Apollo Global Management, Inc. Q3 FY2026 earnings call

• Origination Momentum: Record origination of $114 billion in Q3, with $98 billion in debt, over 80% investment grade (BBB+ average), generating attractive spreads of 330 basis points over treasuries.
• Capital Formation: Total inflows of $53 billion, driven by $35 billion in Asset Management (primarily credit) and $19 billion at Athene. Athene saw strong retail flows with RILA setting records.
• Investment Strategy & Risk: Management emphasizes a defensive posture in high-risk environments, moving from below-investment-grade to investment-grade and unsecured to secured assets. Focus is on safety and return, particularly in AI-related infrastructure like power and chips.
• AI Financing Approach: Apollo is targeting AI capital expenditure through secured lending on power and semiconductor supply chains, aiming for returns that beat public IG debt with better structure and security. They avoid taking equity-like risk for debt-like returns.
• Strategic Transformation: A major initiative to transform private markets into liquid, transparent instruments via Estimated Daily Value (EDV), QSIPs, and market-making capabilities. This includes launching AMAPS, which has reached $40 billion in just over a year.
• New Business Development: Launch of a new European credit platform and a strategic minority investment in Mubadala Capital (MCAM). Also announced the acquisition of MFIC by Aries Capital Corporation at a 30% premium.
• Operational Efficiency: Implementation of significant technology investments, including writing off old software and building new systems in Austin, Texas, to support data-driven operations and future business models.

Fee-Related Earnings (FRE) reached a record $802 million, representing a 23% year-over-year increase and a 2% quarter-over-quarter increase. FRE contributed to the total adjusted net income of $1.3 billion ($2.07 per share). Spread-Related Earnings (SRE) from Athene totaled $909 million excluding notable items, with reported SRE including a $65 million unfavorable actuarial adjustment. Total adjusted net income was $1.3 billion ($2.07 per share), or $2.15 per share excluding notables. The firm generated $290 million in Capital Solutions fees (ACS), contributing significantly to the top-line growth.

• 2026 Guidance: Maintained expectation for 20% plus FRE growth and 10% SRE growth.
• 2027 Guidance: Expects 20% plus FRE growth underpinned by 15% plus management fee growth. Anticipates continued growth in origination-led ACS fees.
• Athene Outlook: Expects Q4 SRE earnings of approximately $1 billion on a same-basis, resulting in ~10% growth for the full year 2026. Projects 10% SRE growth in 2027 assuming an 11% alternative portfolio return.
• Dividend Policy: Intends to grow dividends by roughly half the rate of FRE growth over time.
• Share Repurchases: Continues to use buybacks to offset equity-based compensation and opportunistically when stock price dislocation occurs.

• Regulatory Changes: Potential NAIC actions against offshore jurisdictions for regulatory arbitrage could impact cost structures and competitive dynamics for insurers operating in non-reciprocal jurisdictions.
• Market Volatility: High valuations and elevated risks require careful risk management; tight spreads and rising rates pose headwinds for new business margins.
• Execution Risk: Significant planned expenses ($350 million over 24 months) for technological transformation carry execution risk if new business models do not materialize as expected.
• Concentration Risk: Management explicitly avoids concentrated positions in single issuers or sectors, particularly in AI financing, to mitigate downside risk.
• Alt Returns Uncertainty: Alternative portfolio returns have been sub-11% for five years, though management maintains long-term confidence in achieving the 11% target.

Q: Analyst asked if the ecosystem can evolve fast enough to generate returns on Apollo's massive investment in market structure changes (liquidity, pricing) beyond the 2029 plan. / A: Marc Rowan cited AMAPS ($40B in a year) as proof of concept, noting other firms are joining. Jim Zelter added that Apollo created one-third of net CLO issuance this year, proving first-mover advantage yields dominant economics. They believe leading with tools solves investor problems, capturing lion's share of economics.

Q: Analyst sought clarity on ACS fee durability and upside given the $8T capex spend and conservative revenue recognition. / A: Jim Zelter explained that while sell-side debates $5-7B vs $1T financing, Apollo sees broad opportunities across energy, defense, etc. He emphasized that breadth and granularity of 100+ transactions create durable, recurring revenue rather than just growth spikes. Management is focused on the longevity of these relationships.

Q: Analyst questioned why SRE growth was lower than desired, asking if holding back conservatism would release gains in Q4. / A: Martin Kelly noted that rising rates increase both cost of funds and yields, but timing of deployment (60% in September) skewed Q3. These will quarterize in Q4. Marc Rowan added that NAIC is cracking down on offshore regulatory arbitrage, ensuring 'equal capital for equal risk,' which favors Apollo’s disciplined, onshore-focused model in the long run.

Q: Analyst asked if the $350M tech investment will compress margins or enable top-line expansion without proportional cost increases. / A: Marc Rowan expects to hold margins due to AI-driven capacity increases (e.g., India office saw 50% capacity gain without headcount). He views this as a revenue expansion story, enabling new businesses like market-making and lending. Jim Zelter compared it to adding 'toll booths' to the highway system, creating multiple income streams per asset.

Q: Analyst asked about Athene’s exposure limits to AI/tech and how third-party clients allocate capital amidst rising public IT index concentration. / A: Jim Zelter stated Apollo maintains ~2.5-3% aggregate exposure, well below public index projections (12-15%), prioritizing diversification. Marc Rowan highlighted that Apollo prefers secured private credit over unsecured public bonds, offering better risk-adjusted returns. Third-party insurers are increasingly allocating to private assets for similar safety/risk benefits.