2Q26 Earnings: Margin Expansion Turns a Strong Quarter into a Re-Rating Story

Research evidence excerpt

2Q26 Earnings: Margin Expansion Turns a Strong Quarter into a Re-Rating Story

asing to $550M from $450M previously—a positive for sentiment— and

Q1 12.53 12.53 0 12.53

tokenzation, after filing two tokenized money market funds with the SEC.

Q2E 12.15 13.91 15 12.58

Q3E 14.14 14.14 -0 13.88

Adj. Operating Margin Can Hit 50% by End of 2030 Q4E 15.06 15.71 4 14.85

As noted, the margin approached 46% in 2Q, which management noted is not a ceiling, 12/26E 53.87 56.30 4 53.97

as BLK operated close to 47% margins during '21, prior to having a large scale private 12/27E 60.48 62.90 4 61.65

markets franchise and scale. Margin expansion is expected to be supported by GIP/HPS/ 12/28E 68.80 71.70 4 71.78

Preqin as integrations scale, leading to a structurally higher-margin mix shift toward

Michael Brown

private markets—where both economics and compensation (greater use of

Analyst

performance fees vs. management fees) are more favorable. For more see Figures 1-2. mike.brown@ubs.com

+1-212-713 1387

Further unpacking fee rate dynamics

Mary Mahrer

BLK's 2Q management fee rate came in flattish to 1Q yet light to expectations, but was Analyst

largely mix driven with strong iShares inflows but also lower fee rates for active equity mary.mahrer@ubs.com

and alts. In active equity, we estimate $4B of higher-fee fundamental outflows were +1-212-713 9014

offset by $6B of lower-fee systematic inflows, pressuring fee rates; we expect this Daniel Lehmann

dynamic to continue. The alts fee rate (liquid and private) declined, though there was Associate Analyst

noise due to GIP realizations early in the quarter and inflows late in the quarter; thus, we daniel-j.lehmann@ubs.com

model a sequential tick back up in the fee rate there. Taking a step back, growth was +1-212-713 2391