TROW T. Rowe Price 10-Q 2026-09-30 section summaries

T. Rowe Price Group (TROW) — Q3 and nine months ended September 30, 2026

Consolidated results

Revenue growth was driven largely by higher average AUM. Operating income rose despite higher nine-month expenses; Q3 expenses declined, including compensation costs of $703.5M versus $714.3M. Distribution and servicing costs increased to $111.0M from $95.8M in Q3. Restructuring charges were $4.0M in Q3 and $20.7M for 9M, primarily severance and costs of exiting owned buildings.

Lower investment-related non-operating income helped explain why Q3 attributable net income declined while operating income increased: non-operating income was $17.6M versus $238.4M, including net investment gains of $32.3M versus $161.2M. For 9M, non-operating income was $338.4M versus $544.6M. The firm reports one investment-management segment and says results depend substantially on AUM value and composition.

Revenue sources

Sponsored-product revenue grew 7.1% in Q3 and 8.9% for 9M. Advisory fees generally vary with AUM and its asset mix.

Average AUM

Investors domiciled outside the U.S. represented 9.3% of AUM at September 30, up from 8.8% at year-end 2025.

Balance sheet and cash flow

Tangible equity attributable to T. Rowe Price was $8,495.2M at September 30, calculated after subtracting goodwill and intangible assets from attributable equity. The increase in liabilities included accrued compensation and related costs of $862.2M versus $235.7M. No goodwill impairment triggers arose during the first nine months of 2026 or 2025.

Investing cash outflow was $714.9M versus $18.9M, including $765.2M of sponsored-product purchases versus $134.9M. Financing cash outflow was $700.8M versus $785.6M. The company repurchased 5.267M shares during 9M; stock-based compensation expense was $135.5M versus $134.2M.

Investments, risks and strategic developments

Consolidated investment products had assets of $2,624.0M and debt and other liabilities of $554.4M at September 30, compared with $1,951.0M and $21.3M at year-end. September debt included $368.5M of CLO notes and a $35.3M warehouse facility. The products’ assets are generally unavailable for T. Rowe Price’s operations or general creditors. Their Q3 results included a $21.1M pretax loss versus $70.4M income, reflecting an $18.0M net investment loss versus $72.6M of income. CLO notes’ unpaid principal exceeded the fair value of senior secured loans and bonds by about $6.4M; none of the collateral assets was in default.

Maximum risk of loss on unconsolidated variable-interest entities was $1,460.2M, comprising $1,178.8M of investment carrying value, $167.9M of unfunded commitments and $113.5M of receivables. T. Rowe Price committed $278M for future OHA product launches through 2030. In August 2026, it agreed to acquire F/m Investments for about $75M plus up to $50M in contingent earnout consideration, funded from existing cash; closing is expected in Q1 2027, subject to regulatory approvals. The acquisition is intended to expand fixed-income ETF and separately managed account capabilities. Separately, the OHA acquisition agreement’s potential $900M cash earnout covered cumulative 2022–2026 revenue targets; in April 2026, the parties determined no 2026 contingent consideration would be earned or paid.

Outstanding nonvested restricted stock units totaled 6,347,524, including 384,080 performance-based units, with weighted-average fair value of $113.46 per unit. Estimated future compensation expense was $236.1M for stock awards and $84.0M for restricted fund units. Prior-period technology costs were reclassified to reflect vendor partnerships; the reclassification did not change total expenses, operating income, net income or cash flows. KPMG’s interim review reported no material modifications needed for GAAP conformity; ordinary-course claims were not expected to have a material adverse effect.

T. Rowe Price — Q3 and nine months ended September 30, 2026

T. Rowe Price’s results remain highly sensitive to market levels, client flows, investment performance and product mix: investment advisory fees generated about 90% of Q3 revenue and more than 90% of nine-month revenue. Average AUM growth supported revenue, but lower effective fee rates and net outflows were headwinds. Management is seeking to align expense growth with anticipated revenue growth while investing in talent, technology, products and distribution capabilities. The firm also faces industry fee pressure, competition from passive products, regulatory change and the risk that relative investment performance could weaken asset retention.

Consolidated results

Amounts in $ millions, except per-share data and margins.

Q3 revenue increased 5.9%, while operating income rose 19.7%; the operating margin expanded to 38.4% from 34.0%. Despite higher operating income, Q3 net income declined as non-operating income fell sharply from the prior-year period. For the first nine months, revenue grew 7.2%, operating income 15.9%, and net income 6.1%.

Adjusted results exclude specified acquisition-related costs, market-related deferred-compensation effects, restructuring charges, consolidated investment-product effects and selected investment gains or losses. In Q3, adjusted EPS rose even though adjusted net income was slightly lower, aided by fewer diluted weighted-average shares. Nine-month adjusted EPS increased 9.2%.

