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    BLK
    Earnings call· Jun 2025(Q2 FY25)

    BlackRock Q2 FY25 earnings call BLK

    Jul 15, 2025 Source

    Executive summary

    BlackRock Q2 FY25 — Strong Organic Growth and Strategic Acquisitions Drive Record AUM

    BlackRock delivered robust Q2 FY25 results, marked by strong organic base fee growth and record AUM, underscoring the success of its integrated public and private markets strategy. Strategic acquisitions like HPS, GIP, and Preqin are bolstering its platform, with management anticipating continued profitable growth and a path to a 45%+ operating margin despite near-term integration costs. The firm is actively expanding its global footprint and leveraging technology to capture new opportunities in retirement and digital assets.

    Highlights

    5

    • Organic base fee growth of 6% in Q2 FY25, marking the fourth consecutive quarter of 5% or higher growth, and 7% over the last 12 months.

    • Record AUM of $12.5 trillion, driven by organic growth and market performance.

    • Net inflows of $116 billion in Q2 FY25, excluding a single low-fee institutional index redemption of $52 billion.

    • Double-digit year-over-year growth in revenue (13% to $5.4B), operating income (12% to $2.1B), and EPS (16% to $12.05).

    • GIP V flagship infrastructure strategy closed above its target, raising $25.2 billion, the largest private market fundraise for BlackRock and GIP.

    Concerns

    3

    • As-adjusted operating margin decreased by 80 basis points year-over-year to 43.3%, partially due to lower performance fees.

    • Performance fees decreased year-over-year to $94 million, reflecting lower performance revenue from private markets, liquid alternatives, and long-only products.

    • Effective fee rate was down 0.4 basis points quarter-over-quarter, partially due to lower catch-up base fees from private markets fundraising and intra-month equity market declines.

    Guidance & targets

    11
    CategoryTargetConfidence
    As-adjusted tax rate
    approximately 25%
    medium materiality
    High
    Estimated base fee run rate
    approximately 5% higher
    high materiality
    High
    Estimated base fee run rate (including HPS)
    more like 10% higher
    high materiality
    High
    HPS revenue contribution
    approximately $450 million
    high materiality
    High
    HPS impact on overall effective fee rate
    approximately 0.6 of a basis point
    medium materiality
    High
    Core G&A expense increase
    low teens percentage increase
    high materiality
    High
    Adjusted compensation to net revenue ratio
    modestly higher
    medium materiality
    Medium
    Quarterly share repurchases
    at least $375 million
    high materiality
    High
    Launch of proprietary LifePath with privates target date fund
    sometime in 2026
    medium materiality
    High
    Gross private markets fundraising
    $400 billion
    high materiality
    High
    Dividend growth rates
    high single to low double-digit rates
    high materiality
    High

    Operational metrics

    37
    Organic base fee growth
    6%7% LTM
    Q2 FY25

    Exceeding the target of 5% or higher.

    Net inflows (ex-institutional index redemptions)
    $116B
    Q2 FY25

    Total net inflows were $68 billion, impacted by a single client institutional index redemption of $52 billion.

    Net inflows
    >$650B
    LTM
    Total AUM
    $12.5Trecord
    Q2 FY25
    iShares AUM
    approaching $5T
    Q2 FY25

    Was about $300 billion at the time of BGI acquisition.

    IBIT AUM
    $75B$12B net inflows
    Q2 FY25

    Crossed $75 billion at quarter end, and $80 billion as of call date.

    Cash AUM
    nearly $1Tup 25% YoY
    Q2 FY25
    Tokenized liquidity fund AUM
    $3B
    Q2 FY25
    Circle stablecoin cash reserves managed
    $50B
    Q2 FY25

    BlackRock manages these reserves for Circle.

    Revenue growth
    13%YoY
    Q2 FY25

    Driven by organic growth, higher markets, GIP transaction, and higher technology services revenue.

    Operating income growth
    12%YoY
    Q2 FY25
    EPS growth
    16%YoY
    Q2 FY25

    Reflected higher nonoperating income, higher tax rate, and higher share count.

    Net investment gains
    $433M
    Q2 FY25

    Driven by mark-to-market noncash gains on minority investments (e.g., Circle) and co-invest portfolio.

    As-adjusted tax rate
    25%
    Q2 FY25
    Base fee and securities lending revenue growth
    15%YoY
    Q2 FY25

    Driven by market beta on average AUM, organic base fee growth, and $240 million from GIP.

    Annualized effective fee rate change
    down 0.4 bpsQoQ
    Q2 FY25

    Partially due to $36 million lower catch-up base fees from private markets fundraising and intra-month equity market declines.

