filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW.
Our revenues and net income are derived primarily from investment advisory services provided globally to individual and institutional investors in a broad range of investment solutions across equity, fixed income, multi-asset, and alternatives capabilities. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; trust services; and non-discretionary advisory services.
Investment advisory fees depend largely on the total value and composition of our assets under management. Accordingly, fluctuations in financial markets and in the composition of assets under management affect our revenues and results of operations.
We incur significant expenditures to develop new products and services and improve and expand our capabilities and distribution channels in order to attract new clients and additional investments from our existing clients. These efforts often involve costs that precede any future revenues we may recognize from an increase to our assets under management.
The investment management industry is evolving, facing challenging trends such as passive strategies taking market share from traditional active strategies; continued downward fee pressure; demand for new investment vehicles to meet client needs; and an ever-changing regulatory landscape. In this regard, we have ample liquidity and resources that allow us to take advantage of attractive growth opportunities. Furthermore, we have developed a broad and ongoing plan to align our expense growth with anticipated revenue growth. As a result, we have initiated certain actions to reduce expense growth, realign resources, and invest in existing and future capabilities, while also helping to offset ongoing inflationary pressures on compensation and contractual spending. These investments include hiring investment and distribution professionals, adopting new technologies, and offering new products to provide our clients with strong investment management expertise and services.
MARKET TRENDS.
Major stock indexes rose in the third quarter of 2025. Initially, equities were supported by generally favorable economic data and second-quarter corporate earnings reports, as well as some positive tariff-related news in the form of U.S. trade agreements with other nations. In August, however, a weaker-than-expected nonfarm payroll employment report for July—which included significant downward revisions to employment data for May and June—raised fears of an economic slowdown. Nevertheless, equities were buoyed by growing hopes that the Federal Reserve would resume reducing short-term interest rates; the last rate cut was in December 2024. Indeed, Fed officials decided in mid-September to reduce the fed funds target rate by 25 basis points and indicated there could be two additional rate cuts by the end of the year.
Developed non-U.S. equity markets also produced gains. Markets in several eurozone countries advanced more than 8% in U.S. dollar terms, while UK shares rose about 6%. Developed Asian markets were mostly positive in dollar terms, led by Hong Kong, Singapore, and Japan.
Stocks in emerging markets outperformed equities in developed non-U.S. markets. In emerging Asia, Chinese stocks climbed more than 20%, helped by cash-rich households seeking higher returns. In Latin America, most markets produced positive returns in dollar terms. In the emerging Europe, Middle East, and Africa (EMEA) region, markets were broadly positive. South African shares surged more than 20%, helped by rising metals prices and mining industry strength.
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Returns of several major equity market indexes were as follows:
| Three months ended | Nine months ended | |||||||||||||
| Index | 9/30/2025 | 9/30/2025 | ||||||||||||
| S&P 500 Index | 8.1% | 14.8% | ||||||||||||
| NASDAQ Composite Index(1) | 11.2% | 17.3% | ||||||||||||
| Russell 2000 Index | 12.4% | 10.4% | ||||||||||||
| MSCI EAFE (Europe, Australasia, and Far East) Index | 4.8% | 25.7% | ||||||||||||
| MSCI Emerging Markets Index | 11.0% | 28.2% |
(1) Returns exclude dividends
Global bond returns were mostly positive in the third quarter of 2025. In the U.S., Treasury bill yields declined in anticipation of a Federal Reserve interest rate cut in mid-September. On September 17, the central bank reduced the federal funds target rate from the 4.25% to 4.50% range to the 4.00% to 4.25% range. Intermediate- and long-term U.S. Treasury yields fell to a lesser extent. The 10-year U.S. Treasury note yield decreased from 4.24% to 4.16%.
In the investment-grade bond universe, sector performance was broadly positive. Corporate bonds and mortgage-backed securities performed best, while non-agency commercial mortgage-backed securities, asset-backed securities, and Treasuries lagged. Tax-free municipal bonds and high yield corporate bonds outperformed the taxable investment-grade bond market.
Bonds in developed non-U.S. markets produced slight negative returns in U.S. dollar terms. In the eurozone, longer-term bond yields rose in many countries, while the European Central Bank (ECB) kept key interest rates steady. In the UK, longer-term bond yields also increased, but the Bank of England reduced its key interest rate in August. The euro was little changed versus the greenback, but the British pound fell close to 2% versus the dollar. In Japan, long-term government bond yields increased, but the Bank of Japan kept the benchmark interest rate at 0.50%. The yen fell more than 2% versus the dollar. Emerging markets bonds produced positive returns in U.S. dollar terms. Dollar-denominated bonds outperformed bonds denominated in local currencies, as developing markets currencies were mixed versus the U.S. dollar.
Returns of several major bond market indexes were as follows:
| Three months ended | Nine months ended | |||||||||||||
| Index | 9/30/2025 | 9/30/2025 | ||||||||||||
| Bloomberg U.S. Aggregate Bond Index | 2.0% | 6.1% | ||||||||||||
| JPMorgan Global High Yield Index | 2.5% | 6.9% | ||||||||||||
| Bloomberg Municipal Bond Index | 3.0% | 2.6% | ||||||||||||
| Bloomberg Global Aggregate Ex-U.S. Dollar Bond Index | (0.6)% | 9.4% | ||||||||||||
| JPMorgan Emerging Markets Bond Index Plus | 3.2% | 9.6% | ||||||||||||
| ICE Bank of America U.S. High Yield Index | 2.4% | 7.1% | ||||||||||||
| S&P UBS Leveraged Loan Index | 1.7% | 4.7% |
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ASSETS UNDER MANAGEMENT.****(1)
Assets under management ended the third quarter of 2025 at $1,767.2 billion, an increase of $90.4 billion from June 30, 2025. The increase was primarily driven by market appreciation and income, net of distributions not reinvested, of $89.1 billion, offset by net cash outflows of $7.9 billion. Beginning on July 1, 2025, assets under management include managed account - model delivery portfolios assets, which had $9.2 billion in assets as of that date, and are reflected in the increase from June 30, 2025 and December 31, 2024.
For the nine months ended September 30, 2025, the increase in assets under management was primarily driven by market appreciation, net of distributions not reinvested, of $182.8 billion, offset by net cash outflows of $31.4 billion.
The following tables detail changes in our assets under management, by asset class, during the three- and nine-month periods ended September 30, 2025:
| Three months ended 9/30/2025 | Nine months ended 9/30/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in billions) | Equity | Fixed income, including money market | Multi-asset**(2)** | Alternatives**(3)** | Total | Equity | Fixed income, including money market | Multi-asset**(2)** | Alternatives**(3)** | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets under management at beginning of period | $ | 838.5 | $ | 200.3 | $ | 583.3 | $ | 54.7 | $ | 1,676.8 | $ | 829.7 | $ | 188.1 | $ | 536.0 | $ | 52.8 | $ | 1,606.6 | ||||||||||||||||||||||||||||||||||||||||||
| Managed account - model delivery assets(4) | 9.2 | — | — | — | 9.2 | 9.2 | — | — | — | 9.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flows prior to manager-driven distributions | (14.4) | 4.4 | 1.3 | 1.6 | (7.1) | (51.7) | 11.0 | 7.7 | 3.8 | (29.2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Manager-driven distributions | — | — | — | (0.8) | (0.8) | — | — | — | (2.2) | (2.2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net cash flows | (14.4) | 4.4 | 1.3 | 0.8 | (7.9) | (51.7) | 11.0 | 7.7 | 1.6 | (31.4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net market appreciation (depreciation) and income(5) | 52.1 | 3.4 | 33.1 | 0.5 | 89.1 | 98.2 | 9.0 | 74.0 | 1.6 | 182.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change during the period | 46.9 | 7.8 | 34.4 | 1.3 | 90.4 | 55.7 | 20.0 | 81.7 | 3.2 | 160.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets under management at September 30, 2025 | $ | 885.4 | $ | 208.1 | $ | 617.7 | $ | 56.0 | $ | 1,767.2 | $ | 885.4 | $ | 208.1 | $ | 617.7 | $ | 56.0 | $ | 1,767.2 |
(1) Includes assets in which T. Rowe Price and its affiliates have full discretionary authority along with managed account - model delivery assets.
(2) The underlying assets under management of the multi-asset portfolios have been aggregated and presented in this category and not reported in the equity and fixed income columns.
(3) The alternatives asset class includes strategies authorized to invest more than 50% of its holdings in private credit, leveraged loans, mezzanine, real assets/CRE, structured products, stressed / distressed, non-investment grade CLOs, special situations, or have absolute return as its investment objective. Generally, only those strategies with longer than daily liquidity are included. Unfunded capital commitments were $22.0 billion at September 30, 2025, $18.6 billion at June 30, 2025, and $16.2 billion at December 31, 2024, and are not reflected in fee basis AUM above.
(4) Amount represents the net assets as of July 1, 2025 and all activity for the quarter is reflected in the lines that follow.
(5) Includes net distributions not reinvested for the three- and nine-month periods ended September 30, 2025 of $0.4 billion and $1.3 billion, respectively.
Investment advisory clients outside the United States account for 8.7% of our assets under management at September 30, 2025 and June 30, 2025 and 8.8% at December 31, 2024.
Assets under management in our target date retirement portfolios, which are included in the multi-asset totals shown above, were $552.9 billion at September 30, 2025, $520.3 billion at June 30, 2025, and $475.6 billion at December 31, 2024. Net flows into these portfolios were $2.6 billion and $10.6 billion in the three- and nine-month periods ended September 30, 2025, respectively.
