BlackRock (BLK.US) Q3 Conference Call: Huge Financing Demand for AI Infrastructure, Computing Power May Become a New Asset Class

According to The Smart Finance APP, BlackRock (BLK.US) released its Q3 2026 earnings before the U.S. market opened on October 14, followed by a conference call. Data shows that BlackRock's Q3 revenue was $7.752 billion, up 19% year-on-year, exceeding market expectations of $7.4 billion to $7.52 billion; adjusted EPS was $15.93, a 38% year-on-year increase, over 11% higher than the market expectation range ($14.10 to $14.32). On a GAAP basis, net income was $1.659 billion, and diluted EPS was $10.57, an increase of 25% year-on-year.

Scale and fund flows were the biggest highlights this quarter. As of September 30, the firm's assets under management (AUM) reached a record $15.49 trillion, up 15% year-on-year; Q3 net inflows reached $205 billion, of which iShares ETF net inflows were $135 billion, active product net inflows were $66.4 billion, while institutional index products saw $27.4 billion in net outflows. Over the past 12 months, cumulative net inflows were $869 billion, corresponding to a 10% organic base fee growth; Q3 annualized organic base fee rate growth was 11%.

Management discussed the financing demands for AI infrastructure and the assetization of computing power during the conference call. Over the next few years, just the U.S. electric grid, power supply security, and data center Core and Shell construction will require between $7 trillion and $9 trillion; the cost for a 1 GW data center enterprise is about $50 billion, with approximately 40% for GPUs and chips, and 60% for electricity, grid, and construction. BlackRock is actively participating in related financing, such as collaborating with Meta to finance its planned $14 billion data center in Texas. Management also mentioned that computing power capacity might become a new asset class, with a development path similar to the mortgage-backed securities (MBS) market in the 1980s, which grew from billions to trillions of dollars—key factors were data, standardized performance metrics, and risk analysis frameworks. BlackRock aims to be central to this potential new market, and long-term, related financing could be securitized into tradable structures for a broader client base.

The following are details of the BlackRock Q3 earnings call.

Management Statements

Christopher Meade (General Counsel and Chief Legal Officer):

Good morning, everyone. I’m Chris Meade, General Counsel of BlackRock. Before we begin, I want to remind everyone that we may make some forward-looking statements during this call. Please note that BlackRock’s actual results may differ from these statements. As you know, BlackRock has filed reports with the SEC listing factors that could materially affect our results as compared to today's remarks. BlackRock does not undertake or promise to update any forward-looking statements. Now, I'll turn it over to Martin.

Martin Small (Senior Managing Director, CFO, and Global Head of Enterprise Strategy):

Thanks, Chris, and good morning, everyone. I'm pleased to present our Q3 2026 results. Before I hand it over to Larry, I'll review our financial performance and business outcomes. Our earnings report discloses both GAAP and adjusted financial results. The reconciliation between GAAP and adjusted results is included in today's press release appendix. I’ll primarily discuss the adjusted numbers.

One year ago, clients were concerned about managing inflation, interest rates, and uncertainty about growth. Today, they focus on capturing opportunities created by technology and artificial intelligence. They care about infrastructure investing and the revival of income-oriented investments. They’re looking for returns powered by a new wave of productivity and innovation. Global capital markets activity is rising, and opportunities for BlackRock and our clients are expanding. These opportunities are driven by performance-based returns, higher yields, and broader prospects to diversify and manage risk through a whole-portfolio approach.

The breadth of our platform is deepening our relationships with all distribution channels, retail and institutional, and clients worldwide. Capital is flowing into infrastructure powering AI and digital transformation. Wealth portfolios are moving beyond traditional allocations toward mass-delivered personalized solutions. Retirement is being reshaped by increasing demand for income and broader investment access.

When clients need capital markets advice, portfolio construction, or a partner for large-scale capital deployment in public and private markets, they come to BlackRock. We invest methodically through cycles and have built a scaled platform capable of connecting clients across public and private markets through technology.

This is evident in our results and an accelerating pipeline. Over the past 12 months, clients entrusted us with nearly $870 billion of net inflows, driving 10% organic base fee growth. This isn’t driven by just one product or region—growth is broad across client channels, asset classes, and geographies.

As we discussed at last year’s Investor Day with our 2030 strategy, we are driving growth in higher-value, higher-base-fee categories, and our portfolio across public, private, and technology businesses is creating more durable, all-weather revenue and earnings growth. Our shareholders are benefitting from this growth. In the first comparable quarter after the HPS deal, EPS accelerated to over 35% year-on-year growth.

