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Ares Management Corp (ARES)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3 with strong beats: revenue of $1.66B and After-tax Realized Income (ARI) per share of $1.19; revenue beat consensus by ~$586M (+54.7%) and ARI EPS beat by ~4% as management highlighted record fundraising and deployment .
  • Management fees +28% YoY, FRE +39% YoY, realized income +34% YoY; AUM $595.7B, FPAUM $367.6B, available capital $149.5B underpin forward growth .
  • Guidance positives: Q4 fee-related performance revenues (FRPR) ~$125M in Credit; ~$500M net realized performance income across 2025-2026 with ~$200M in Q4/early Q1 and ~$450M next five quarters; 2026 FRE margin expansion targeted toward top end of 0–150bps .
  • Strategic catalysts: infrastructure secondaries $5.3B close, BlueCove systematic credit acquisition, specialty healthcare direct lending ($1.5B), and data center buildout momentum; dividend maintained at $1.12 with DRIP launch .

What Went Well and What Went Wrong

What Went Well

  • Record fundraising and deployment: $30.9B raised and $41.7B deployed in Q3; AUM +28% YoY, FPAUM +28% YoY; fee-related performance revenues crystallized, supporting FRE growth .
  • Credit performance resilient with broad-based returns and low non-accruals; CEO emphasized senior positioning (93% senior debt) and conservative LTVs (~42% US, ~48% EU) as support if cycle turns .
  • Platform expansion: ASIS III hard-cap increase to $3.3B (total $5.3B with related vehicles), BlueCove acquisition to form Ares Systematic Credit, specialty healthcare fund $1.5B, and continued data center momentum .

Quotes:

  • “We now expect to meaningfully exceed our previous annual fundraising record of $93 billion this year…” — Michael Arougheti .
  • “We are well positioned to generate future earnings growth as we deploy our significant available capital, which stood at $150 billion…” — Jarrod Phillips .

What Went Wrong

  • Real Assets margin drag from GCP integration persists near term; management reiterated temporary compression and 2026 margin expansion target to top end of 0–150bps .
  • Private Equity Group shows softer economics: management and other fees -4% YoY; FRE -21% YoY as an extended value fund stopped paying fees end of Q4-24 .
  • Mix effects: FRPR realization dependent on market valuations into year-end; Q4 FRPR varies with total returns and could be impacted by marks .

Financial Results

GAAP and Core Operating Metrics

MetricQ1 2025Q2 2025Q3 2025
Revenues ($USD Millions)$1,066.8*$1,339.2*$1,657.6
GAAP Net Income ($USD Millions)$47.2 $137.1 $288.9
GAAP Diluted EPS ($USD)$0.00 $0.46 $1.15
Fee Related Earnings (FRE) ($USD Millions)$367.3 $409.1 $471.2
After-tax Realized Income per Share ($USD)$1.09 $1.03 $1.19
FRE Margin (%)41.5% 41.2% 41.4%

Values with * retrieved from S&P Global.

Estimates vs. Actuals (Wall Street Consensus – S&P Global)

MetricConsensusActualSurprise
Primary EPS ($USD)1.144*1.19 +0.046 (+4.0%)*
Revenue ($USD Millions)1,071.3*1,657.6 +586.3 (+54.7%)*
EPS – # of Estimates13*——
Revenue – # of Estimates3*——

Values with * retrieved from S&P Global.

Segment Breakdown (Q3 2025)

SegmentMgmt & Other Fees ($USD ‘000)FRE ($USD ‘000)Realized Income ($USD ‘000)
Credit Group$665,435 $468,605 $474,572
Real Assets Group$233,211 $126,087 $112,051
Private Equity Group$33,751 $13,107 $10,581
Secondaries Group$91,499 $74,033 $72,317

