Updated from 10:01 a.m. EST

Goldman Sachs ( GS) put an exclamation point on the Wall Street earnings season Tuesday, reporting a 95% increase in first-quarter profit due mostly to a surge in revenue from stock trading.

In the quarter, Goldman earned $1.29 billion, or $2.50 a share, compared with $662 million, or $1.29 a share, a year ago. The investment bank breezed past the estimates of analysts, who predicted the firm would earn $1.66 in the quarter, according to Thomson First Call.

Goldman's earnings are the capper on a string of impressive profit reports from the nation's major brokers. Last week Bear Stearns ( BSC), Lehman Brothers ( LEH) and Morgan Stanley ( MWD) all reported better-than-expected first-quarter earnings.

But Goldman's performance outshined its peers as the firm cashed in on the revival in the equity markets. Net revenue from stock trading and commissions rose 77% in the quarter from a year ago to $1.66 billion. Revenue from equities trading accounted for much of that gain, rising 77% to $946 million.

Goldman said the boon in equity revenue was driven by a more favorable environment and demand from its wealthy customers. It experienced sharply higher demand from customers for equity-related derivatives -- products that serve both the hedging strategies of corporate America and the speculative appetites of hedge funds.

The firm's asset management division also posted strong gains, with net revenue rising 67% to $761 million. Investment banking revenue rose 6% to $763 million, largely due to higher levels of stock underwriting. Fixed income trading also continued to be robust, rising 9% to $2.1 billion.

Total net revenue rose 42% to $5.9 billion. Operating expenses rose 26% to $4 billion.

In a rare display of bravado, Goldman Chief Financial Officer David Viniar opened the firm's conference call Tuesday by telling analysts not to "underestimate the earnings power of Goldman Sachs.''

Brad Hintz, a brokerage analyst at Bernstein & Co., said revenue from stock trading far surpassed even the most optimistic expectations. He said Goldman's strength as a proprietary equity trader now rivals its long reputation as king of the bond traders.

"It appears to be an evolution of equities to a fixed-income model with lots of proprietary trading," said Hintz.

However, Viniar disputed the notion that most of Goldman's stock trading gains came from trading for its own account.

"The majority of out trading revenue comes from trading with customers,'' said Viniar. "We do take proprietary risk as well, but the bulk of trading revenues comes from our customer-driven business.''

Viniar, however, declined requests by several analysts to put a dollar figure on Goldman's proprietary equity trading.

There wasn't much bad news in the Goldman report. The most ominous comment in the release pertained to "continued weakness in industrywide completed mergers and acquisitions." Wall Street firms traditionally don't book revenue from advising on a corporate deal until the transaction closes.

The sterling numbers from Goldman, which pushed the firm's shares up $2, or 2%, in early trading to $103, is likely to rekindle the debate about whether its stock is overpriced. Up 5% this year and 53% since the end of 2002, the stock trades at a far higher multiple compared to its brokerage peers.

Knox Fuqua, a money manager with AAM Investments, said Goldman shares deserve to trade at a higher multiple since it's the leader of the brokerage group. Fuqua's fund has owned shares of Goldman since it was trading around $80. He plans to continue owning the stock, although Fuqua said he might sell some shares to book a profit.

"A 20% sale here might make sense to take some profits off the table, but it's a core long-term holding," said Fuqua.

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