The firm’s multi-asset investment division provides advisory solutions that include investment insights, strategic asset allocation design, tactical asset allocation recommendations, and portfolio rebalancing services. The assets in these solutions, predominantly in the United States, were $25.2 billion at September 30, 2025, compared with $24.1 billion at June 30, 2025.
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We provide participant accounting and plan administration for retirement plans that primarily invest in the firm's U.S. mutual funds, collective investment trusts and products outside of the firm's complex. As of September 30, 2025, our assets under administration were $315 billion, of which $178 billion are assets we manage.
INVESTMENT PERFORMANCE.****(1)
Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. Our performance disclosures include specific asset classes, assets under management weighted performance, U.S. fund performance against passive peers, and composite performance against benchmarks. The following tables present investment performance for the one-, three-, five-, and 10-years ended September 30, 2025. Past performance is not a guarantee nor a reliable indicator of future performance.
| % of U.S. funds that outperformed Morningstar median**(2),(3)** | ||||||||||||||||||||||||||
| 1 year | 3 years | 5 years | 10 years | |||||||||||||||||||||||
| Equity | 39% | 41% | 50% | 56% | ||||||||||||||||||||||
| Fixed Income | 61% | 67% | 55% | 59% | ||||||||||||||||||||||
| Multi-Asset | 45% | 57% | 44% | 65% | ||||||||||||||||||||||
| All Funds | 48% | 54% | 50% | 60% | ||||||||||||||||||||||
| % of U.S. funds that outperformed passive peer median**(2),(4)** | ||||||||||||||||||||||||||
| 1 year | 3 years | 5 years | 10 years | |||||||||||||||||||||||
| Equity | 27% | 43% | 41% | 44% | ||||||||||||||||||||||
| Fixed Income | 59% | 58% | 58% | 59% | ||||||||||||||||||||||
| Multi-Asset | 27% | 36% | 47% | 48% | ||||||||||||||||||||||
| All Funds | 35% | 44% | 48% | 49% | ||||||||||||||||||||||
| % of composites that outperformed benchmarks**(5)** | ||||||||||||||||||||||||||
| 1 year | 3 years | 5 years | 10 years | |||||||||||||||||||||||
| Equity | 19% | 24% | 29% | 51% | ||||||||||||||||||||||
| Fixed Income | 66% | 52% | 62% | 79% | ||||||||||||||||||||||
| All Composites | 40% | 36% | 43% | 61% | ||||||||||||||||||||||
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| AUM Weighted Performance | ||||||||||||||||||||||||||
| % of U.S. funds AUM that outperformed Morningstar median**(2),(3)** | ||||||||||||||||||||||||||
| 1 year | 3 years | 5 years | 10 years | |||||||||||||||||||||||
| Equity | 54% | 58% | 53% | 73% | ||||||||||||||||||||||
| Fixed Income | 80% | 76% | 74% | 79% | ||||||||||||||||||||||
| Multi-Asset | 43% | 78% | 67% | 93% | ||||||||||||||||||||||
| All Funds | 53% | 64% | 57% | 78% | ||||||||||||||||||||||
| % of U.S. funds AUM that outperformed passive peer median**(2),(4)** | ||||||||||||||||||||||||||
| 1 year | 3 years | 5 years | 10 years | |||||||||||||||||||||||
| Equity | 9% | 50% | 21% | 45% | ||||||||||||||||||||||
| Fixed Income | 73% | 69% | 82% | 69% | ||||||||||||||||||||||
| Multi-Asset | 15% | 55% | 68% | 94% | ||||||||||||||||||||||
| All Funds | 14% | 52% | 36% | 58% | ||||||||||||||||||||||
| % of composites AUM that outperformed benchmarks**(5)** | ||||||||||||||||||||||||||
| 1 year | 3 years | 5 years | 10 years | |||||||||||||||||||||||
| Equity | 14% | 29% | 27% | 38% | ||||||||||||||||||||||
| Fixed Income | 74% | 50% | 69% | 72% | ||||||||||||||||||||||
| All Composites | 25% | 33% | 34% | 43% | ||||||||||||||||||||||
As of September 30, 2025, 63 of 142 (44.4%) of the firm's rated U.S. mutual funds (across primary share classes) received an overall rating of 4 or 5 stars. By comparison, 32.5% of Morningstar's fund population is given a rating of 4 or 5 stars(6). In addition, 59%(6) of AUM in the firm's rated U.S. mutual funds (across primary share classes) ended September 30, 2025 with an overall rating of 4 or 5 stars.
(1) The investment performance reflects that of T. Rowe Price U.S. mutual funds, ETFs, and composites.
(2) Source: © 2025 Morningstar, Inc. All rights reserved. The information contained herein: 1) is proprietary to Morningstar and/or its content providers; 2) may not be copied or distributed; and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
(3) Source: Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that outperformed the Morningstar category median. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $337B for 1 year, $328B for 3 years, $326B for 5 years, and $325B for 10 years.
(4) Passive Peer Median was created by T. Rowe Price using data from Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, funds with fewer than three peers, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of a retail fund. This analysis compares T. Rowe Price active funds with the applicable universe of passive/index open-end funds and ETFs of peer firms. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that outperformed the passive peer universe. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $284B for 1 year, $275B for 3 years, $269B for 5 years, and $261B for 10 years.
*(5)*Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared to official GIPS composite primary benchmark. The top chart reflects the percentage of T. Rowe Price composites with 1 year, 3 year, 5 year, and 10 year track record that are outperforming their benchmarks. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,567B for 1 year, $1,559B for 3 years, $1,554B for 5 years, and $1,518B for 10 years.
(6) The Morningstar Rating™ for funds is calculated for funds with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Morningstar gives its best ratings of 5 or 4 stars to the top 32.5% of all funds (of the 32.5%,10% get 5 stars and 22.5% get 4 stars). The Overall Morningstar Rating™ is derived from a weighted average of the performance figures associated with a fund’s 3, 5, and 10 year (if applicable) Morningstar Rating™ metrics.
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RESULTS OF OPERATIONS.
The following table and discussion sets forth information regarding our consolidated financial results for the three- and nine-month periods ended September 30, 2025 and 2024 on a U.S. GAAP and a non-GAAP basis. The non-GAAP basis adjusts for the impact of our consolidated investment products, the impact of market movements on the deferred compensation liabilities and related economic hedges, investment income related to certain other investments, acquisition-related amortization and costs, impairment charges, and certain nonrecurring charges and gains, if any.
| Three months ended | Q3 2025 vs. Q3 2024 | Nine months ended | YTD 2025 vs. YTD 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except per-share data) | 9/30/2025 | 9/30/2024 | $ change | % change**(1)** | 9/30/2025 | 9/30/2024 | $ change | % change**(1)** | ||||||||||||||||||||||||||||||||||||||||||
| U.S. GAAP basis | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment advisory fees(2) | $ | 1,698.7 | $ | 1,627.3 | $ | 71.4 | 4.4 | % | $ | 4,864.7 | $ | 4,732.5 | $ | 132.2 | 2.8 | % | ||||||||||||||||||||||||||||||||||
| Performance-based advisory fees(2) | $ | 6.4 | $ | 5.6 | $ | 0.8 | 14.3 | % | $ | 23.2 | $ | 40.0 | $ | (16.8) | (42.0) | % | ||||||||||||||||||||||||||||||||||
| Capital allocation-based income(3) | $ | 42.0 | $ | 4.6 | $ | 37.4 | n/m | $ | 40.4 | $ | 51.8 | $ | (11.4) | n/m | ||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,893.5 | $ | 1,785.6 | $ | 107.9 | 6.0 | % | $ | 5,380.7 | $ | 5,269.1 | $ | 111.6 | 2.1 | % | ||||||||||||||||||||||||||||||||||
| Operating expenses | $ | 1,250.3 | $ | 1,172.0 | $ | 78.3 | 6.7 | % | $ | 3,662.9 | $ | 3,504.2 | $ | 158.7 | 4.5 | % | ||||||||||||||||||||||||||||||||||
| Net operating income | $ | 643.2 | $ | 613.6 | $ | 29.6 | 4.8 | % | $ | 1,717.8 | $ | 1,764.9 | $ | (47.1) | (2.7) | % | ||||||||||||||||||||||||||||||||||
| Non-operating income (loss) | $ | 238.4 | $ | 212.5 | $ | 25.9 | 12.2 | % | $ | 544.6 | $ | 481.7 | $ | 62.9 | 13.1 | % | ||||||||||||||||||||||||||||||||||
| Net income to T. Rowe Price Group, Inc. | $ | 646.1 | $ | 603.0 | $ | 43.1 | 7.1 | % | $ | 1,641.8 | $ | 1,660.2 | $ | (18.4) | (1.1) | % | ||||||||||||||||||||||||||||||||||
| Diluted earnings per common share | $ | 2.87 | $ | 2.64 | $ | 0.23 | 8.7 | % | $ | 7.25 | $ | 7.23 | $ | 0.02 | 0.3 | % | ||||||||||||||||||||||||||||||||||
| Weighted average common shares outstanding assuming dilution | 219.7 | 222.8 | (3.1) | (1.4) | % | 220.9 | 223.5 | (2.6) | (1.2) | % | ||||||||||||||||||||||||||||||||||||||||
| Adjusted basis**(4)** | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | $ | 1,134.4 | $ | 1,099.0 | $ | 35.4 | 3.2 | % | $ | 3,416.7 | $ | 3,276.2 | $ | 140.5 | 4.3 | % | ||||||||||||||||||||||||||||||||||
| Operating expenses, excluding accrued carried interest related compensation | $ | 1,111.8 | $ | 1,087.4 | $ | 24.4 | 2.2 | % | $ | 3,376.9 | $ | 3,237.6 | $ | 139.3 | 4.3 | % | ||||||||||||||||||||||||||||||||||
| Net operating income | $ | 774.1 | $ | 718.4 | $ | 55.7 | 7.8 | % | $ | 2,029.1 | $ | 2,065.7 | $ | (36.6) | (1.8) | % | ||||||||||||||||||||||||||||||||||
| Non-operating income (loss) | $ | 50.2 | $ | 51.2 | $ | (1.0) | (2.0) | % | $ | 132.8 | $ | 114.4 | $ | 18.4 | 16.1 | % | ||||||||||||||||||||||||||||||||||
| Net income to T. Rowe Price Group, Inc. | $ | 631.7 | $ | 586.5 | $ | 45.2 | 7.7 | % | $ | 1,647.8 | $ | 1,654.7 | $ | (6.9) | (0.4) | % | ||||||||||||||||||||||||||||||||||
| Diluted earnings per common share | $ | 2.81 | $ | 2.57 | $ | 0.24 | 9.3 | % | $ | 7.28 | $ | 7.21 | $ | 0.07 | 1.0 | % | ||||||||||||||||||||||||||||||||||
| Assets under management (AUM) (in billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Average AUM | $ | 1,723.0 | $ | 1,589.5 | $ | 133.5 | 8.4 | % | $ | 1,644.4 | $ | 1,536.2 | $ | 108.2 | 7.0 | % | ||||||||||||||||||||||||||||||||||
| Ending AUM | $ | 1,767.2 | $ | 1,630.9 | $ | 136.3 | 8.4 | % | $ | 1,767.2 | $ | 1,630.9 | $ | 136.3 | 8.4 | % | ||||||||||||||||||||||||||||||||||
| Investment advisory annualized effective fee rate (EFR) (in bps) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| EFR without performance-based fees | 39.1 | 40.7 | (1.6) | (3.9) | % | 39.6 | 41.2 | (1.6) | (3.9) | % | ||||||||||||||||||||||||||||||||||||||||
| EFR with performance-based fees | 39.3 | 40.9 | (1.6) | (3.9) | % | 39.7 | 41.5 | (1.8) | (4.3) | % |
(1) n/m - the percentage change is not meaningful.