The high momentum in the business is translating to increasingly strong financial results. Again, we achieved double-digit growth in revenue, operating profit, and EPS, all hitting record highs. Our scaled and disciplined financial framework is helping translate growth to the bottom line. Our operating margin reached 47.8%, up 320 basis points year-on-year.

In Q3, BlackRock generated $205 billion in net inflows. Organic base fee growth was 11%, reaching or exceeding 5% for nine consecutive quarters. Growth continues to expand across active ETFs, private markets, systematic, SMA, digital assets, and technology. These capabilities are scaling simultaneously, demonstrating the power and durability of BlackRock’s platform and growth profile.

Q3 revenue was $7.8 billion, up 19% year-on-year, driven by organic base fee growth, better market beta impact on average AUM, higher performance fees, and higher technology services and subscription revenue. Operating profit reached $3.3 billion, up 27%. EPS was $15.93, up 38%, also reflecting higher non-operating income and a lower diluted share count for the quarter. Non-operating results this quarter included a $164 million net investment gain, mainly from non-cash mark-to-market gains on minority stakes in Securitize and Circle.

The Q3 adjusted tax rate was about 24%. We continue to estimate a 25% tax rate for Q4 2026 as a reasonable expectation. The actual effective tax rate may vary due to extraordinary or discrete items or potential changes in tax law.

Q3 base fees and securities lending revenue totaled $6 billion, up 20% year-on-year, reflecting positive market beta on average AUM, organic base fee growth, and higher securities lending revenue. On a like-for-like days-adjusted basis, the annualized effective fee rate was roughly flat compared to Q2. There is continued strong demand for high-value categories, including private markets, active ETFs, and systematic, which continues to support net inflow fee rates well above the firmwide blended effective fee rate.

Performance fees were $630 million, up 22%, primarily reflecting higher revenue from alternatives, including $110 million of performance fees from HPS. Technology services and subscription revenue grew 14% year-on-year, reflecting continued demand for our comprehensive technology suite.

Annual contract value (ACV) grew 12% year-on-year. On a constant currency basis, we estimate ACV grew 13% year-on-year. We remain committed to long-term low to mid-double-digit ACV growth.

Total expenses grew 14% year-on-year, mainly driven by higher compensation, sales asset and account fees, and G&A expenses. Employee compensation and benefits were up 12% year-on-year, reflecting higher incentive compensation tied to higher operating income and higher performance-linked pay versus the prior year.

Sales, asset, and account fees increased 22% year-on-year, driven by higher distribution and servicing costs as well as direct fund expenses. G&A expenses rose 6% year-on-year, mainly due to higher technology investment spend. Consistent with the G&A outlook we provided in January and after annualizing the HPS and Preqin effects, we continue to expect full-year G&A growth in the mid-single-digit percentage range.

We continue to expand our margin on recurring expense-related earnings. Excluding all performance fees and related compensation impact, Q3 adjusted operating margin would be 48.6%, up 230 basis points year-on-year.

Our capital management strategy remains consistent. We invest in the business first, then return excess cash to shareholders through a combination of dividends and share repurchases. In Q3, we repurchased $550 million of stock. Currently, based on this year's capital spending plans and subject to market and other conditions, we expect to repurchase at least $550 million of stock in Q4—consistent with prior guidance from July.

Turning to flows. BlackRock’s Q3 net inflows of $205 billion were diversified across product types, client channels, geographies, and active and index strategies. ETFs had net inflows of $135 billion for the quarter. Index bond ETFs and precision ETFs led with net inflows of $61 billion and $41 billion, respectively.

Continued demand for our growing active ETF lineup added $22 billion of net inflows. Our digital asset ETPs raised $8 billion this quarter. Our ETFs have now achieved double-digit organic base fee growth for six straight quarters, led by higher-value ETF categories such as active and precision.

Retail net inflows were $23 billion, driven by continued momentum in liquid alternatives, broad demand for U.S. active fixed income products, and ongoing inflows to Aperio and SpiderRock. Institutional active net inflows were $44 billion, positive across all asset types, led by private markets, fixed income, systematic equity, and liquid alternatives.

Institutional index saw net outflows of $27 billion, concentrated in low-fee index equities. Private markets net inflows were $15 billion, primarily from infrastructure and private credit deployment and the addition of a real estate mandate.

This quarter, we updated our earnings supplement to provide greater transparency on private market activity and fee-paying AUM drivers. These metrics include fundraising, deployment, total AUM, and investable capital, which can be found on pages 9 to 11 of the earnings supplement.

