Executive Summary

Q2 2025 adjusted and GAAP diluted EPS were $2.24, a beat versus Wall Street consensus ($2.13*) despite softer net revenue of $1.72B, which missed consensus ($1.75B*) .
Ending AUM rose to $1.68T (+6.9% YoY, +7.1% QoQ) on strong market appreciation, but net client outflows remained elevated at $14.9B, concentrated in U.S. equities .
Fee rate pressure persisted (EFR ex performance-based fees 39.6 bps vs 41.1 bps YoY; 40.0 bps in Q1), reflecting mix shift toward lower-fee products and vehicles (collective trusts, ETFs, model accounts) .
Management raised 2025 adjusted operating expense ex carried interest guidance to up 2–4% vs 2024 ($4.46B), from 1–3% in Q1, while launching a multi-year efficiency plan and moving model delivery assets into AUM beginning July (Aug 12 release) .

What Went Well and What Went Wrong

What Went Well

“We are building momentum for the long-term—growing our ETF business, leveraging partnerships to extend our reach, and expanding our leadership in retirement.” — Rob Sharps (CEO) .
ETF momentum: ~$6B YTD inflows with ETF AUM at ~$16.2B; 11 ETFs >$500M; new launches (Global Equity, International Equity Research; sector ETFs) broadened lineup .
Alternatives performance was solid in private and structured credit; fixed income posted sixth consecutive quarter of positive net flows .

What Went Wrong

Net client outflows of $14.9B driven by U.S. equity redemptions and rebalancing; performance-based fees fell to $6.4M vs $16.8M in Q2 2024 .
EFR declined to 39.6 bps, down from 41.1 bps YoY and 40.0 bps in Q1, reflecting mix shift to lower-fee vehicles (collective trusts, ETFs, SMAs/models) .
Adjusted operating expenses rose 3.7% YoY to $1.15B and technology/occupancy costs increased with first full quarter in new HQ .

Financial Results

Income Statement Summary (GAAP)

Metric	Q4 2024	Q1 2025	Q2 2025
Net Revenues ($USD Millions)	$1,824.5	$1,763.9	$1,723.3
Operating Expenses ($USD Millions)	$1,256.1	$1,167.6	$1,245.0
Operating Income ($USD Millions)	$568.4	$596.3	$478.3
Non-operating Income ($USD Millions)	$4.6	$70.7	$235.5
Net Income ($USD Millions)	$439.9	$490.5	$505.2
Diluted EPS ($USD)	$1.92	$2.15	$2.24

Q2 2025 Actual vs Prior Year and Consensus

Metric	Q2 2024	Q2 2025 Actual	Consensus*	Surprise
Net Revenues ($USD Millions)	$1,733.3	$1,723.3	$1,747.3*	Miss (−$24.0M)
Diluted EPS ($USD)	$2.11	$2.24	$2.13*	Beat (+$0.11)

Values with asterisk (*) retrieved from S&P Global.

Investment Advisory Fee Breakdown

Segment Fees ($USD Millions)	Q2 2024	Q1 2025	Q2 2025
Equity	$947.5	$959.2	$923.6
Fixed Income (incl. MM)	$100.2	$103.6	$105.5
Multi-asset	$444.8	$454.7	$455.9
Alternatives	$76.3	$80.9	$82.6
Performance-based Fees	$16.8	$10.4	$6.4
Admin/Distribution/Other Fees	$147.6	$156.3	$149.7
Total Net Revenues	$1,733.3	$1,763.9	$1,723.3

KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Ending AUM ($USD Billions)	$1,606.6	$1,566.3	$1,676.8
Average AUM ($USD Billions)	$1,638.6	$1,620.3	$1,588.8
Net Client Flows ($USD Billions)	$(19.3)	$(8.6)	$(14.9)
EFR (ex perf-based fees, bps)	40.5	40.0	39.6
EFR (incl perf-based fees, bps)	40.9	40.3	39.7

