Ares Management Corporation (ARES) Earnings & Analysis

Latest quarter

Ares Management reported Q2 FY2026 revenue of $1.4 billion, up 5.81% from a year earlier. Revenue as the consensus counts it was $1.3 billion, compared with consensus revenue of $1.3 billion, while the reported comparison recorded a 4.16% miss against the consensus.

The company reported adjusted EPS, as the consensus counts it, of $1.29, matching the $1.29 consensus estimate. Diluted EPS was $0.49, up 6.52% from $0.46 in Q2 FY2025.

The filing shows management-fee growth in Credit from fundraising in publicly traded and perpetual wealth funds, as well as capital deployment in direct lending and alternative credit strategies. It also attributes Real Assets management-fee growth partly to funds managed following the GCP Acquisition. Operating margin was 17.4%, compared with 15.7% a year earlier, while gross margin was 100.0% in both periods. Free cash flow was −$384.5 million, compared with $392.8 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the latest supplied earnings call, which covered Q1 2026, Chief Executive Officer Michael J. Arougheti said Ares raised $30 billion of gross capital and described institutional demand as broad based across private credit, real assets and secondaries. He said the firm’s forward investment pipeline had reached a record level, with notable activity in European and U.S. direct lending, alternative credit and infrastructure.

Arougheti said U.S. direct-lending transaction activity slowed during the first quarter, while the company saw a pickup in new transactions over recent weeks. He said slower activity reflected lower middle-market M&A, and that the company had seen deployment in infrastructure, real estate, European direct lending, secondaries, structured solutions and asset-backed finance. He added that the company was seeing wider spreads, higher fees and better terms in the current environment.

Chief Financial Officer Jarrod Morgan Phillips said quarterly management fees exceeded $1 billion for the first time and that fee-related earnings were $454 million in Q1. Phillips said Ares expected FY2026 fee-related-earnings margin expansion within the upper end of its 0 to 150 basis-point annual target, citing GCP integration efficiencies, anticipated AUM and fee-paying-AUM growth from deployment, and a planned digital-infrastructure fund.

Analysts asked about redemptions and deployment in private credit. Arougheti said the company’s two U.S. private-credit wealth products accounted for approximately 4.5% of fee-paying AUM, and that assets not deployed through those vehicles could be invested through traded, institutional or separately managed funds. He said Ares had not changed its $125.0 billion FY2028 fundraising target. In response to questions on the timing of transaction activity, Arougheti said the company could not guarantee the exact cadence of deployment.

Arougheti also said an external review assessed 86% of the company’s software-oriented portfolio as low risk for potential AI disruption, while 13% was assessed as medium risk and 1% as high risk.

Guidance

Ares said it had not changed its $125.0 billion FY2028 fundraising target. Phillips said the company expected its FY2026 tax rate to remain within 11.0% to 15.0%, in line with where it expected the rate for the remainder of the year. He said Ares expected FY2026 fee-related-earnings margin expansion within the upper end of its 0.00%–1.50% annual target. The company also reiterated longer-term targets for 16.0%–20.0% fee-related-earnings growth, 20.0%–25.0% realized-income growth and 20.0% dividend growth.