(2) 2024 performance-based advisory fees are reported separately from investment advisory fees to align with the presentation in 2025.
(3) Capital allocation-based income represents the change in accrued carried interest.
(4) See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management’s Discussion and Analysis.
Results Overview - Quarter ended September 30, 2025
Net revenues consist of investment advisory revenues; performance-based advisory fees; administrative, distribution, services, and other fees; and capital allocation-based income. About 90% of our net revenues are related to investment advisory fees. Total net revenues were $1,893.5 million in the third quarter of 2025, a 6.0%
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increase compared to $1,785.6 million in the 2024 quarter. The increase was driven primarily by higher investment advisory fees on higher average assets under management and capital allocation-based income.
Investment advisory fees are generally earned based on the value and composition of our assets under management, which change based on fluctuations in financial markets and net cash flows. As our average assets under management increase or decrease in a given period, the level of our investment advisory fee revenue for that same period generally fluctuates in a similar manner. Our annualized effective fee rates can be impacted by market or cash flow related shifts among asset classes and products, including those with tiered-fee structures, along with price changes we make in existing products.
Capital allocation-based income will fluctuate quarter-to-quarter to reflect the adjustment to accrued carried interest for the change in value of certain affiliated funds assuming the funds’ underlying investments were realized as of the end of the period.
Operating expenses on a U.S. GAAP basis were $1,250.3 million in the third quarter of 2025, a 6.7% increase over the comparable 2024 period. On a non-GAAP basis, operating expenses were $1,134.4 million, a 3.2% increase over the comparable 2024 period.
Compared to the third quarter of 2024, the increase in U.S. GAAP operating expenses was driven by a few items, including the restructuring charge, primarily compensation and related, associated with our ongoing plan to reduce expense growth and realign resources to invest in existing and future capabilities. Additionally, higher technology and facilities costs and accrued carried interest compensation contributed to the rise in U.S. GAAP operating expenses and were the main drivers of the increase in non-GAAP operating expenses over the 2024 period. Given the non-recurring nature of the restructuring charge, we have excluded this charge from our non-GAAP operating expenses measures.
Operating margin in the third quarter of 2025 was 34.0% on a U.S. GAAP basis, compared to 34.4% in the third quarter of 2024. The restructuring charge was the primary driver of the decrease in the operating margin.
Diluted earnings per share was $2.87 for the third quarter of 2025 compared to $2.64 for the third quarter of 2024. The increase was primarily driven by higher operating income, higher investment gains, and fewer weighted average shares outstanding compared to the 2024 period.
On a non-GAAP basis, diluted earnings per share was $2.81 for the third quarter of 2025 as compared to $2.57 for the third quarter of 2024. The increase was primarily due to higher adjusted operating income and fewer weighted average shares outstanding compared to the 2024 period.
Results Overview - Year-to-Date ended September 30, 2025
Net revenues consist of investment advisory revenues; performance-based advisory fees; administrative, distribution, services, and other fees; and capital allocation-based income. More than 90% of our net revenues for the nine months ended September 30, 2025 are related to investment advisory fees. Total net revenues were $5,380.7 million in the nine months ended September 30, 2025, a 2.1% increase over $5,269.1 million in the 2024 period. The increase was primarily driven by a 2.8% increase in investment advisory fee revenue as average assets under management increased by 7.0% and a $7.6 million increase in non-advisory revenues, partially offset by a $16.8 million decrease in performance-based advisory fees and a $11.4 million decrease in capital allocation-based income (change in accrued carried interest) earned from investments in certain affiliated funds.
Operating expenses on a U.S. GAAP basis were $3,662.9 million in the nine months ended September 30, 2025, compared with $3,504.2 million over the comparable 2024 period. On a non-GAAP basis, operating expenses were $3,416.7 million, a 4.3% increase over the comparable 2024 period.
Compared to the nine months ended September 30, 2024, the increase in U.S. GAAP operating expenses were primarily due to compensation and related costs, the restructuring charge, technology and facility costs, and distribution and servicing costs. The drivers of the increase in non-GAAP operating expenses were the same as U.S. GAAP with the exception of the restructuring charge, which is excluded from our non-GAAP operating expenses measures.
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Operating margin in the nine months ended September 30, 2025 was 31.9% on a U.S. GAAP basis, compared to 33.5% earned in the 2024 period. The decrease was primarily driven by operating expense growth outpacing net revenue growth.
Diluted earnings per share was $7.25 for the nine months ended September 30, 2025, compared to $7.23 for 2024 period. On a non-GAAP basis, adjusted diluted earnings per share was $7.28 for the nine months ended September 30, 2025, compared to $7.21 for the 2024 period. The increase was primarily due to fewer weighted average shares outstanding and higher investment gains, which were partially offset by lower operating income.