Revenue mix and fee trends

Nine-month advisory fees were $5,224.2 million, up from $4,864.7 million; performance-based fees were $21.3 million, compared with $23.2 million; capital allocation-based income was $99.9 million, versus $40.4 million; and administrative, distribution, servicing and other fees were $423.9 million, versus $452.4 million. Capital allocation income fluctuates with accrued carried interest and related items. The decline in other fees partly reflected the prior-year reclassification of certain managed-account and advisory-service revenue into investment advisory fees, as well as lower recordkeeping fees.

Average AUM increased 9.5% in Q3 to $1,887.2 billion and 11.5% for the first nine months to $1,834.0 billion. Advisory fee growth was slower than average AUM growth: the annualized effective fee rate excluding performance fees declined to 37.8 basis points in Q3 from 39.1 basis points, and to 38.1 basis points for nine months from 39.6 basis points. Management cited shifts toward lower-fee products and asset classes, partly offset by equity-market appreciation.

AUM, flows and investment performance

Ending AUM was $1,862.7 billion at September 30, up 5.4% from $1,767.2 billion a year earlier, but down $30.7 billion from June 30. Q3 net outflows of $28.3 billion and market depreciation of $2.4 billion drove the sequential decline. Over the first nine months, AUM increased $87.1 billion: $135.6 billion of market appreciation and income was partly offset by $48.5 billion of net outflows. Nine-month net flows were equity −$61.7 billion, fixed income +$11.5 billion, multi-asset −$3.1 billion and alternatives +$4.8 billion. Alternatives included $19.0 billion of unfunded commitments that did not earn fees. Target-date retirement AUM was $613.9 billion, down from $622.0 billion at June 30; Q3 outflows were $6.5 billion, while nine-month net flows were approximately flat at +$0.1 billion.

Investment results were mixed and remain a risk to asset retention. Among U.S. funds, 60% outperformed Morningstar medians over one year, but 48% did so over five years; against passive-peer medians, the figures were 57% and 42%. Only 45% of composites beat benchmarks over one year and 32% over five years. At quarter-end, 64 of 142 rated U.S. mutual funds had four- or five-star Morningstar ratings.

Expenses, liquidity and capital allocation

Nine-month GAAP operating expenses rose 3.2%, while adjusted expenses increased 4.2%. Compensation and related costs increased 3.8% to $2,186.6 million despite a 5.4% decline in average headcount to 7,584. Distribution and servicing costs rose 12.2% to $316.4 million, reflecting more assets distributed through third-party intermediaries; technology, occupancy and facility costs rose 7.3% to $615.4 million, including spending on outsourced capabilities and cloud infrastructure. Q3 included an approximately $10 million reversal of accrued technology costs for work expected in future periods. Advertising and promotion costs declined 21.9% to $60.4 million. Restructuring charges were $20.7 million for nine months, versus $28.5 million.

Company-attributable cash and investments totaled $7.5213 billion at September 30, 2026, compared with $6.3033 billion at December 31, 2025. This included $3.7743 billion of cash and cash equivalents, $1.1517 billion of discretionary investments, $1.2452 billion of redeemable seed capital and $1.3501 billion of investments hedging deferred-compensation liabilities. The broader balance-sheet presentation included $10.0291 billion of cash and investments, including consolidated investment-product assets and redeemable non-controlling interests; the company’s $1.0122 billion interest in consolidated investment products was not directly available for general operations. Management said liquidity and expected operating cash generation were sufficient, and the company had no external source of additional liquidity.

Higher company-attributable operating cash flow primarily reflected improved settlement timing, higher net income and more non-cash adjustments. Investing cash outflow increased mainly because of net investment purchases of $739.5 million, compared with net investment-sale proceeds of $241.9 million in 9M 2025. Full-year 2026 capital expenditures, including capitalized internal labor, are expected to be about $290 million, nearly all for technology. The company repurchased 5.3 million shares for $497.5 million at an average $94.44 per share during the nine months; cash-flow financing disclosures report $500.9 million of repurchases. The quarterly dividend increased 2.4% in February 2026 to $1.30 per share. In August, T. Rowe Price agreed to acquire F/m Investments for about $75 million plus up to $50 million of contingent earnout consideration, with closing expected in Q1 2027.

Results are exposed to market movements, flows, fee competition, investment performance, investor sentiment, regulatory and tax changes, and the continuity of fund-related agreements. The company also identifies potential cost pressures from technology and infrastructure, employee and incentive costs, and strategic investment, as well as operational risks including cyberattacks and third-party service interruptions.

T. Rowe Price reported no material change in market risks from those disclosed in Item 7A of its 2025 Form 10-K. The section provided no new market-risk metrics or specific changes to the company’s risk exposures.

Management concluded that TROW’s disclosure controls and procedures were effective at the reasonable-assurance level as of September 30, 2026. No change in internal control over financial reporting during Q3 2026 materially affected, or was reasonably likely to materially affect, those controls. This section reports no financial results or business developments.

T. Rowe Price reported no material changes to the risk factors disclosed in its 2025 Form 10-K. The section identifies no new or updated risks, financial metrics, or strategic developments.