T. Rowe Price Group, Inc. (TROW) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings report shows mixed results: revenue growth and strong cash reserves are positive, but declining performance-based fees and lack of margin guidance are concerns. The Q&A reveals management's cautious stance on margins and mixed views on blockchain and AI impacts. Share buybacks are a positive signal, but the lack of specific guidance and concerns over Target Date fund outflows contribute to a neutral outlook.
Key Financial Performance
Assets Under Management (AUM) $1.78 trillion, up over 10% from the start of the year despite $56.9 billion in net outflows. The increase was driven by strong global market returns, which offset the net outflows.
Net Outflows $56.9 billion for the year, with $25.5 billion in Q4. Concentrated in equity and mutual fund businesses, driven by performance shortfalls in certain strategies and portfolio rebalancing due to elevated equity markets.
Free Cash Flow Over $2 billion in 2025. This allowed the company to return nearly $1.8 billion of cash to stockholders.
Adjusted Diluted Earnings Per Share (EPS) $9.72 for the full year, up 4.2% from 2024. The increase was due to higher average AUM, investment advisory revenue, and lower average share count.
Adjusted Net Revenue Nearly $7.4 billion for the full year, an increase of 2.8% from 2024. Driven by higher average AUM and investment advisory fees.
Investment Advisory Revenue $6.6 billion for the full year, up 3.1% from 2024. Growth was driven by higher average AUM, despite a lower effective fee rate.
Performance-Based Fees $37.4 million for the full year, down from $59.3 million in 2024. The decline was attributed to changes in asset and vehicle mix.
Adjusted Operating Expenses $4.6 billion for 2025, up 3.4% from 2024. The increase was within the guidance range of 2% to 4% and reflects ongoing expense management.
Share Buybacks $624.6 million worth of shares repurchased in 2025, representing 2.8% of shares outstanding.
Cash and Discretionary Investments $3.8 billion at year-end, up $735 million from the start of the year. This supports recurring dividends, potential acquisitions, and share buybacks.
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Operating Highlights
New ETFs: Launched 13 ETFs in 2025, bringing the total to 30, and grew assets under management to over $21 billion at year-end.
Retirement Allocation Funds: Launched two new retirement allocation funds in Asia, marking the first time a U.S. asset manager offered retirement-focused products to retail investors in Hong Kong and Singapore.
Social Security Analyzer Tool: Launched an innovative tool to help clients navigate retirement solutions.
Private Equity Fund: Launched a T. Rowe Price managed private equity fund targeting late-stage private companies.
Middle East Expansion: Announced a strategic partnership with First Abu Dhabi Bank to deliver investment solutions tailored to Middle Eastern investors.
Asia Expansion: Extended retirement leadership globally with new products in Hong Kong and Singapore.
Canadian Market Growth: Saw growth in the Canadian Target Date series launched in 2024.
AI Integration: Advanced the use of artificial intelligence to enhance investment professionals' capabilities, client service, and operational efficiency.
Organizational Changes: Created a technology, data, and operations function and a global strategy function to accelerate execution and sharpen strategic vision.
Goldman Sachs Collaboration: Established a strategic collaboration with Goldman Sachs, launching co-branded model portfolios and public-private offerings.
Private Credit Expansion: OHA achieved a record fundraising year with $16 billion in capital raising, led by private lending strategies.
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Risk or Challenges
Net Outflows: The company experienced $56.9 billion in net outflows for 2025, with $75 billion of net outflows from equity and $64 billion from mutual funds. Elevated redemptions were driven by performance shortfalls in certain strategies and portfolio rebalancing due to elevated equity markets.
Performance Shortfalls: Weaker 1-year performance with only 29% of fund assets outperforming peers, driven by lower weight to international equities and security selection issues in some portfolios during the second and third quarters of 2025.
Declining Effective Fee Rate: The effective fee rate declined due to changes in asset and vehicle mix, as client demand shifted towards lower-priced vehicles and strategies, impacting revenue.