Net revenues
| Three months ended | Q3 2025 vs. Q3 2024 | Nine months ended | YTD 2025 vs. YTD 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 9/30/2025 | 9/30/2024 | $ change | % change**(1)** | 9/30/2025 | 9/30/2024 | $ change | % change**(1)** | ||||||||||||||||||||||||||||||||||||||||||
| Investment advisory fees**(2)** | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity | $ | 1,011.8 | $ | 978.5 | $ | 33.3 | 3.4 | % | $ | 2,894.6 | $ | 2,858.5 | $ | 36.1 | 1.3 | % | ||||||||||||||||||||||||||||||||||
| Fixed income, including money market | 110.1 | 104.1 | 6.0 | 5.8 | % | 319.2 | 304.5 | 14.7 | 4.8 | % | ||||||||||||||||||||||||||||||||||||||||
| Multi-asset | 492.1 | 465.8 | 26.3 | 5.6 | % | 1,402.7 | 1,340.3 | 62.4 | 4.7 | % | ||||||||||||||||||||||||||||||||||||||||
| Alternatives | 84.7 | 78.9 | 5.8 | 7.4 | % | 248.2 | 229.2 | 19.0 | 8.3 | % | ||||||||||||||||||||||||||||||||||||||||
| 1,698.7 | 1,627.3 | 71.4 | 4.4 | % | 4,864.7 | 4,732.5 | 132.2 | 2.8 | % | |||||||||||||||||||||||||||||||||||||||||
| Performance-based advisory fees**(2)** | 6.4 | 5.6 | 0.8 | 14.3 | % | 23.2 | 40.0 | (16.8) | (42.0) | % | ||||||||||||||||||||||||||||||||||||||||
| Capital allocation-based income | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in accrued carried interest | 56.2 | 35.1 | 21.1 | 60.1 | % | 101.9 | 121.6 | (19.7) | (16.2) | % | ||||||||||||||||||||||||||||||||||||||||
| Acquisition-related amortization and impairments | (14.2) | (30.5) | 16.3 | (53.4) | % | (61.5) | (69.8) | 8.3 | (11.9) | % | ||||||||||||||||||||||||||||||||||||||||
| 42.0 | 4.6 | 37.4 | n/m | 40.4 | 51.8 | (11.4) | n/m | |||||||||||||||||||||||||||||||||||||||||||
| Administrative, distribution, services, and other fees | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Administrative fees | 124.1 | 125.4 | (1.3) | (1.0) | % | 387.5 | 378.4 | 9.1 | 2.4 | % | ||||||||||||||||||||||||||||||||||||||||
| Distribution and servicing fees | 22.3 | 22.7 | (0.4) | (1.8) | % | 64.9 | 66.4 | (1.5) | (2.3) | % | ||||||||||||||||||||||||||||||||||||||||
| 146.4 | 148.1 | (1.7) | (1.1) | % | 452.4 | 444.8 | 7.6 | 1.7 | % | |||||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,893.5 | $ | 1,785.6 | $ | 107.9 | 6.0 | % | $ | 5,380.7 | $ | 5,269.1 | $ | 111.6 | 2.1 | % | ||||||||||||||||||||||||||||||||||
| Average AUM (in billions): | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity | $ | 865.8 | $ | 813.1 | $ | 52.7 | 6.5 | % | $ | 825.7 | $ | 791.4 | $ | 34.3 | 4.3 | % | ||||||||||||||||||||||||||||||||||
| Fixed income, including money market | 203.8 | 183.3 | 20.5 | 11.2 | % | 197.8 | 175.9 | 21.9 | 12.5 | % | ||||||||||||||||||||||||||||||||||||||||
| Multi-asset | 597.7 | 542.3 | 55.4 | 10.2 | % | 566.8 | 519.9 | 46.9 | 9.0 | % | ||||||||||||||||||||||||||||||||||||||||
| Alternatives | 55.7 | 50.8 | 4.9 | 9.6 | % | 54.1 | 49.0 | 5.1 | 10.4 | % | ||||||||||||||||||||||||||||||||||||||||
| Average AUM | $ | 1,723.0 | $ | 1,589.5 | $ | 133.5 | 8.4 | % | $ | 1,644.4 | $ | 1,536.2 | $ | 108.2 | 7.0 | % | ||||||||||||||||||||||||||||||||||
| Investment advisory annualized effective fee rate (EFR) (in bps) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| EFR without performance-based fees | 39.1 | 40.7 | (1.6) | (3.9) | % | 39.6 | 41.2 | (1.6) | (3.9) | % | ||||||||||||||||||||||||||||||||||||||||
| EFR with performance-based fees | 39.3 | 40.9 | (1.6) | (3.9) | % | 39.7 | 41.5 | (1.8) | (4.3) | % |
(1) n/m - the percentage change is not meaningful.
(2) 2024 performance-based advisory fees are reported separately from investment advisory fees to align with the 2025 presentation.
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Investment advisory fees in the third quarter of 2025 increased 4.4% over the comparable 2024 quarter while average assets under management increased $133.5 billion, or 8.4%, to $1,723.0 billion. For the nine months ended September 30, 2025, investment advisory revenues increased 2.8% over the comparable 2024 period as average assets under management increased $108.2 billion, or 7.0%, to $1,644.4 billion.
The average annualized effective fee rate earned for the three- and nine-month periods ended September 30, 2025 declined from the comparable 2024 periods primarily due to client flows and transfers shifting assets under management toward lower-fee strategies and products.
Performance-based advisory fees in the third quarter of 2025 and 2024 were earned primarily from alternatives strategies, and from alternatives and equity strategies for the nine months ended September 30, 2025 and 2024.
Capital allocation-based income includes the change in accrued carried interest along with acquisition-related amortization and impairments. In the third quarter of 2025, the change in accrued carried interest increased net revenues by $56.2 million compared to $35.1 million in the 2024 period. For the nine months ended September 30, 2025, the change in accrued carried interest increased net revenues by $101.9 million compared to $121.6 million for the 2024 period. The difference in the change in accrued carried interest for the 2025 periods compared to the 2024 periods was due to relative market impacts and performance. The decrease in acquisition-related amortization and impairments for the 2025 periods from the comparable 2024 periods was primarily due to higher impairments recognized in prior periods.
A portion of the capital allocation-based income is passed through to certain associates as compensation and the related expense recognized in compensation and related costs with the unpaid amount reported as non-controlling interest on the unaudited consolidated balance sheets.
Administrative, distribution, services, and other fees in the third quarter of 2025 were $146.4 million, a decrease of $1.7 million, or 1.1%, from the comparable 2024 quarter. For the nine months ended September 30, 2025, these fees were $452.4 million, an increase of $7.6 million, or 1.7%, from the 2024 period. In the third quarter of 2025, we began reporting revenue from managed account model delivery assets and certain other advisory services in investment advisory fees, which was over $13 million in Q3 2025. This reclassification was the primary driver of the decline in administrative, distribution, services, and other fees, partially offset by higher transfer agents services compared to the 2024 period. For the nine months ended September 30, 2025, the increase was primarily due to higher recordkeeping fees and higher transfer agent services.
Our net revenues reflect the elimination of advisory and administrative fee revenue earned from our consolidated
investment products. The corresponding expenses recognized by these products, which are consolidated in our financial statements, were also eliminated from operating expenses. For the third quarter, we eliminated net revenue of $0.8 million in 2025 and $1.3 million in 2024. For the nine months ended September 30, we eliminated net revenue of $3.6 million in 2025 and $3.0 million in 2024.
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Operating expenses
| Three months ended | Q3 2025 vs. Q3 2024 | Nine months ended | YTD 2025 vs. YTD 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 9/30/2025 | 9/30/2024 | $ change | % change**(1)** | 9/30/2025 | 9/30/2024 | $ change | % change**(1)** | ||||||||||||||||||||||||||||||||||||||||||
| Compensation, benefits and related costs | $ | 632.5 | $ | 632.9 | $ | (0.4) | (0.1) | % | $ | 1,939.2 | $ | 1,898.0 | $ | 41.2 | 2.2 | % | ||||||||||||||||||||||||||||||||||
| Acquisition-related retention agreements | 14.2 | 4.0 | 10.2 | n/m | 42.5 | 30.6 | 11.9 | 38.9 | % | |||||||||||||||||||||||||||||||||||||||||
| Capital allocation-based income compensation(2) | 16.8 | (2.0) | 18.8 | n/m | 14.9 | 8.8 | 6.1 | 69.3 | % | |||||||||||||||||||||||||||||||||||||||||
| Market-related change in deferred compensation liabilities | 50.8 | 43.4 | 7.4 | 17.1 | % | 109.9 | 111.0 | (1.1) | (1.0) | % | ||||||||||||||||||||||||||||||||||||||||
| Total compensation and related costs | 714.3 | 678.3 | 36.0 | 5.3 | % | 2,106.5 | 2,048.4 | 58.1 | 2.8 | % | ||||||||||||||||||||||||||||||||||||||||
| Distribution and servicing | 95.8 | 91.6 | 4.2 | 4.6 | % | 281.9 | 261.2 | 20.7 | 7.9 | % | ||||||||||||||||||||||||||||||||||||||||
| Advertising and promotion | 21.3 | 20.8 | 0.5 | 2.4 | % | 77.3 | 79.4 | (2.1) | (2.6) | % | ||||||||||||||||||||||||||||||||||||||||
| Product and recordkeeping related costs | 78.7 | 75.0 | 3.7 | 4.9 | % | 237.3 | 223.0 | 14.3 | 6.4 | % | ||||||||||||||||||||||||||||||||||||||||
| Technology, occupancy, and facility costs | 183.2 | 164.0 | 19.2 | 11.7 | % | 530.2 | 474.8 | 55.4 | 11.7 | % | ||||||||||||||||||||||||||||||||||||||||
| General, administrative, and other | 101.7 | 104.2 | (2.5) | (2.4) | % | 314.5 | 305.5 | 9.0 | 2.9 | % | ||||||||||||||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | — | (13.4) | 13.4 | n/m | — | (13.4) | 13.4 | n/m | ||||||||||||||||||||||||||||||||||||||||||
| Acquisition-related amortization and impairment costs | 26.8 | 51.5 | (24.7) | (48.0) | % | 86.7 | 125.3 | (38.6) | (30.8) | % | ||||||||||||||||||||||||||||||||||||||||
| Restructuring charge | 28.5 | — | 28.5 | n/m | 28.5 | — | 28.5 | n/m | ||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 1,250.3 | $ | 1,172.0 | $ | 78.3 | 6.7 | % | $ | 3,662.9 | $ | 3,504.2 | $ | 158.7 | 4.5 | % | ||||||||||||||||||||||||||||||||||
| Total adjusted operating expenses (3) | $ | 1,134.4 | $ | 1,099.0 | $ | 35.4 | 3.2 | % | $ | 3,416.7 | $ | 3,276.2 | $ | 140.5 | 4.3 | % |
(1) n/m - The percentage change is not meaningful.
(2) Capital allocation-based income compensation represents the change in accrued carried interest compensation along with acquisition-related, non-cash amortization and impairments.
(3) See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management’s Discussion and Analysis.
Compensation, benefits, and related costs were $632.5 million in the third quarter of 2025, a decrease of $0.4 million, or 0.1%, compared to the 2024 quarter. For the nine months ended September 30, 2025, these costs were $1,939.2 million, an increase of $41.2 million, or 2.2%, compared to the 2024 period.
For the third quarter of 2025, the decrease was due to lower temporary personnel, offset by higher salaries and related benefits and lower capitalized labor. For the nine months ended September 30, 2025, the increase was primarily due to higher salaries and related benefits, higher long-term incentive compensation, and lower capitalized labor. These increases were partially offset by lower temporary personnel and other employee related costs.
