Blackstone Inc. (BX) Earnings

Management highlights

- AI Strategic Positioning and New Ventures * Blackstone has positioned itself as one of the largest private capital providers in the global AI ecosystem, with investments spanning data centers, power/energy infrastructure, and leading frontier AI companies including Anthropic, OpenAI, and SpaceX. * Launched four new AI-focused ventures in Q2 2026: a new AI cloud provider with Google (initial investment up to $5 billion), an enterprise AI adoption platform with Anthropic, a $35 billion AI compute financing platform with Broadcom (the largest private credit investment in history), and BX DC, the $2 billion largest blind pool REIT IPO in history for public market access to stabilized data centers. * Blackstone's global data center platform has grown to $185 billion in total value (up from $130 billion at the start of 2026), with 15 gigawatts of entitled, power-accessible sites supporting up to $200 billion in future development. The firm expects to lease 3x more capacity in 2026 than any prior year, with potential to double the platform over the next few years. - Fundraising and Channel Momentum * Institutional business: Three flagship drawdown funds hit hard caps with excess demand in 2026, with the Asia PE flagship raising $13.1 billion (double the prior vintage) and the energy transition flagship already matching the prior vintage size on its way to an $8.7 billion target. Secondaries have raised over $14 billion year-to-date for a new buyout flagship targeting at least $22 billion. * Insurance channel: Grown to 40 dedicated clients (nearly doubled in two years) with a new $10 billion private credit and real estate partnership with Nippon Life, retaining scale advantage without taking on insurance liabilities. * Private wealth channel: BREIT is back in growth mode with net inflows at the best level in four years, and BXP reached $25 billion NAV with 20% annualized returns since inception. New products including the Wellington/Vanguard alliance funds and BXHF perpetual multi-strategy hedge fund have launched to expand access to the retail and retirement markets. - Investment Performance * AI-related holdings accounted for 9 of the 10 largest markups in Q2 2026. Dedicated infrastructure returned 7.2% in Q2 and 29% for the last 12 months, led by data center assets. Corporate private equity returned 3.7% in Q2 and 14% LTM, with the latest Asia PE flagship returning 8.8% and the most recent energy fund returning 23.6% in Q2. BXMA delivered 25 consecutive quarters of positive returns, with 5.8% gross return in Q2 and 15% LTM. Overall credit was up 1% in Q2 and 7% LTM, with stable performance across most holdings. - Market and Real Estate Fundamentals * The IPO market has strengthened considerably, with US IPO activity up 6-fold year-over-year and Blackstone having 8 global IPOs on file as of Q2, setting the foundation for higher future realizations. For private real estate, new supply has declined sharply, and leasing activity has reaccelerated in logistics, with improving fundamentals in hotels and stabilizing vacancies in New York office.

Guidance

- Base management fees are expected to maintain a similar year-over-year growth rate in Q3 2026 as seen in Q2, with a return to double-digit full-year base management fee growth in 2027, driven by embedded growth from new fund drawdowns, seasoning of perpetual strategies, AUM growth across BXMA and Credit insurance, dry powder that will generate fees as deployed, and stabilization of real estate base fees. - Sequential deceleration in net realizations is expected in Q3 2026, with a robust rebound expected in Q4 2026 and continued strength into 2027. - Management expects the structural growth trajectory of fundraising across institutional, insurance, and private wealth channels to continue into 2027 and beyond, with acceleration possible if market volatility eases and interest rates decline. - Transaction fees are expected to maintain a higher structural baseline after the record Q2 2026, with quarter-to-quarter variability but a strong pipeline for the second half of 2026 driven by growth in customized corporate capital solutions. - Management expects attractive risk-adjusted returns to continue for new data center investment, constrained by limited supply of entitled sites and power that prevents a supply glut even with growing demand.

