FEDERATED HERMES (FHI)·Q4 2025 Earnings Summary
Federated Hermes Crushes Q4 on Record AUM, Stock Jumps After Hours
January 29, 2026 · by Fintool AI Agent
Federated Hermes (NYSE: FHI) delivered a blowout Q4 2025, posting EPS of $1.39 that crushed consensus estimates by 24% and revenue of $482.8 million that beat by 8.4%. The asset manager reached record AUM of $902.6 billion, fueled by surging demand for money market funds as investors sought yield in a high-rate environment. Shares rose 2.6% to $54.40 in after-hours trading.
Did Federated Hermes Beat Earnings?
Federated Hermes delivered a decisive double beat in Q4 2025:
*Values retrieved from S&P Global
The EPS beat of 24% marks one of the strongest outperformances in the company's recent history. Revenue growth of 14% year-over-year was driven by higher average money market and equity assets, plus a $7.9 million increase in real estate development fees.
For the full year, Federated Hermes posted EPS of $5.13, up 59% from $3.23 in 2024 — though the prior year included a $66.3 million ($0.73/share) intangible asset impairment charge that depressed results.
Earnings Beat/Miss History
*Values retrieved from S&P Global
Federated Hermes has delivered five consecutive quarters of EPS beats, with the magnitude of beats accelerating in recent quarters as money market assets surge.
Ask Fintool AI AgentWhat Drove Record AUM?
Federated Hermes reached record total AUM of $902.6 billion at year-end, up $73 billion or 9% from $829.6 billion a year earlier.
AUM by Asset Class
Money market assets were the primary driver, reaching a record $682.6 billion — comprising 76% of total AUM. CEO J. Christopher Donahue attributed the growth to "attractive cash management resources and opportunities for risk-adjusted returns" in the elevated rate environment.
The equity business also posted strong growth, with AUM up 23% to $97.9 billion driven by market gains and net positive flows in MDT strategies. Top-selling equity funds included the MDT Mid Cap Growth Fund, MDT Large Cap Growth Fund, and MDT US Equity Fund.
What Did Management Guide?
Federated Hermes did not provide explicit forward guidance, but management highlighted several growth vectors:
Growing Non-Mutual Fund Solutions: Management noted "continued investor interest in our growing range of investment solutions beyond mutual funds, including ETFs, CITs and SMAs." In Q4, SMA net sales were led by the MDT All Cap Core strategy, MDT Mid Cap Growth equity strategy, and Core Plus fixed-income strategy.
Industry Positioning: Federated Hermes ranks in the top 6% of equity fund managers, top 8% of money market fund managers, and top 12% of fixed-income fund managers based on Morningstar U.S. fund flows.
Forward Consensus Estimates
*Values retrieved from S&P Global
Analysts expect modest sequential revenue growth through 2026, though estimates may reset higher following this significant beat.
Ask Fintool AI AgentHow Did the Stock React?
Federated Hermes shares closed the regular session at $53.03 and jumped 2.6% to $54.40 in after-hours trading following the earnings release.
Stock Performance Context
*Calculated from 52-week low
The stock is trading within 1.3% of its 52-week high, reflecting investor enthusiasm for the money market-heavy business model in a higher-for-longer rate environment.
What Changed From Last Quarter?
Several notable developments from Q3 2025 to Q4 2025:
AUM Acceleration: Total AUM grew $31.4 billion sequentially (vs. $25.5 billion in Q3), with money market assets adding $29.8 billion in the quarter alone.
Revenue Mix Shift: Revenue from "other service fees" jumped 14% sequentially to $59.1 million, driven by higher real estate development fees.
Margin Pressure: Operating expenses increased $7.3 million (2%) sequentially, primarily from higher distribution expenses tied to money market fund growth. Operating margin was 28.1% vs. 27.6% in Q3 2025.
Buyback Activity: The company repurchased 1.57 million shares for $78.7 million in Q4, continuing aggressive capital returns. Full-year 2025 buybacks totaled 6.19 million shares for $263.4 million.
Capital Allocation Highlights
Federated Hermes continues to return substantial capital to shareholders:
The dividend of $0.34 per share is payable February 13, 2026 to shareholders of record as of February 6, 2026 — representing a 10% increase from $0.31 in Q4 2024.
Revenue and Profitability Trends
Revenue growth of 14% year-over-year was driven by:
- Higher average AUM: $51.7 million increase in fee revenue from money market and equity assets
- Real estate development fees: $7.9 million increase
Operating expenses increased 11% YoY but grew slower than revenue, driving margin expansion to 28.1% from 26.0% in Q4 2024.
Ask Fintool AI AgentKey Risks and Considerations
Interest Rate Sensitivity: Federated Hermes derives 52% of revenue from money market assets. A meaningful decline in interest rates could trigger outflows as investors seek higher-yielding alternatives, though the company has navigated rate cycles before.
Long-Term Asset Flows: While money market assets surged, total long-term assets (equity, fixed income, alternatives) saw net redemptions of $1.2 billion in Q4 2025 and $691 million for full-year 2025. The equity business posted $1.5 billion in net sales in Q4, partially offset by fixed-income outflows of $2.8 billion.
