Ares Management plunges 11% on earnings miss despite 29% AUM surge
Alternative asset manager reports $1.45 EPS vs $1.71 consensus as rising expenses pressure margins
Ares Management shares plunged more than 11% in Thursday trading after the alternative asset manager reported fourth-quarter earnings that fell short of Wall Street expectations, despite achieving record growth in assets under management.
The Los Angeles-based firm reported adjusted earnings per share of $1.45, missing the Zacks consensus estimate of $1.71 by 15%. Revenue reached $1.17 billion, which also disappointed analysts who had projected approximately $1.34 billion to $1.52 billion. The stock closed at $121.87, its lowest level since October, and remains well below its 52-week high of $191.86.
The earnings shortfall came despite what management described as exceptional operational performance. Ares reported that assets under management surged 29% to reach $623 billion, while management fees hit a quarterly record of $994 million. The company also announced a quarterly dividend of $1.35 per share, reflecting continued confidence in cash generation.
However, rising expenses weighed on profitability, a concern that analysts highlighted during the earnings call. The margin pressure overshadowed the company's strong fundraising and investment activity, which management expects to continue robustly through 2026. The disconnect between asset gathering and earnings performance unnerved investors accustomed to the alternative asset manager's consistent growth trajectory.
Analyst questions during the call focused on potential headwinds including market volatility impacting fundraising, increased competition in the alternative asset management sector, and potential disruptions from technological advancements. Specific concerns emerged regarding wealth channel flows, distribution strategy, and fundraising plans for credit and real estate funds.
Despite Thursday's sharp decline, Ares maintains strong analyst support. According to current data, the stock carries a consensus target price of $194.62, with nine analysts rating it a buy or strong buy and eight maintaining hold ratings. Prior to the earnings release, several firms including TD Cowen, Oppenheimer, and B of A Securities had issued positive ratings on the stock in late 2025.
The company's forward price-to-earnings ratio stands at approximately 20, suggesting the market still prices in significant growth despite the recent setback. Ares reported a 22% year-over-year increase in revenue and grew EPS to $1.45 from $1.23 in the prior-year quarter, indicating underlying business momentum remains intact.
Thursday's sell-off wiped approximately $4.5 billion from Ares's market capitalization, which now stands at roughly $45 billion. The stock's decline was particularly sharp given its institutional ownership of 87.6%, suggesting large shareholders rotated out of the position following the earnings disappointment.
Looking ahead, investors will focus on whether Ares can translate its record asset gathering into improved earnings performance while managing expense growth. The company's guidance for 2026 fundraising and investment activity will be critical in determining whether Thursday's decline represents a buying opportunity or the start of a more sustained period of multiple compression for the alternative asset manager.