Invesco (IVZ)·Q4 2025 Earnings Summary
Invesco Smashes EPS by 38% but Stock Tanks 8% on 2026 Expense Outlook
January 27, 2026 · by Fintool AI Agent
Invesco delivered a blowout quarter with adjusted EPS of $0.62 crushing the $0.44 consensus by 38%, while assets under management hit a record $2.2 trillion. Yet the stock plunged 8% as investors focused on elevated 2026 expense guidance including $25-30M in higher hybrid platform costs, a new $60-100M QQQ marketing budget, and near-term operating income drag from strategic divestitures.
Did Invesco Beat Earnings?
Yes — decisively on EPS, modestly on revenue.
The EPS beat was driven by strong revenue growth (+6% YoY) and disciplined expense management, delivering 14% operating income growth and 19% EPS improvement versus Q4 2024.
Historical Beat/Miss Pattern:
*Values retrieved from S&P Global
Ask Fintool AI AgentWhat Drove the Strong Quarter?
Record AUM and Broad-Based Flows
Invesco reached $2.2 trillion in AUM — up 18% YoY — driven by $19 billion in net long-term inflows representing 5% annualized organic growth.
Key flow highlights:
- ETF & Index: $12B net inflows (8% annualized organic growth), now at record $630B AUM ex-QQQ
- China JV: $8.9B net inflows (36% annualized organic growth), record $132B AUM
- Fixed Income: $12B total fixed income inflows including ETFs and China products
- Global Equity Income Fund: $3B net inflows, grew to $23B AUM — top-selling retail active fund in Japan
QQQ Conversion Transforms Revenue Profile
The December 20th QQQ ETF conversion was a landmark moment. Invesco now earns revenue on the $407 billion fund, which will contribute approximately 18 basis points in management fees plus 12 basis points through licensing and custodial fees.
CEO Andrew Schlossberg called it "the modernization of our sizable QQQ ETF" noting shareholders now pay lower fees while Invesco earns revenue on $400B+ of AUM.
Operating Leverage and Margin Expansion
*Values retrieved from S&P Global
The company delivered 340 basis points of positive operating leverage sequentially and 440 basis points year-over-year.
Why Did the Stock Drop 8%?
Despite the strong quarter, IVZ fell ~8% on earnings day. The culprit: 2026 expense guidance that spooked investors.
Expense Headwinds for 2026
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Hybrid Platform Costs: $25-30M higher vs 2025, with implementation costs of $10-15M/quarter trending toward $15M as completion accelerates
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QQQ Marketing: $60-100M annual budget (midpoint ~$80M), not present in Q4 2025 baseline
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Canada Transaction: $5-10M quarterly operating income drag starting Q3 2026, comprised of $15-20M revenue reduction partially offset by $5-10M expense savings
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Compensation Timing: Q1 2026 comp expense ~$30M higher than Q4 2025 due to retirement eligibility changes and seasonal payroll tax resets
CFO Allison Dukes acknowledged the concerns but emphasized: "Everything we are doing is with a focus towards operating margin expansion, and we have every expectation we will continue to grow operating margin this year."
Ask Fintool AI AgentWhat Did Management Guide?
Capital Return Priorities
- Share Buybacks: Increasing to $40M in Q1 2026 (vs $25M in Q4 2025)
- Target Payout Ratio: ~60% for 2026 including dividends and buybacks
- Preferred Stock: $1.5B repurchased in 2025, reducing annual preferred dividends by $88.5M — earnings now available to common shareholders
Operating Margin Trajectory
Management reiterated its objective to reach mid-30s operating margin on a path back to high-30s. Q4 2025's 36.4% margin demonstrates progress, and despite elevated expenses, 2026 should show continued margin expansion.
Forward Estimates
*Values retrieved from S&P Global
What Changed From Last Quarter?
Strategic Transactions Completed
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India JV: Sold majority interest in Indian asset management business to Hinduja Group, retaining 40% minority stake. Operating results now reported below the line.
