Apollo Global Management, Inc. 2026 Q2 Earnings Call

Great. Thanks, operator. Welcome again, everyone, to our call. As usual, joining me to discuss our results are Marc Rowan, CEO, Jim Zelter, President, Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the investor relations portion of our website. As you can see, our second quarter results demonstrate the momentum we are seeing across our business. We generated record fee-related earnings of $785 million, or $1.26 per share. Record spread-related earnings of $877 million, or $1.41 per share. Combined, these core earnings streams drove total earnings or adjusted net income of $1.3 billion, or $2.11 per share. Across key business drivers, including investment performance, origination, and capital formation, these results highlight the tangible execution we're delivering against our business plan and the targets we've set. I'll now turn it over to Marc.

Thanks, Noah. Good morning. Second quarter was really all about momentum. FRE, as Noah suggested, $785 million, 25% year-over-year, 8% quarter-over-quarter. Management fees, 23% year-over-year, 5% quarter-over-quarter. ACS, $277 million, the fifth straight quarter greater than $200 million. As you will hear from Jim and Martin, increasingly durable and directly tied to our level of originations. SRE, $877 million. On an adjusted basis, at 11%, it added about $76 million, also a record. The results were 5% up quarter-on-quarter, 11% year-over-year on the same basis. Strong organic growth, in line and slightly improved core spreads. In short, we're seeing momentum across the business. As you know, we believe that almost everything starts with origination. Origination here was a very strong quarter, $74 billion.

Just to give you some perspective, that does not include Broadcom, the largest origination in our sector ever, or a number of others. We account for and record the results when they close, not when they are announced, $50 billion of signed and announced in Q2 will benefit coming quarters. The pipeline has never been stronger, reflecting the global industrial renaissance that we've been speaking about. Most importantly, it's coming at consistent spread, 340 basis points over Treasuries off an average rating of BBB. At the end of the day, people are in this asset class for excess return per unit of risk, and that is what we need as a principle, that is what our investors need, and that is what we are trying to deliver. The reward for good performance is, of course, more to do.

Capital formation, record for the quarter at $60 billion of organic inflows, $38 billion in asset management, $22 billion in Athene. In short, we believe that our '26 growth outlook is on track for FRE and SRE. The trends in the business remain favorable. And it's up to us now to balance the desire for growth while the vast opportunity to invest in our business. Talk about our business a little bit. Our industry is in the midst of unprecedented change. Certainly no different than the kind of change we've seen, but coming in a slightly different way. Just for some perspective, Apollo and its peer group in 2008, roughly $40 billion of AUM. Almost all of us were $35 billion of private equity and $5 billion of something else.

Today, we're closer to $1.05 trillion led by the growth for a product set that none of us envisioned when we were back in 2008 investment grade. We have built the dominant IG origination franchise supporting the global industrial renaissance. Our peers are just now discovering that IG is actually a source of growth. We've seen this coming, and we're happy to have led them here. The growth in our sector continues to be driven by the need for capital to finance the global industrial renaissance, the need for yield from retirees directly and indirectly, and by the need of investors to find diversification from increasingly crowded and correlated and indexed public markets. Recall that some 10 stocks are nearly 50% of the S&P. And when things go poorly, they go poorly all around.

Private markets now offer the kind of diversification that investors used to expect in public markets when there were 8,000 public companies versus the 3,800 public companies we have today. The future for the industry, I also believe to be increasingly bright. As we've discussed in prior quarters, the entirety of our industry was built from one investor, one source of demand. This was the alternative bucket of our institutional clients. Today we have six sources of demand. That first, plus individuals, plus insurance companies, plus the debt and equity bucket of our institutional clients, plus traditional asset managers, and plus 401 and DC. All of that, I believe, bodes very well for future demand for private assets from a number of new investors, each of which has the opportunity to be the size of the first investor.

I think the thing that we have seen perhaps differently than most of our peer set is we do not believe that those five new investors are coming to us in private markets in the structures that exist. If we want to serve them and increasingly have access to the full TAM that should be available to us, we are going to need to go to them. They have grown up as public market investors. The more that we can bring the origination from the private markets, but the packaging that they expect, the more I believe we will grow the asset class, and we will be more accepted and have greater sources of demand for our product. What you see going on in our business today is us pursuing this strategy.

The changes we've made in estimated daily value, our ICE joint venture, our focus on settlement mechanics, and on market making are all efforts to bring us closer to these five new buyers. It's not to say the rest of the industry is ignoring this. It's just no one is as fully committed to what we see as this big trend that is taking place in our industry and will increasingly shape our future. Just a couple of milestones. We went live with estimated daily value, estimated daily NAV on 7/1 for our entirety of our fixed income investment grade suite of asset products. By 10/1, we expect to have daily pricing for all of our credit assets. That will be quite an accomplishment. Understand that the drive to estimated daily value is very investor-friendly. It is very transparent, but it also forces massive change internally.

It forces us to digitize. It allows us to put our data in a form that increasingly allows us to take advantage of new technologies, new sources of information, new sources of efficiency. This is a win-win. This is good for investors, and this is good for us. The partnership that we've announced with ICE is also driving change. It is now live. There are more than 2,000 ICE IDs. We expect the entirety of our product set, debt and equity, over time to have ICE IDs. We expect ICE IDs will do what CUSIPs have done for public credit. We are increasingly attaching data and data fields to these ICE IDs, and ultimately this will help in settlement and in market making. In market making, greater liquidity has expanded the opportunity set for every asset class that we have seen anywhere around the globe.

We are now more than $30 billion traded. Volume continues to double, and we see really strong growth. People want to trade these assets, but they've never been in a form where liquidity has been available in a fair way, at a fair price, in a reasonable amount of time to settle. Every day, this franchise gets better and improves. The kinds of things that I've talked about in market making, estimated daily value, settlement are a piece of what we need to do to serve these five new asset classes. Regulatory and transparency are another piece of this. Particularly in the insurance industry, we have been leading regulatory change. More disclosure, more transparency, no guesswork required. Full transparency on related party affiliate and Apollo-originated assets. Full transparency on top holdings with case studies. Full transparency with credit quality and ratings granularly dissected. We believe transparency helps all constituents grow.

We have nothing but an amazing opportunity in retirement. The world is getting older. The world is in greater need of retirement income. We, the industry, have an opportunity to serve it and to grow through 2050. Very few industries can look out and see a demographic pattern as positive and as shaped just the way we see it. It is our job to maintain and preserve trust. Increasingly, the industry is of the same mindset. Just this past week, the NAIC put forward proposals to take meaningful steps toward addressing offshore regulatory arbitrage. We are also seeing increased focus by new governments, particularly in the Caymans, committed to cleaning up this sort of regulatory arbitrage.

Caymans has done an unbelievable job for the funds industry and does not want to be thought of as a lesser place when it comes to insurance regulatory. We will wait and see whether they actually move toward the kinds of steps that would grant them reciprocity and eliminate the regulatory arbitrage, which endangers the trust to the entire insurance industry. We are unwavering in our desire to see the industry operate on a level playing field, equal capital for equal risk. As I've mentioned previously, we are pushing hard on a double A. We believe we are capitalized for that. It is not that we need it. We want to make the distinction between what we do and many others in our market unmistakable. In short, the future that we see is incredibly bright.