Carlyle Group Inc. (CG) Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered record Fee Related Earnings ($323M) and record AUM ($465B) with a 48% FRE margin; After-tax DE/share was $0.91 and GAAP margin on income before taxes improved to 28.0% .
• Results exceeded Street on EPS and revenue: EPS $0.91 vs $0.887* and total revenue $1.573B vs $0.899B*, reflecting strong performance allocations and fee strength; EBITDA estimates were conservative versus realized profitability (see tables) .*
• Guidance raised: management increased FY 2025 FRE growth outlook to ~10% (from ~6%) and now expects inflows to track ~$50B (vs prior ~ $40B), citing firm‐wide momentum and improving market activity .
• Execution catalysts: record capital markets fees trajectory, continued outperformance in secondaries and asset-backed finance, and evergreen/wealth momentum including UBS partnership; dividend maintained at $0.35/share .

What Went Well and What Went Wrong

What Went Well

• “We delivered an exceptionally strong second quarter… record FRE of $323,000,000… and record AUM of $465,000,000,000.” — Harvey Schwartz, CEO .
• Capital return and monetization: ~$15B returned to investors over LTM (~3x industry average), with ~$4B realizations in Q2 and additional ~$4B announced but not yet closed .
• Strategic growth vectors: asset-backed finance AUM up ~40% YoY; first-of-its-kind fintech origination collaboration with Citigroup; evergreen AUM ~ $30B, up ~40% YoY; new UBS secondary partnership expanding global wealth channel .

What Went Wrong

• Realized net performance revenues declined sequentially (Q2: $87.7M vs Q1: $127.4M), reflecting lower realizations mix vs Q1’s heavier monetization .
• LTM inflows decelerated (-22% YoY) despite strong QTD inflows, highlighting fund activation cadence and macro variability in fundraising versus prior year .
• CP7 net IRR (~8%) remains a constraint for initiating cash carry; management reiterated focus on performance and DPI progression as the tipping point for carry recognition .

Financial Results

Headline Results vs Prior Periods and Estimates

Notes: Q2 2025 EPS and revenue exceeded consensus; Total Revenues include performance allocations and consolidated fund activity . Values marked with * are retrieved from S&P Global.

Segment FRE Breakdown

KPIs and Capital Metrics

Guidance Changes

Management noted potential upside if market environment continues to improve, and ongoing investment in growth initiatives .

Earnings Call Themes & Trends

Management Commentary

• “We returned almost $15,000,000,000 to investors over the last twelve months… three times the industry average… a really impressive achievement… differentiates us.” — Harvey Schwartz, CEO .
• “We now expect full year FRE growth of approximately 10%, up from our prior outlook of 6%… tracking towards full year inflows of $50,000,000,000.” — John Redett, CFO .
• “Last month, we launched a partnership with UBS, where we are the only private equity secondary solution for their international wealth clients… we expect this partnership to be a strong driver of growth.” — Harvey Schwartz .
• “Over the last twelve months, we generated over $230,000,000 in capital markets fees… further upside as M&A/IPOs increase.” — Harvey Schwartz .

Q&A Highlights

• Guidance revision: Drivers of stepping up FRE growth to ~10% include organic AlpInvest growth, strong capital markets revenue, wealth momentum, and credit deployment; upside possible if markets improve .
• Wealth platforms: Advisors’ receptivity strong; three flagship evergreen products with CPAP launch in 2H; potential retirement channel expansion contingent on executive order and regulatory design .
• Credit strategy: Convergence of insurance, private investment grade, and private credit drives growth; selective origination partnerships (six to date) with largest transactions (e.g., Discover) underpin asset flow .
• CP7 carry: IRR near 8% remains gating; realization pipeline heavy; accrued carry $2.9B (≈$8/share) a forward value source .
• Capital markets fees: Capital-light, activity-driven flywheel; muscle memory across platform; as vintages enable fees, intermediate-term potential to “exceed [prior $300M] meaningfully” in the right environment .

Estimates Context

Values marked with * are retrieved from S&P Global. Carlyle exceeded Street EPS and revenue estimates, supported by performance allocations, fee growth, and capital markets contributions .*

Key Takeaways for Investors

• Raised FY 2025 FRE growth (10%) and inflows ($50B) guidance signals increased earnings power and fundraising momentum; a positive revision catalyst .
• Mix shift toward Global Credit and AlpInvest continues to diversify and stabilize FRE, with these segments comprising 55% of firm-wide FRE vs <30% two years ago .
• Wealth/evergreen flywheel is gaining scale (UBS partnership, CAPM ramp), expanding durable, perpetual FEAUM and fee visibility .
• Capital markets fees are high-quality, capital-light, and lever market activity; intermediate-term upside as M&A/IPOs normalize .
• Monetization and capital return underpin carry conversion prospects (accrued performance revenues $2.866B); sequential realized net performance revs lower in Q2 but pipeline remains active .
• Asset-backed finance and insurance solutions are strategic growth vectors with differentiated origination content, enhancing private investment grade opportunities and insurer client demand .
• Dividend stability ($0.35/share) plus buyback capacity ($0.6B remaining) supports shareholder returns while investing for growth .

S&P Global disclaimer: Consensus estimate values marked with an asterisk are retrieved from S&P Global.*