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PRICE T ROWE GROUP INC (TROW)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was operationally stronger with adjusted EPS of $2.81, up 25% q/q and 9% y/y on higher average AUM, lower adjusted opex, and steady adjusted non‑op income. EPS beat S&P Global consensus by ~11% (actual $2.81 vs. $2.54*), while net revenue of $1.893B was essentially in line with a slight miss vs. $1.899B* (0.3%) .
  • Ending AUM reached a record $1.77T (+5% q/q, +8% y/y) as markets drove gains; net client outflows improved to $7.9B from $14.9B in Q2 (still equity‑led). EFR fell to 39.1 bps (ex perf fees) on mix shift to lower‑priced vehicles (target date CITs, ETFs, SMAs) .
  • Expense discipline continued: adjusted opex fell 1.1% q/q to $1.134B; a $28.5M restructuring charge (severance) was excluded from non‑GAAP. Management guided FY25 adj opex ex‑carry +2–4% (maintained), and flagged ~ $100M one‑time real estate charge in Q4 (excluded from non‑GAAP) .
  • Strategic catalysts: the Goldman Sachs collaboration (co‑branded target date sister series, wealth model portfolios, multi‑asset public/private solutions, and advisor‑managed accounts) progresses toward initial launches late 2025–mid‑2026; Goldman intends to buy up to $1B of TROW stock (aiming up to 3.5% ownership) .
  • Capital return remained robust: $442M returned in Q3 via dividends and buybacks; quarterly dividend held at $1.27 (Oct 28 declaration) and YTD buybacks surpassed $525M by October; liquidity remains strong with $4.3B+ of cash and discretionary investments .

Estimates marked with * are from S&P Global. Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Adjusted profitability improved: adjusted EPS rose to $2.81 (from $2.24 in Q2) on higher net revenues (+10% q/q) and lower adjusted opex (‑1.1% q/q), with adjusted non‑op income steady; GAAP EPS $2.87 .
  • AUM momentum: ending AUM hit $1.77T (+$90B q/q), aided by $89B market appreciation; multi‑asset and equity saw strong market lifts; alternatives stable. Inclusion of model‑delivery managed account assets boosted reported AUM from July .
  • Positive flow pockets and product traction: target date inflows of $2.6B, nearly $2B ETF net inflows, and institutional wins in global multi‑sector bonds and U.S. Equity Research SMA model delivery; fixed income, multi‑asset, and alternatives had positive net flows .

Selected quotes:

  • “We reached an end‑of‑period high of $1.77 trillion in assets under management…” (Rob Sharps) .
  • “We saw strong net inflows for our U.S. equity research strategy… a large SMA model delivery win in July…” (CFO Jen Dardis) .
  • “We continue to expect 2025 adjusted operating expenses… up 2% to 4% over 2024’s $4.46 billion.” (CFO) .

What Went Wrong

  • Net outflows persisted at $(7.9)B (improved but still negative), driven by U.S. equities; management noted October flow softness and higher equity redemptions (seasonal rebalancing, passive share gains) .
  • Fee rate pressure: EFR fell to 39.1 bps (from 39.6 in Q2; 40.7 in Q3’24) due to mix shifting toward lower‑fee vehicles (target date trusts, ETFs, SMAs) and outflows from higher‑fee U.S. equity mutual funds .
  • One‑time costs: $28.5M restructuring charge in Q3 (severance) and a planned ~ $100M non‑recurring Q4 real estate charge (exited two unoccupied Owings Mills buildings), both excluded from non‑GAAP; real estate savings will take time .

Financial Results

Consolidated Performance vs. Prior Periods and Consensus

MetricQ3 2024Q2 2025Q3 2025Q3 2025 Cons.*
Net Revenues ($M)$1,785.6 $1,723.3 $1,893.5 $1,898.3*
Diluted EPS (GAAP)$2.64 $2.24 $2.87 —
Diluted EPS (Adj)$2.57 $2.24 $2.81 $2.54*
Operating Expenses (Adj, $M)$1,099.0 $1,147.2 $1,134.4 —
Net Operating Income (Adj, $M)$718.4 $614.4 $774.1 —
Ending AUM ($B)$1,630.9 $1,676.8 $1,767.2 —
  • Revenue: in line; slight miss vs. consensus (~$4.9M, 0.3%). EPS: beat by ~$0.27 (~11%). Drivers included higher average AUM, lower adjusted compensation and ad/promo, and steady adjusted non‑op income **[1113169_0001628280-25-047662_earningsreleaseq32025.htm:2]*.
    Estimates marked with * are from S&P Global. Values retrieved from S&P Global.