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Intelliflo Sale: Sold to Carlyle in Q4 2025
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Canada Partnership: Announced strategic partnership with CI Global Asset Management — CI acquires 100 funds (
$19B AUM), Invesco remains sub-advisor for 63 funds ($10B). Closes late Q2 2026.
Private Markets Partnerships
Two new strategic partnerships launched to penetrate wealth management and defined contribution markets:
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Barings Partnership: Co-managed credit strategies with $650M committed by MassMutual. First product launched, second in development.
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LGT Capital Partners: Co-managed total return, growth-oriented multi-asset products targeting wealth and DC investors. Launches later in 2026.
Balance Sheet Transformation
The $1.5B preferred repurchase is expected to generate $0.20 EPS benefit once associated debt is repaid. With $500M of term loans already repaid, $0.11 of that benefit is now captured in run-rate.
Key Management Quotes
On QQQ Conversion:
"Fund shareholders are now paying a lower fee, and we are earning revenue on the more than $400 billion of AUM in the fund." — CEO Andrew Schlossberg
On Margin Expansion:
"We have every expectation we will continue to grow operating margin this year. Our objective is to get our operating margin into the mid-thirties on a path back to the high thirties." — CFO Allison Dukes
On 2025 Accomplishments:
"What we collectively accomplished this past year was remarkable in bringing so many of these large-scale initiatives to fruition, while also delivering exceptional operating performance." — CEO Andrew Schlossberg
Ask Fintool AI AgentQ&A Highlights
On M&A vs Organic Growth
When asked about capital deployment priorities, management emphasized: "Our best opportunity is to continue to invest in ourselves and grow our own business... we've got tremendous opportunity within our own business profile to grow organically and to do so in a really shareholder-friendly way."
On 2027 Expense Outlook
Implementation costs for the hybrid platform will "taper off and then go away over the course of 2027," with additional savings from decommissioning systems. "2027 relative to 2026, yes, there will absolutely be savings."
On China JV Outlook
China growth was driven by "fixed income plus" balanced strategies as investors gained confidence in both fixed income and equity markets. CEO Schlossberg noted: "The stimulus and reforms that have happened in China continue to stimulate investors' interest... easing trade tensions with the US has helped interest grow domestically, but also by foreign investors."
On Defined Contribution Opportunity
"We're seeing more traction in the United Kingdom and places across Europe, where there's retirement reform going on, and more private markets participation in things like defined contribution plans."
Risks and Concerns
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Fee Pressure Continues: Net revenue yield fell to 22.5 bps, though decline is slowing. Mix shift toward lower-fee ETFs and fixed income pressures yields.
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Fundamental Equity Outflows: $5.5B net outflows in the quarter, reflecting secular headwinds in active equities, particularly in the US.
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Expense Guidance Uncertainty: Multiple moving parts (hybrid platform, QQQ marketing, Canada, comp timing) create modeling complexity.
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Developing Markets Repositioning: $1.5B outflows from developing markets funds after strategic decision to install new portfolio management team.
Investment Performance
- 44% of active funds in top quartile on 3-year basis
- ~50% reaching top quartile on 5-year basis
- 70% of active AUM beating respective benchmarks on 5-year basis
The Bottom Line
Invesco delivered an exceptional Q4 with record AUM, strong flows, and significant margin expansion. The 38% EPS beat demonstrates the operating leverage inherent in the platform as revenue scales. However, the 8% stock drop reflects investor concerns about 2026's elevated expense base — between hybrid platform costs, QQQ marketing, and strategic transaction impacts, near-term profitability faces headwinds.
The bull case centers on: (1) QQQ revenue contribution stabilizing the fee yield, (2) continued margin expansion toward high-30s, (3) private markets partnerships driving wealth channel penetration, and (4) China JV growth continuing at 30%+ rates.
The bear case worries about: (1) active equity outflows accelerating, (2) expense guidance proving conservative, and (3) multiple strategic initiatives creating execution risk.
Management's track record over 2025 — navigating QQQ conversion, preferred stock recapitalization, and multiple strategic transactions — provides some confidence in execution. The question is whether the 8% sell-off creates an entry point or reflects legitimate concerns about 2026's path to profitability.