BlackRock shares suffered their sharpest earnings-day decline in over a decade on Tuesday, falling 5.9% despite reporting stronger-than-expected earnings per share for the second quarter.
The stock’s slump made it the worst performer on the S&P 500 for the session and erased most of its 2025 gains.
The asset management giant reported second-quarter EPS of $12.05, beating the $10.78 expected.
However, revenue slightly missed expectations, coming in at $5.42 billion versus $5.45 billion on consensus.
The market reaction reflected concerns about disappointing net inflows, a jump in operating expenses, and weaker performance in key asset categories. Net inflows totalled $68 billion, well below the $110.1 billion analysts had anticipated, partly due to a $52 billion withdrawal by a large institutional client from a low-fee index strategy.
Long-term net inflows amounted to $46 billion, while the firm also saw redemptions in its multi-asset and fixed-income strategies. Despite these headwinds, the company saw solid performance in cash management ($22 billion), alternatives ($9.8 billion), and ETFs ($85 billion in aggregate).
Still, expenses rose sharply - up 14% year over year - driven by a 12% increase in employee compensation following the recent acquisitions of Global Infrastructure Partners and Preqin.
BlackRock completed its $12 billion acquisition of private-credit manager HPS Investment Partners just after the quarter ended, its third major purchase in under two years.
With these acquisitions, BlackRock now manages over $600 billion in alternative assets and aims to raise another $400 billion by 2030.
Despite higher costs, BlackRock’s assets under management hit a record $12.5 trillion. CEO Larry Fink attributed the sell-off to investor concerns about expenses, but defended the spending as a strategic investment in transforming BlackRock into a dominant player in private markets. In his annual letter, Fink noted that BlackRock is no longer a “traditional asset manager” and reiterated his plans to democratise access to private assets.
CFO Martin Small said HPS alone is expected to contribute about $450 million in revenue during Q3, including $225 million in management fees.
BlackRock’s push into digital assets also gained traction during the quarter. The firm attracted $14 billion in flows into digital-asset ETFs and disclosed a $330 million stake in Circle Internet Group Inc., a stablecoin issuer that went public in June. Circle shares have surged 560% since their IPO.
However, not all investor classes contributed equally. Net inflows from retail clients were just $2 billion, the lowest since Q4 2023, as market volatility and political uncertainty, including President Donald Trump’s surprise tariffs at the start of the quarter, led to risk-off sentiment.
BlackRock (NYSE: BLK) stock was trading at US$1,046.16, down 5.9% from Monday's close of $1,111.46. The company's market cap stands at $162.08 billion.
