JPMorgan (JPM): Q2 2026 results, my verdict

2026-07-17 · By Lubin Danilo, founder of Lubin Investment

JPM: see the full analysis on Lubin Investment

JPMorgan Chase just posted its best quarter ever, helped in part by a one-time gain on its Visa stake. Strip that boost out and the performance still holds up, just less spectacular. Here is why I am also wary of the usual pricing model for judging a bank like this one.

The bank's best quarter ever, almost

JPMorgan Chase reported second quarter 2026 results on July 14, 2026, and the headline number is easy to remember: 21.2 billion dollars in net income, the most profitable quarter in the bank's history, or 7.70 dollars per share. Total managed revenue came in at 58.0 billion dollars, up 27% year over year, with record revenue across every line of business, from retail banking to investment banking to asset management.

But a careful reader of earnings always checks what sits behind a record. Part of this number comes from something that will not repeat every quarter: a 4.6 billion dollar gain on the bank's long-standing stake in Visa, plus 1.0 billion dollars in gains on other equity investments. Strip those one-time items out and normalized net income comes to 16.9 billion dollars, or 6.14 dollars per share. That is far less spectacular than 21.2 billion, but it is still a clear beat versus the 5.59 dollars analysts expected, nearly 10% above consensus. Return on tangible common equity excluding one-time items (ROTCE, a measure of the profit a bank earns on each dollar of shareholder capital it actually deploys, excluding accounting goodwill from past acquisitions) came in at 23%, a level very few global banks reach.

Where the real surprise comes from: trading floors, not loans

The real engine of this quarter is not JPMorgan's best known business, lending to consumers and companies, but its trading floors. Equity markets revenue jumped 86% year over year to 6.0 billion dollars, fixed income revenue rose 6%, bringing total markets revenue to 12.1 billion dollars for the quarter alone. This revenue comes from market making: the bank earns money buying and reselling stocks, bonds, and derivatives on behalf of clients, capturing the spread between buy and sell prices plus commissions on trading volume.

This business has an important feature to understand: it depends on volatility and trading volumes in the markets, not on a structural change in the bank's operations. A choppy quarter, rattled by trade uncertainty and rate moves, mechanically translates into more hedging and speculative trades for JPMorgan's clients, hence more commissions. A calm quarter would generate far less. Net interest income, the more stable and predictable part of banking (interest earned on loans minus interest paid on deposits), grew far more modestly over the period. This record is therefore partly a record of favorable market conditions, not solely proof that the core banking business has transformed overnight.

Why I am wary of P/FCF for judging a bank

On JPMorgan's analysis page, one number jumps out: a P/FCF (price-to-free-cash-flow, the share price divided by the cash the company actually generates once every bill is paid) of just 6.2 times. For a company scored as solidly as JPMorgan, that level would seem to signal an extraordinarily cheap stock. Except you need to check the history of this number before believing it: over the last six fiscal years, JPMorgan's annual free cash flow went from negative 79.9 billion dollars in 2020 to positive 78.1 billion in 2021, positive 107.1 billion in 2022, positive 13.0 billion in 2023, negative 42.0 billion in 2024, then negative 147.8 billion in 2025. These figures make no intuitive economic sense for a company supposed to be profitable every year.

The reason is specific to banking: the standard free cash flow calculation starts from operating cash flow, which for a bank includes changes in its loans and deposits. When JPMorgan lends more to its customers, that increase in loans counts as a cash outflow in the calculation, exactly as if the bank were buying a pile of inventory, when in fact this is precisely its business and a profitable one. When customer deposits rise, the opposite happens. These balance sheet swings, driven by the credit cycle and depositor confidence, completely dominate the calculation and have almost nothing to do with the bank's real economic profit for the period. A P/FCF of 6.2 times for JPMorgan therefore says almost nothing: it is neither proof of a bargain nor a market anomaly, it is an artifact of the calculation method.

What I prefer to look at for a bank is net income, a far more stable measure over time: 27.4 billion dollars in 2020, 46.5 billion in 2021, 35.9 billion in 2022, 47.8 billion in 2023, 56.9 billion in 2024, 55.7 billion in 2025. The path is not perfectly linear, but it tells a coherent growth story, unlike the free cash flow roller coaster. This measure, paired with return on tangible common equity, best reflects JPMorgan's true earning power from one year to the next.