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Operating Expenses (ex carried interest)	FY 2025	Up 1–3% vs 2024 $4.46B	Up 2–4% vs 2024 $4.46B	Raised
Effective Tax Rate (GAAP)	FY 2025	23.0–27.0% (as of Q4 2024)	23.5–27.5%	Raised
Effective Tax Rate (Adjusted)	FY 2025	23.0–26.0% (as of Q4 2024)	24.0–27.0%	Raised
Dividend	Quarterly	$1.27 declared in Q1	$1.27 declared Aug 11, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Expense trajectory and program	Lowered FY25 opex ex carry to +1–3%; tech investments ongoing	Raised FY25 opex ex carry to +2–4%; announced role reductions, vendor partnerships, closing subscale strategies; aiming low single-digit non-market expense growth in 2026–27	Tightening costs; more structural actions
Fee rate/mix	Ongoing EFR pressure from trust/ETF mix, DC flow dynamics	EFR 39.6 bps; continued shift to lower-fee vehicles; model delivery assets to be included in AUM from July	Continued pressure
Flows	Large outflows in multi-asset/equities Q4; Q1 outflows in U.S. equities; fixed income inflows	Q2 outflows $(14.9)B; fixed income/multi-asset/alternatives positive; July roughly flat to slightly negative	Gradual improvement beneath surface
ETF strategy	Building lineup; strong placement and scale	~$6B YTD inflows; new ETFs launched (global/international, sectors); 24 active ETFs, 11 >$500M	Accelerating
Alternatives (OHA/private credit)	Solid capabilities; slower deployment; O-Credit early traction	Strong gains in private/structured credit; pipeline improving; exploring DC integration subject to fiduciary/fee clarity	Improving
AI/technology/tokenization	Interest in innovation; tech investments	Multi-year efficiency with AI; tokenization pilots; research-led approach; focus on operational alpha	Scaling initiatives
Retirement/DC leadership	Target date inflows; expanding internationally (Canada, Korea, Japan)	Target date AUM >$520B; DC inflows; cautious approach to adding private assets to DC pending regulatory clarity	Strength sustained

Management Commentary

“We have developed a broad and ongoing plan to reduce our expense growth over time while continuing to invest in capabilities and client reach.” — Rob Sharps .
“We now expect 2025 adjusted operating expenses excluding carried interest expense to be up 2% to 4% over 2024's $4.46 billion.” — Jen Dardis .
“We will start including model delivery assets and flows in our AUM beginning with the July AUM release on August 12.” — Jen Dardis .
“Looking ahead, we do expect outflows to continue in the second half, although our leading indicators would suggest that second half outflows will be lower than first half levels.” — Rob Sharps .

Q&A Highlights

DC private assets adoption: Management is encouraged by long-term potential but awaits DOL/SEC guidance; prefers legislative clarity; will consider OHA and best-in-class partners; not rushing first-to-market .
Expense/AI/tokenization: Multi-year process/tech streamlining; leveraging AI for productivity, alpha generation; tokenization pilots underway; expect low single-digit non-market expense growth in 2026–27 .
Fee rate and mix: Expect a steady downward fee trend; shift from mutual funds to collective trusts lowers fee rate; ETFs/SMAs/models largely consistent with institutional pricing; cost-to-serve lower at scale .
ETF cannibalization: Mix of recapture and new clients; ~25% industry recapture into ETFs; new lower-priced active core ETFs target incremental demand; broader platform placement than mutual funds .
Model delivery in AUM: Decision reflects capability scale and economic similarity to SMAs; ~$9B moves from AUA to AUM; large July win with further pipeline .
M&A posture: High bar; focused on culturally aligned deals adding capabilities (e.g., retirement advice/customization, alternatives); open to minority stakes/partnerships .
Organic growth: Required over time to sustain investment and shareholder value; path back expected but gradual .

Estimates Context

Q2 2025 EPS: $2.24 vs consensus $2.13* — beat.
Q2 2025 Revenue: $1.72B vs consensus $1.75B* — miss.
Number of estimates: EPS (10*), Revenue (5*).
Values retrieved from S&P Global.

Implication: EPS beat on higher non-operating income (investment gains, consolidated products) offsetting higher opex; revenue miss reflects lower performance-based fees and EFR compression .

Key Takeaways for Investors

Mixed print: EPS beat but revenue miss; stock likely focuses on fee-rate pressure and persistent outflows versus strong non-op gains and AUM recovery .
Fee rate headwinds to persist near term given product/vehicle mix; watch collective trust penetration and model/ETF growth trajectory .
Expense discipline turning more structural (roles reduced, vendor partnerships, subscale closures), with 2026–27 non-market expenses targeted for low single-digit growth — supportive to margins .
Flows improving beneath the surface (fixed income, alternatives, retirement, ETFs) and July roughly flat; monitor whether H2 outflows moderate as management expects .
Strategic catalysts: Inclusion of model delivery into AUM (optics and flow reporting), continued ETF launches/placement, alternatives expansion (OHA, private credit), and potential DC private assets pending guidance .
Tax-rate guidance raised vs Q4 levels; adjust models accordingly for FY25 GAAP 23.5–27.5% and adjusted 24.0–27.0% .
Capital returns steady: Dividend maintained at $1.27 and YTD buybacks ($349M) already above full-year 2024; balance sheet strength supports flexibility .

PRICE T ROWE GROUP INC (TROW)·Q2 2025 Earnings Summary