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Price T Rowe Group (TROW) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 31, 2026

Source: earnings call transcript

Executive summary

T. Rowe Price Q2 FY26 — Strong ETF Inflows and Strategic Investments Amidst Active Equity Outflows

T. Rowe Price navigated Q2 FY26 with strong ETF inflows and strategic investments in AI and new product offerings, despite continued net outflows in active equity and a declining effective fee rate. The firm is balancing short-term expense management with long-term growth initiatives, including expanding its ETF and SMA platforms, diversifying into alternatives, and enhancing direct client platforms. Management anticipates a more challenging net flow environment in the second half of the year.

Highlights

5

  • Net inflows of $4.4 billion into the ETF business, which now manages $30 billion in assets.

  • Adjusted diluted EPS increased to $2.57 in Q2 FY26, up from $2.24 in Q2 FY25.

  • Adjusted net revenue grew 8.5% year-over-year to $1.9 billion in Q2 FY26.

  • Over half of funds beat peer groups for 1-, 3-, and 10-year periods, with asset-weighted 10-year outperformance at 79%.

  • Strong balance sheet with $4.4 billion in cash and discretionary investments.

Concerns

5

  • Total net outflows of $6.5 billion in Q2 FY26, primarily driven by fundamental active equity.

  • Annualized active fee rate declined to 38.1 basis points in Q2 FY26 from 38.4 basis points in Q1 FY26 due to mix shift.

  • Adjusted operating expenses increased 4.9% year-over-year to $1.2 billion in Q2 FY26.

  • Asset-weighted 5-year fund performance saw only 43% outperforming peers.

  • Expectation for net flows in H2 FY26 to be "meaningfully more challenging" than H1 FY26 due to active equity outflows, absence of large mandates, portfolio rebalancing, and a lull in target date fund flows.

Guidance & targets

CategoryTargetConfidence
Full year adjusted operating expenses (excluding carried interest expense)
up 4% to 7%
high materiality
High
Late-stage venture fund size
Exceed target fund size
medium materiality
High
Second late-stage venture fund launch
Anticipated launch
medium materiality
Medium
Net flows outlook
Meaningfully more challenging
high materiality
High
Gross flows
Record year
medium materiality
High

TROW operating KPIs by quarter

TROW operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q1 FY26This call Jun 2026 Q2 FY26Change vs prior quarter
Net new assets ETF
$2.8B+ Our ETFs generated over $2.8 billion in net flows in the first quarter. Source: earnings call transcript
$4.4B Within our growing ETF business, we had $4.4 billion in net inflows. Source: earnings call transcript
—
Assets under management (AUM) SMA
$17B+ Our SMA platform expanded to 42 offerings with more than $17 billion in AUM and over $900 million in net flows in the [indiscernible] quarter. Source: earnings call transcript
$20B Our SMA platform now includes 43 products and $20 billion in assets under management. Source: earnings call transcript
—
Net new assets
-$13.7B As previously reported, we ended the quarter with $1.71 trillion in AUM, and $13.7 billion in net outflows. Source: earnings call transcript
-$6.5B We ended the quarter with $1.9 trillion in assets under management and $6.5 billion in Q2 net outflows. Source: earnings call transcript
+52.6%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
T. Rowe Price Capital Appreciation Market Opportunities ETFlaunch
T. Rowe Price Active Crypto ETF (TKNZ)launch
T. Rowe Price Goldman Sachs Private Markets Fundlaunch
Public, private equity interval fund (second fund with Goldman Sachs)roadmap
Target Date Sister Series (CIT)milestone
Late-stage venture fund (first fund)milestone
Late-stage venture fund (second fund)roadmap

Deals & partnerships

Goldman Sachs Strategic alliance for private markets funds and model accounts.

Collaboration includes 5 launched model accounts, a T. Rowe Price Goldman Sachs Private Markets Fund (interval fund), a public-private equity interval fund in registration, and a target date series incorporating alternatives.

Risks & headwinds

Continued pressure in fundamental active equity H2 FY26

expect that to continue in the second half of the year

Mitigation:Diversifying into fixed income, alternatives, ETFs, SMAs; maintaining focus on active equity.

Declining annualized active fee rate ongoing

38.1 bps in Q2 FY26 vs 38.4 bps in Q1 FY26

Mitigation:Investing in higher-growth, differentiated products and vehicles (ETFs, SMAs, alternatives) and enhancing advice offerings.

