Updated from 8:51 a.m. EST

Wall Street firms are making more money than even the most bullish investors predicted, at least based on the 64% profit gain posted by Goldman Sachs ( GS) in the first quarter.

The storied investment bank didn't just exceed analyst expectations, it crushed them, posting a 56% year-over-year gain in revenue. In the quarter, Goldman Sachs earned $2.48 billion, or $5.08 a share, up from $1.5 billion, or $3.35 a share in the year-ago period. Total revenues were $10.3 billion.

Analysts as surveyed by Thomson First Call were expecting Goldman Sachs to earn $3.29 a share. Revenues at the investment firm were expected to tally $7.2 billion.

The Wall Street firm performed well in all of its lines of business, especially trading, where revenue rose 61% to $6.69 billion. Investment banking revenue was up 68% to $1.47 billion.

In another sign of the firm's robust profitability, Goldman Sachs announced it was boosting its quarterly dividend by a dime to 35 cents a share.

In premarket trading, shares of Goldman Sachs rose $5.33, or 3.8%, to $146.05.

The trading gains at Goldman Sachs, which includes trading for the firm's own account as well as making markets for its customers, came from stocks, bonds and commodities. In fact, equity-related trading revenue showed surprising strength in the quarter, rising 94% to $1.6 billion. Revenue from bond and commodities trading rose 50% to $3.7 billion.

To score those gains, Goldman Sachs stuck its neck out. The closely watched "value at risk" metric, which gauges how much money a firm could lose in a single day if all its trades went bad, was $92 million in the quarter, up from $65 million a year ago and $80 million in the fourth quarter of 2005.

One thing skeptics have been warning about in the recent years is that big Wall Street firms are putting too much of their own capital at risk to generate outsized trading profits. So far, Wall Street firms like Goldman Sachs have shown those risks are worth taking, as they've generally posted strong trading gains for two straight years.

But some worry about what would happen if the markets turned south and the bets became losers. For now, those worries are for another day, given Goldman Sachs' sterling performance.

"To me, Goldman Sachs is a joke. You can't analyze them,'' says David Hendler, an analyst with CreditSights, who for long has been critical of the amount risk the firm is taking on to generate trading profits. "They are a hedge fund, not a broker dealer. How do you know a big gain now won't lead to a big loss later on?''

Brad Hintz, an analyst with Sanford Bernstein, says the new trading business at Goldman Sachs is equities. At one time, the firm generated most of its trading dollars from bond and commodities trading, but that's increasingly become a smaller piece of the pie.

"With equity-based value at risk up 137% year over year, there are few doubts about the future of institutional equities at Goldman," Hintz says. "Proprietary trading against the flow is the new name of the game."

Goldman Sachs and other Wall Street firms clearly benefit from a unique market perspective. Some critics say these firms, by acting as market makers, have a huge information advantage that allows them to make money at the expense of their wealthy customers.

Whatever the reason for the results, the company concedes they aren't completely sustainable.

"Nearly all of our business produced record or near record results this quarter," said Henry Paulson, Goldman Sachs' chairman and CEO. "While we know that we cannot expect to achieve these results every quarter, we continue to see attractive opportunities and high levels of client activity."

Goldman Sachs is the first of the big four Wall Street firms whose quarters ended in February to report earnings over the next two weeks. Next up is Lehman Brothers ( LEH), which analysts expect to report a 9% gain in first-quarter profits on Wednesday.

Bear Stearns ( BSC) will report earnings on Thursday, followed Morgan Stanley ( MS) on March 22.

Going into the first-quarter earnings season, most analysts were expecting strong profit reports from all the firms except for Morgan Stanley. Analysts were expecting strong trading gains and soaring revenues from investment banking work in light of the booming market for corporate deal-making.

In anticipation of a good quarter, brokerage stocks have been on fire this year, rising nearly 13%. In fact, brokerage stocks have been one of the market's strongest performing sectors since the bull market began in the fall of 2002.

Traditional investment banking work was a strong suit for Goldman Sachs. In the quarter, fees from bond and stock underwriting rose 53% to $735 million. Advisory work on corporate mergers generated $736 million in fees, up 78% from a year ago.