The company logo for Jefferies Financial Group Inc. is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 30, 2025. REUTERS/Jeenah Moon

By Prakhar Srivastava and Lananh Nguyen

(Reuters) -Jefferies beat third-quarter profit estimates on Monday, as a rebound in dealmaking pushed advisory fees to a record, giving investors an early read on how Wall Street's investment-banking business may perform this earnings season.

Despite a short pause in April as tariff concerns briefly clouded sentiment, optimism around M&A has remained strong. Companies have pressed ahead with multibillion-dollar transactions across sectors, reflecting confidence in growth prospects and a willingness to commit capital even in a choppy policy environment.

Dealmakers say the pipeline for 2026 remains strong, with expectations of Federal Reserve rate cuts adding to confidence that financing conditions will improve.

"Interest rates are starting to come down, the economy is holding up, business confidence is reasonable and, as a result, M&A activity continues to pick up," Jefferies President Brian Friedman told Reuters in an interview. "We do expect it to continue."

Jefferies' total investment banking net revenues jumped 20.3% to $1.14 billion from a year earlier.

Results from bigger rivals, including Morgan Stanley, Goldman Sachs and JPMorgan Chase, are due next month and will give a broader picture of how strongly Wall Street's dealmaking engine is recovering.

Jefferies shares fell 1.6% in after-market trading.

DEALS REVIVAL

Global dealmaking reached $2.6 trillion in the first seven months of the year, the highest since the 2021 pandemic-era peak, as a quest for growth in corporate boardrooms and the impact of a surge in AI activity helped overcome uncertainty caused by U.S. tariffs.

"The recent periods have been characterized by greater strength in corporate M&A, and not yet a robust M&A market for private equity and sponsor-backed transactions," Friedman said. "Our backlog would suggest that there will be an increase in sponsor-oriented M&A activity ... I think you’ll see increased activity into 2026."

Advisory revenue at Jefferies rose 10.7% to a record of $655.6 million in the quarter.

Jefferies said its equity and debt underwriting revenues climbed 20.7% and 36.3%, respectively.

"Our equities business continues to perform well, our market position has clearly grown ... and we expect that to continue," he said, citing the strength of Jefferies' equity research and advisory services, as well as its global presence in derivatives, swaps and prime brokerage.

It acted as bookrunner on several high-profile U.S. IPOs during the quarter, including Firefly Aerospace and crypto exchange Bullish.

Revenue from the capital markets business, which houses its trading desks, rose 6.9% to $723.4 million from the previous quarter.

Earlier this month, Japan's Sumitomo Mitsui Banking Corp agreed to raise its stake in Jefferies, aimed at strengthening cross-border dealmaking and equity capital markets as Japanese capital flows surge.

Net earnings attributable to common shareholders rose to $224 million, or $1.01 per share, in the three months ended August 31. That compares with $167.1 million, or 75 cents per share, a year earlier. Analysts on average had expected a profit of 80 cents per share, according to data compiled by LSEG.

(Reporting by Lananh Nguyen in New York and Prakhar Srivastava in Bengaluru; Editing by Alan Barona)