Franklin Resources Inc (BEN) Earnings & Analysis

Latest quarter

Franklin Resources reported Q3 FY2026 revenue of $2.4 billion, up 14.3% from $2.1 billion a year earlier. Revenue, as the consensus counts it, was $2.4 billion, above the $2.3 billion consensus.

Adjusted EPS, as the consensus counts it, was $0.72, above the $0.66 consensus. The filing reported diluted EPS of $0.31, compared with $0.15 in Q3 FY2025.

The filing said investment management fees increased primarily because of higher average equity, multi-asset and alternative assets under management, higher performance fees and the acquisition of Apera, partly offset by WAM outflows. Franklin Resources reported an operating margin of 9.15%, compared with 7.47% a year earlier. The company reported free cash flow of $561.7 million, compared with $1.3 billion in Q3 FY2025.

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

What management said on the call

Chief Executive Officer Jenny Johnson said the company recorded positive long-term net flows across every asset class and geography during the quarter. She said institutional clients were seeking integrated public- and private-market solutions, and the company’s public-markets franchise was broadening its sources of organic growth.

Johnson told analysts that private-markets fundraising reflected contributions across the company’s managers and strategies rather than a single fund. She said the company expected fundraising momentum to continue and described wealth-management distribution as requiring advisor-by-advisor education. She also said the company would provide FY2027 guidance at the end of the next quarter.

On fixed income, Johnson said the company was integrating public and private credit capabilities because clients increasingly sought combined solutions. She said investment teams would retain discretion over whether to participate in particular deals while gaining access to more resources and sourcing capabilities.

Asked about artificial intelligence, Johnson said the company had rolled out tools intended to improve sales activity and was encouraging investment teams to develop applications. She said the company was balancing employee experimentation against the expense of continuously running AI agents. Co-President and Chief Financial Officer Matt Nichols said the company was focusing initially on production and effectiveness, while expecting efficiency benefits over time across functions.

Nichols said expense discipline, higher average assets under management and efficiency initiatives contributed to operating leverage. He also said the company was prioritizing organic growth, investments alongside its strategies, dividends, employee-share grant repurchases and opportunistic repurchases, while evaluating acquisitions or investments where it could not grow quickly enough organically.

Guidance

Nichols changed Q4 FY2026 compensation expense guidance to $850.0 million from $830.0 million, information systems and technology expense guidance to $165.0 million from $155.0 million, and general and administrative expense guidance to $200.0 million from $210.0 million–$215.0 million. He said FY2026 expenses excluding performance fees were expected to be 3.00%–3.50% above FY2025, versus the prior guide of approximately in line with or slightly above FY2025. Including the performance-fee guide, he expected total FY2026 expenses to be 2.00%–2.50% higher than FY2025.