Finally, our cash management platform had net inflows of $31 billion in Q3. This included flows into custom liquidity solutions, demand for government funds, and continued growth from Circle.

At the June 2025 Investor Day, we introduced BlackRock’s 2030 vision and business plan. Five quarters into the plan, we've met or exceeded objectives: higher and more durable organic base fee growth; more all-weather combinations of asset management and technology in public and private markets; continued operating margin expansion and higher EPS. Q3 was another solid step toward 2030. In a more uneven market, we delivered record revenue, operating profit, and EPS, operating margin over 47%, and 11% organic base fee growth.

Opportunities ahead for BlackRock continue to expand. Clients are seeking partners that can connect the whole portfolio, navigate a new environment of capital scarcity, higher long-term yields, and redesigned diversification. I don’t think we can assess the investment environment simply as risk-on or risk-off any longer. The new environment is about capital allocation prowess, financing advantages achieved through scale, channels, and breadth of opportunity, and reengineering client portfolio diversification.

Our industry is being reshaped by the convergence of public and private markets and client portfolios’ need for technology and data. These conditions align directly with BlackRock’s strengths. Client engagement is at an all-time high, we’re entering the most seasonally strong Q4, momentum is significant, and our runway for growth is long.

I'll now turn it over to Larry.

Laurence Fink (Founder, CEO, and Chairman):

Thank you, Martin. Good morning everyone, and thank you all for joining the call. We built BlackRock to be the partner of choice for clients globally, wherever capital flows. We provide comprehensive advice across public, private, and technology. We operate with a global view but act with a local perspective. This ability to cover every angle of the client’s whole portfolio positions BlackRock at the core of today’s capital movement and is reflected in our performance.

Q3 EPS grew 38%. Operating margin reached 47.8%, and organic base fee growth was 11%, reflecting $205 billion in net inflows. Year-to-date net inflows and organic base fee growth are both over 45% higher than the same period last year.

Our results reflect the true scale of BlackRock today. We achieved net inflows across every asset class, every client type, every region, and across active and index. AUM grew by over $2 trillion in the past year, now reaching $15.5 trillion. We have now operated with GIP, HPS, and Preqin as part of BlackRock for a full year. This quarter offers the clearest view to date of the earnings potential from our integrated platform, helping us serve more client needs and create more value for our shareholders.

In my 50-year career, this is the first time I’ve seen a true shortage of capital. Governments are running historically high deficits, while the private sector demand for capital is also growing. Governments need infrastructure financing, corporations need capital for generational AI buildouts, and individuals need better ways to invest and retire.

Everyone is rethinking capital deployment, and BlackRock is at the center of many of these conversations. We’re both a trusted adviser and a destination for global client capital. This drives meaningful activity and future growth pipelines for the firm, which is especially evident in our collaborations at the heart of the AI buildout.

We’ve built long-term relationships with these hyperscale cloud providers, sovereign wealth funds, pensions, and corporate clients worldwide. These relationships are now backing some of the largest financing deals in the market. We're working with Meta to finance its planned $14 billion data center in Texas, combining GIP’s infrastructure investing and HPS’s private financing capabilities. We're also partnering with leading tech firms to create dedicated pools for their clients, expanding computing capacity and power.

In the short term, these can be offered as private placements for high-rated insurance mandates. But longer-term, there’s a bigger opportunity to securitize these as tradable structures accessible to a broader client base.

Rob Kapito and I have seen this playbook before. In the early 1980s, mortgages were loans sitting on bank balance sheets—illiquid and hard to price. Fannie Mae and Freddie Mac began bundling them, but that alone didn’t make these assets tradable. What was needed was data, years of performance history, and the ability to understand how assets performed across rates and the broader economy. Once investors had credible data time series and issuers had a framework for standards, the market opened up to a much broader investor base. This combination took the MBS market from billions when I started to trillions today. Computing power capacity is now on a similar path, and we intend for BlackRock to be at the center, just as we were at the birth of mortgage-backed securities.

BlackRock is uniquely suited to help develop this market because we combine capital formation with, most importantly, technology, data, and scale. Thousands of investment professionals just attended the Aladdin community event, using our analytics and risk frameworks to make investment decisions. AI is amplifying the value of Aladdin as we accelerate innovation and create better analytics.

As computing power capacity becomes an asset class, the market will need credible data, standardized performance measures, and common risk analysis frameworks. These are capabilities we have built over decades. They now differentiate BlackRock as we build the infrastructure with tech firms and investors for this potential new market. These opportunities highlight the strategic logic behind our private market acquisitions.

