10-Q: Blackstone Q3 2025: Mixed Results Amid Market Shifts

Blackstone reports a decrease in Q3 2025 net income and total revenues, while segment distributable earnings and assets under management show growth, alongside significant debt refinancing and ongoing legal challenges.

Summary

• Net Income Attributable to Blackstone Inc. decreased by 20% to $624.9 million for the three months ended September 30, 2025, and by 3% to $2.004 billion for the nine months ended September 30, 2025.
• Total Revenues decreased by 16% to $3.089 billion for the three months ended September 30, 2025, and by 1% to $10.090 billion for the nine months ended September 30, 2025.
• Total Assets Under Management (AUM) increased by $30.5 billion to $1.242 trillion in Q3 2025, and by $114.6 billion since December 31, 2024.
• Fee-Earning AUM increased by $19.1 billion to $906.2 billion in Q3 2025, and by $75.5 billion since December 31, 2024.
• Segment Distributable Earnings increased across all segments for Q3 2025: Real Estate by 14% to $618.3 million, Private Equity by 106% to $871.5 million, Credit & Insurance by 11% to $416.2 million, and Multi-Asset Investing by 30% to $79.5 million.
• Repaid $550.0 million outstanding borrowings under the Revolving Credit Facility on November 5, 2025.
• Issued $1.2 billion in new senior notes on November 3, 2025, for general corporate purposes.
• Ongoing legal proceedings related to Kentucky Retirement System investments continue, with a previously agreed settlement terminated in May 2025.

Sentiment

Score: 6

Explanation: While net income and total revenues declined, the underlying business metrics like AUM growth and segment distributable earnings were positive. Significant debt refinancing and ongoing legal matters introduce some uncertainty, but the overall operational performance and strategic positioning remain strong in a recovering market.

Positives

• Total Assets Under Management (AUM) grew by $30.5 billion in Q3 2025 to $1.242 trillion, and by $114.6 billion year-to-date from December 31, 2024.
• Fee-Earning Assets Under Management (AUM) increased by $19.1 billion in Q3 2025 to $906.2 billion, and by $75.5 billion year-to-date from December 31, 2024.
• Segment Distributable Earnings showed strong growth across all segments for Q3 2025 and year-to-date, particularly in Private Equity (106% Q3, 55% YTD).
• Realized Performance Revenues increased significantly in Private Equity ($342.7 million Q3, $270.1 million YTD) and Real Estate ($54.8 million Q3).
• Realized Principal Investment Income saw substantial growth in Credit & Insurance ($112.2 million YTD).
• Successfully amended and restated the $4.325 billion Revolving Credit Facility, extending its maturity to October 16, 2030.
• Issued $1.2 billion in new senior notes on November 3, 2025, enhancing liquidity for general corporate purposes.
• The Absolute Return Composite achieved its twenty-second consecutive quarter of positive performance.
• Strong investor sentiment led to year-to-date net inflows of over $5 billion in Multi-Asset Investing, the highest in nearly 15 years.
• Perpetual Capital Total AUM increased by $16.0 billion in Q3 2025 and $55.8 billion year-to-date.

Negatives

• Net Income Attributable to Blackstone Inc. decreased by 20% for the three months ended September 30, 2025, to $624.9 million, and by 3% for the nine months ended September 30, 2025, to $2.004 billion.
• Total Revenues decreased by 16% for the three months ended September 30, 2025, to $3.089 billion, and by 1% for the nine months ended September 30, 2025, to $10.090 billion.
• Investment Income (Loss) decreased significantly by 58% for Q3 2025 and 13% for the nine months ended September 30, 2025, primarily due to lower unrealized investment income.
• Unrealized Investment Income decreased by $1.6 billion in Q3 2025 and $1.5 billion year-to-date, driven by net unrealized depreciation of investments.
• Corporate Private Equity funds appreciated only 2.5% in Q3 2025 compared to 6.2% in Q3 2024, and 8.7% YTD 2025 compared to 11.7% YTD 2024.
• Performance Allocations Compensation decreased by $311.6 million in Q3 2025 and $284.6 million YTD, reflecting the decrease in Investment Income (Loss).
• Other Revenue on a GAAP basis was negative $(270.0) million for the nine months ended September 30, 2025, primarily due to foreign exchange losses.
• Ongoing legal proceedings with the Kentucky Retirement System, including a terminated settlement agreement, indicate continued legal exposure and uncertainty.