Fee Pressure: The asset management industry continues to face fee compression from passive alternatives and competitive pressure. Federated Hermes has responded by expanding into ETFs, CITs, and SMAs.
Q&A Highlights
What's Driving MDT Success?
MDT fundamental quant strategies were the standout performer in Q4, with record $4 billion of gross sales and over $2 billion in net sales in the quarter alone. For full-year 2025, MDT gross sales of $19.1 billion and net sales of $13 billion were both record highs.
Performance Rankings (as of December 31, 2025):
- 6 of 9 MDT strategies in top quartile of Morningstar category for trailing 3 years
- 4 strategies in top decile for trailing 3 years
- MDT US Equity UCITS Fund (launched June 2025) gathered $500M+ from non-US clients
When asked about capacity constraints, CEO Chris Donahue stated: "We do not see any so-called capacity constraints at this time or in the foreseeable future." Demand is "across the board" — about two-thirds of Q4 net sales went into mutual funds and ETFs, with the rest into institutional and SMAs.
What's the Outlook for Money Market Funds?
CIO Debbie Cunningham provided the firm's 2026 rate outlook: one 25 bps cut to 3.25%-3.5% Fed funds target range. "If we're wrong, we're wrong by having maybe two cuts instead of zero."
In this environment, money funds remain attractive vs. alternatives:
- Institutions: Fund yields benefit from positively sloped curve vs. direct market securities (repo, T-bills, commercial paper)
- Retail: Fund yields remain well above bank deposit rates in a 3%+ environment
Management expects "maybe only single-digit gains from an AUM standpoint in 2026, but our expectation is it's still pretty positive from an environment standpoint."
How Is Tokenization Progressing?
CEO Donahue tempered expectations: "On the end demand from clients, it's not as robust as what you might expect from all the press, media, and in fact, all the work we're doing on it. It's getting ready for tomorrow."
Current tokenization initiatives include:
- Archax Partnership: First FCA-regulated digital securities exchange to offer tokenized US money market funds
- Superstate: Sub-adviser for Short Duration US Government Securities Fund (private tokenized fund)
- BNY/Goldman Collaboration: Mirrored tokenization with dual-processing on traditional and digital ledgers
- Genius Act Fund: Developing compliant money market fund to serve as stablecoin collateral
Key insight: Stablecoins cannot pay interest under the Genius Act, creating opportunity for tokenized money funds to serve as the 100% collateral backing for stablecoins.
What About PM Succession?
Five high-profile portfolio managers are scheduled to retire this year. CEO Donahue addressed concerns: "In every one of those cases, it's, on average, like you take someone who's been here 35-40 years and replacing them with someone who's been here from 25-30 years."
Management expressed confidence: "We don't look for any disruption in the investment management techniques, performance. And we look for some great enthusiasm and opportunities by the new people coming in."
Ask Fintool AI AgentStrategic Initiatives
FCP Acquisition
The acquisition of FCP, which will add US multifamily housing expertise, is expected to close in H1 2026.
Hong Kong Office Expansion
At the Asia Financial Forum this week, Federated Hermes announced plans to open a Hong Kong office to capitalize on the region's rapidly growing wealth market. Subject to regulatory approvals, this will complement existing regional offices in Singapore, Tokyo, and Sydney.
U.K. Real Estate Development
The U.K. real estate team (MEPC) was selected as exclusive developer on a significant mixed-use development opportunity in Manchester, with a focus toward living/residential space.
The $8.2 million in real estate development fees recorded in Q4 related to two Northern England estates (NOMA in Manchester and Wellington Place in Leeds) where large institutional clients paused further investment. Federated Hermes retains the option to continue development with other clients.
Forward Pipeline
Federated Hermes began 2026 with approximately $2.7 billion in net institutional mandates yet to fund:
Private Markets Fundraising Progress:
- European Direct Lending III: Final close at $780M (vs. EDL I $330M, EDL II $700M)
- Global Private Equity Co-Invest Fund VI: ~$300M closed to date (PEC series typically raises $400-600M)
- European Real Estate Debt Fund: New pooled European debt fund currently in market
Q1 2026 Outlook
Management provided seasonal guidance for Q1 2026:
Seasonal flow patterns: January is typically the worst month for money fund flows, with corporate taxes (March) and individual taxes (April) creating additional headwinds. Growth typically accelerates in the second half.
Notably, separate account inflows have been "bucking the trend" — despite industry money fund outflows in January, Federated Hermes' total money market assets reached $684 billion as of January 28, up from $683 billion at year-end.
Earnings Call Information
The Q4 2025 earnings call was held on January 30, 2026 at 9 a.m. Eastern. Participants included CEO Chris Donahue, CFO Tom Donahue, Federated Hermes Limited CEO Saker Nusseibeh, and CIO for Money Markets Debbie Cunningham.
- Webcast Replay: FederatedHermes.com/us
- Full Transcript
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