We're already mobilizing capital at unprecedented scale. Our AI infrastructure partners just completed their first deployment, closing the Aligned Data Centers transaction at about $40 billion of enterprise value. Over the past 12 months, we raised $68 billion in private markets. In private credit, higher base fees help investors earn stronger income, making private credit an increasingly attractive source of yield and diversification.

In our first full year post-HPS acquisition, we raised $25 billion of private credit. We especially see strong momentum among insurers rotating or adding high-rated solutions, and we expect this to accelerate through year-end and into 2027. Across private markets, we have a robust fundraising and deployment pipeline ahead.

Clients want scaled access to capital markets across their portfolios, which is how iShares leads industry ETF growth. iShares inflows were again led by index bond ETFs, with $61 billion in net inflows as investors rotated along the curve. We’re also seeing strong demand for AI-linked exposures—our semiconductor and Korea ETFs are among the top inflow products.

What sets iShares apart is our breadth and precision. Whatever view investors hold, they can express it through iShares. The ETF wrapper is also changing how investors access active strategies, with iShares leading industry active flows with $60 billion in 2026, including a record $22 billion this quarter. iShares active AUM doubled in the last year to over $160 billion. We've surpassed the $50 billion revenue ambition we set out last summer.

Performance ultimately drives active net returns and inflows. Performance and scale reinforce each other. BlackRock’s technology-driven process delivers investment insights across broad securities, and scale drives continued performance. Over 90% of our systematic equity AUM is outperforming benchmarks or peers. This performance drove another record quarter for the broader systematic active equities franchise.

Systematic equities generated nearly $30 billion in Q3 net inflows, over $60 billion in 2026. Our systematic equity inflows are up 50% year-on-year, bringing total AUM in active strategies to nearly $500 billion.

We see the same dynamics in fixed income. About 85% of taxable fixed income assets outperformed benchmarks or peer medians over 3 and 5 years. This consistency is why clients continue to bring more of their portfolios. Active fixed income net inflows were $14 billion, reflecting strong demand across institutional and retail channels. Clients turn to strategies such as Strategic Income Opportunities and Total Return to generate yield in a higher-rate environment. Rick and team spent decades building this performance, and we are now porting it to new wrappers, including our fixed income ETF suite.

Clients are also capturing yield opportunities at the short end of the curve. Cash net inflows were $31 billion, including several scaled mandates, as clients consolidate liquidity projects into more customized BlackRock solutions. Income is especially critical in retirement. In recent years, we've innovated with LifePath Paycheck, offering guaranteed income options for retirement.

Last month, we launched the LifePath Solutions framework. It brings capabilities historically reserved for the largest plans to a broader set of plan sponsors. Our $700 billion global LifePath platform reflects 30-plus years of expertise and uniquely positions us to meet challenging client demands.

Our brand and reputation are further strengthened by initiatives such as BlackRock Future Builders. As part of this, the BlackRock Foundation deploys capital to connect workers with skilled trades training. It also embeds financial education and digital savings tools to help workers build more enduring economic security, from first paycheck to retirement.

Many international pension and corporate clients are navigating structural shifts in retirement savings as defined contribution continues to grow globally. For example, plan sponsors in the Netherlands need partners to help them manage the transition from defined benefit to defined contribution models at scale. We've won several pension mandates related to this transaction.

Just last month, the Netherlands construction industry pension named BlackRock as its preferred candidate for an $80 billion outsourced mandate, citing our global scale, execution capabilities, and technology. We’re advising clients and governments worldwide on building durable retirement systems and deepening domestic capital markets. When capital moves cross-border, much flows through platforms like ours.

Foreign investment is flowing into U.S. stocks and funds at record levels. This activity benefits BlackRock, with roughly one-third of long-term net inflows coming from clients outside the U.S. It's even more pronounced in systematic equities, with over 70% of net inflows coming from international clients.

Both Europe and Asia saw double-digit organic base fee growth, while the Middle East achieved over 20% global base fee growth. We have long-term local presence and years of execution expertise in these regions, reflected in robust engagement in systematic equities, private markets, retirement, and technology—the highest-value engines of growth.

Aladdin underpins everything we deliver to clients. Q3 ACV grew by 12%, reflecting both new wins and existing clients deepening their technology stacks. We offer comprehensive public and private market workflow and data products via Aladdin, eFront, and Preqin.

As private markets become a larger part of client portfolios, demand for transparency, risk management, and portfolio analytics will only increase. This is a natural extension of Aladdin’s role as the operating system for full client portfolios worldwide.