Challenging net flow environment in H2 FY26 H2 FY26

meaningfully more challenging than the first half

Mitigation:Focusing on strong interest in lower tracking offerings, active ETFs, consistent fixed income flows, building momentum in alternatives, and international growth.

Portfolio rebalancing away from equities Q3 FY26

reflecting the significant year-to-date gains

Mitigation:Diversifying product offerings and investment capabilities.

Lull in target date fund flows H2 FY26

air pocket in the late-stage pipeline

Mitigation:Engaging with clients and prospects for the new target date series incorporating alternatives.

Russell Reconstitution impact June 2026

$300 billion of turnover

Mitigation:Creates opportunity for active management to assess changes through a research-driven lens.

What to watch in Q3 FY26

Net flows in H2 FY26

next quarter (Q3 FY26)
Current $6.5 billion net outflows in Q2 FY26
Target Less challenging than H1 FY26, or signs of improvement

Why it matters

Management expects H2 flows to be "meaningfully more challenging," making any stabilization or improvement critical for the growth outlook.

We expect net flows in the second half of the year to be meaningfully more challenging than the first half, primarily due to a number of the things that you've cited.

Find out whether TROW delivers this. Inve re-checks your case every morning.

Q&A highlights

How is TROW adapting its strategy to declining fee rates and high expenses, and what role does M&A play?

Rob Sharps emphasized delivering world-class capabilities, maintaining active equity importance, and growing fixed income and alternatives. He highlighted organic investment in ETFs, SMAs, and direct platforms, and confirmed continued evaluation of inorganic opportunities given industry consolidation.

“I would say in each of those priorities, whether it's diversification from an asset class and capability perspective, fixed income and alternatives, whether it's diversification from a vehicle perspective, ETF and SMA, or as we lean into our direct platforms, there will be organic investment in those businesses...”

asked by Bill Katz · answered by Robert Sharps

2 min read 7 chapters

Detailed narrative

Strategic Focus on Diversification and Growth

T. Rowe Price is actively diversifying its business beyond traditional active equity, which remains under pressure. Key growth areas include fixed income, alternatives (OHA, late-stage venture, Goldman Sachs partnership), and expanding vehicle offerings like ETFs and SMAs. The firm aims to deliver world-class investment capabilities aligned with client needs, balancing organic investment with potential inorganic opportunities.

Advancements in AI Integration

The company is embedding AI into end-to-end business workflows, with over 130 AI solutions deployed and more than 70% adoption across the firm. AI is being used for investment research, portfolio insights, sales, and client workflows to enhance decision-making speed and consistency, supported by a robust governance framework and associate upskilling.

Leadership Appointments

Eric Veiel has been named President, taking on an expanded role to drive enterprise execution and critical initiatives, while retaining his leadership in Global Investments. Sébastien Page, Head of Global Multi-Asset, is now Co-Head of Global Investments, focusing on solutions and outcomes. These changes aim to sharpen execution and position the firm for continued growth.

Digital Assets and Tokenization Strategy

T. Rowe Price views tokenization as a structurally important evolution in investment management. The firm's digital assets group is exploring opportunities, including the potential for digital wallets to become important client interfaces if tokenized assets become widely adopted. The strategy aims to meet client needs, reach new investors, and increase operational efficiency.

SMA Business Expansion

Despite being a relatively late entrant, T. Rowe Price is rapidly building momentum in its SMA platform, which now includes 43 products and $20 billion in AUM. The firm is focusing on platform placement, developing partnerships with existing platforms, and launching its own tax optimization capability in conjunction with a vendor partner next week.

Goldman Sachs Strategic Alliance Progress

The collaboration with Goldman Sachs is progressing, with 5 model accounts launched approaching $0.5 billion in AUM. The T. Rowe Price Goldman Sachs Private Markets Fund, an interval fund, launched on July 1st, targeting the wealth channel. A second public-private equity interval fund is expected later this year, and a target date series incorporating alternatives is operationally ready for launch as a CIT.

Russell Reconstitution Impact

The June 2026 Russell reconstitution was described as a significant reshaping of benchmark risk characteristics, involving over $300 billion of turnover and a substantial migration of AI-related exposures and momentum factors. This reassignment of exposures created volatility but also opportunities for active management.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.