T. Rowe Price Defies Outflows as AUM Rises 10%

Date of Call: Feb 4, 2026

Financials Results

• Revenue: Q4 investment advisory revenue of $1.7B, up 2.3% from prior quarter and 4.2% from Q4 2024. Full year adjusted net revenue of $7.4B, up 2.8% from 2024.
• EPS: Q4 adjusted diluted EPS of $2.44. Full year adjusted diluted EPS of $9.72, up 4.2% from 2024.

Guidance:

• 2026 adjusted operating expenses, excluding carried interest expense, expected to be up 3% to 6% over 2025's $4.6B.
• Expect continued pressure in equities, partially offset by inflows in retirement date funds, steady growth in fixed income, and accelerating growth in alternatives.
• Target Date franchise had $1.7B of inflows in January; overall flows need equity outflows to moderate to return to positive.

Business Commentary:

Asset Management and Market Returns:

• T. Rowe Price ended the year with $1.78 trillion in assets under management, up over 10% from the start of the year despite $56.9 billion in net outflows.
• The increase in assets was driven by strong global market returns, which more than offset the net outflows, particularly in equity and mutual fund business.

Investment Performance:

• Over half of the company's funds beat their peer groups on a 3- and 5-year basis, with fixed income funds showing particularly strong performance, as 75% of fund assets outperformed their peers across various time periods.
• Performance was bolstered by effective credit selection and strategies that avoided exposure to frauds or failures, especially in alternatives.

Strategic Initiatives and Partnerships:

• T. Rowe Price established a strategic collaboration with Goldman Sachs, launching co-branded model portfolios and expanding into new markets such as Hong Kong and Singapore with retirement-focused products.
• The company also advanced its use of artificial intelligence and announced a new strategic partnership with First Abu Dhabi Bank to deliver investment solutions in the Middle East.

Financial Results and Expense Management:

• The company reported an adjusted diluted earnings per share of $9.72 for the full year, up 4.2% from 2024, with adjusted net revenue increasing to nearly $7.4 billion.
• Growth was supported by higher average AUM and investment advisory fees, while expense management remained a focus to maintain efficiency amid shifts in asset and vehicle mix.

Target Date and Retirement Solutions:

• T. Rowe Price's Target Date franchise surpassed $560 billion in assets under management, with strong long-term performance, although it faced net outflows in Q4 due to market dynamics and client rebalancing.
• The company remains a leader in active Target Date solutions, with a focus on maintaining and growing its share in the face of competition from passive and blend strategies.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated, 'I remain confident in our plan and our people, and I look forward to what's ahead.' CFO noted 'encouraging momentum and signs of strength' in some business areas. Company highlighted record fundraising, strategic partnerships, and strong long-term performance in many strategies.

Q&A:

• Question from Alexander Blostein (Goldman Sachs Group, Inc., Research Division): So maybe starting with just a question around how you guys are planning from an operating perspective for 2026... And then bigger picture... How do you guys think about the margins for T. Rowe Price in totality kind of over the medium term over the next couple of years?
  Response: CEO: The biggest driver of revenue is equity market returns, which significantly influence margins. The expense guide balances cost savings and investment in growth areas. CFO: 2026 expense growth includes market-driven factors like AUM growth and year-end compensation, with a focus on efficiency and productivity.

• Question from Michael Cyprys (Morgan Stanley, Research Division): More of a longer-term question for you just on tokenization. Just curious if you could just talk a little bit about how you're experimenting with tokenization and blockchain... And where might there be scope for differentiation?
  Response: Head of Global Investments: The firm is investing in digitization across three vectors: efficiency (middle/back-office savings), product (e.g., active crypto ETF via SEC registration), and distribution (partnerships or new builds for mobile/crypto-native investors).

• Question from Craig Siegenthaler (BofA Securities, Research Division): My question is on the update on the potential migration of privates into the 401(k) channel... where is T. Rowe Price on the product launch front with your new Goldman Sachs partnership...?
  Response: CEO: DOL guidance clarity is pending; there is mixed sponsor interest due to fiduciary and liquidity concerns. The Goldman Sachs co-branded retirement date offering is in development, with a planned launch around mid-2026. Market penetration is expected to be slow and incremental.

• Question from Daniel Fannon (Jefferies LLC, Research Division): I wanted to talk about the Target Date business. You showed some outflows in the fourth quarter... I wanted to get a little bit more context around the momentum and/or outlook for that business as we think about 2026...
  Response: CEO: Q4 outflows were driven by M&A-related losses, larger mandate losses, and a headwind from active Target Date funds losing share to passive/blend. The firm is well-positioned with strong blend/hybrid offerings, gaining share in that category, and expects continued growth albeit potentially at moderated levels.

• Question from Benjamin Budish (Barclays Bank PLC, Research Division): ...how would you expect that sort of impact [from market shock] to translate to near-term equity flows?... And could you maybe talk about the sort of mix across the equity franchise?...
  Response: CEO: Short-term market shocks may cause knee-jerk reactions, but over longer periods, client allocation commitments mitigate impact. Equity market returns overall have a significant effect on flows. Head of Investments: The firm has studied AI disruption risks and is positioned in many portfolios; exposure is not more than the market as a whole.