Our results demonstrate the strength and potential of an integrated firm. Shareholders participate in this growth via 38% EPS growth, an operating margin over 47%, and double-digit organic base fee growth. BlackRock brings together decades of issuer relationships, financing expertise, investment performance, and the technology and data that connect it all—established through our public market platform.

This combination differentiates BlackRock in all competitive categories and operating geographies. That's why BlackRock wins mandates at the capital markets frontier—from hyperscale cloud vendors to computing power financings, from pension outsourcing to Aladdin and Preqin partnerships.

Our momentum is accelerating, the pipeline is broad, covering whole portfolios, private markets, retirement, and our international platform. More clients see BlackRock as both a capital destination and growth partner. I’m highly confident about opportunities and growth ahead for BlackRock, our clients, and our shareholders.

Operator, let's open it up for questions.

Q&A Session

Operator

We will now open the floor for questions.

JPMorgan Michael Cho

I want to talk about organic base fee growth this quarter. There’s some nice acceleration. We see flows driven by various contributors. Martin, you mentioned several factors. Can you elaborate on which contributions are increasing and may be more persistent across the businesses you highlighted?

Martin Small

Thanks, Mike. First, we're executing the 2030 plan—delivering durable premium organic base fee growth. Organic base fee growth was 11% in Q3, reaching or exceeding our 5% long-term goal for nine straight quarters, and over 8% for five quarters. I think we’ve proven BlackRock can sustainably deliver in the 6-8% range. In periods of elevated client activity and strong markets, we can clearly reach the high single- to low double-digits—driven by client preferences, international markets, increased precision semiconductor exposures, large mandate wins, as well as private market fundraising and deployment timing.

This quarter's organic base fee growth, as Larry and I mentioned, is highly diversified across the platform. Systematic businesses, broad active, AI partnership deployments, mid-market infrastructure fundraising with day-one fees, precision ETFs, Aperio and SpiderRock tax-aware solutions, and cash all provided strong contributions.

A few financial highlights may help illustrate our breadth in core asset allocation, portfolio diversification, tax-aware strategies, and private markets. Year-to-date, of $524 billion of inflows, about $220 billion lands in the 5–10 basis point range—call it broad asset allocation or core exposures held long-term by clients. About $270 billion is in the 10-60 basis point range covering active ETFs, sovereign funds, diversification management, and tactical opportunities. The remainder, higher than 60 basis points, flows into private markets and liquid alternatives—$25 billion into liquid alts this quarter, inclusive of $15 billion in private markets and $9 billion across hedge fund strategies and liquid alternatives.

We view this mix as both strong and persistent. Durability comes from two sources. First, what we've long called structural growers. These segments historically grow faster in strong markets and still grow in softer conditions—like ETFs, active, private markets, and systematic SMAs. That’s visible in the pipeline. We have several large outsourcing relationships expected to inject capital at year-end and into 2027. We’ve also won high-rated insurance mandates that will drive growth as deployed over the next several months and days. So the future for organic base fee growth is both strong and visible.

On private markets, fundraising is diversified across infra, private credit, and multi-alts. We have strategies that fee on fundraising and others that scale as they deploy. That supports both near-term revenue, long-term growth, and maintaining the ability to deliver at least 6-8% sustainably.

Second, we're integrators. If you look back at industry flows over several years, the top five asset managers have integrated about 80% of assets, but the industry remains highly fragmented by both AUM and revenue. In such a large fragmented market, every investor wants to consolidate relationships to get the most value from partners—integration share is a path to ongoing organic growth. Clients do want to do more with BlackRock. That’s evident in flows and momentum, both this quarter and the past year. That gives the management team confidence and optimism.

Morgan Stanley Michael Cyprys

I wanted to ask, given the recent rise in long-term rates, what are you seeing and hearing from asset-owner clients? To what extent are clients changing relative value thinking and marginal capital allocations? Can you connect that to ongoing major AI infrastructure builds? How sensitive do you think that investment opportunity is to higher funding costs? Are you seeing any change in AI project pace or economics?

Robert Kapito (President and Board Member)

I remember the last time you asked this years ago—the answer then was “bonds are back.” Now, I would say rates will be dictated by all the obvious things: inflation, energy prices, capital imbalances, global deficits, geopolitics. We expect greater volatility before a new equilibrium is found, with rates somewhat higher today, especially on the long end.