Market Environment: The narrow market dominated by mega-cap stocks and riskier names outperformed quality and value, creating challenges for fundamental research, active management, and long-term investing.
Expense Growth: Operating expenses increased by 3.4% in 2025, with anticipated further growth of 3% to 6% in 2026, potentially impacting profitability.
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Guidance & Outlook
2026 adjusted operating expenses: Anticipated to increase by 3% to 6% over 2025's $4.6 billion, based on normal market conditions and assets at the end of 2025.
Private credit transactions: Expectation of an acceleration in deal volume as the pipeline of pending private credit transactions remains robust.
Strategic partnership with First Abu Dhabi Bank: Aims to deliver world-class investment solutions across public and private markets tailored to meet the needs of investors throughout the Middle East.
Goldman Sachs collaboration: Plans to pursue opportunities in wealth and retirement through co-developed public-private offerings and advice solutions. A fifth co-branded model portfolio is expected in the first half of 2026.
ETF business: Continued growth expected, with a focus on active core strategies and fixed income ETFs. The company launched 13 ETFs in 2025 and grew assets under management to over $21 billion.
Private equity fund: First close for a T. Rowe Price managed private equity fund in January 2026, aiming to create a portfolio of approximately 25 category-leading private companies.
Artificial intelligence: Advancing the use of AI to amplify investment professionals' capabilities, improve client service, and adopt new technologies with disciplined governance.
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Shareholder Return Plan
Dividend Increase: T. Rowe Price extended its long history of increasing its regular dividend, marking the 39th consecutive year of increases since its IPO in 1986.
Share Buyback Program: During Q4 2025, T. Rowe Price repurchased $141 million worth of shares, bringing the total buybacks for 2025 to $624.6 million, which represents 2.8% of its shares outstanding.
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Key Q&A
Q:How is T. Rowe Price planning from an operating perspective for 2026, particularly regarding expenses and margins?
A:The biggest factor influencing operating margin is equity market return. About 1/3 of the expense base is variable, and revenue is driven by equity market returns. T. Rowe Price is balancing long-term investments with cost-saving initiatives to maintain efficiency. They are not commenting on the margin profile due to market return variability. For 2026, 2/3 of controllable expenses are managed towards low single-digit growth, with investments in growth areas like ETFs, SMAs, and alternatives. Market-driven expenses are slightly higher due to distribution expenses and year-end compensation.
Q:What is T. Rowe Price's approach to tokenization and blockchain?
A:T. Rowe Price has been investing in digitization since 2022, focusing on efficiency, product opportunities, and distribution. They see potential in middle and back-office cost savings, moving traditional finance assets on-chain, and engaging a new generation of mobile and crypto-native investors. They plan to launch an active crypto ETF in 2026 and are exploring partnerships and new builds for distribution.
Q:What is the update on the potential migration of private investments into the 401(k) channel?
A:T. Rowe Price's multi-asset team supports including private market alternatives in defined contribution solutions like Target Date funds. However, plan sponsors have mixed views due to fiduciary risk and liquidity concerns. The Department of Labor's guidance is expected in several months. T. Rowe Price plans to launch a product with Goldman Sachs midyear, but expects slow penetration of the market.
Q:What is the outlook for T. Rowe Price's Target Date business, given recent outflows?
A:Target Date fund outflows in Q4 were driven by M&A activity and a shift from active to passive and blend funds. T. Rowe Price is gaining market share in the blend category, which is growing faster than passive. They had $1.7 billion in Target Date inflows in January. The 2026 flow outlook anticipates equity outflows to moderate, with growth in retirement date funds, fixed income, and alternatives.
Q:How does T. Rowe Price view the impact of market disruptions, such as AI developments, on equity flows and exposure?