• Question from Kenneth Worthington (JPMorgan Chase & Co, Research Division): ...what is Oak Hill's exposure to investments potentially disrupted by AI? And ultimately, do you think the problems could be big enough in private credit to drive market share shifts?...
  Response: CEO: Will not comment on OHA's specific exposures but stated their rigorous credit process will differentiate in a tougher credit environment. OHA had record capital raising, is involved in key partnerships, and will be spotlighted in a future earnings call.

• Question from Brennan Hawken (BMO Capital Markets Equity Research): ...Were there any particular factors that caused the misses [in Target Date sales]? And how are you adjusting your offering...? And can you speak to the pipeline...?
  Response: CEO: Misses were due to client acquisitions leading to plan consolidation and loss of mandate. The firm is seeing less interest in fully active Target Date and more in blend/hybrid offerings. Pipeline activity is robust but primarily in blend/hybrid.

• Question from Patrick Davitt (Autonomous Research US LP): ...Can you remind on the Target, can you remind on the cadence each year on when those lumpier planned losses can occur?
  Response: CEO: Outside of elevated activity around year-end, there is no specific seasonality; plan activity can occur throughout the year.

Contradiction Point 1

Product Launch Timeline for Goldman Sachs Partnership

It directly impacts expectations regarding the rollout of a major joint venture product, affecting investor confidence in execution and partnership momentum.

What is the update on private markets migration into the 401(k) channel pending DOL guidance and T. Rowe Price's product launch with Goldman Sachs? - Craig Siegenthaler (BofA Securities)

2025Q4: The Goldman Sachs T. Rowe Price retirement date offering is in development, with a planned mid-2026 launch. - [Robert Sharps](CEO)

Could you elaborate on the economic arrangements with Goldman Sachs and the potential impact based on assumed flows? - Benjamin Budish (Barclays Bank PLC)

2025Q3: Product launches are moving at pace, with the first offerings expected in the next 6 months. - [Robert Sharps](CEO), [Jen Dardis](CFO)

Contradiction Point 2

Outlook and Strategy for Target Date Funds

It shifts the strategic focus from a growth-oriented opportunity to a defensive outlook, significantly altering expectations for the firm's future performance in a key business segment.

What are the details on Q4 Target Date outflows, the 2026 outlook, new opportunities, and competitive positioning? - Daniel Fannon (Jefferies)

2025Q4: The 2026 base case expects continued equity outflows... with growth in fixed income and alternatives. - [Robert Sharps](CEO)

Is organic growth essential for T. Rowe Price given five years of net outflows in a strong market? - Kenneth Brooks Worthington (JPMorgan Chase)

2025Q2: The biggest opportunity remains in retirement solutions and target date funds... organic growth is necessary for the firm to remain successful... - [Robert Sharps](CEO)

Contradiction Point 3

Timeline and Clarity for Private Markets in Defined Contribution (DC) Plans

It changes the expected path to regulatory clarity, moving from a definitive executive order to a prolonged and uncertain process, impacting strategic planning for product migration.

What is the update on private markets migration into the 401(k) channel pending DOL guidance and T. Rowe Price's progress on product launch with Goldman Sachs? - Craig Siegenthaler (BofA Securities)

2025Q4: Clarity from DOL is expected after a public comment period, possibly in a few months. - [Robert Sharps](CEO)

Could you share updated thoughts on the 401(k) business, including the potential timing for adopting private market investments in defined contribution plans and what large plan sponsors require to allow such products? - Brian Bertram Bedell (Deutsche Bank)

2025Q2: Potential clarity...expected from an upcoming executive order. Legislation would be preferable to agency guidance for long-term endurance. - [Robert Sharps](CEO)

Contradiction Point 4

Characterization of AI's Impact on Business Model and Expenses

It reframes AI from a strategic, operational priority with clear benefits to a general market exposure, diminishing its perceived role in the company's cost structure and competitive positioning.

How might yesterday's market disruption affect short-term equity flows, and what is T. Rowe Price's exposure to AI-disrupted software/services? - Benjamin Budish (Barclays)

2025Q4: Exposure to software/services is market-wide. The firm's ~$1 trillion in equity assets have varied exposures. - [Robert Sharps](CEO), [Eric Veiel](CIO)

How will advancements in AI, blockchain, and stablecoins impact the industry and T. Rowe Price's business model over the next 5–10 years, and what steps are being taken to adapt the business model and manage expenses accordingly? - Michael J. Cyprys (Morgan Stanley)

2025Q2: AI is a game-changer for investment processes, offering three key benefits: 1) **Productivity gains**... 2) **Alpha generation**... 3) **Cost savings**... - [Eric Lanoue Veiel](CIO)

Contradiction Point 5

Expense Guidance and Cost Management

It alters the provided expense growth forecast without clear justification, impacting perceptions of cost control and financial planning.

What's your operating strategy for 2026, especially with potentially flat equities, and how do current challenges impact medium-term margin expectations? - Alexander Blostein (Goldman Sachs)

2025Q4: The 2026 expense guide (3%–6% growth) includes ongoing cost savings and investments... Market-driven expenses increased due to higher AUM growth assumptions and year-end compensation accounting. - [Jen Dardis](CFO)

What factors led to the revision of the expense growth guide from 4–6% to 1–3%, and what equity market assumptions underlie the guidance? - Alexander Blostein (Goldman Sachs)

2025Q1: Market-driven expenses adjusted lower. Intentional management of controllable expenses (e.g., slowing hiring, reducing internal travel). If AUM had remained at March 31 levels... expense growth would have been at the higher end of the range (3–4%). - [Jen Dardis](CFO)