Segment performance

Blackstone reported GAAP net income of $2.4 billion and distributable earnings of $2 billion ($1.52 per common share) for the second quarter of 2026, with 26% year-over-year growth in distributable earnings. Fee related earnings (FRE) grew 22% year-over-year to $1.8 billion, and total fee revenues rose 22% year-over-year to $3 billion, with double-digit growth across all four segments: Private Equity grew 32%, Real Estate grew 21%, BXMA grew 18%, and Credit grew 11%. Transaction and advisory fees nearly doubled year-over-year to a record $321 million, while fee related performance revenues increased 68% year-over-year to $793 million. Net realizations rose 27% year-over-year to $414 million, with gross performance revenues growing 32% year-over-year to $731 million. Total assets under management (AUM) reached a record $1.35 trillion, up 11% year-over-year, with total quarterly inflows of nearly $70 billion, bringing the 12-month total to over $260 billion. Segment specific AUM: Infrastructure AUM grew 40% year-over-year to $90 billion; BXMA AUM reached a record $109 billion, up 21% year-over-year; combined Credit platform AUM grew to nearly $550 billion, up 13% year-over-year; Insurance solutions AUM reached $290 billion, up 15% year-over-year; private wealth channel AUM grew 16% year-over-year to a record $324 billion.

Risks & headwinds

- Geopolitical volatility (including ongoing conflicts in the Middle East) has delayed exit pipelines and slowed near-term realization activity, and can continue to impact market sentiment and IPO/exit activity. - Management acknowledges the potential for excessive market exuberance around AI, which could create valuation risks; the firm mitigates this by focusing on carefully selected assets with strong risk-adjusted returns and downside protection. - Elevated interest rates have created near-term headwinds for private real estate fundraising and performance, and can continue to slow market activity until rates decline. - BCRED has experienced elevated redemption requests that have exceeded the 5% quarterly limit, and while redemptions have declined materially in early Q3 2026, ongoing redemption pressure could persist in the near term. - For non-AI exposed white collar professional services, information services, and enterprise software, there is heightened buyer uncertainty that has muted M&A and exit activity, which may persist for some time.

Analyst Q&A

• Q: What are the core drivers of the expected return to double-digit base management fee growth in 2027? /

  A: Key building blocks include full-year fee impact from 2026 fund drawdowns across private equity, Asia PE, and energy transition strategies, plus the continued seasoning and expansion of high-AUM perpetual strategies like BXP, BX Infra, and BXMA, which have all seen strong AUM and performance growth. Credit growth is supported by expanding AUM in the insurance and investment-grade private credit channels, with $84 billion in dry powder that will generate fees as invested. Finally, real estate base fee trends are expected to stabilize next year. These combined drivers position the firm for strong 2027 base fee growth. /n/nQ: Could you update on BCRED redemption trends and the outlook for the new Wellington/Vanguard alliance products? / A: After elevated redemptions driven by widespread market noise about private credit risks, redemption requests have declined materially in early Q3 2026 as the level of negative market chatter has calmed and performance has held up with no major credit issues. The overall private wealth platform remains strong with 16% year-over-year AUM growth to $324 billion. The Wellington/Vanguard alliance products open access to Blackstone private markets to a larger universe of investors who want simplified one-stop exposure, and will add new growth engines for the firm over time as they scale. /n/nQ: Could you explain whether compute capacity could emerge as a standalone asset class, and how BXDC is positioned to grow to a $1 trillion market over time? / A: There is currently a global shortage of AI compute that is outpacing current investment, due to constraints on chip supply, power access, and development permitting. This shortage is increasing the value of completed, operating data center and energy infrastructure assets, similar to how mobile towers evolved into a major standalone real estate/infrastructure asset class. BXDC can reach $1 trillion over time not just from new development, but also from potential sales of existing data centers currently held on hyperscaler balance sheets, creating a large acquisition pipeline for the REIT. Blackstone's cross-firm scale across credit, infrastructure, real estate, and private equity lets it provide capital solutions for every need in the AI ecosystem, supporting continued innovation around compute assets. /n/nQ: What is your outlook for capital return and buybacks given the current discounted stock price? / A: Blackstone's longstanding capital policy remains in place: the firm returns 100% of cash earnings over time via its dividend, which currently yields 4x the S&P 500, paired with a consistent, moderate buyback program to deliver total return. This policy aligns with the firm's capital-light business model and has worked well long-term. While there is scope to be opportunistic with share repurchases, management plans to remain consistent with the current policy framework. /n/nQ: How do prospective returns on new data center investment compare to existing portfolio returns, given growing competition? / A: Unlike typical investment cycles where high returns attract a massive supply glut that compresses returns, AI data center development is constrained by hard limits on access to chips, power connections, and local development entitlements. Most projects are pre-contracted to long-term creditworthy customers, so speculative overbuilding is not occurring. Blackstone already controls 15 gigawatts of entitled, power-ready global sites, which is the scarce commodity today. This allows the firm to continue delivering attractive returns on new investment, matching the returns on existing portfolio assets.