KKR & Co. Inc. (KKR) Earnings

Management highlights

### Secular and Structural Growth Drivers - The alternative asset management industry continues to grow at a healthy rate, supported by massive global capital needs for AI, digital infrastructure, energy infrastructure, defense, and industrial capex. - Asia-Pacific represents ~60% of expected global GDP growth through the next cycle, and has lower alternatives penetration than the US and Europe, creating large opportunities across all asset classes. KKR has an established, difficult-to-replicate 20-year platform in the region with 9 offices and ~1,000 on-ground employees. - Global demographic shifts (aging population, growing demand for retirement solutions) create long-term tailwinds for KKR's insurance and wealth businesses. - KKR's diversified, asset-light business model leverages existing 50-year core competencies across investing, capital access, and brand for both asset management and the firm's insurance and strategic holdings segments. KKR employees own ~30% of outstanding shares (vs. 2% average for S&P 500 firms), aligning management with long-term shareholder value creation. ### Operational Highlights - KKR launched Helix Digital Infrastructure in Q2 2026 with over $10 billion of initial long-duration committed capital from founding investors including KKR, Kuwait Investment Authority, Navidya, and Vistra. Helix is a perpetual, open-ended AI infrastructure company focused on delivering integrated data center, power, and connectivity solutions to hyperscalers, led by former AWS CEO Adam Selipsky. - Fundraising: KKR beat its 3-year $300 billion total fundraising target (set at April 2024 Investor Day) in just 2.5 years, raising $305 billion total through June 30 2026, including $34 billion in Q2 2026. AUM growth across segments: private equity +45%, infrastructure +100%, credit +35%, Asia +35%, third-party insurance +50%, wealth +600%. After the Q2 closing of Arctos, KKR manages ~$20 billion in Arctos-related capital. - Exit/Monetization Activity: Q2 2026 was the largest monetization quarter in KKR history, with exits diversified across strategies, regions, and transaction types, delivering 2x to 20x returns on invested capital. Despite strong exit activity, remaining total unrealized gains across the portfolio grew to ~$18.2 billion as of June 30 2026. - Key product milestones: K-Series (private wealth) AUM reached $42 billion as of Q2, up 70% year-over-year and up 20% year-to-date 2026, with $3 billion of inflows in Q2 after rebounding from April 2026 industry-wide lows. Arctos closed its inaugural Keystone Fund at over $6 billion, the largest first-time fund ever in the GP solutions space. - Financial reporting change: KKR now reports realized performance fees from K-Series private equity vehicles within fee-related performance revenues (subject to 15-20% compensation, vs. 70-80% compensation under the prior reporting structure), aligning with current industry practice and structurally increasing forward earnings per share.

Guidance

- KKR reaffirms its full year 2026 strategic holdings operating earnings target of ~$350 million, maintaining the expectation that activity will be back-end weighted in 2026. Management continues to target $1.1+ billion in annual strategic holdings operating earnings by 2030. - KKR maintains its 2026 insurance segment operating earnings guidance of ~$250 million (plus/minus), noting the $40 million of realization gains in Q2 2026 is not a sustainable quarterly run rate. Management expects step-function growth in insurance operating earnings to materially above $250 million as the alternatives portfolio matures in the back half of 2027 and into 2028. - Management expects 2026 to be a record full-year fundraising year for KKR, with momentum accelerating after strong year-to-date results. KKR continues to target scaling its Arctos GP solutions business to over $100 billion in AUM over the long term. - Management expects structural long-term management fee growth driven by $72 billion in already-committed unfunded capital (up 30% year-over-year) that will begin earning fees (at a weighted average 90 bps) as it is deployed or enters its investment period.

Segment performance

1. Asset Management: Q2 management fees were $1.2 billion, up 26% year-over-year (18% growth excluding catch-up fees). Total transaction and monitoring fees were $221 million, capital markets fees were $178 million, and fee-related performance revenues were $255 million (up sharply year-over-year). Realized performance income was $848 million and realized investment income was $220 million, in what was the highest monetization quarter in KKR's history. Total fee-related earnings (FRE) for the firm were $1.2 billion, with an FRE margin of 70%. 2. Insurance (Global Atlantic): Segment operating earnings were $288 million in Q2. Including $40 million of net realization activity in the alternatives portfolio this quarter. Total all-in insurance economics (including management fees and other related income) net of compensation were $2 billion over the trailing 12 months, up 13% year-over-year. KKR has $62 billion of AUM tied to insurance-related vehicles, up from ~$50 billion a year ago. 3. Strategic Holdings: Segment operating earnings were $37 million in Q2. KKR reaffirmed its full-year 2026 target of ~$350 million in operating earnings, with activity back-end weighted through the year. Trailing 12 month operating earnings for the segment are $187 million, and management targets $1.1+ billion in annual operating earnings by 2030.