Investment Advisory Fees by Asset Class

Investment Advisory Fees ($M)Q3 2024Q2 2025Q3 2025
Equity$978.5 $923.6 $1,011.8
Fixed income (incl. MM)$104.1 $105.5 $110.1
Multi‑asset$465.8 $455.9 $492.1
Alternatives$78.9 $82.6 $84.7
Total$1,627.3 $1,567.6 $1,698.7

KPIs and Flow Dynamics

KPIQ3 2024Q2 2025Q3 2025
Average AUM ($B)$1,589.5 $1,588.8 $1,723.0
Ending AUM ($B)$1,630.9 $1,676.8 $1,767.2
Net Flows ($B)—$(14.9) $(7.9)
EFR ex perf fees (bps)40.7 39.6 39.1
Target Date Net Inflows ($B)——$2.6
ETF Net Inflows ($B)—$2.5 ~$2.0

Notes: Target date and ETF flows from management commentary.

Non‑GAAP Adjustments (Q3 2025)

  • Adjusted EPS excludes: deferred comp mark‑to‑market, acquisition‑related amortization, restructuring charge ($28.5M), consolidated investment products, and certain non‑operating items .
  • Key reconciling items (EPS impact): acquisition‑related ($0.18), restructuring ($0.11), consolidated investment products ($0.11), and other non‑op ($0.23), partially offset by hedges vs. deferred comp .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted opex ex‑carried interest growthFY 2025+2% to +4% vs. 2024 ($4.46B) +2% to +4% vs. 2024 Maintained
Controllable expense growthFY 2026–27Low‑single digits Low‑single digits Maintained
Effective tax rate (GAAP)FY 202523.5%–27.5% 23.0%–26.0% Lowered
Effective tax rate (Adjusted)FY 202524.0%–27.0% 23.5%–25.5% Lowered
Q4 real estate chargeQ4 2025—~ $100M one‑time, excluded from non‑GAAP New
Dividend per shareQuarterly$1.27 (Aug 11, 2025) $1.27 (Oct 28, 2025) Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Prior)Q2 2025 (Prior)Q3 2025 (Current)Trend
Flows/Equity HeadwindsNet outflows $(8.6)B; focus on retirement leadership Outflows $(14.9)B; expected 2H outflows lower than 1H; fixed income 6th straight qtr inflows; ETF +$2.5B Q3 outflows $(7.9)B; October softer; equity redemptions, passive share gains Improving but still negative
Fee rate pressureEFR 40.0 bps; mix to lower‑fee vehicles EFR 39.6 bps; mix impact (CITs, ETFs) EFR 39.1 bps; continued mix shift Downward slope
Expense disciplineOpex focus noted Broad expense program; low‑single‑digit controllable opex in ’26–’27 Q3 restructuring charge; real estate consolidation; FY25 opex guide maintained Execution progressing
AI/Tech & Productivity—AI to drive productivity, alpha; tokenization research; cost efficiencies Continued AI investment for productivity and client delivery Building
ETFs & Models—8 new ETF filings; models to drive placement; 11 ETFs >$500M AUM ~ $2B ETF inflows; 1.5% active ETF share; expanding active core/muni suite Scaling
Retirement/Private markets—Exploring privates in DC target date with caution pending regulatory clarity GS collaboration: sister series (mid‑2026), wealth models late 2025; balanced economics Advancing