KPIs

KPIQ3 2025
Assets Under Management (AUM, $USD Billions)$595.7
Fee Paying AUM (FPAUM, $USD Billions)$367.6
Available Capital (Dry Powder, $USD Billions)$149.5
AUM Not Yet Paying Fees ($USD Billions)$103.0
AUM Not Yet Paying Fees Available for Future Deployment ($USD Billions)$81.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Credit FRPRQ4 2025“Q4 FRPR to grow ~10% YoY with ~$20B eligible AUM” ~$125M FRPR expected; could vary with market values Clarified magnitude; sensitivity noted
Net Realized Performance Income (European-style)2025–2026$225–$275M 2025; higher in 2026 ~$500M total across 2025–2026; ~$200M in Q4/early Q1; ~$450M next 5 quarters More specific timing
FRE MarginFY 20260–150 bps annual expansion target Closer to top end in 2026; GCP drag temporary Raised confidence
Dividend (Common)Q4 2025$1.12 declared Q2 $1.12 payable Dec 31, 2025; DRIP effective Maintained, DRIP active
Tax Rate on RIFY 20258%–12% 8.6% in Q3; range intact Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Wealth channel momentumRecord semi-liquid equity inflows; ~$3.7B Q1; $6.3B Q2 including leverage; adding partners globally Record Q3 wealth inflows; Aug monthly record >$2B; international ~40% of Q3 inflows; pipeline strong Accelerating
Infrastructure/data centersJapan Data Center Fund $2.4B closed; pipeline across London/Tokyo/Osaka Additional closes; $5.3B infra secondaries; strong data center demand and low vacancies; ~$6B development in ground Expanding
Credit qualityLow non-accruals; strong EBITDA growth; LTV ~42% US, ~49% EU 93% senior debt; non-accruals at ARCC ~1% FV; loan-to-value ~42% US, ~48% EU; idiosyncratic fraud events not systemic Stable/Resilient
European private marketsIncreased attractiveness post tariffs; deployment +20% LTM Elevated investor appetite; comparable/better metrics vs US; fundraising rotation to EU products Improving
Asset-Based Finance (ABF)~50/50 rated vs non-rated; bank flow agreements and SRTs; $1.3B loan portfolio purchase Open-ended core alternative credit fund >$7.4B; annual FRPR crystallization; negligible subprime exposure Scaling with disciplined risk
BlueCove/systematic creditMinority stake in 2023; AUM grew $1.8B → $5.5B Full acquisition; create Ares Systematic Credit to enhance insurance/IG capabilities Strategic expansion

Management Commentary

  • “Our third quarter results included strong year-over-year growth in management fees of 28%, FRE of 39%, and realized income of 34%... AUM increased to more than $595 billion” — Michael Arougheti .
  • “We anticipate approximately $125 million in FRPR from the credit group in the fourth quarter... could be impacted by changes in market values” — Jarrod Phillips .
  • “We continue to see robust opportunities to support the energy and data center needs for the digital economy... vacancy is running at historic lows” — Michael Arougheti .
  • “We understand that we are now the largest eligible financial company not in the S&P 500 index...” — Michael Arougheti .

Q&A Highlights

  • Fundraising outlook: even without large flagship credit funds, 2025 is set to exceed prior record; 40+ strategies in market and elevated pipeline; floor for annual fundraising rising .
  • Private credit yields vs base rates: spreads ~225bps above traded alternatives; lower rates typically widen spreads and boost deployment/fees; wealth flows not negatively impacted .
  • GCP integration: near-term margin drag; 2026 margin expansion targeted; data center pipeline ~$6B with urban-adjacent sites for low latency and AI tailwinds .
  • ABF sourcing: ~100 professionals, bank partnerships (SRTs, forward flow), platform acquisitions as needed; significant uptick in deployment QoQ and YoY .
  • Deployment sustainability: broad-based across strategies, driven by improving tone, narrowing bid-ask and better financing conditions; repeatability expected .

Estimates Context

  • Ares delivered a broad beat: ARI EPS $1.19 vs S&P Global consensus $1.144; revenue $1,657.6M vs $1,071.3M; 13 EPS estimates and 3 revenue estimates contributed to consensus (S&P Global) .
  • Estimates likely to move higher for FRE/management fees given $81B shadow AUM available for fee activation and large performance-income pipeline .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Strong beat and operating momentum: management fees +28% YoY, FRE +39% YoY, realized income +34% YoY; forward earnings visibility supported by $149.5B dry powder and $81B shadow AUM .
  • FRPR catalysts: Q4 Credit FRPR guidance ~$125M with DRIP-supported dividend sustainability; Real Assets non-traded REIT approaching high watermark may add FRPR in 2026 .
  • Performance income timing: ~$500M net realized performance income across 2025–2026 with ~$200M in Q4/early Q1 and ~$450M over next five quarters — potential upside to distributable earnings trajectory .
  • Strategic growth vectors: infra secondaries ($5.3B), systematic credit via BlueCove, specialty healthcare direct lending ($1.5B), and data centers — all broaden fee basins and add durable revenues .
  • Credit quality resilience a differentiator: senior-heavy books, conservative LTVs, minimal non-accruals — supports downside protection and fundraising confidence across channels .
  • Near-term: watch Q4 marks for FRPR realization sensitivity and Real Assets margin trajectory; medium-term: 2026 margin expansion as GCP synergies scale and data center funds mature .
  • Potential index inclusion (S&P 500) noted by management could serve as a stock demand catalyst when timing aligns .