The firm employed 7,830 associates at September 30, 2025, a decrease of 2.9% from 8,063 associates at June 30, 2025, a decrease of 4.0% from the end of 2024, and a decrease of 3.4% from September 30, 2024. The decrease in associates over each period is primarily driven by the workforce action in July 2025.
Distribution and servicing costs were $95.8 million for the third quarter of 2025, an increase of $4.2 million, or 4.6%, from $91.6 million recognized in the 2024 quarter. For the nine months ended September 30, 2025, these costs were $281.9 million, an increase of $20.7 million, or 7.9%, from $261.2 million recognized in the comparable 2024 period. The increases in both periods were primarily driven by higher average assets under management distributed through intermediaries.
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The costs in this expense category include amounts paid to third-party intermediaries that source the assets of certain share classes of our U.S. mutual funds, ETFs, and our international products, such as our Japanese ITMs and SICAVs. These costs are offset entirely by the distribution revenue we earn and report in net revenues: 12b-1 revenue is recognized in administrative, distribution, services, and other fees for the Advisor and R share classes of the U.S. mutual funds and investment advisory fee revenue for our international products and ETFs.
Product and recordkeeping related costs were $78.7 million in the third quarter of 2025, an increase of $3.7 million, or 4.9%, compared to $75.0 million in the 2024 quarter. For the nine months ended September 30, 2025, these costs were $237.3 million, an increase of $14.3 million, or 6.4%, from $223.0 million recognized in the comparable 2024 period. The increases in both periods were primarily due to higher recordkeeping fees and other product related costs. Also contributing to the nine month increase was higher custody fees related to our trust products.
Technology, occupancy, and facility costs were $183.2 million in the third quarter of 2025, an increase of $19.2 million, or 11.7%, compared to the $164.0 million recognized in the 2024 quarter. For the nine months ended September 30, 2025, these costs were $530.2 million, an increase of $55.4 million, or 11.7%, compared with the 2024 period. The increases in both periods were primarily due to higher technology costs, including hosted solutions and depreciation. Also contributing to the nine month increase was higher occupancy and facility costs related to our new corporate headquarters, which was occupied in March 2025, and a non-recurring cost benefit related to our UK facility in the first quarter of 2024.
General, administrative, and other expenses were $101.7 million in the third quarter of 2025, a decrease of $2.5 million, or 2.4%, compared to the $104.2 million recognized in the 2024 quarter. For the nine months ended September 30, 2025, these costs were $314.5 million, an increase of $9.0 million, or 2.9%, compared with the 2024 period. For the third quarter of 2025, the decrease was primarily related to a non-recurring cost recovery recognized during the quarter. For the nine months ended September 30, 2025, the increase was primarily driven by higher professional fees, information services, and other administrative costs. These increases were partially offset by the non-recurring cost recovery recognized in the third quarter of 2025 and lower external research fees.
Acquisition-related amortization and impairment costs primarily relate to the indefinite- and definite-lived intangible assets identified and separately recognized, at fair value, on acquisition date. For the third quarter of 2025, we recognized $26.8 million in amortization and impairments related to intangible assets, compared to $51.5 million in the 2024 quarter. For the nine months ended September 30, 2025, we recognized $86.7 million in amortization and impairments related to intangible assets, compared to $125.3 million, in the 2024 period. For the 2024 periods, intangible asset impairment charges totaled $25.6 million for the third quarter and $59.7 million for the year-to-date period. If conditions that led us to recognize impairment charges worsen, additional impairments may be recognized in future periods.
Restructuring charge of $28.5 million for three- and nine-month periods ended September 30, 2025 reflects compensation costs, primarily severance, incurred in connection with the July workforce action. This was related to our previously announced broad and ongoing plan to reduce expense growth and realign resources. This ongoing effort is designed to support investment in both existing and future capabilities.
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Non-operating income (loss)
Non-operating income for the third quarter of 2025 was $238.4 million compared to $212.5 million in the 2024 quarter. The following table details the components of non-operating income for both the three- and nine-month periods ended September 30, 2025 and 2024.
| Three months ended | Nine months ended | ||||||||||||||||||||||
| (in millions) | 9/30/2025 | 9/30/2024 | 9/30/2025 | 9/30/2024 | |||||||||||||||||||
| Net gains (losses) from non-consolidated investment products | |||||||||||||||||||||||
| Cash and discretionary investments | |||||||||||||||||||||||
| Dividend income | $ | 38.1 | $ | 37.4 | $ | 102.3 | $ | 98.8 | |||||||||||||||
| Market-related gains (losses) and equity in earnings (losses) | 12.1 | 5.9 | 29.6 | 6.2 | |||||||||||||||||||
| Total cash and discretionary investments | 50.2 | 43.3 | 131.9 | 105.0 | |||||||||||||||||||
| Seed capital investments | |||||||||||||||||||||||
| Dividend income | 0.5 | 0.5 | 0.9 | 0.8 | |||||||||||||||||||
| Market-related gains (losses) and equity in earnings (losses) | 17.1 | 21.3 | 42.6 | 60.1 | |||||||||||||||||||
| Total seed capital investments | 17.6 | 21.8 | 43.5 | 60.9 | |||||||||||||||||||
| Total cash, discretionary, and seed investments | 67.8 | 65.1 | 175.4 | 165.9 | |||||||||||||||||||
| Net gains (losses) recognized upon deconsolidation | — | (0.6) | 3.1 | (0.6) | |||||||||||||||||||
| Investments used to hedge the deferred compensation liabilities | 53.0 | 41.1 | 112.8 | 105.6 | |||||||||||||||||||
| Total net gains (losses) from non-consolidated investment products | 120.8 | 105.6 | 291.3 | 270.9 | |||||||||||||||||||
| Other investment income | 40.4 | 13.4 | 67.7 | 47.6 | |||||||||||||||||||
| Net gains (losses) on investments | 161.2 | 119.0 | 359.0 | 318.5 | |||||||||||||||||||
| Net gains (losses) on consolidated investment products | 72.6 | 85.9 | 183.1 | 166.7 | |||||||||||||||||||
| Other gains (losses), including foreign currency gains (losses) | 4.6 | 7.6 | 2.5 | (3.5) | |||||||||||||||||||
| Non-operating income (loss) | $ | 238.4 | $ | 212.5 | $ | 544.6 | $ | 481.7 | |||||||||||||||
| Adjusted non-operating income (loss)****(1) | $ | 50.2 | $ | 51.2 | $ | 132.8 | $ | 114.4 |
(1) See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management's Discussion and Analysis.
Higher investment gains earned by our investment portfolio during the three- and nine-month periods ended September 30, 2025 compared to the 2024 periods were primarily due to higher cash and investment holdings coupled with stronger overall market returns.
The table above shows the net investment income of the underlying portfolios of the consolidated investment products, not just the income from our ownership share. The table below displays how consolidated investment products affected the individual lines of our unaudited consolidated income statements and the portion attributable to our interest.
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| Three months ended | Nine months ended | ||||||||||||||||||||||
| (in millions) | 9/30/2025 | 9/30/2024 | 9/30/2025 | 9/30/2024 | |||||||||||||||||||
| Operating expenses reflected in net operating income | $ | (2.2) | $ | (2.4) | $ | (7.1) | $ | (7.3) | |||||||||||||||
| Net investment income (loss) reflected in non-operating income | 72.6 | 85.9 | 183.1 | 166.7 | |||||||||||||||||||
| Impact on income before taxes | $ | 70.4 | $ | 83.5 | $ | 176.0 | $ | 159.4 | |||||||||||||||
| Net income (loss) attributable to our interest in the consolidated investment products | $ | 30.0 | $ | 46.1 | $ | 70.1 | $ | 100.5 | |||||||||||||||
| Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors) | 40.4 | 37.4 | 105.9 | 58.9 | |||||||||||||||||||
| Impact on income before taxes | $ | 70.4 | $ | 83.5 | $ | 176.0 | $ | 159.4 |
Provision for income taxes
The GAAP effective tax rate for the third quarter of 2025 was 22.1% compared with 22.5% in the third quarter of 2024. These quarterly rates were the result of an overall year-to-date rate of 22.8% for 2025 and 23.5% for 2024. The following table reconciles the statutory federal income tax rate to our effective tax rate on a U.S. GAAP basis for the nine months ended September 30, 2025 and 2024:
| Nine months ended | |||||||||||||||||||||||
| 9/30/2025 | 9/30/2024 | ||||||||||||||||||||||
| Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | |||||||||||||||||||
| State income taxes for current year, net of federal income tax benefits(1) | 2.5 | 2.7 | |||||||||||||||||||||
| Net (income) losses attributable to redeemable non-controlling interests(2) | (1.0) | (0.6) | |||||||||||||||||||||
| Net excess tax benefits from stock-based compensation plans activity | (0.2) | (0.2) | |||||||||||||||||||||
| Valuation allowances | (0.2) | 0.3 | |||||||||||||||||||||
| Other items | 0.7 | 0.3 | |||||||||||||||||||||
| Effective income tax rate | 22.8 | % | 23.5 | % | |||||||||||||||||||
| Adjusted effective tax rate | 23.8 | % | 24.1 | % |
(1) State income tax benefits are reflected in the total benefits for net income attributable to redeemable non-controlling interests and stock-based compensation plans activity.
(2) Net income attributable to redeemable non-controlling interests represents the portion of earnings held in the firm's consolidated investment products, which are not taxable to the firm despite being included in pre-tax income.