But we’re still early in demand for fixed income. For years, investors were forced into equity risk to generate meaningful income. Now, that’s changed significantly. 10-year U.S. Treasuries yield above 5%, with real rates near 3%. In our BINC and SIO strategies, you can earn about 7% yields in diversified, high-quality portfolios. These are benchmarks for the resilience and durability Larry referenced. Notably, medium-term bond portfolio returns historically closely track starting yields—in other words, you don’t need heroic market outcomes. Much of the opportunity is embedded in today’s income levels.

We see clients recognizing this opportunity. Fixed income net inflows were $78 billion this quarter, $205 billion year-to-date—reflecting demand for quality yield and more resilient portfolio construction. This macro backdrop dovetails directly with BlackRock’s strengths. Investors can earn attractive income without taking significant duration, volatility, or drawdown risk. If rates stabilize from here, we see significant room for fixed income allocation growth. Clients can now use our better-wrapped fixed income options, especially bond ETFs, and have a desire to lock in future yields.

Laurence Fink

On data centers and financing, let’s place this against the backdrop of the federal deficit. The U.S. federal deficit took 232 years to reach $8 trillion and then only 26 years to reach $40 trillion. So deficit funding needs and requirements are at a record high. I’ve talked a lot about the necessity for unlocking private capital. We’re now seeing this unfold, which is fantastic for the U.S. and its growth potential.

But unlocking private capital means massive financing—whether for AI and data centers or for deals like Humana, which we announced yesterday or last week, or AT&T financings. This is one of the unique drivers of American growth; capital markets are playing a bigger role than ever.

So capital competition is intensifying between record-high federal deficits and growing private sector demand. All of this means we will have structurally higher rates for longer, especially on the long end. I think that’s here to stay.

As I mentioned in my prepared remarks, I don’t believe we can raise trillions for data center custom deals alone. Creating new financing tools for chips and compute power is essential for the U.S. to continue to build at the necessary scale. Once we’ve done that, the whole world will have to build too.

Consider that a 1 GW data center in the U.S. costs about $50 billion, with 40% of that for GPUs and chips and 60% for electricity, grid, and Core and Shell. Altogether, these numbers add up. Right now, data center financing is based on lease credits, but we’re seeing a need to finance the scale of chip and compute power buildouts too.

If we want to democratize AI, the sooner the better—the wider the economic benefit. We can’t have just five or seven companies buying every chip being produced. We need to finance startup AI firms, every company needing these new innovative compute chips. They lack credit ratings, so innovation is needed.

The best way is through asset-based chip financing supported by data and analytics—then we can help finance startups and young companies as they grow, and perhaps lift U.S. growth to 3% or more. At that point, the debt won’t seem as severe, because economic growth above 3% would lower debt/GDP.

BofA Securities Craig Siegenthaler

We’d like to dig deeper on the tax-aware suite, including over $200 billion in and out of Aperio. Where is the greatest demand? Can you quantify Q3 inflows? You gave an Aperio inflow of $7 billion last quarter. Regarding long-short tax-aware, how are you handling the two big RIA custodians’ capacity constraints? They’ve recently tightened flows—is that important given the products also enter many other wealth platforms, banks, and online brokers?

Martin Small

Craig, thanks. I hear three questions: a demand overview and flows, some details on tax-aware strategies, and growth of long-short strategies and custodian funding.

First, philosophically, we put the client at the center of these strategies. For taxable clients, maximizing returns means managing both market and tax impacts. We’re seeing strong demand for tax-aware solutions, including direct indexing, long-short, and SpiderRock option strategies to help manage concentrated equity and liquidity events.

The Aperio platform grew from about $40 billion at acquisition to nearly $200 billion within five years, continuing double-digit organic growth. Direct indexing long-only AUM is $175 billion with about $13 billion in net inflows year-to-date for 2026. Long-short AUM is $19 billion with about $12 billion net inflows year-to-date.

In Q3, Aperio had $5 billion in net inflows, with $4 billion to long-short and $1 billion to long-only. For 2026, these tax-aware strategies have taken in $25 billion—70% higher than 2025, which was a record $15 billion and our fifth consecutive record year.

Through SpiderRock, we also provide option overlay capabilities complementing direct indexing and tax-aware long-short as part of broader whole-portfolio solutions. SpiderRock net flows were $3 billion in 2025. For 2026, that’s three consecutive record quarters, including $2 billion in Q3—congrats to Eric Metz and team.

I think BlackRock differentiates here based on service, platform breadth, and delivery results. We partner with clients not just in SMAs but across ETF, SMA, direct indexing, long-short, public/private models, and full portfolio approaches. Growth is robust, and the future pipeline is strong.