Risks

• Market risk related to sensitivities in the fair value of investments, impacting management fees, performance revenues, and investment income.
• Potential for prolonged periods of few substantial realizations from investment funds accompanied by substantial capital calls for new investments, adversely affecting available capital.
• Exposure to counterparty risk in derivative contracts, mitigated by dealing with investment-grade financial institutions.
• Fluctuations in the fair value of underlying investments can significantly impact accrued Performance Allocations and potential clawback obligations.
• Competition in private credit markets is increasing due to product innovation and customization, and potential regulatory changes reducing burden on U.S. banks.
• Sustained periods of low market volatility may make it more difficult for Multi-Asset Investing strategies to generate strong returns.
• Legal proceedings and claims incidental to business conduct, including regulatory proceedings, could have a material adverse effect on financial results.
• Clawback obligations for Performance Allocations, where general partners may be required to repay amounts to funds if cumulative returns fall below preferred returns.
• Changes in U.S. and foreign taxation laws, regulations, or treaties, or adverse interpretations by tax authorities, could affect the company's effective tax rate and tax liability.

Future Outlook

Expect values in the Real Estate equity portfolio to benefit from healthy cash flow growth, declining new supply, and improved cost/availability of debt. Anticipate a strong foundation for acceleration in transaction activity, including realizations, in the Private Equity segment if the favorable capital markets environment is sustained. Believe private credit strategies will continue to generate excess returns relative to liquid markets, despite lower interest rates, driven by structural shifts toward private credit. A sustained period of low market volatility may make it more difficult for Multi-Asset Investing strategies to generate strong returns. The company does not believe the extension of certain tax provisions (OBBBA) or the new CAMT guidance will materially impact its financial statements.

Management Comments

• We believe values in our Real Estate equity portfolio will continue to benefit from healthy cash flow growth, declining new supply and further improvement in the cost and availability of debt.
• More favorable capital markets, along with improving investor sentiment, are also supporting an environment that is more conducive to transaction activity.
• While we expect the market for larger realizations to remain muted in the near-term, we believe this environment, if sustained, should provide a strong foundation for acceleration in transaction activity.
• Our Private Equity segment generated positive performance across all strategies in the third quarter of 2025, with particular strength in our Infrastructure and Secondaries strategies.
• In Corporate Private Equity, our operating companies exhibited resilient performance with solid revenue growth and margin stability.
• Our Credit & Insurance segment demonstrated strong performance in the third quarter of 2025.
• While lower interest rates will likely reduce returns in our floating rate strategies, we believe we will continue to generate excess returns relative to liquid markets in our private credit strategies.
• We also continue to see long-term structural shifts toward private credit in the lending market. This has contributed to robust momentum in our non-investment grade strategies, investment grade private credit and perpetual capital strategies.
• Nearly all the strategies in our Multi-Asset Investing segment exhibited positive performance in the third quarter of 2025.
• The Absolute Return Composite had its twenty-second consecutive quarter of positive performance, including across our equities, macro, quantitative, and credit strategies.
• This coincided with strong investor sentiment, with year-to-date net inflows in the segment of over $5 billion, the highest in nearly 15 years.

Industry Context

The broader financial markets in Q3 2025 saw appreciation in most major equity markets (S&P 500 up 8.1%), driven by positive economic data, accommodative central bank actions (Federal Reserve lowered federal funds target range by 25 bps in September and October 2025), and easing trade tensions. Capital markets activity in the U.S. expanded dramatically, with IPO volumes and M&A deal volumes up approximately 100% and 64% year-over-year, respectively. Inflation remained above the Federal Reserve's 2.0% target. Outside the U.S., central banks largely maintained policies, though the Bank of England lowered its rate. The company's performance reflects these trends, with strong AUM growth and segment earnings, but also the impact of unrealized depreciation in some investment categories.

Comparison to Industry Standards

• S&P 500 Index delivered a total return of 8.1% in Q3 2025.
• S&P Leveraged Loan Index generated a total return of 1.8% in Q3 2025.
• ICE Bank of America High Yield Bond Index returned 2.4% in Q3 2025.
• Corporate Private Equity funds appreciated 2.5% in Q3 2025 compared to 6.2% in Q3 2024, and 8.7% in the nine months ended September 30, 2025, compared to 11.7% in the nine months ended September 30, 2024.
• Absolute Return Composite achieved its twenty-second consecutive quarter of positive performance.
• BREIT Total Net Return (inception to date) is 9%.
• BXSL Total Net Return (inception to date) is 11%.
• BCRED Total Net Return (inception to date) is 10%.
• ECRED Total Net Return (inception to date) is 10%.
• BIP Total Net Return (inception to date) is 17%.
• BXPE Total Net Return (inception to date) is 16%.