    Performance fees
    $94Mdecreased YoY
    Q2 FY25

    Reflecting lower performance revenue from private markets, liquid alternatives, and long-only products.

    Technology services revenue growth
    26%YoY
    Q2 FY25

    Reflects sustained demand for Aladdin and $60 million from Preqin acquisition.

    Annual Contract Value (ACV) growth
    32%YoY
    Q2 FY25

    Includes Preqin acquisition; organic ACV growth was 16%, including FX tailwinds.

    Total expense growth
    14%YoY
    Q2 FY25

    Reflecting higher compensation, sales asset and account expense, and G&A.

    Employee compensation and benefits expense growth
    12%YoY
    Q2 FY25

    Reflecting higher headcount from GIP and Preqin, and higher incentive compensation.

    G&A expense growth
    16%YoY
    Q2 FY25

    Primarily driven by GIP and Preqin acquisitions and higher technology spend.

    Sales, asset and account expense growth
    14%YoY
    Q2 FY25

    Primarily driven by higher direct fund expense and distribution costs.

    Direct fund expense growth
    23%YoY
    Q2 FY25

    Mainly due to higher average ETF AUM and net inflows.

    As-adjusted operating margin
    43.3%down 80 bps YoY
    Q2 FY25

    Partially due to lower performance fees; long-term target is 45% or greater.

    Common shares repurchased
    $375M
    Q2 FY25
    ETF net inflows
    $85B
    Q2 FY25

    Diversified by channel, with over one-third from European clients.

    Retail net inflows
    $2B
    Q2 FY25

    Reflected continued strength in Aperio and systematic liquid alternatives funds.

    Institutional active net inflows
    $7B
    Q2 FY25

    Driven by insurance client fixed income mandates and strength in infrastructure, private credit, and liquid alternatives.

    Institutional index net outflows
    $48B
    Q2 FY25

    Impacted by a single client redemption of $52 billion, primarily from fixed income.

    Cash net inflows
    $22B
    Q2 FY25

    Driven by scale and active approach with clients around liquidity management.

    GIP V fundraise
    $25.2Bsurpassed $25B target
    Q2 FY25

    Largest private market fundraise in the histories of BlackRock and GIP.

    SLS II fundraise
    >$2.5B
    Q2 FY25

    Next of the secondaries fund.

    LifePath Paycheck AUM
    >$500B
    Q2 FY25
    Jio BlackRock funds raised
    >$2B
    Q2 FY25

    From its first funds launched.

    ETF organic base fee growth
    12%
    Q2 FY25

    Driven by new investments and product launches.

    Dividend payout ratio
    40-50%
    target

    Targeted range; average 50% of GAAP net income over the last 5 years.

    Product announcements

    3
    ProductTypeDetails
    Public-private target date solutionlaunch
    Jio BlackRock first fundslaunch
    LifePath with privates target date fundroadmap

    Deals & partnerships

    7
    HPS Investment PartnersAcquisition of a private credit firm to enhance BlackRock's private markets offerings.

    Closed on July 1. Issued approximately 8.5 million BlackRock SubCo units and 1 million restricted stock units. Up to 13.8 million additional shares may be issued subject to contingent conditions.

    Generation LifeMinority investment and strategic alliance to develop investment solutions for Australian retirees.

    Made a minority investment and established a strategic alliance in May.

    ElmTree FundsAcquisition of a real estate investment firm specializing in triple net lease assets.

    A real estate investment firm with $7.3 billion in client AUM, of which $3.1 billion is fee paying. Expected to close in Q3 2025, subject to regulatory approvals and customary closing conditions.

    Great Gray Trust CompanyPartnership to provide a custom target date fund glidepath that strategically allocates across public and private markets for retirees.

    BlackRock was selected to provide the underlying index equity, fixed income exposures, and private equity exposures through its BlackRock Private Investment Fund (BPIF).

    JFS and RelianceJoint venture to build out a large-scale asset management platform in India.

    Aims to help more people participate in the growth of local and global capital markets in India.

    Kuwait Investment Authority and TemasekAdded as partners to the AIP fund.

    Additions to the Artificial Intelligence Partnership (AIP) fund, which is targeting $30 billion in equity.

    ViridiumMinority investment to bolster private credit and alternatives capabilities.

    Minority investment made earlier this year.

    Risks & headwinds

    4
    Lower performance feesQ2 FY25

    Performance fees of $94 million decreased from a year ago, contributing to an 80 basis point year-over-year decline in as-adjusted operating margin.

    Mitigation: Management defers a portion of compensation linked to performance fees for talent retention, which impacts comp expense in future years.

    Intra-month equity market declinesApril (Q2 FY25)

    Contributed to a 0.4 basis point quarter-over-quarter decrease in the annualized effective fee rate.