As for long-short growth and custodian dynamics, I’d reiterate that our value proposition is broad across tax-advantaged strategies. Long-short is a rapidly expanding segment. Industry custody and funding models are evolving.

There are compelling return and funding economics for banks, broker dealers, and custodians, and we’re seeing more players enter to fund growth. Industry-wide, long-short assets have reached $170 billion—3x year-on-year growth. Our AUM in this space is almost $20 billion.

Client demand is very strong for these strategies. As I mentioned, long-short flows were $4 billion. Our focus is to do on the short side what we’ve done on the long side—make every custodian access point available. Our aim is similarly to add more counterparties for these strategies’ financing, benefiting clients. We are broadening platform relationships and expect to add more distribution and custody entry points through our partners.

Some custodian changes deserve understandable and appropriate attention. But we have a diversified base of financing, distribution, and other providers, and capacity is increasing. We’re working closely with sophisticated private wealth clients to broaden custody access, offer alternative SMA delivery options through new structures such as SpiderRock and direct indexing, and provide clear guidance, education, and coordination with all partners and financing counterparties to manage onboarding, reporting, operations, and funding with the high fiduciary quality clients expect. There’s more to come in this space—it has a valuable place in the client portfolio.

UBS Michael Brown

This quarter's margin expansion was very impressive. Can you break down the biggest drivers and how should we think about the pros and cons going into Q4? Is roughly flat margins sequentially a reasonable assumption? More broadly, you’ve guided to about 200 basis points of expansion this year. Thank you for not incorporating beta in outlook, but under a typical market backdrop, what’s the potential for margin expansion into 2027?

Martin Small

Thank you. We continue to deliver industry-leading margins. This is central to the 2030 strategy. Both operating and recurring expense margins expanded by 200-300 basis points year-on-year, as you noted. Operating margin for Q3 was 47.8%, up 320 basis points. Excluding performance fees and related comp, the margin was 48.6%, up 230 basis points.

Unpacking the drivers, our reported operating margin can vary quarter to quarter due to changes in performance fee mix—they’re paid at different rates for different strategies. This quarter, operating margin was elevated partly due to the performance fee mix. But excluding performance fees and related compensation, recurring expense margin still expanded 230 basis points.

We’ve talked about building BlackRock around whole-portfolio construction and structurally growing investment solution categories. These structural growers include private markets, ETFs, SMAs, models, and target date tech. Their flows and base fee growth are all-weather and less market-sensitive. We think they play a key role in supporting structurally higher adjusted operating margins.

The market will always impact BlackRock’s margins—up and down, as you said. But our 2030 goal of getting over 30% of revenue from private markets and technology is aimed at dampening that market effect, pushing to more stable double-digit EPS growth and margin expansion as well as more resilient client portfolios. What’s different today is, with GIP and HPS as private market engines now, both operate above 50% FRE margins. On that base, we see two things ahead for margin growth.

First, recurring expense profit margin can trend toward best-in-class private market peers—exceeding 50%. We can do this through business acquisition, or highly scaled, high-operating-leverage platforms like ETFs, digital assets, and systematic equity, which can generate more expansion and profitability. Second, in constructive markets, with higher-fee inflows and strong organic growth, we think we can drive further company-wide adjusted operating margin expansion. We operate at leading margins today and still see room to scale further.

Goldman Sachs Alexander Blostein

I'd like to spend a few more minutes on the AI theme. There’s been much discussion on capital needs, and you’ve covered that well. Where is BlackRock most comfortable participating in the ecosystem today—in compute or data centers, and which part of the capital structure? Building a fully securitized secondary trading market could take time. How much "bridging" might you provide over the next few years, and how does that translate to BlackRock's revenue opportunity? Finally, is there room for you to create a syndication business in capital markets, like some alternative peers?

Laurence Fink

I'll start, and Martin can add. Good question. You're right—it will take time to get data and analytics, and ratings agencies need time to assess new markets and set metrics. Aladdin and Preqin will need new datasets for proper analysis, and this is a huge priority—we’re focused on it right now.

That said, we’re involved in nearly every conversation. This past week, I spoke with every major hyperscale cloud provider. This is a huge opportunity—in GPU financing (a big focus for HPS) and data center construction/partnerships (a big focus for GIP).

We announced completion of the Aligned Data Centers platform and are looking at two more global platforms for potentially even greater involvement. As I said in my prepared remarks, this really resonates: as a major public shareholder in every leading hyperscale and tech platform, we’re engaged in very broad conversations across all companies.

