPR's agility and specialized focus can lead to greater efficiency and stronger client loyalty in its chosen segments.

Against peers like Jefferies Financial Group (JEF), which also targets the middle market but with a broader capital markets focus, Piper Sandler differentiates through its deep roots in public finance and alternative asset management, particularly in healthcare. The firm's municipal finance platform, for example, maintained a number-two ranking in negotiated underwritings in 2024. Similarly, compared to advisory-centric firms like Evercore (EVR), Piper Sandler offers a wider suite of services, including institutional brokerage and debt financing for non-profits, providing a more comprehensive solution for its client base.

Piper Sandler's competitive advantages are further bolstered by its technological differentiators, particularly in its institutional brokerage and advisory services. The firm leverages advanced analytics and robust electronic trading platforms to facilitate client trades and provide differentiated advice. For instance, its broad product capabilities and distribution allow it to offer liquidity across various aspects of the balance sheet, including loans, securities, and derivatives. In municipal finance, the company is actively increasing electronic trading capabilities, recognizing the significant rise in small municipal trades (under $1 million par value) from approximately 3% to over 30% of the market in recent years. This technological adaptation is crucial for efficient interaction with SMAs and large funds managing these accounts.

Furthermore, Piper Sandler maintains one of the largest research platforms in the small and mid-cap space, covering approximately 950 stocks, and its macro research capabilities consistently rank among the top. These technological and research-driven strengths contribute to a competitive moat by enhancing client service, improving execution efficiency, and providing proprietary insights that larger, more generalized firms may not offer with the same depth in PIPR's focus areas. The strategic intent behind these technological investments is to drive higher productivity and expand market share, particularly in fixed income, where the medium-term goal is to grow annual revenues to $300 million.

Financial Performance and Operational Strength

Piper Sandler's financial performance in 2025 demonstrates a compelling narrative of growth and operational efficiency, building on a strong 2024. For the third quarter ended September 30, 2025, the company reported adjusted net revenues of $455 million, a 29.4% increase over the prior-year period. This robust growth translated into an adjusted operating margin of 21.2% and adjusted diluted EPS of $3.82. Year-to-date through September 30, 2025, adjusted net revenues reached $1.24 billion, with an adjusted operating margin of 19.2% and adjusted diluted EPS of $10.86.

The Investment Banking segment was a primary driver of this performance. Total investment banking revenues for Q3 2025 surged by 36.9% year-over-year to $330.6 million. Advisory services revenues increased 12.9% to $212.4 million, propelled by a higher volume of completed transactions, particularly in the financial services, healthcare, consumer, and energy, power, and infrastructure sectors. Corporate financing revenues saw an exceptional 345.3% increase to $79.7 million in Q3 2025, marking the strongest quarterly result since 2021, driven by improved equity financing conditions and strong valuations, with the healthcare sector leading this surge. Municipal financing revenues also contributed positively, rising 8.4% to $38.5 million in Q3 2025 due to increased negotiated issuance activity.

The Institutional Brokerage segment also showed solid performance. Total institutional brokerage revenues for Q3 2025 grew 8.5% year-over-year to $109.5 million. Fixed income services revenues were particularly strong, up 15% to $55.7 million, benefiting from increased client activity in anticipation of further Federal Reserve rate cuts and ongoing balance sheet repositioning from bank M&A. Equity brokerage revenues saw a modest 2.4% increase to $53.8 million in Q3 2025.

Operationally, Piper Sandler is demonstrating strong discipline. The adjusted compensation ratio improved to 61.7% in Q3 2025 from 62.5% in Q3 2024, primarily due to higher adjusted net revenues. This reflects management's commitment to balancing employee retention with operating leverage. Non-compensation expenses, excluding reimbursed deal costs, were $65 million in Q3 2025, in line with guidance, though higher occupancy costs related to the Minneapolis headquarters relocation contributed to an 18% increase in occupancy and equipment expenses.

The firm's liquidity position remains robust, with most tangible assets readily convertible into cash. As of September 30, 2025, the company had $133.4 million remaining under its share repurchase authorization, and it continues to return capital to shareholders through dividends, including a recently approved quarterly cash dividend of $0.70 per share.