Management Commentary

  • Strategy and performance: “We reached an end‑of‑period high of $1.77 trillion in AUM… long‑term investment performance is solid… fixed income performance is even stronger…” (Rob Sharps) .
  • GS collaboration scope: “Model portfolios… on first platform before year‑end… multi‑asset public‑private market solutions… launch by mid‑2026… managed account platform… latter half of 2026… co‑branded sister series… launch in mid‑2026.” (Rob Sharps) .
  • Expense/real estate: “We incurred $28.5M in non‑recurring [severance]… decision to exit two of the six buildings on our Owings Mills campus… non‑recurring charge of approximately $100M in Q4…” (CFO Jen Dardis) .
  • Product momentum: “Our target date franchise had $2.6B of net inflows… nearly $2B of net inflows into our [ETFs]… strong net inflows for our U.S. equity research strategy… large SMA model delivery win in July.” (CFO) .

Q&A Highlights

  • Digital assets strategy: Building internal capability; launching a multi‑token ETP as a building block; see growing advisor demand and portfolio role with studied risk/return characteristics .
  • GS collaboration economics: Balanced and equitable; product advisorship roles split by solution; ambitions exceed “a couple of billion” over a multi‑year horizon (wealth and retirement are large markets) .
  • Near‑term flows: Q4 outlook “weaker at the margin”; October resembled August with higher equity redemptions; pipeline softer; positives in target date, fixed income, ETFs, OHA private credit capital raising .
  • Expenses and savings: Multi‑year program supports low‑single‑digit controllable opex in ’26–’27; real estate optimization (Owings Mills exits) will take time; savings to be reinvested in strategic priorities including AI and ETFs .
  • ETFs: Expanding active core offerings; view active ETF as a “very big business” over time; distribution and marketing infrastructure being built for ETF ecosystem .

Estimates Context

  • Q3 2025: Adjusted EPS $2.81 vs. consensus $2.54* (beat); net revenue $1.8935B vs. $1.8983B* (slight miss). EPS outperformance driven by higher average AUM, lower adjusted compensation and promotional spend, and steady adjusted non‑op gains; minor revenue variance consistent with fee‑rate pressure and revenue reclassification (model‑delivery into advisory fees) .
  • Q2 2025 (for context): EPS $2.24 vs. $2.13* (beat); net revenue $1.7233B vs. $1.7473B* (miss).
    Estimates marked with * are from S&P Global. Values retrieved from S&P Global.

Where estimates may adjust:

  • Modest downward pressure on forward revenue assumptions from fee‑mix (lower EFR) may be offset by higher average AUM starting point; expense run‑rate messaging (Q4 seasonal uptick; Q1 reset) argues for limited upward EPS revisions near‑term but a higher 2026–2027 margin trajectory if expense discipline persists .

Key Takeaways for Investors

  • Quality beat on EPS driven by operating leverage and expense control; revenue essentially in line amid continued fee‑mix pressure—positioning improves if AUM momentum persists .
  • Flows remain the swing factor: equity outflows continue but are improving; strength in target date, fixed income, ETFs, and alternatives pipelines provides partial offsets near term .
  • The Goldman Sachs collaboration is a multi‑year growth vector across retirement and wealth; product launches staged from late 2025 through mid‑2026—watch early distribution wins and platform placements as catalysts .
  • Expense story has teeth: restructuring and real estate actions, plus vendor leverage, support low‑single‑digit controllable opex growth in ’26–’27; Q4 ~$100M real estate charge is non‑recurring and excluded from non‑GAAP .
  • Dividend durability and accelerated buybacks underpin capital return; Board maintained $1.27 quarterly dividend in October; YTD buybacks exceeded $525M by October with ample liquidity .
  • Trading lens: Near‑term stock moves likely keyed to flows trajectory (especially U.S. equity redemptions), active ETF scaling, and incremental details/timing on GS co‑branded launches; downside risk if October/Nov outflows persist, upside if flow stabilization and fee‑rate pressure abate .

Citations:

  • Q3 2025 8‑K/press release and financials: .
  • Q3 2025 earnings call transcript: .
  • Prior quarters (trend): Q2 2025 8‑K ; Q2 2025 call ; Q1 2025 8‑K .
  • Other press releases: Preliminary AUM (Oct 10) ; Dividend (Oct 28) ; Goldman Sachs collaboration (Sept 4) .