The adjusted effective tax rate primarily adjusts for the impact of the consolidated investment products, including the net income attributable to the redeemable non-controlling interests. The decrease in the year-to-date 2025 U.S. GAAP and adjusted effective tax rates compared to 2024 was primarily due to the reversal of a U.S. foreign tax credit carryover valuation allowance and lower state taxes. The impact of redeemable non-controlling interest also contributed to the lower U.S. GAAP effective tax rate compared to the 2024 period.
We currently estimate that our effective tax rate for the full year 2025, on a U.S. GAAP basis, will be in the range of 23.0% to 26.0%. On an adjusted basis, the range is 23.5% to 25.5%.
Our effective tax rate will continue to experience volatility in future periods due to tax benefits recognized from stock-based compensation being influenced by market fluctuations in our stock price, and changes in deferred tax asset valuation allowances, primarily in foreign jurisdictions, being impacted by the sufficiency of taxable income in future periods. Our U.S. GAAP rate will also be impacted by changes in the proportion of net income that is attributable to our redeemable non-controlling interests and non-controlling interests reflected in permanent equity.
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NON-GAAP INFORMATION AND RECONCILIATION.
We believe the non-GAAP financial measures below provide relevant and meaningful information to investors about our core operating results. These measures have been established in order to increase transparency for the purpose of evaluating our core business, for comparing current results with prior period results, and to enable more appropriate comparison with industry peers. However, non-GAAP financial measures should not be considered a substitute for financial measures calculated in accordance with U.S. GAAP and may be calculated differently by other companies.
The following schedules reconcile certain U.S. GAAP financial measures to Non-GAAP financial measures for the three months ended September 30, 2025 and 2024.
| Three months ended 9/30/2025 | |||||||||||||||||||||||||||||||||||
| Operating expenses | Net operating income | Non-operating income (loss) | Provision (benefit) for income taxes**(6)** | Net income attributable to T. Rowe Price Group, Inc. | Diluted earnings per share**(7)** | ||||||||||||||||||||||||||||||
| U.S. GAAP Basis (FS line item) | $ | 1,250.3 | $ | 643.2 | $ | 238.4 | $ | 195.1 | $ | 646.1 | $ | 2.87 | |||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition-related: | |||||||||||||||||||||||||||||||||||
| Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs) | 5.8 | 8.4 | — | 1.2 | 7.2 | 0.03 | |||||||||||||||||||||||||||||
| Acquisition-related retention arrangements(1) (Compensation and related costs) | (14.2) | 14.2 | — | 2.1 | 12.1 | 0.05 | |||||||||||||||||||||||||||||
| Intangible assets amortization and impairments(1) | (26.8) | 26.8 | — | 3.9 | 22.9 | 0.10 | |||||||||||||||||||||||||||||
| Total acquisition-related | (35.2) | 49.4 | — | 7.2 | 42.2 | 0.18 | |||||||||||||||||||||||||||||
| Deferred compensation liabilities(2) (Compensation and related costs) | (50.8) | 50.8 | (53.0) | (0.3) | (1.9) | (0.01) | |||||||||||||||||||||||||||||
| Restructuring charge(3) | (28.5) | 28.5 | — | 4.2 | 24.3 | 0.11 | |||||||||||||||||||||||||||||
| Consolidated investment products(4) | (1.4) | 2.2 | (72.6) | (4.4) | (25.6) | (0.11) | |||||||||||||||||||||||||||||
| Other non-operating income(5) | — | — | (62.6) | (9.2) | (53.4) | (0.23) | |||||||||||||||||||||||||||||
| Adjusted Basis | $ | 1,134.4 | $ | 774.1 | $ | 50.2 | $ | 192.6 | $ | 631.7 | $ | 2.81 |
| Three months ended 9/30/2024 | |||||||||||||||||||||||||||||||||||
| Operating expenses | Net operating income | Non-operating income (loss) | Provision (benefit) for income taxes**(6)** | Net income attributable to T. Rowe Price Group, Inc. | Diluted earnings per share**(7)** | ||||||||||||||||||||||||||||||
| U.S. GAAP Basis (FS line item) | $ | 1,172.0 | $ | 613.6 | $ | 212.5 | $ | 185.7 | $ | 603.0 | $ | 2.64 | |||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition-related: | |||||||||||||||||||||||||||||||||||
| Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs) | 13.6 | 16.9 | — | 2.3 | 14.6 | 0.06 | |||||||||||||||||||||||||||||
| Acquisition-related retention arrangements(1) (Compensation and related costs) | (4.0) | 4.0 | — | 0.5 | 3.5 | 0.02 | |||||||||||||||||||||||||||||
| Contingent consideration(1) | 13.4 | (13.4) | — | (1.8) | (11.6) | (0.05) | |||||||||||||||||||||||||||||
| Intangible assets amortization and impairments(1) | (51.5) | 51.5 | — | 7.0 | 44.5 | 0.19 | |||||||||||||||||||||||||||||
| Total acquisition-related | (28.5) | 59.0 | — | 8.0 | 51.0 | 0.22 | |||||||||||||||||||||||||||||
| Deferred compensation liabilities(2) (Compensation and related costs) | (43.4) | 43.4 | (41.1) | 0.3 | 2.0 | 0.01 | |||||||||||||||||||||||||||||
| Consolidated investment products(4) | (1.1) | 2.4 | (85.9) | (6.3) | (39.8) | (0.17) | |||||||||||||||||||||||||||||
| Other non-operating income(5) | — | — | (34.3) | (4.6) | (29.7) | (0.13) | |||||||||||||||||||||||||||||
| Adjusted Basis | $ | 1,099.0 | $ | 718.4 | $ | 51.2 | $ | 183.1 | $ | 586.5 | $ | 2.57 |
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The following schedules reconcile certain U.S. GAAP financial measures to non-GAAP financial measures for the nine months ended September 30, 2025 and 2024.
| Nine months ended 9/30/2025 | |||||||||||||||||||||||||||||||||||
| Operating expenses | Net operating income | Non-operating income (loss) | Provision (benefit) for income taxes**(6)** | Net income attributable to T. Rowe Price Group, Inc. | Diluted earnings per share**(7)** | ||||||||||||||||||||||||||||||
| U.S. GAAP Basis (FS line item) | $ | 3,662.9 | $ | 1,717.8 | $ | 544.6 | $ | 514.7 | $ | 1,641.8 | $ | 7.25 | |||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition-related: | |||||||||||||||||||||||||||||||||||
| Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs) | 24.9 | 36.6 | — | 7.7 | 28.9 | 0.13 | |||||||||||||||||||||||||||||
| Acquisition-related retention arrangements(1) (Compensation and related costs) | (42.5) | 42.5 | — | 8.3 | 34.2 | 0.15 | |||||||||||||||||||||||||||||
| Intangible assets amortization and impairments(1) | (86.7) | 86.7 | — | 17.1 | 69.6 | 0.31 | |||||||||||||||||||||||||||||
| Total acquisition-related | (104.3) | 165.8 | — | 33.1 | 132.7 | 0.59 | |||||||||||||||||||||||||||||
| Deferred compensation liabilities(2) (Compensation and related costs) | (109.9) | 109.9 | (112.8) | (0.6) | (2.3) | (0.01) | |||||||||||||||||||||||||||||
| Restructuring charge(3) | (28.5) | 28.5 | — | 4.2 | 24.3 | 0.11 | |||||||||||||||||||||||||||||
| Consolidated investment products(4) | (3.5) | 7.1 | (183.1) | (16.0) | (54.1) | (0.24) | |||||||||||||||||||||||||||||
| Other non-operating income(5) | — | — | (115.9) | (21.3) | (94.6) | (0.42) | |||||||||||||||||||||||||||||
| Adjusted Basis | $ | 3,416.7 | $ | 2,029.1 | $ | 132.8 | $ | 514.1 | $ | 1,647.8 | $ | 7.28 |
| Nine months ended 9/30/2024 | |||||||||||||||||||||||||||||||||||
| Operating expenses | Net operating income | Non-operating income (loss) | Provision (benefit) for income taxes**(6)** | Net income attributable to T. Rowe Price Group, Inc. | Diluted earnings per share**(7)** | ||||||||||||||||||||||||||||||
| U.S. GAAP Basis (FS line item) | $ | 3,504.2 | $ | 1,764.9 | $ | 481.7 | $ | 527.5 | $ | 1,660.2 | $ | 7.23 | |||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||
| Acquisition-related: | |||||||||||||||||||||||||||||||||||
| Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs) | 29.8 | 40.0 | — | 7.8 | 32.2 | 0.14 | |||||||||||||||||||||||||||||
| Acquisition-related retention arrangements(1) (Compensation and related costs) | (30.6) | 30.6 | — | 7.2 | 23.4 | 0.10 | |||||||||||||||||||||||||||||
| Contingent consideration(1) | 13.4 | (13.4) | — | (1.8) | (11.6) | (0.05) | |||||||||||||||||||||||||||||
| Intangible assets amortization and impairments(1) | (125.3) | 125.3 | — | 24.9 | 100.4 | 0.44 | |||||||||||||||||||||||||||||
| Total acquisition-related | (112.7) | 182.5 | — | 38.1 | 144.4 | 0.63 | |||||||||||||||||||||||||||||
| Deferred compensation liabilities(2) (Compensation and related costs) | (111.0) | 111.0 | (105.6) | 1.2 | 4.2 | 0.02 | |||||||||||||||||||||||||||||
| Consolidated investment products(4) | (4.3) | 7.3 | (166.7) | (21.2) | (79.3) | (0.35) | |||||||||||||||||||||||||||||
| Other non-operating income(5) | — | — | (95.0) | (20.2) | (74.8) | (0.32) | |||||||||||||||||||||||||||||
| Adjusted Basis | $ | 3,276.2 | $ | 2,065.7 | $ | 114.4 | $ | 525.4 | $ | 1,654.7 | $ | 7.21 |
(1) These non-GAAP adjustments remove the impact of acquisition-related amortization of intangible assets, the recurring fair value remeasurements of the contingent consideration liability, if any, amortization of acquired investment and non-controlling interest basis differences and amortization of compensation-related arrangements. We believe adjusting for these charges helps the reader's ability to understand our core operating results and increases comparability period to period.
