BlackRock, Inc. earnings

Management highlights

### Overall Financial Performance & Strategic Positioning - BlackRock delivered record quarterly revenue, operating income, EPS, and a 45.9% operating margin (the highest level in nearly five years), expanding 260 basis points year-over-year. - The firm reached 8 consecutive quarters of organic base fee growth at or above target, with 10% organic base fee growth and $868 billion in net inflows for the trailing 12 months. - Recent acquisitions of GIP, HPS, and Prequin are performing above initial plans and accelerating progress toward 2030 growth targets. ### Core Growth Priorities - **Retirement Solutions**: Life Path Paycheck, a retirement income-focused solution, has grown to $30 billion in AUM. BlackRock is positioned to deliver scaled retirement portfolios that integrate public markets, private markets, and guaranteed income, a core long-term growth priority. - **iShares ETF Leadership**: BlackRock has moved from the 7th to 3rd largest active ETF manager globally in three years, and holds leading market share in both passive and active ETFs, benefiting from accelerating global ETF adoption and category innovation. - **Private Markets Flywheel**: The integrated public-private market platform is driving faster deal origination, deployment, and fundraising, particularly in digital infrastructure. BlackRock is seeing strong demand from insurance clients seeking higher yields from private credit and infrastructure debt, with $10 billion in insurance high-grade debt mandates closed in 2026 year-to-date. - **M&A Integration Strategy**: BlackRock acquires client-need focused capabilities, integrates them into its global platform, and scales them faster than independent operations; GIP, HPS, and Prequin are expected to follow the same successful path as prior acquisitions like Appirio. ### Technology & AI Investment - AI is accelerating BlackRock’s ability to deliver data and workflow solutions across public and private markets for Aladdin clients. - The combination of Aladdin, eFront, and Prequin is positioned to create the first seamless analytics platform for evaluating risk across combined public and private portfolios, addressing growing demand for transparency from institutional and retail investors.

Guidance

- Maintains the long-term target of low-to-mid-teens annual ACV growth for technology services. - Reaffirms the 2030 goal of 30% of total revenue coming from private markets and technology, which will drive more stable double-digit EPS growth and consistent margin expansion. - Expects full-year 2026 adjusted effective tax rate to remain approximately 25%. - Maintains the expectation of a mid-single-digit percentage increase in full-year G&A after annualizing the impact of the HPS and Prequin acquisitions. - Increased quarterly share repurchase guidance to at least $550 million per quarter going forward, up from prior January guidance. The firm expects to return over $5.7 billion total to shareholders in 2026, a 16% increase over 2025. - Maintains the target of $400 billion in total gross private markets fundraising from 2025 through 2030, and is currently on track to meet this goal. - Targets building digital assets into a $500 million annual revenue business over the long term as part of the 2030 plan. - Management expects operating margins can expand beyond the current 45.9% Q2 level, with a structural path toward levels matching or exceeding the 47% margin reached in 2021, driven by scale, higher revenue mix from high-margin private markets and technology, and operating leverage.

Segment performance

Overall, BlackRock recorded $7.1 billion in total Q2 2026 revenue, up 31% year-over-year, with operating income of $2.9 billion (up 39% YoY) and adjusted EPS of $13.91 (up 15% YoY). AUM reached a record $15.3 trillion, with total Q2 net inflows of $192 billion. - **iShares ETFs**: Total Q2 net inflows of $178 billion, with core equity ETFs at $85 billion, index bond ETFs at $61 billion, and active ETFs at $20 billion. iShares global AUM is over $6 trillion, with 12% organic base fee growth year-to-date 2026, and 10% organic base fee growth for the trailing 12 months. iShares Europe AUM reached $1.5 trillion, with $80 billion year-to-date net inflows; locally domiciled iShares Asia Pacific AUM crossed $100 billion in Q2. - **Active & Systematic Strategies**: Total active franchise net inflows of $53 billion, with $18 billion in active fixed income net inflows led by strategic income and high-yield funds. Systematic strategies delivered $20 billion in Q2 net inflows, with AUM doubling to $400 billion in two years; BlackRock Systematic ETFs gathered $6 billion in active ETF net inflows. - **Private Markets**: Total Q2 net inflows of $15 billion, with $6 billion from private credit and $5 billion from a mix of infrastructure fundraising and deployment, plus a $3 billion partial private equity outsourcing mandate. - **Wealth & Customized Solutions**: Retail net inflows totaled $19 billion. Appirio (direct indexing/tax-aware strategies) recorded $7 billion in Q2 net inflows, $20 billion year-to-date 2026 flows, and AUM near $200 billion, up 4x since acquisition. SpiderRock AUM has nearly tripled to $13 billion in two years, with two consecutive record quarters of over $1 billion in flows. - **Technology (Aladdin, Prequin)**: Q2 technology services and subscription revenue grew 13% YoY, with annual contract value (ACV) up 15% YoY, in line with the long-term target of low-to-mid-teens ACV growth. - **Digital Assets**: BlackRock holds ~$110 billion in AUM connected to digital assets, including $60 billion in stablecoin reserves for Circle, representing 25% of the $300 billion global stablecoin market.

