T. Rowe Price Group, Inc. (TROW) Earnings & Analysis

Latest quarter

T. Rowe Price reported Q3 FY2026 revenue of $2.0 billion, up from $1.9 billion a year earlier and 2.57% above the consensus. Adjusted earnings per share were $2.86, ahead of the $2.58 consensus.

The company’s filing attributed revenue growth primarily to higher investment advisory fees and capital allocation-based income. It said higher markets raised average assets under management, lifting advisory revenue, although client flows and transfers shifted the asset mix toward lower-fee products and asset classes.

T. Rowe Price reported an operating margin of 38.4%, compared with 34.0% a year earlier. The filing attributed the increase to revenue growth and lower GAAP operating expenses, including reduced restructuring and acquisition-related charges. It said adjusted operating expenses rose as compensation, distribution, technology and other costs increased.

Free cash flow was $470.6 million, down from $546.0 million in the prior-year quarter. The filing attributed the year-over-year decline in diluted earnings per share primarily to lower non-operating income, partly offset by higher operating income and fewer shares outstanding.

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

What management said on the call

CEO Rob Sharps said the quarter ended with net outflows, and CFO Jen Dardis attributed them to continued withdrawals from equity strategies and mutual funds. Dardis said multi-asset outflows came primarily from target-date strategies, including a previously disclosed large redemption by a retirement plan. Fixed income and alternatives attracted net inflows, as did exchange-traded funds.

Dardis said investment advisory revenue rose on higher average assets under management, partly offset by a lower effective fee rate. She attributed about two-thirds of the sequential fee-rate decline to growth in the blend and hybrid suite, with the rest reflecting U.S. equity outflows and a shift in vehicle mix. She said adjusted operating expenses fell from the prior quarter as compensation costs declined and some accrued technology expenses were reversed.

Asked about structural change, Sharps said, “we do expect pressure on active equities and mutual funds to persist.” He said T. Rowe Price is investing in distribution, retirement offerings and businesses including ETFs, separately managed accounts and model portfolios. Head of Global Distribution Dee Sawyer said the company is adding 50 associates to its intermediary business and investing in customized models for advisers.

Sharps said T. Rowe Price plans to acquire fixed-income manager and ETF specialist FM Investments, with closing expected early in 2027. He also said the company is expanding its use of AI through its Anthropic relationship, while keeping human judgment and accountability in its processes.

On the flow outlook, Sharps expects fourth-quarter outflows to moderate sequentially but remain elevated relative to the first half. Asked about retirement flows, he said aging participants are reducing the contribution tailwind and that target-date flows will depend more on winning new plans, making them more uneven.

Guidance

CFO Jen Dardis maintained T. Rowe Price’s FY2026 outlook for adjusted operating expenses excluding carried interest expense to rise 4.00% to 7.00% from 2025. She said the company was trending toward the middle of that range, based on third-quarter average assets under management.