Blackstone Inc. 2026 Q3 Earnings Call

Please go ahead. Great. Thanks, Katie, and good morning, and welcome to Blackstone's third quarter conference call.

Joining today are Steve Schwarzman, Chairman and Chief Executive Officer, Jon Gray, President and Chief Operating Officer, and Michael Chae, Vice Chairman and Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10-Q in a few weeks. We would like to remind you that today's call may include forward-looking statements, which are uncertain and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the factors that could affect results, please see the Risk Factors section of our 10-K. We will also refer to non-GAAP measures, and you will find reconciliations in the press release on the Shareholders page of our website.

Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audiocast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported GAAP net income for the quarter of $1.3 billion. Distributable earnings were $1.7 billion, or $1.32 per common share, and we declared a dividend of $1.12 per share, which will be paid to holders of record as of November 2nd. With that, I will now turn the call over to Steve.

Good morning, and thank you for joining our call. The third quarter of 2026 represented a highly complex environment characterized by an historic increase in bond yields globally, including U.S. Treasury yields hitting the highest level in decades, alongside continued geopolitical turbulence, wars in the Middle East and Ukraine, inflation concerns, high oil prices, sovereign debt worries, uncertainty over the U.S. midterm elections, and other challenges. These challenges have continued post quarter end. On the one hand, the artificial intelligence revolution is powering robust growth in many areas, while on the other hand, a higher cost of capital has negatively impacted investor sentiment and transaction activity and triggered significant volatility in the markets. The S&P 500 index rose slightly in the third quarter, with gains concentrated in the largest tech companies and the energy sector.

Although most individual stocks declined, and the median stock is now 15% below its recent high. Against this challenging backdrop, Blackstone reported strong distributable earnings of $1.7 billion in the quarter, underpinned by continued year-over-year growth in fee-related earnings, notwithstanding fewer realizations, as we indicated would be the case on our last call. Inflows reached $63 billion in the quarter, reflecting sustained momentum across our major fundraising channels, and exceeded $270 billion for the last 12 months, the highest level in four years. Most importantly, in terms of investment performance, our flagship strategies outperformed the relevant market indices in the third quarter, led by infrastructure and our energy holdings. Overall, the unparalleled breadth of our firm and the leading platforms we've established across asset classes have allowed us to navigate changing market conditions, deploy capital in the most compelling areas, and continue to build value for our limited partners.

For shareholders, the firm's underlying earnings power continues to expand substantially, and we are moving towards what we expect will be an outstanding 2027. Stepping back, the economy is strong today. The key catalyst, as I mentioned, is the historic level of investment taking place to facilitate the development of AI, including data centers, chips, equipment, power generation, construction and engineering services, and many other related areas. This engine is supporting exceptional corporate earnings momentum, as well as momentum in our own portfolio. We also believe we're in the earliest stages of an AI-driven uplift in productivity, and consequently, an additional multi-year tailwind for corporate earnings and value creation. Rising productivity over time is also a potential mitigant for inflation.

Over the past few weeks, however, we've seen an increased focus in the market on the sustainability and risks of AI-related investment, the significant financing needs of companies involved in the AI build-out in the context of higher interest rates, and the levels of valuations. As we've stated before, we believe the transformative power of AI has precedent in the Industrial Revolution and the commercialization of electricity, and we are in the earliest stages of its development. Demand for compute is accelerating, and we see no signs of that slowing down as AI use cases ramp for both businesses and consumers, and the world increasingly engages with the vast potential of this technology. At the same time, there's a critical scarcity of supply that has only intensified. Seldom in my career have I seen such a supply-constrained market of this scale.

Current public attitudes towards data centers will likely only amplify this scarcity. Over time, as the public comes to understand the advancements that have occurred in data center operations and construction, including with respect to water usage and the funding for electricity, these attitudes should change. We also anticipate new laws and regulations codifying these advancements will be implemented. Of course, there are risk factors to consider. There will be situations where investors don't have sufficient capital, and projects can't procure power, equipment, or the necessary approvals. At Blackstone, we approach investments in this area with the same rigor and focus on risk-adjusted returns that have defined our investment process for four decades. In AI infrastructure, for example, our data center portfolio is built on durable long-term contracts with highly creditworthy counterparties.

Overall, we keep coming back to the fundamental supply-demand imbalance, which supports our conviction that this is the right place to invest significant capital. As the AI revolution progresses, the rising demand for capital is creating generational opportunities for those with the platform, relationships, capabilities, and discipline to meet this demand. Blackstone has become one of the most important capital providers in the AI ecosystem. We started with our data center development business, focused on serving the major hyperscalers, which provided the foundation for deep partnership with many of today's AI leaders. We've been teaming up with them in multiple ways. We've previously announced the launch of Crux, our partnership with Google, to help address the shortage of compute. We've also created Ode with Anthropic to drive enterprise adoption of AI.

In August, Nvidia named Blackstone as one of the small group of managers they'll work with to deploy $500 billion of large-scale GPU financing. At the same time, the energy area, electrification, reindustrialization, and of course, AI, are leading to accelerating demand for power following decades of static demand. With one of the largest private energy investing platforms across debt and equity, Blackstone is at the center of this megatrend as well. We are actively investing across generation, transmission, storage equipment, and services, and more. In the third quarter, we invested in a leading developer of renewable projects in Europe and committed to acquire a supplier of components for data center cooling systems. In August, our portfolio company, Lancium, which is providing energy infrastructure to OpenAI's flagship data center in Texas, announced a strategic investment from Nvidia to help fund its development of low-cost scale power.

In credit, our energy business backed approximately 15% of solar and storage projects in the entire U.S. last year, and together with our equity business, has supported nearly 50% of LNG export capacity. Of course, it's much more than AI and energy driving our firm forward. Blackstone has established leading platforms to address other paradigm shifts we see shaping the economy and markets. Private credit is becoming a crucial source of financing for the real economy, and we manage the world's largest third-party-focused private credit business. Advancements in drug development are accelerating. We've built the largest sponsor-backed life sciences platform. India continues its ascent as the fastest-growing major economy, and we are one of the country's largest private investors. Private markets themselves remain on a strong growth trajectory leading to significant opportunities in secondaries, where we oversee one of the largest businesses.

Defense is an area that's in critical need of global capital, and we've been highly active here as well, addressing this need in numerous ways. The firm's positioning across these and other areas powers our deployment, fuels fundraising, and ultimately translates to greater earnings for shareholders. The virtuous circle underpinning our business. As always, the Blackstone innovation engine continues to fire, and we are investing today in the leading platforms of tomorrow. Despite the firm's extraordinary record of growth over four decades and our unique positioning in the alternative sector, Blackstone stock, along with the other alternative managers, has been under pressure. This is due to some of the factors I discussed earlier, along with AI disruption and private credit concerns. Over the past two years, while our shares are down meaningfully, our earnings have grown nearly 50% with commensurate growth in our dividend.

In my experience, disconnects of this type don't typically last. We've seen similar drawdowns for Blackstone stock before, and each time our shares ultimately recovered and dramatically outperformed any index comparison on the way back up following the fundamental trajectory of our business. I have learned the most important thing during these periods is to keep our focus on delivering great results for limited partners, pioneering new markets for investment, and expanding our fundraising channels, all of which are occurring now. Our firm has enormous earnings power, and we expect outstanding results in the years ahead. I believe the future for Blackstone will be remarkable. With that, I'll turn it over to Jon.