KKR & Co., Inc. Q3 FY2026 earnings call

• Record Financial Performance: Reported record results across Fee-related earnings, total operating earnings, and adjusted net income per share for the second consecutive quarter. FRE per share rose 24% YoY to $1.42.
• Capital Deployment and Monetization: Deployed $20 billion of capital in Q3, bringing T12M deployment to $98 billion (+15%). Returned $31 billion to clients YTD 2026, with expectations to exceed $40 billion for the full year, driven by disciplined linear deployment and strong portfolio performance.
• USI Transaction: Announced the sale of USI, its inaugural core private equity investment. The transaction is expected to deliver an ~6x multiple on original costs, provide ~$3.3 billion in after-tax proceeds, and generate ~$2 billion in adjusted net income.
• Fundraising Momentum: Raised $25 billion in new capital in Q3 and $116 billion over T12M. Notable successes include the final close of the flagship global infrastructure fund at $19.2 billion and $1 billion commitment from Samsung for Helix AI infrastructure.
• Insurance Growth: GA new business volumes accelerated to $3.4 billion in Q3, implying an annualized run rate of ~$13.5 billion, with September/October run rates reaching ~$20 billion annually.
• Strategic M&A and Solutions: Completed acquisition of Arctos (tracking ahead of budget) and closed Keystone ($6 billion commitments). Expects 'KKR Solutions' to become a >$100 billion AUM business.
• Governance Transition: Will fully transition to a traditional one-share, one-vote structure following the sunset of co-founders' super voting rights.

Fee-Related Earnings (FRE): Record $1.3 billion ($1.42 per share), up 24% year-over-year, with a record margin of approximately 71%. This segment represents the core recurring fee income. Insurance Segment: Operating earnings were $230 million (or $257 million excluding actuarial adjustments). The broader economic impact from Global Atlantic (GA) to KKR totaled $1.9 billion over the trailing twelve months, net of compensation. Strategic Holdings: Delivered $192 million in operating earnings for the quarter and $277 million year-to-date, tracking toward a full-year expectation of over $350 million. Investing Earnings: Realized performance and investment income totaled $824 million, including $71 million from strategic holdings.

• Strategic Holdings: Reiterated guidance of >$350 million in operating earnings for 2026 and >$1.1 billion for 2030.
• Total Operating Earnings: Management expects to deliver a third consecutive quarter of record Adjusted Net Income (ANI) per share to close out 2026.
• Monetization Pipeline: Expects USI closing to contribute ~$3.5 billion in liquidity over the next couple of quarters. Embedded gains stand at $18 billion, up ~60% over three years.
• Capital Markets Fees: Expects insurance-related capital markets fees to scale to several hundred million dollars annually over time; generated ~$50 million in Q3.

• Market Volatility: Q3 saw significant volatility, including an 80 bps surge in 10-year Treasury yields and declines in major indices (Russell 2000 -7%, S&P 500 -2%).
• Private Equity Portfolio Performance: The private equity portfolio was flat during the volatile quarter, contrasting with resilience in Infrastructure (+4%) and weakness in Opportunistic Real Estate (-2%).
• Interest Rate Sensitivity: Higher interest rates create a more complex environment than the low-rate era of 2010-2020, potentially impacting entry multiples and exit valuations, though management views current rates as closer to historical averages.
• AI Investment Risks: Acknowledges that while AI is a large opportunity, money will be made and lost. Risks include unprecedented spending speeds and potential disruption to existing assets, requiring careful portfolio construction and downside protection.
• Industry Cycle Exposure: Notes that over 65% of private market participants formed after 2009 have not experienced a real recession or cycle, posing execution risks for less experienced firms compared to KKR's long-cycle experience.

Q: Craig Siegenthaler asked about the acceleration in Global Atlantic (GA) inflows in Q3, specifically whether it was driven by rising Treasury yields, leaning into higher-yielding AI adjacency segments like GPU financing, and the status of duration extensions/reallocation to alternatives. / A: Rob Lewin stated the acceleration resulted from better investment opportunities due to upward rate movements and favorable fixed income spread movements. Scott Nuttall added that structured alternative deals sourced globally are now maturing and closing, feeding the pipeline. He noted that while alts are ~2% of the portfolio, they aim to approach industry averages (5-8%) prudently while matching liability duration.

Q: Glenn Schorr questioned the quality of earnings, noting that while records were set, management fees and insurance earnings decelerated, and he sought perspective on the sustainability and growth of transaction/capital markets fees given their perceived lower quality than management fees. / A: Rob Lewin emphasized the firm's multi-pronged P&L impact strategy, highlighting that capital markets fees have raised their floor significantly despite past cyclical shutdowns. Scott Nuttall argued these fees are highly recurring because they monetize inherent deal flow (syndication, refinancing, IPOs, secondaries) with high margins and no additional headcount, viewing them as a durable growth engine.

Q: Alex Blostein asked about KKR's AI infrastructure exposure across credit and equity businesses, how data center restrictions might impact forward growth, and the firm's strategic posture amid AI hype. / A: Scott Nuttall outlined a three-part strategy: get out of the way of disruption (selling threatened assets), sell early on winners (e.g., Kokusai, Cool IT), and judiciously deploy capital. He noted AI/data center assets represent only 1-2% of total firm AUM, with 90% of long-term leases tied to governments or investment-grade hyperscalers, ensuring downside protection while maintaining opportunistic upside.

Q: Steven Chubak asked about the management fee outlook heading into 2027, given lighter fundraising campaigns post-super cycle, and how non-campaign fundraising and operational efficiency inform growth expectations. / A: Rob Lewin highlighted that since 2022, management fees have compounded at 17% while OpEx grew only 10% and fee-related comp grew just 2%, translating to 22% FRE growth. He noted $75 billion in uncalled capital (up 24% YTD) provides visibility. The firm focuses on scalable, unique capabilities rather than chasing marginal fees, preserving culture and alpha generation.

Q: Michael Cypress asked about capital allocation priorities for the $3.3 billion USI proceeds among buybacks, strategic holdings, M&A, and insurance, and the timeline for reinvestment, particularly regarding dividends from new strategic holdings investments. / A: Rob Lewin explained there are no fixed buckets; allocation depends on generating the most durable, EPS-accretive returns. Buybacks are immediately attractive, while strategic holdings (Integer, Gen2, A1) are replacing USI earnings (expected to match 2028 levels by 2028/2030). Scott Nuttall added that all options look creative, with buybacks offering immediate impact and strategic holdings/insurance offering longer-term value toward the $15+ ANI goal.