Corporate Governance

Legal Proceedings

• Ongoing derivative lawsuit (Mayberry Action) filed by pension plan members of the Kentucky Retirement System (KRS) alleging breaches of fiduciary duty.
• Kentucky Attorney General (AG) filed its own action (July 2020 Action) asserting substantially identical claims, with motions to dismiss denied in May 2024 and an amended complaint filed in April 2024.
• Separate direct class action (Taylor I) filed by former Mayberry Action plaintiffs, stayed pending the AG's July 2020 action.
• Another action (Taylor II) filed by KRS members, substantially similar to Taylor I, with motions to dismiss denied in May 2024 and an appeal pending at the Kentucky Supreme Court.
• AG filed a Declaratory Judgment Action seeking a declaration that certain subscription agreement provisions violate the Kentucky Constitution, with an appeal pending at the Kentucky Supreme Court.
• BLP filed a breach-of-contract action against KRS-affiliated defendants, with an appeal pending at the Kentucky Supreme Court.
• A settlement agreement for $82.5 million (Blackstone's portion expected to be covered by insurance) was reached in January 2025 but was terminated in May 2025 as court approval was declined.

Related Party Transactions

• Founder, senior managing directors, and employees invest on a discretionary basis in consolidated Blackstone Funds, often with preferential fee arrangements. Such investments aggregated $2.2 billion as of September 30, 2025.
• Tax receivable agreements provide for payments to predecessor owners and others who acquire Blackstone Holdings Partnership Units, representing 85% of cash savings from increased tax basis. Expected future payments aggregate $2.1 billion over 15 years.
• Blackstone and its personnel guarantee payment of clawback obligations to carry funds on a several basis (subject to a cap).
• Blackstone Holdings Partnerships provided guarantees to lending institutions for certain employee loans ($79.7 million as of September 30, 2025).

Stakeholder Impact

• Shareholders are impacted by net income, dividends ($1.03 per share for Q3 2025, $3.40 YTD 2025), and the share repurchase program ($93.7 million YTD 2025).
• Employees/Senior Managing Directors are affected by compensation and benefits, equity-based compensation, and participation in fund investments with preferential terms.
• Investors in Blackstone Funds are affected by fund performance, management fees, incentive fees, and potential clawback obligations.
• Creditors are impacted by the company's ability to service its debt, including new senior notes and the Revolving Credit Facility.
• Regulatory Bodies maintain oversight, and potential proceedings could arise due to extensive regulation of the business.
• The Kentucky Retirement System is directly involved in multiple ongoing legal proceedings with Blackstone.

Next Steps

• Continue discussions regarding the Kentucky Retirement System lawsuits, as the previous settlement agreement was terminated.
• Monitor the impact of market conditions on Real Estate equity portfolio values, expecting benefits from healthy cash flow growth, declining new supply, and improved debt conditions.
• Observe acceleration in transaction activity and realizations in the Private Equity segment, contingent on sustained favorable capital markets.
• Address increasing competition in private credit markets through product innovation and customization.
• Manage strategies in Multi-Asset Investing to generate strong returns despite potential sustained periods of low market volatility.
• The new FASB guidance on income tax disclosures will be effective for the annual period ending December 31, 2025.

Key Dates

Recommendation

While Blackstone demonstrated strong AUM growth and positive segment distributable earnings, the decline in net income and total revenues, primarily due to unrealized investment losses, presents a mixed financial picture. The successful refinancing of debt and new capital raise are positive for liquidity. However, the ongoing and complex legal proceedings with the Kentucky Retirement System introduce significant uncertainty and potential future liabilities, even if covered by insurance. The overall market environment is improving, but competition in private credit and potential volatility impacts on multi-asset strategies warrant a cautious stance. A 'hold' recommendation is appropriate given the balance of operational strengths, market tailwinds, and unresolved legal and unrealized investment challenges.

Keywords

Blackstone, SEC Filing, 10-Q, Alternative Asset Management, Private Equity, Real Estate, Credit & Insurance, Multi-Asset Investing, Assets Under Management, AUM, Fee-Earning AUM, Financial Results, Investment Income, Performance Allocations, Capital Markets, Debt Financing, Revolving Credit Facility, Senior Notes, Legal Proceedings, Kentucky Retirement System, Clawback Obligations, Financial Reporting, Corporate Governance, Risk Management