Analysts had expected the company to report earnings excluding items of 27 cents a share on $7.02 billion in revenue, according to a consensus estimate from Thomson Reuters.
Compensation expense, typically the biggest cost for Wall Street firms, fell 5 percent to $3.6 billion in the fourth quarter from a year earlier.
Revenue from sales and trading rose 43 percent to nearly $3 billion. Wealth management business grew 8 percent to $3.5 billion.
"We had a stronger, but not perfect, fourth quarter," Chairman and CEO James Gorman said "First on CNBC," who added that "we're at a pivot point as a company. A lot of the legs are firing, but not all of them."
Gorman said he believes "all the digging and shoveling and cleaning up the last few years" is done, and now is time to get back to running the business.
Morgan's workforce has been cut by about 6,000 from the first of January 2012, he said, adding that he believes the investment bank is done, "unless the market completely collapses."
The news follows generally better-than-expected earnings so far from major Wall Street banks, such as JPMorgan Chase and Goldman Sachs. Troubled mega bank Citigroup, whose earnings fell far short of estimates, was a notable exception.
The company's shares rose in pre-market trading. (Click here to track the pre-market reaction to Morgan Stanley's earnings report.)
—Reuters contributed to this report.