(2) This non-GAAP adjustment eliminates the compensation expense impact from market valuation changes in deferred compensation liabilities, including the supplemental savings plan and, starting in Q4 2024, restricted fund units, and the related net gains (losses) on investments used as economic hedges against the related liabilities. The liabilities are adjusted based on the performance of hypothetical investments selected by participants. We use investment products to economically hedge the market risk associated with the supplemental savings plan liability and the expected settlement
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value of unvested restricted fund units. We believe it is useful to offset the non-operating investment income (loss) of the hedges against the related compensation expense and remove the net impact to help the reader's ability to understand the firm's core operating results and to increase comparability period to period.
(3) This non-GAAP adjustment removes compensation expenses, primarily severance, incurred as part of our broad and ongoing plan to reduce expense growth and realign resources to invest in existing and future capabilities. We believe this adjustment helps the reader’s ability to understand our core operating results and increases comparability period to period.
(4) This non-GAAP adjustment removes the impact of the consolidated investment products by adding back their operating expenses and subtracting their investment income. The operating expense adjustment represents their operating expenses net of related investment advisory and administrative fees. The adjustment to net income attributable to T. Rowe Price Group, Inc. represents the consolidated investment products' net income, net of redeemable non-controlling interests. We believe this adjustment helps the reader’s ability to understand our core operating results and increases comparability period to period.
(5) This non-GAAP adjustment removes non-operating income (loss) earned on those investments that are not economic hedges for the deferred compensation liabilities and are not part of the cash and discretionary investment portfolio. We retain gains from cash and discretionary investments in our non-GAAP measures, as they are considered part of our core operations. We believe adjusting for the remaining non-operating income (loss) helps the reader’s ability to understand the firm's core operating results and increases comparability period to period. Additionally, we do not emphasize this portion of non-operating income (loss) when assessing the firm's performance.
(6) The income tax impacts were calculated in order to achieve an overall year-to-date non-GAAP effective tax rate of 23.8% in 2025 and 24.1% in 2024. As such, the non-GAAP effective tax rate for the third quarter was 23.4% in 2025 and 23.8% in 2024.
(7) This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to T. Rowe Price Group, Inc. divided by the weighted-average common shares outstanding assuming dilution. The calculation of adjusted net income allocated to common stockholders is as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| (in millions) | 9/30/2025 | 9/30/2024 | 9/30/2025 | 9/30/2024 | |||||||||||||
| Adjusted net income attributable to T. Rowe Price Group, Inc. | $ | 631.7 | $ | 586.5 | $ | 1,647.8 | $ | 1,654.7 | |||||||||
| Less: adjusted net income allocated to outstanding restricted stock and stock unit holders | 14.3 | 15.0 | 39.7 | 44.1 | |||||||||||||
| Adjusted net income allocated to common stockholders | $ | 617.4 | $ | 571.5 | $ | 1,608.1 | $ | 1,610.6 |
CAPITAL RESOURCES AND LIQUIDITY.
Sources of Liquidity
We have ample liquidity, including cash and investments in T. Rowe Price products, as follows:
| (in millions) | 9/30/2025 | 12/31/2024 | |||||||||
| Cash and cash equivalents | $ | 3,634.8 | $ | 2,649.8 | |||||||
| Discretionary investments | 643.6 | 457.1 | |||||||||
| Total cash and discretionary investments | 4,278.4 | 3,106.9 | |||||||||
| Redeemable seed capital investments | 1,054.5 | 1,262.3 | |||||||||
| Investments used to hedge the deferred compensation liabilities | 1,158.6 | 1,110.9 | |||||||||
| Total cash and investments in T. Rowe Price products | $ | 6,491.5 | $ | 5,480.1 |
Our discretionary investment portfolio is primarily comprised of short duration bond funds, which typically yield higher than money market rates. Our subsidiaries outside the United States held cash and discretionary investments of $812.2 million at September 30, 2025 and $653.9 million at December 31, 2024. Given the availability of our financial resources and cash expected to be generated through future operations, we do not maintain an available external source of additional liquidity.
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Our seed capital investments are redeemable, although we generally expect to be invested for several years for the products to build an investment performance history and until unrelated third-party investors substantially reduce our relative ownership percentage.
The cash and investment presentation on the unaudited consolidated balance sheet is based on the accounting treatment for the cash equivalent or investment item. The following table details how T. Rowe Price Group, Inc.’s interests in cash and investments relate to where they are presented on the unaudited consolidated balance sheet as of September 30, 2025.
| (in millions) | Cash and cash equivalents | Investments | Net assets of consolidated investment products**(1)** | Total | |||||||||||||||||||
| Cash and discretionary investments | $ | 3,634.8 | $ | 592.6 | $ | 51.0 | $ | 4,278.4 | |||||||||||||||
| Seed capital investments | — | 383.2 | 671.3 | 1,054.5 | |||||||||||||||||||
| Investments used to hedge the deferred compensation liabilities | — | 1,110.8 | 47.8 | 1,158.6 | |||||||||||||||||||
| Total cash and investments in T. Rowe Price products attributable to T. Rowe Price Group, Inc. | 3,634.8 | 2,086.6 | 770.1 | 6,491.5 | |||||||||||||||||||
| Investments in affiliated private investment funds(2) | — | 705.8 | — | 705.8 | |||||||||||||||||||
| Investments in CLOs | — | 38.2 | — | 38.2 | |||||||||||||||||||
| Investment in UTI and other investments | — | 586.8 | — | 586.8 | |||||||||||||||||||
| Total cash and investments attributable to T. Rowe Price Group, Inc. | 3,634.8 | 3,417.4 | 770.1 | 7,822.3 | |||||||||||||||||||
| Redeemable non-controlling interests | — | — | 984.9 | 984.9 | |||||||||||||||||||
| As reported on unaudited consolidated balance sheet at September 30, 2025 | $ | 3,634.8 | $ | 3,417.4 | $ | 1,755.0 | $ | 8,807.2 |
(1) The consolidated investment products are generally those products we provided seed capital at the time of their formation and we have a controlling interest. These products generally represent U.S. mutual funds, ETFs, and funds regulated outside the U.S. The $770.1 million represents the total value at September 30, 2025 of our interest in the consolidated investment products. The total net assets of the T. Rowe Price investment products at September 30, 2025 of $1,755.0 million includes assets of $1,777.7 million, less liabilities of $22.7 million as reflected in our unaudited consolidated balance sheets.
(2) Includes $170.0 million of non-controlling interests in consolidated entities held by related parties, and we cannot sell in order to obtain cash for general operations.
Our unaudited consolidated balance sheet includes the cash, investments, and other assets and liabilities of our consolidated investment products, which includes any redeemable non-controlling interests held by third-party investors. While we can redeem our net interest in these investment products at any time, we cannot directly access or sell their assets for general operations, and their assets are not available to our general creditors. Our interest typically serves as initial seed capital and is reclassified as discretionary when management decides the seed capital is no longer needed. We evaluate these discretionary investment products and aim to liquidate our interest without affecting the product or unrelated third-party investors.
Uses of Liquidity
We increased our quarterly recurring dividend per common share in February 2025 by 2.4% to $1.27 per common share from $1.24 per common share. Further, we spent $483.8 million in the first nine months of 2025 to repurchase 4.8 million shares of our outstanding common stock, at an average price of $100.59 per share. These dividends and repurchases were funded using existing cash balances and cash generated from operations. While opportunistic in our approach to stock buybacks, we will generally repurchase our common stock over time to offset the dilution created by our equity-based compensation plans.
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Since the end of 2022, we have returned $4.2 billion to stockholders through stock repurchases and regular quarterly dividends, as follows:
| (in millions) | Recurring dividend | Stock repurchases | Total cash returned to stockholders | ||||||||||||||||||||
| 2023 | $ | 1,121.9 | $ | 254.3 | $ | 1,376.2 | |||||||||||||||||
| 2024 | 1,135.2 | 334.5 | 1,469.7 | ||||||||||||||||||||
| Nine months ended 9/30/2025 | 858.7 | 483.8 | 1,342.5 | ||||||||||||||||||||
| Total | $ | 3,115.8 | $ | 1,072.6 | $ | 4,188.4 |
We anticipate property, equipment, software and other capital expenditures, including internal labor capitalization, for the full-year 2025 to be about $275 million of which over 80% is planned for technology initiatives. We expect to fund our anticipated capital expenditures with operating cash flows and other available resources.