Risks & headwinds

- External market sentiment is disconnected from internal operating fundamentals, with broad market pessimism across areas including private credit, private wealth, private equity monetization, and technology exposure creating short-term valuation pressure. - Heightened competition in the insurance market has compressed ROEs in the near term, leading KKR to allocate less capital to insurance organic growth in the current environment. - AI-related disruption risk is a market concern for software and business services holdings; KKR notes its strategic holdings portfolio is diversified across ~20 businesses with varied exposure, and has already successfully monetized one software asset for 4.5x cost in 2026, with remaining portfolio holdings continuing to deliver solid growth. - Recent industry-wide private wealth redemption volatility and concentrated redemptions among international investors have created near-term headline risk, though KKR has continued to deliver strong net inflows year-to-date.

Analyst Q&A

• Q: Management has delivered strong 2026 results, but what are the key drivers of management fee growth into 2027 against tough 2026 comparables, and what is your multi-year outlook for management fee growth broadly? /

  A: Rob Lewin notes KKR has a uniquely diversified mix of management fees, with ~1/3 coming from each of its three core business lines, and has delivered strong consistent growth. Over the next 12-18 months, KKR has over 30 products coming to market, and record levels of already-committed capital that is not yet earning fees, providing strong visibility into future growth. Scott Nuttall adds that external market pessimism is disconnected from internal fundamentals: the industry is increasingly K-shaped, and KKR is positioned in the strong, growing portion of the K. He addresses key sources of concern: KKR expects a record 2026 credit fundraising year; private wealth AUM is up 70% year-over-year and 20% year-to-date after rebounding from April lows; KKR just delivered a record monetization quarter; software exposure is only 6% of AUM, and remaining holdings continue to deliver solid growth; and full-year 2026 fundraising is already ahead of expectations on pace for a record year.

• Q: How has Global Atlantic's organic growth outlook evolved across its product channels, and what is the ROE trajectory given current heightened competition? /

  A: Rob Lewin confirms KKR has reduced capital allocation to insurance organic growth given current competitive conditions, but Q2 liability originations continued the business's shift to longer-duration products: 99% of Q2 originations were at least 5-year duration, and ~80% were 7-year duration, allowing the firm to lean more heavily into higher-return alternative assets. KKR has $6 billion of dry powder for third-party sidecar capital that translates to over $60 billion of liability buying power, a unique competitive advantage. While current market conditions lead to structurally lower near-term ROEs, KKR expects higher ROEs over the cycle as volatility reduces competition and expands spreads.

• Q: There is market schizophrenia about the AI capex cycle: some believe it is already overbought, with spending and cash flow set to decline. How does KKR view this opportunity, and how do you manage risk as you pursue AI-related infrastructure investments? /

  A: Scott Nuttall clarifies KKR is focused on infrastructure opportunities supporting AI development (data centers, power, connectivity), not investing in AI chip or LLM companies directly. Craig Larson adds that recent volatility in data center spreads has created a more favorable environment for selective investing: KKR prioritizes strong counterparties and robust contract terms, allowing it to be selective. Beyond data centers, KKR is active across a broad set of digital and infrastructure themes including fiber, mobile infrastructure, renewables, and traditional energy and utility infrastructure, with large aggregated exposure to the AI capex cycle that is not concentrated in a single sub-sector.

• Q: What is the growth outlook for Arctos post-acquisition, and how do you expect to reach the $100 billion AUM target for KKR Solutions? /

  A: Rob Lewin says early results post-close have been stronger than expected, with the combination of Arctos's secondary/GP solutions expertise and KKR's client relationships and industry expertise creating a highly complementary platform. A previously underappreciated benefit is that the Arctos ecosystem generates valuable deal flow for Global Atlantic, which was a core part of the original acquisition thesis. Scott Nuttall adds that Arctos has three high-growth lines of business: sports (Arctos is already the largest incumbent player in a young market), GP solutions (the just-closed $6 billion Keystone Fund is off to a strong start with a large pipeline), and a new secondaries business, all in large total addressable markets. While the split of the $100 billion AUM is not yet fixed, management sees multiple paths to hit the target.

• Q: What is the mandate and structure of Helix Digital Infrastructure, is it incremental to prior AI infrastructure targets, and will it invest in power as well as data centers? /

  A: Craig Larson clarifies Helix is an incremental evolution of KKR's prior AI infrastructure partnership with ECP, leveraging growing hyperscaler demand for end-to-end integrated solutions. Scott Nuttall adds that Helix is a permanent operating company, not a closed-end fund. It launched with $10 billion of founding committed capital, with no fixed final target size, and management expects it will grow over time as it pursues more investment opportunities. Helix's full mandate is to be a one-stop shop for hyperscalers, including data centers, power, and connectivity, so power investments are a core part of the strategy.