Quality and price: what my filter says

My quality filter validates 7 out of 10 criteria for JPMorgan. The strengths are clear: a 33.3% net margin, a share count down 2.01% a year through buybacks, expanding margins, and a cash conversion ratio above 2. The weaknesses are just as instructive: 5-year sales growth (7.7% a year) sits below my 10% threshold, and free cash flow per share growth comes in negative (negative 48.8% a year), but I just explained why that last figure mostly reflects banking balance sheet noise rather than real deterioration. Return on invested capital and the net debt to free cash flow ratio are not even calculable for JPMorgan: the classic capital employed formulas, built for industrial companies with factories and inventory, simply do not apply to a balance sheet made almost entirely of loans, deposits, and financial securities.

My site's fair price model, which projects free cash flow per share five years out to derive a discounted exit value, puts JPMorgan's reasonable buy price at 71.96 dollars against a share price of 341.10 dollars: an 78.9% premium according to this calculation. But I just explained why JPMorgan's free cash flow per share is an unreliable signal year to year: this valuation model mechanically inherits the same flaw for a bank, and I do not take it at face value here. What I look at instead to judge whether JPMorgan's price is reasonable: the share price relative to net income (the P/E ratio, the equivalent of P/FCF but applied to accounting profit rather than cash), compared with other major global banks, and the trajectory of return on tangible common equity over time.

What I am watching next

Three things are worth tracking over the coming quarters. First, whether the bank can sustain elevated markets revenue: an exceptional trading quarter does not mechanically repeat, and a good part of the Q2 2026 record comes from there. Second, the path of net interest income against Federal Reserve policy: a rate cut would shrink what the bank earns on the spread between its loans and its deposits. Third, the pace of credit loss provisions, which typically rise late in the economic cycle and has not yet meaningfully weighed on this quarter.

How I read it

I never recommend a specific stock, but this quarter is a good exercise in separating a real signal from an accounting artifact. The 21.2 billion dollar record makes headlines, but a good part of it comes from a one-time gain on the Visa stake that will not repeat. Strip that boost out and the performance still holds up: normalized profit of 16.9 billion dollars that comfortably beats consensus, driven by exceptionally active trading floors this quarter. On quality, JPMorgan remains one of the top rated banks in my filter. On price, I trust the P/E ratio and return on tangible common equity far more than P/FCF, a ratio that a bank's balance sheet renders essentially unusable. This is exactly the kind of sector nuance I wanted to be able to apply to any stock, which is what pushed me to build my analysis tool. You can find the full breakdown on the JPMorgan analysis page, my full thesis on the bank in my in-depth JPMorgan analysis, and my methodology.

• Record net income of 21.2 billion dollars in Q2 2026 (7.70 $/share), inflated by a one-time 4.6 billion dollar gain on the Visa stake; excluding one-time items, profit of 16.9 billion dollars (6.14 $/share), still beating consensus by nearly 10%.
• The real driver of the quarter is trading floor revenue (+86% in equities, 12.1 billion dollars total), a volatile business tied to trading volumes, not a lasting transformation of the lending business.
• JPMorgan's free cash flow is erratic year to year (from negative 147.8 to positive 107.1 billion dollars since 2020) due to swings in loans and deposits on the balance sheet: a 6.2 times P/FCF should not be taken at face value for a bank.
• My filter validates 7 out of 10 criteria: 33.3% net margin, regular buybacks, but sales growth below my 10% a year threshold.
• I prefer net income and return on tangible common equity (23% excluding one-time items) over P/FCF to judge the price of a bank like JPMorgan.

FAQ

What is the Visa stake gain and why does it weigh so much on the quarter?

JPMorgan has long held a legacy stake in Visa, dating back to when major banks owned the card network. The bank booked a 4.6 billion dollar gain on this stake this quarter, a one-time event that inflates reported net income but has nothing to do with recurring banking operations.

What is a bank's markets (trading) revenue?

It is the revenue a bank earns buying and reselling stocks, bonds, and derivatives on behalf of clients, through the spread between buy and sell prices plus commissions. It depends heavily on market volatility and trading volumes, unlike the more stable net interest income, which comes from loans and deposits.

Why is P/FCF unreliable for judging a bank?

The standard free cash flow calculation includes changes in a bank's loans and deposits, which are part of its normal business but completely distort the figure year to year. For JPMorgan, annual free cash flow swung from positive 107 billion to negative 147 billion dollars within a few years without anything actually alarming happening in the business.

What is ROTCE?

ROTCE (return on tangible common equity) measures the profit a bank earns on each dollar of shareholder capital it actually deploys, excluding accounting goodwill from past acquisitions. A 23% ROTCE for JPMorgan this quarter, excluding one-time items, is a high level for a bank this size.

Should I buy JPMorgan stock after these results?

The results confirm a high quality bank, but my free cash flow based pricing model is unreliable for a bank's balance sheet: I prefer judging price through the P/E ratio and return on tangible common equity. This is not personalized investment advice, do your own research.

JPM: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).