Charles Schwab (SCHW) posted record third-quarter results on Thursday, October 15, and the stock still fell almost 4% in morning trading. Revenue rose 17% to $7.17 billion and adjusted earnings per share rose 29% to $1.69. The more interesting part of the day came on the earnings call. There, CEO Rick Wurster laid out three products that widen what Schwab offers clients.
Three New Bets From Schwab’s Call
The first is prediction markets. Schwab already offers binary options on the S&P 500, built with Cboe Global Markets (CBOE). Over the next 12 to 18 months, Wurster said, Schwab will add contracts on financial events, company KPIs and political events. It will stay out of sports betting.
That’s a turn for a CEO who warned last November against young people treating a Monday Night Football bet like long-term investing. Leaving out sports is his answer to that tension.
The second is long/short investing. Wurster said he expects Schwab to launch its own long/short offering, without giving a date. In the meantime, Schwab has changed minimums to slow demand for the long/short program on its advisor platform.
The third is Charley, an AI assistant that will reach all clients in the coming months. Wurster expects it to become a front door to Schwab.
Schwab Still Earns Half Its Money From Interest
Prediction markets would add trading revenue. Wurster called the planned proprietary long/short offering another way to deliver monetization, though he didn’t say how it would earn money. Charley carries no fee in Schwab’s announcement. Schwab already books the fixed net yield it earns on existing client long/short strategies as interest revenue. Net interest revenue still carries Schwab.
Net interest revenue made up 61% of revenue in 2019. It fell to 43% in 2021, when rates sat near zero, and was back at 49% in 2025. In the third quarter, net interest revenue was 48.5% of the total, barely changed from 49.7% a year earlier. It also supplied 41% of the quarter’s revenue growth.
The fee side is already big. Asset management and administration fees brought in $6.51 billion in 2025, or 27% of revenue, and trading brought in $3.92 billion, or 16%. Prediction markets would land in trading. Existing client long/short strategies show up on the interest side instead. Wurster said the program grew exceptionally quickly this year, and CFO Mike Verdeschi credited it for part of the rise in margin loans and sweep cash.
How Much Prediction Markets Could Add
Robinhood (HOOD) offers a benchmark. Its event contracts made $156 million in the second quarter, about 12% of its revenue. Wurster himself noted that most of that market’s activity sits in sports.
Interactive Brokers (IBKR) has taken the non-sports route through its own exchange, ForecastEx, which lists contracts on elections, inflation and interest rates.
Suppose Schwab matched Robinhood’s quarter every quarter, without sports. That’s about $624 million a year, or 2.6% of Schwab’s 2025 revenue. Useful, not transformative.
Charley matters for a different reason. The AI fear that hit the stock this year was about tools that pull idle client cash out of Schwab’s sweep accounts, which fund its interest income. Wurster pushed back on the call. He said clients who use AI more are holding more cash because they buy more stocks. Schwab is also blocking unauthorized AI agents from logging in for clients, and Wurster expects Charley to become the main way clients reach AI at Schwab.
Conclusion
None of these products will change what drives Schwab stock in the next year. Net interest revenue is still about half of revenue, and the third quarter’s mix barely moved. Prediction markets could add a few percent to a trading and fee business that already brings in more than $10 billion a year. Existing client long/short strategies are adding to net interest revenue, and the proprietary version has no launch date yet. For now, the stock still rides on what Schwab earns from client cash and lending.
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