Risks & headwinds

- Forward-looking statements are inherently uncertain, and actual results may differ materially from guidance due to regulatory changes, market conditions, and other unforeseen factors, as disclosed in SEC filings. - Market volatility and changes in equity market valuations can impact AUM and margins, leading to potential downward swings in financial performance. - Digital asset and tokenized product development is subject to regulatory uncertainty and evolving market acceptance, which may impact the timeline and success of growth plans in this segment. - Potential broader industry trend of increasing platform and revenue sharing fees from major distribution partners could create net revenue headwinds, though management notes BlackRock’s scale and diversified value-add to partners mitigates this risk currently. - Credit quality of private market investments could weaken, negatively impacting performance fees and net investment returns.

Analyst Q&A

• Q: What is the growth outlook for direct indexing and tax-aware long-short liquid alternative strategies, and does demand for these products have structural staying power? /

  A: Optimizing after-tax portfolio returns is a long-term structural growth theme across all of BlackRock’s portfolio business, not just direct indexing, as clients ultimately spend after-tax dollars. Appirio, BlackRock’s direct indexing business, recorded $7 billion in Q2 2026 net inflows and $20 billion in 2026 year-to-date flows, which already exceeds 2025’s full-year record of $15 billion, marking a fifth consecutive record year for inflows. Tax-optimized long-short strategies are seen as the next major growth category in this space, and are complementary to private market holdings to offset taxable capital gains, making this a core structural growth engine for BlackRock’s 2030 strategic plan.

• Q: What progress and milestones does BlackRock have for tokenization of ETFs and other assets over the next 12 months? /

  A: BlackRock’s tokenization strategy is client-led, focused on providing regulated, scaled access to long-term investment products for investors already active in digital wallets. BlackRock recently filed two SEC registration statements for tokenized money market funds, including one tokenized share class for an existing fund on Ethereum and a digitally native fund with features like on-chain dividend reinvestment. Tokenization is viewed as an organic growth opportunity to access a new distribution channel of 5 billion global digital wallet users, positioning BlackRock to become a native digital asset manager over time with a full ecosystem of tokenized investment products.

• Q: Can you update on progress capturing insurance client demand for shifting from liquid to illiquid private fixed income, and how much growth can we expect in this segment? /

  A: BlackRock has closed $10 billion in high-grade infrastructure debt mandates for insurance clients year-to-date 2026, with growing global demand as insurers seek 150-350 basis point yield premiums over Treasuries by taking on illiquidity risk. The integration of HPS and GIP has accelerated joint origination of large infrastructure deals, which require large amounts of private debt, creating more opportunities to place this debt with insurance clients. Based on BlackRock’s existing $800 billion of insurance client assets, even a 5-10% conversion to private markets would deliver a meaningful lift to average fee income, and this shift is already accelerating materially with no signs of slowing.

• Q: What drove Q2’s 45.9% operating margin, the highest in five years, how sustainable is this level, and how much more margin expansion can we expect? /

  A: The margin expansion came from stronger-than-expected organic growth in high-margin structural growth categories (private markets, active ETFs, technology, customized SMA solutions), operating leverage from scale, and acquisition synergies from HPS and GIP, which both have FRE margins above 50%. Management does not view 45.9% as a ceiling; BlackRock reached 47% operating margins in 2021 without the scale of current high-margin private markets and systematic businesses, so the 2030 strategy is structurally engineered to push margins higher over time through faster revenue growth, higher average fee rates, and AI-driven automation that improves operating leverage.

• Q: What is the latest on private markets fundraising and deployment that drove the $15 billion Q2 inflow, and what does this imply for coming quarters? /

  A: The $15 billion Q2 inflow was split into $6 billion from private credit deployment, where wider spreads have created attractive relative value opportunities that institutional investors are eager to capitalize on, and $5 billion from a mix of infrastructure fundraising and deployment, plus a $3 billion partial private equity outsourcing mandate. BlackRock is on track to hit its 2025-2030 target of $400 billion in total gross private markets fundraising, with a very active deal pipeline including large transactions like the Alliant Data Centers take-private and AES acquisition. The growing market for general partner limited partner portfolio consolidation and optimization is a new incremental growth driver for BlackRock’s private equity solutions business, as demonstrated by the $3 billion Latin America mandate secured in Q2.