    Litigation risk in defined contribution plans for private market exposureOngoing

    The opportunity to add private markets exposure to DC plans is most tangible in larger plans if litigation reform or advice reform occurs.

    Mitigation: BlackRock is engaging with policymakers and trade associations to build consensus and a fact base around this issue, and emphasizes the role of analytics and data (Preqin, eFront, Aladdin) to manage risk.

    Regulatory uncertainty for stablecoinsOngoing

    Questions remain with some stablecoins as to what is the collateral backing some of that.

    Mitigation: BlackRock advocates that stablecoins should be invested in short-term government bonds to ensure legitimacy and safety, and is actively engaging with central banks and regulators on stablecoin development.

    What to watch in Q3 FY25

    5

    HPS Revenue Contribution

    Q3 FY25
    CurrentHPS closed July 1, expected to add revenue in Q3 FY25
    TargetApproximately $450M revenue, including $225M management fees in Q3 FY25

    Why it matters

    This is a key financial impact from a major acquisition, directly affecting BlackRock's top-line growth and effective fee rate.

    We expect HPS to add approximately $450 million of revenue, including $225 million in management fees in the third quarter of 2025.

    Q&A highlights

    8

    How are HPS and GIP integrations progressing, particularly with insurance clients? What's the traction in wealth/retirement for private/multi-liquid strategies, and what are the next steps?

    Larry Fink highlighted strong client feedback and opportunities in Asia for insurance and wealth management. GIP V exceeded its target, and the AIP fund is progressing towards $30B equity and $100B debt. He noted the growing need for public-private and infrastructure financing. For HPS, early acceptance is strong. BlackRock manages $700B for insurance companies and sees opportunities to drive private markets with them. In wealth/retirement, the firm is innovating with LifePath and target date products, and sees analytics/data (Preqin, eFront) as crucial for future growth in private markets for retirement.

    “There is no question in my mind that with rising deficits with more and more governments, the conversations we're having, whether it's in Europe or the United States or Japan that the role of public-private financing and the role of infrastructure financing is going to grow dramatically.”

    asked by Michael Cyprys · answered by Laurence Fink

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Vision and Acquisitions

    BlackRock's strategy focuses on integrating public and private markets, building on its foundational strengths in ETFs, Aladdin, fixed income, and cash management. Recent acquisitions of GIP, Preqin, and HPS are central to this vision, aiming for 30% revenue contribution from private markets and technology by 2030. The firm emphasizes its history of successful integrations and a "One BlackRock" culture to leverage these new capabilities.

    02

    Private Markets Expansion

    The successful final close of GIP V at $25.2 billion, exceeding its target, demonstrates strong client validation for the BlackRock-GIP combination. The AIP fund is also progressing towards its $30 billion equity target, with an additional $100 billion in associated debt. The acquisition of HPS Investment Partners is expected to significantly enhance private credit offerings, with client feedback on these integrations being "extremely positive."

    03

    Retirement Solutions and Private Markets Access

    BlackRock, managing over half its AUM in retirement assets, is actively working to bring private market exposure to defined contribution plans. The partnership with Great Gray for a public-private target date solution and plans to launch a proprietary LifePath fund with privates in 2026 highlight this effort. Management believes that broadening investment profiles in DC plans with private assets could significantly boost long-term returns for retirees, contingent on litigation reform.

    04

    Technology and Data Leadership

    The firm continues to see sustained demand for its Aladdin technology offerings, with Annual Contract Value (ACV) growing 16% organically. The acquisition of Preqin is enhancing transparency and analytics in private markets, providing GPs and LPs with better tools for analysis and benchmarking. This focus on data and analytics is seen as crucial for expanding opportunities, especially in the evolving retirement and wealth management spaces.

    05

    iShares and Digital Assets Innovation

    iShares continues to be a powerful growth engine, with record first-half inflows and 12% organic base fee growth in ETFs this quarter. Active ETFs and digital asset ETPs, including IBIT which crossed $75 billion in AUM, are driving outsized growth and attracting new investors to the BlackRock brand. The firm is also innovating in cash management, with its tokenized liquidity fund reaching $3 billion in AUM and managing $50 billion for Circle's stablecoin cash reserves.

    06

    Global Market Expansion

    BlackRock is actively pursuing growth opportunities outside its home market, with $4.5 trillion AUM for clients outside the US. Initiatives include the Jio BlackRock offering in India, which has already raised over $2 billion, and efforts to expand capital markets and retirement systems in the Middle East and Europe. The firm sees the expansion of global capital markets as a primary driver for future success, leveraging its presence in 100 countries.

    AI-generated summary of the company’s earnings call. Not investment advice.