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Cash Flows
The following table summarizes the cash flows for the nine months ended September 30, 2025 and 2024, that are attributable to T. Rowe Price Group, Inc., our consolidated investment products, and the related eliminations required in preparing the statement.
| Nine months ended | |||||||||||||||||||||||||||||||||||||||||||||||
| 9/30/2025 | 9/30/2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Cash flow attributable to T. Rowe Price Group, Inc. | Cash flow attributable to consolidated investment products | Elims | As reported | Cash flow attributable to T. Rowe Price Group, Inc. | Cash flow attributable to consolidated investment products | Elims | As reported | |||||||||||||||||||||||||||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 1,641.8 | $ | 176.0 | $ | (70.1) | $ | 1,747.7 | $ | 1,660.2 | $ | 159.4 | $ | (100.5) | $ | 1,719.1 | |||||||||||||||||||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | |||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation, amortization and impairments of property, equipment and software | 203.7 | — | — | 203.7 | 188.4 | — | — | 188.4 | |||||||||||||||||||||||||||||||||||||||
| Amortization and impairment of acquisition-related assets and retention agreements | 165.8 | — | — | 165.8 | 196.5 | — | — | 196.5 | |||||||||||||||||||||||||||||||||||||||
| Fair value remeasurement of contingent liability | — | — | — | — | (13.4) | — | — | (13.4) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 134.2 | — | — | 134.2 | 162.2 | — | — | 162.2 | |||||||||||||||||||||||||||||||||||||||
| Net (gains) losses recognized on investments | (417.6) | — | 70.1 | (347.5) | (432.6) | — | 100.5 | (332.1) | |||||||||||||||||||||||||||||||||||||||
| Total non-cash adjustments | 86.1 | — | 70.1 | 156.2 | 101.1 | — | 100.5 | 201.6 | |||||||||||||||||||||||||||||||||||||||
| Net redemptions in T. Rowe Price investment products used to economically hedge deferred compensation liabilities | 63.3 | — | 46.7 | 110.0 | 29.8 | — | — | 29.8 | |||||||||||||||||||||||||||||||||||||||
| Net change in trading securities held by consolidated investment products | — | (821.4) | — | (821.4) | — | (517.9) | — | (517.9) | |||||||||||||||||||||||||||||||||||||||
| Other changes | 588.8 | (1.1) | (8.1) | 579.6 | 548.3 | 5.7 | (19.1) | 534.9 | |||||||||||||||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | 2,380.0 | (646.5) | 38.6 | 1,772.1 | 2,339.4 | (352.8) | (19.1) | 1,967.5 | |||||||||||||||||||||||||||||||||||||||
| Net cash provided by (used in) investing activities | (79.3) | (35.8) | 96.2 | (18.9) | (143.1) | (15.7) | 3.8 | (155.0) | |||||||||||||||||||||||||||||||||||||||
| Net cash provided by (used in) financing activities | (1,315.7) | 664.9 | (134.8) | (785.6) | (1,089.4) | 345.9 | 15.3 | (728.2) | |||||||||||||||||||||||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents of consolidated investment products | — | 3.4 | — | 3.4 | — | 0.5 | — | 0.5 | |||||||||||||||||||||||||||||||||||||||
| Net change in cash and cash equivalents during period | 985.0 | (14.0) | — | 971.0 | 1,106.9 | (22.1) | — | 1,084.8 | |||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents at beginning of year | 2,649.8 | 63.1 | — | 2,712.9 | 2,066.6 | 77.2 | — | 2,143.8 | |||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 3,634.8 | $ | 49.1 | $ | — | $ | 3,683.9 | $ | 3,173.5 | $ | 55.1 | $ | — | $ | 3,228.6 |
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Operating Activities
Operating activities attributable to T. Rowe Price Group, Inc. provided cash flows of $2,380.0 million during the first nine months of 2025, an increase of $40.6 million from $2,339.4 million provided during the 2024 period. The increase was primarily driven by a $40.5 million increase in cash flows related to timing differences in the cash settlement of our assets and liabilities. Additionally, in 2025, net redemptions from certain investment products that economically hedge our deferred compensation liabilities were $33.5 million higher as compared to the 2024 period. These increases were offset in part by a $18.4 million decrease in net income and a $15.0 million decrease in the add-back for non-cash items as detailed in the table above. The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying portfolios.
Our interim operating cash flows does not include the cash impact of variable compensation that is accrued throughout the year before being substantially paid out in December.
Investing Activities
Net cash used in investing activities attributable to T. Rowe Price Group, Inc. totaled $79.3 million in 2025 compared with $143.1 million in 2024. In 2025, we decreased our property and equipment expenditures by $102.9 million and had higher net proceeds from the sale of sponsored investment products. We had net proceeds from the sale of investments of $241.9 million in the 2025 period compared to $209.9 million during the 2024 period. Partially offsetting these changes was an increase in other investing activity of $71.1 million compared to the 2024 period. We eliminate our capital in our consolidated investment products in preparing our consolidated statements of cash flows. The remaining change in reported cash flows from investing activities of $20.1 million is related to the net cash removed from our unaudited consolidated balance sheet from consolidating and deconsolidating investment products.
Financing Activities
Net cash used in financing activities attributable to T. Rowe Price Group, Inc. totaled $1,315.7 million in 2025 compared with $1,089.4 million in 2024. During 2025, we used $481.8 million to repurchase 4.8 million shares compared to $269.1 million to repurchase 2.3 million shares in 2024. The $7.5 million increase in dividends paid in 2025 was a result of the 2.4% increase in our quarterly dividend per share over prior year. The remaining change in reported cash flows from financing activities was primarily attributable to a $168.9 million increase in net subscriptions from redeemable non-controlling interest holders of our consolidated investment products during 2025.
CRITICAL ACCOUNTING POLICIES.
The preparation of financial statements often requires the selection of specific accounting methods and policies from among several acceptable alternatives. Further, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in our unaudited consolidated balance sheets, the revenues and expenses in our unaudited consolidated statements of income, and the information that is contained in our significant accounting policies and notes to the unaudited consolidated financial statements. Making these estimates and judgments requires the analysis of information concerning events that may not yet be complete and of facts and circumstances that may change over time. Accordingly, actual amounts or future results can differ materially from those estimates that we include currently in our unaudited consolidated financial statements, significant accounting policies, and notes.
There have been no material changes in the critical accounting policies previously identified in our 2024 Annual Report on Form 10-K.
NEWLY-ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE.
See Note 1 - The Company and Basis of Preparation note within Item 1. Financial Statements for a discussion of newly issued but not yet adopted accounting guidance.
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FORWARD-LOOKING INFORMATION.
From time to time, information or statements provided by or on behalf of T. Rowe Price Group, Inc., including those within this report, may contain certain forward-looking information, including information or anticipated information relating to: our revenues, net income, and earnings per share of common stock; changes in the amount and composition of our assets under management; our expense levels, tax rate, dividends, stock repurchases, investments, new products and services, capital expenditures, changes in our effective fee rate, and potential transactions; legal or regulatory developments; geopolitical instability; interest rates and currency fluctuations; our expectations regarding financial markets and other industry or market conditions. Readers are cautioned that any forward-looking information provided by or on behalf of T. Rowe Price Group, Inc. is not a guarantee of future performance. Actual results may differ materially from those in forward-looking information because of various factors including, but not limited to, those discussed below and in Item 1A, Risk Factors, included in our Form 10-K Annual Report for 2024. Further, forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events.
Our future revenues and results of operations will fluctuate primarily due to changes in the total value and composition of assets under our management. Such changes result from many factors, including, among other things: client-related cash inflows and outflows in our products, performance fees, capital allocation-based income, fluctuations in global financial markets that result in appreciation or depreciation of the assets under our management, our introduction of new investment products, and changes in retirement savings trends relative to participant-directed investments and defined contribution plans.
Our ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence, including: changes thereto that may result from U.S. trade policies, market volatility and economic outlook; the relative investment performance of the T. Rowe Price mutual funds and other managed investment products as compared with competing offerings and market indexes; the ability to maintain our investment management and administrative fees at appropriate levels; the impact of changes in interest rates and inflation; competitive conditions in the mutual fund, asset management, and broader financial services sectors; our level of success in implementing our strategy to expand our business; and our ability to attract and retain key personnel. Our revenues are substantially dependent on fees earned under contracts with the T. Rowe Price funds and could be adversely affected if the independent directors of one or more of the T. Rowe Price funds terminated or significantly altered the terms of the investment management or related administrative services agreements. Non-operating investment income will also fluctuate primarily due to the size of our investments, changes in their market valuations, and any other-than-temporary impairments that may arise or, in the case of our equity method investments, our proportionate share of the investees’ net income.
Our future results are also dependent upon the level of our expenses, which are subject to fluctuation for the following or other reasons: changes in the level of our advertising and promotion expenses in response to market conditions, including our efforts to expand our investment advisory business to investors outside the U.S. and to further penetrate our distribution channels within the U.S.; the pace and level of spending to support key strategic priorities; variations in the level of total compensation expense due to, among other things, bonuses, restricted stock units and other equity grants, other incentive awards, our supplemental savings plan, changes in our employee count and mix, and competitive factors; any goodwill, intangible asset or other asset impairment that may arise; fluctuation in foreign currency exchange rates applicable to the costs of our international operations; expenses and capital costs, such as technology assets, depreciation, amortization, and research and development, incurred to maintain and enhance our administrative and operating services infrastructure; the timing of the assumption of all third party research payments, unanticipated costs that may be incurred to protect investor accounts and the goodwill of our clients; and disruptions of services, including those provided by third parties, such as fund and product recordkeeping, facilities, communications, power, and the mutual fund transfer agent and accounting systems, as a result of extreme events, cyberattacks or otherwise.
Our business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax, and compliance requirements may have a substantial effect on our operations and results, including, but not limited to, effects on costs that we incur and effects on investor interest in investment products and investing in general or in particular classes of mutual funds or other investments.
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