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    TROW
    Earnings call· Jun 2026(Q2 FY26)

    PRICE T ROWE GROUP Q2 FY26 earnings call TROW

    Jul 31, 2026 Source

    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

    5
    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

    Operational metrics

    41
    Assets Under Management
    $1.9 trillion
    Q2 FY26

    End of quarter AUM.

    Net Outflows
    $6.5 billion
    Q2 FY26

    Elevated outflows in April, but positive flows in May and June.

    Adjusted Diluted EPS
    $2.57up from $2.52 in Q1 2026 and $2.24 in Q2 2025
    Q2 FY26

    Increase driven by higher average AUM and investment advisory revenue, coupled with lower share count, partially offset by higher expenses.

    Adjusted Net Revenue
    $1.9 billionup 2.7% from Q1 2026 and up 8.5% from Q2 2025
    Q2 FY26

    Increase driven by higher AUM, partially offset by lower change in accrued carried interest.

    Investment Advisory Revenue
    $1.7 billionup from both the prior quarter and the prior year quarter
    Q2 FY26

    Driven by higher AUM levels.

    Annualized Active Fee Rate (excluding performance-based fees)
    38.1compared with 38.4 basis points in Q1 2026
    Q2 FY26

    Reflects changes in asset and vehicle mix, client demand for lower fee strategies, and redemptions in higher fee equity strategies.

    Adjusted Operating Expenses
    $1.2 billionup 4.2% from Q1 2026 and up 4.9% from Q2 2025
    Q2 FY26

    Driven by higher market-driven expenses, product and recordkeeping costs, and nonrecurring G&A, partially offset by cost savings.

    Share Buyback
    $157 million
    Q2 FY26

    Part of capital management.

    Share Buyback
    $497 millionnearly 2.5% of our outstanding shares
    YTD FY26

    Total buybacks year-to-date.

    Share Count
    213.3 million
    Q2 FY26 end

    Share count at the end of Q2.

    Cash and Discretionary Investments
    $4.4 billion
    Q2 FY26 end

    Strong balance sheet position.

    Funds Outperforming Peer Groups
    >50%
    1-year

    Based on Morningstar peer groups.

    Funds Outperforming Peer Groups
    >50%
    3-year

    Based on Morningstar peer groups.

    Funds Outperforming Peer Groups
    >50%
    10-year

    Based on Morningstar peer groups.

    Funds Outperforming Peer Groups
    44%
    5-year

    Based on Morningstar peer groups.

    Asset-Weighted Funds Outperforming Peer Groups
    79%
    10-year

    Strong long-term performance.

    Asset-Weighted Funds Outperforming Peer Groups
    44%
    1-year

    Near-term performance more challenged.

    Asset-Weighted Funds Outperforming Peer Groups
    57%
    3-year

    Near-term performance more challenged.

    Asset-Weighted Funds Outperforming Peer Groups
    43%
    5-year

    Near-term performance more challenged.

    Equity Funds Outperforming Peer Groups
    >50%
    1-year

    Mirrored overall fund range.

    Equity Funds Outperforming Peer Groups
    >50%
    3-year

    Mirrored overall fund range.

    Equity Funds Outperforming Peer Groups
    >50%
    10-year

    Mirrored overall fund range.

    Equity Funds Outperforming Peer Groups
    <50%
    5-year

    Fell below threshold.

    Asset-Weighted Fixed Income Funds Outperforming Peer Groups
    >75%
    all reported time periods

    Continued strong performance.

    Target Date AUM Outperforming Peer Groups
    80%
    3-year

    Long-term performance remained strong.

    Target Date AUM Outperforming Peer Groups
    54%
    5-year

    Long-term performance remained strong.

    Target Date AUM Outperforming Peer Groups
    98%
    10-year

    Long-term performance remained strong.

    Target Date AUM Outperforming Peer Groups
    80%
    1-year

    Rebounded due to higher relative equity exposure and tactical asset allocation decisions.

    Integrated Equity and Fixed Income Strategies AUM
    $200 billion
    Q2 FY26 end

    These approaches combine fundamental research and quantitative insights.

    Integrated Equity and Fixed Income Strategies Net Inflows
    $16 billion
    YTD FY26

    Reflects growing client demand.

    ETF Business Net Inflows
    $4.4 billion
    Q2 FY26

    Strong growth in the ETF business.

    ETF Business Funds
    34
    Q2 FY26 end

    Total number of ETFs in the lineup.

    ETF Business AUM
    $30 billion
    Q2 FY26 end

    Total AUM in the ETF business.

    SMA Platform Products
    43
    Q2 FY26 end

    Number of products on the SMA platform.

    SMA Platform AUM
    $20 billion
    Q2 FY26 end

    Total AUM on the SMA platform.

    AI Solutions Deployed
    130
    Q2 FY26 end

    Across the firm.

    AI Solution Adoption Rate
    >70%
    Q2 FY26 end

    Associated adoption.

    Target Date Assets (Hybrid and Blend Retirement Strategies)
    ~25%
    Q2 FY26 end

    Continued steps in these strategies.

    Equity AUM (Direct Active Equity)
    $900 billion
    Q2 FY26 end

    Despite outflows, this business remains important.

    Model Accounts AUM (Goldman Sachs alliance)
    ~$0.5 billion
    Q2 FY26 end

    Continuing to grow.

    Russell Reconstitution Turnover
    $300 billion
    June 2026

    Significant reshaping of benchmark risk characteristics.

    Product announcements

    7
    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

    1
    Goldman SachsStrategic 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

    6
    Continued pressure in fundamental active equityH2 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 rateongoing

    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 FY26H2 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 equitiesQ3 FY26

    reflecting the significant year-to-date gains

    Mitigation: Diversifying product offerings and investment capabilities.

    Lull in target date fund flowsH2 FY26

    air pocket in the late-stage pipeline

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

    Russell Reconstitution impactJune 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

    5

    Net flows in H2 FY26

    next quarter (Q3 FY26)
    Current$6.5 billion net outflows in Q2 FY26
    TargetLess 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.

    Q&A highlights

    6

    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 read7 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    07

    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.

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