A:Market disruptions like AI developments have varying impacts on equity flows depending on client type. T. Rowe Price's equity exposure is not more concentrated in software and services than the market as a whole. They have been studying AI-related risks and opportunities and are positioned for such events in many portfolios.
Q:What is Oak Hill's exposure to investments potentially disrupted by AI, and how is T. Rowe Price collaborating with Oak Hill?
A:T. Rowe Price did not comment on Oak Hill's specific exposures but highlighted their rigorous credit process. Oak Hill had record capital raising in private lending and is collaborating with T. Rowe Price on wealth, insurance, and institutional market opportunities. T. Rowe Price helped Oak Hill raise over $3 billion in 2025.
Q:What factors caused recent misses in Target Date fund sales, and how is T. Rowe Price adjusting its offerings?
A:Recent misses were due to M&A activity where plans were consolidated with the acquirer's provider. T. Rowe Price is seeing less interest in fully active Target Date funds and more in blend and hybrid offerings. They are focusing on capturing market share in the growing blend category.
Q:What is the cadence of lumpier planned losses in Target Date funds?
A:Elevated activity typically occurs around year-end, but there is no specific seasonality, and plan activity can happen throughout the year.
Q:Review of Unclear Management Responses
A:Management avoided directly commenting on the future margin profile due to the significant influence of market returns. They also did not provide specific details on Oak Hill's exposure to AI-related disruptions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Abu Dhabi
Bank strength
Credit selection
Date solution
Dhabi Bank
ETF launch
ETF portfolio
ETF strategy
ETFs core
East Middle
East region
FAB world
Goldman Sachs
Hello today
IPO OHA
IPO momentum
Middle East
President Sharps
Price ETF
Price access
Relations course
Returns period
Sachs Rowe
Sachs opportunity
Sharps CFO
Singapore Date
Stanley platform
Wealth platform
access stage
asset manager
company
equity fund
fund asset
manager retirement
period fund
security
series
start
TROW Transcript
T. Rowe Price Group, Inc. (TROW) Q4 2025 Earnings Call Transcript
Unknown2-4
The earnings report shows mixed results: revenue growth and strong cash reserves are positive, but declining performance-based fees and lack of margin guidance are concerns. The Q&A reveals management's cautious stance on margins and mixed views on blockchain and AI impacts. Share buybacks are a positive signal, but the lack of specific guidance and concerns over Target Date fund outflows contribute to a neutral outlook.
T. Rowe Price Group, Inc. (TROW) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call summary highlights strong financial metrics, such as significant capital returns and ETF growth, which are positive indicators. The Q&A section reveals optimism about new partnerships and strategic initiatives, despite some uncertainties. The company's focus on expense management and shareholder returns adds to the positive sentiment. Although there are concerns about weak investment performance and regulatory challenges, the overall outlook is positive, with strategic growth in ETFs and retirement solutions. Thus, the stock price is likely to experience a positive movement of 2% to 8% over the next two weeks.
T. Rowe Price Group, Inc. (TROW) Q2 2025 Earnings Call Transcript
Positive8-1
The earnings call highlights strong financial performance and strategic initiatives, such as new product launches and headquarters expansion. The Q&A reveals positive long-term potential in private investments and AI advancements. Despite fee rate pressures and equity outflows, T. Rowe is optimistic about growth in retirement date funds and ETFs. The commitment to capital return and strategic expense management further supports a positive outlook. Overall, the combination of optimistic guidance and strategic growth initiatives suggests a likely positive stock price movement in the short term.
T. Rowe Price Group, Inc. (NASDAQ:TROW) Q1 2025 Earnings Call Transcript
Unknown5-3
The earnings call presents a mixed picture: positive elements include strong ETF growth, solid shareholder returns, and optimistic future outflow management. However, concerns arise from net outflows, declining revenue, and increased expenses. The Q&A session highlights growth potential in ETFs and private markets but lacks clarity in some responses. The overall sentiment remains neutral, as positive developments are balanced by financial and operational challenges.
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TROW Report
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