Many companies want to build—not only in the U.S. but globally—as computing power is universally needed. We’re participating and will be part of that. This, I believe, will be a prime growth driver.

At the same time, global clients are also hearing from our competitors, and they're all seeking similar financing. So unique structuring skills are necessary—partnering with the hyperscale providers, then working with clients to meet their needs, determine structures, back-end collateral if it’s computing power, etc.—we're on the frontier for all of this, with more to come. As indicated by our private market growth, we're already involved and expect to do even more. We’re in the market right now with a very significant deal, and we’ll know the result in the coming months. Day-to-day, we’re fielding opportunities where we can help.

Remember, just building the U.S. electricity grid, securing power, and Core and Shell construction alone could require $7–9 trillion in the coming years. And that’s just the U.S.—other regions are seeking the same financing capabilities. This is a broad role for U.S. capital markets and a big opportunity for BlackRock as an active participant.

Martin, would you like to continue?

Martin Small

I’d emphasize, Alex, what Larry said—from a CFO perspective, the future of Western capital markets is right here, right now. When we talk about convergence of public and private portfolios, it's not just about client portfolios—it's about how companies finance themselves. With growing options, flexibility, and liquidity from public-private structures and off-balance-sheet financing, there will be even more, and we have to excel to finance the massive productivity and innovation opportunities brought by AI.

For BlackRock, expect to see more of what you've already seen: us involved in senior public debt, 144A placements, holding company notes, insurance accounts, equity and junior securities—especially through our HPS and GIP platforms. The ability to provide full capital stack financing, and do it broadly by geography and client type, is critical for building financing solutions for issuers, whom we also view as clients. There’s more to come here. Larry’s enthusiasm in these calls is well-founded—these pockets remain specialist capital. For broader participation, we need to see overall allocations evolve toward GPUs, data centers, compute infrastructure, etc. That's going to take a lot of analytics and also unlocking pension plans and traditional fixed income allocations for these exposures.

On your second question—syndication—we’re first and foremost a fiduciary business. The aim is to find attractive investments for long-term client accounts that generate recurring management fees. When we originate, we focus on where that investment creates the most value in institutional, wealth, and insurance portfolios. Our core advantage is client breadth. We run large pools in private credit funds, insurance mandates, custom accounts, pensions, and OCIOs. That gives us significant flexibility to match assets with long-term capital. Our primary focus is growing fee-paying AUM by placing assets in long-term client portfolios as a fiduciary. If—and when—there is syndication or distribution revenue to capture, we do, but it is incremental, not the primary driver of value creation. The bigger and more enduring opportunity is delivering high-rated private credit and infrastructure debt on our platform and deepening client relationships over time.

Jefferies Daniel Fannon

Martin, I wanted to break down your earlier comments about flows—you mentioned an accelerating pipeline. Looking ahead, what do you expect to contribute more or what mix or category shifts might occur compared to the first nine months this year?

Martin Small

Thanks. First, we're entering the most seasonally strong Q4. iShares typically sees 30–40% of annual flows in Q4, so we should expect typical Q4 iShares seasonality. The difference is, we will continue to see transitions toward higher-value, higher-fee ETF categories—precision exposures, active ETFs, digital assets, factors, etc.

Second, Q3 is typically the softest quarter for private market fundraising. So, expect fundraising to be stronger in Q4, tracking toward annual goals and including day-one fee strategies. I’m even more optimistic that Q4 and H1 next year will be a turning point for evergreen private market funds. Our evergreen platform is about $20 billion, taking in $1.2 billion in inflows this quarter and $800 million in total subscriptions. I see a pivot here. Importantly, as base rates have risen, there is a constructive return to private credit and direct lending in retail BDCs. SOFR is higher, and private credit performance is resilient. You’re going to see that we’re having very constructive discussions with distributors. There are still redemptions in the queue. Industry fee rates are higher than ever. But I think Q4 and early next year—evergreen structures and cash yields will be even more attractive.

Closing Remarks

Operator: Ladies and gentlemen, that concludes the Q&A. Mr. Fink, do you have any closing comments?

Laurence Fink

Thank you, operator. Thank you all for joining us this morning and for your continued focus on BlackRock. This quarter’s results are the clearest view yet of the strength of our integrated platform. I think we can all see the investments we’re making are showing up in growth, far ahead of our goals, and we’re just getting started for the next few years. With momentum accelerating into year-end, I’m confident about the future for us, our clients, and you as shareholders. Thank you all and have a great quarter.

Operator: This concludes today's call. You may now disconnect.