Strategic Trajectory and Forward Outlook

Piper Sandler's strategic trajectory is firmly set on expanding its market leadership and deepening its specialized expertise. The firm aims to grow annual corporate investment banking revenues to $2 billion over the medium term, a goal to be achieved by scaling industry groups, increasing transaction and fee sizes, enhancing productivity, and further growing revenues from private equity clients. Revenues from private equity clients already grew over 20% in 2024, accounting for roughly 50% of advisory services revenues.

Management's outlook for the remainder of 2025 is generally constructive, albeit with an acknowledgment of lingering uncertainties. For Q4 2025, advisory revenues are expected to be similar to Q4 2024, supported by a robust and building pipeline. Corporate financing revenues are projected to moderate from the strong Q3 2025 levels, but overall equity and debt financing activity is expected to increase in 2025 as companies seek capital for strategic plans. The equity brokerage business anticipates its strongest quarter in Q4 2025, following historical trends. Municipal financing revenues for Q4 2025 are expected to be similar to Q3 2025, with favorable market conditions and issuance volumes anticipated to continue into 2025.

The firm's strategic investments in talent are critical to this growth. Piper Sandler finished Q3 2025 with 183 investment banking managing directors, having added 8 new MDs to its technology group alone this year, including those from the G Squared acquisition. Building out the technology franchise remains a top strategic priority, with the long-term ambition for it to rival the scale of its financial services and healthcare businesses. The firm is also focused on expanding its non-M&A advisory capabilities, including debt capital markets advisory and private capital advisory, which have shown significant growth and are on pace for a third consecutive record year.

From a cost perspective, the company expects a modest decline in its compensation ratio for the full year 2025, targeting a range of 61.5% to 62.5%. Non-compensation expenses for 2025 are guided to be between $65 million and $67 million per quarter, excluding reimbursed deal costs, driven by factors such as the Minneapolis headquarters relocation and inflationary pressures. The effective tax rate for 2025 is projected to be around 30%, excluding stock-based compensation benefits, reflecting upward pressure from non-deductible expenses.

Risks and Challenges

Despite the positive momentum, Piper Sandler operates within an inherently volatile industry, exposed to several risks. Macroeconomic conditions, financial market activity, and geopolitical events remain unpredictable and can significantly impact profitability. Changes in U.S. trade policy, retaliatory actions, and a prolonged U.S. federal government shutdown could negatively affect financial market activity and client confidence, potentially delaying M&A deal cycles and new announcements.

The absence of a public credit rating could also adversely affect the company's liquidity and competitive position by increasing financing costs and limiting access to certain funding sources. Furthermore, while the advisory pipeline is robust, the conversion of these pipelines can be impacted by heightened volatility and declining equity valuations, as seen in early 2025. Specific sectors, such as parts of consumer products heavily reliant on international sourcing, face challenges due to trade barriers and P&L uncertainty. The biotech IPO market, in particular, has been slow and requires significant improvement in market conditions to rebound.

Conclusion

Piper Sandler Companies stands as a compelling investment proposition, underpinned by a clear strategy of specialized expertise, diversified service offerings, and disciplined operational management. The firm's consistent revenue growth, particularly in its investment banking and institutional brokerage segments, reflects its ability to capitalize on improving market conditions and its strategic investments in talent and technology. Its strong competitive positioning in the middle-market and specialized sectors, coupled with a growing emphasis on private equity clients and non-M&A advisory, provides a resilient foundation for future expansion.

While external macroeconomic and geopolitical uncertainties present ongoing challenges, Piper Sandler's robust pipeline and proactive strategic initiatives, including the build-out of its technology franchise and electronic trading capabilities, position it to gain market share and drive long-term value. Investors should monitor the firm's ability to execute on its growth targets, particularly in expanding its technology and fixed income revenues, and its continued operational efficiency in managing compensation and non-compensation expenses. The commitment to returning capital to shareholders further enhances its appeal, making Piper Sandler a noteworthy player poised for enduring growth in the evolving financial services landscape.