The quarter cleared the earnings bar, but not by much. Adjusted diluted EPS was $2.57, versus published estimates around $2.50-$2.53, while revenue of $1.91 billion was broadly in line with expectations near $1.89-$1.92 billion.
| Metric | Q2 2026 | Q2 2025 | Q1 2026 | Read-through |
|---|---|---|---|---|
| Adjusted diluted EPS | $2.57 | $2.24 | $2.52 | Beat versus roughly $2.50-$2.53 consensus |
| Net revenues | $1,907.4M | $1,723.3M | $1,857.0M | Up 10.7% year over year (Financial Highlights) |
| Adjusted operating expenses | $1,203.2M | $1,147.2M | $1,155.2M | Up 4.9% year over year (Financial Highlights) |
| Adjusted net operating income | $709.1M | $614.4M | $706.1M | Up 15.4% year over year (Financial Highlights) |
| Ending AUM | $1,893.4B | $1,676.8B | $1,709.7B | Up 10.7% sequentially, helped mainly by markets (AUM table) |
| Net flows | $(6.5)B | — | — | Still negative in the quarter (AUM table) |
| Effective fee rate | 38.1 bps | 39.6 bps | 38.4 bps | Continued mix-driven compression (Financial Highlights) |
Core operating leverage was better than the headline EPS suggests. Adjusted net operating income rose 15.4% year over year to $709.1 million, ahead of the 10.7% revenue growth because adjusted expenses increased only 4.9% (Financial Highlights). That is the cleanest favorable surprise in the release, although part of the EPS benefit came from lower acquisition-related charges and other adjustments rather than a step-change in underlying demand.
Asset growth was market-driven, not flow-driven. AUM reached a record $1.893 trillion, but $190.2 billion of market appreciation and income outweighed $6.5 billion of net outflows in the quarter (AUM table). Equity flows were particularly weak at negative $13.5 billion, while fixed income, multi-asset, and alternatives were modestly positive (AUM table). Management's statement that flows turned positive in May and June is encouraging, but the quarterly scorecard still shows retention and product-mix pressure.
The structural pressure points remain visible. The effective fee rate fell to 38.1 basis points from 38.4 in Q1 and 39.6 a year earlier because assets shifted toward lower-fee products and strategies (Investment advisory fees). Management also acknowledged that fundamental active equity remains under pressure, while the firm continues investing in ETFs, SMAs, and strategic partnerships (CEO commentary). These initiatives are not yet offsetting the fee-rate and equity-flow drag in the reported numbers.
Net: a narrow beat, not a clean business inflection. The adjusted EPS result was modestly better than the market's expectation and expense growth was controlled, supporting a narrowly positive read. But negative quarterly flows, falling fee rates, and reliance on strong market appreciation keep the result closer to an execution beat than evidence that the longer-term asset-gathering problem has been solved.
Read the original 8-K on SEC EDGAR ↗