Key Takeaways
- • Blackstone reported third-quarter distributable earnings down 9% to $1.7 billion, while shares rallied 8.4% on the day, driven by strong inflows and AI-related business.
- • Blackstone raised $63.3 billion in inflows in the quarter, lifting assets under management to $1.37 trillion and increasing fee-related earnings 6% to $1.6 billion.
- • Net realizations fell 34% to $332 million, with private equity down 49% to $194 million and real estate down 21% to $54 million, reflecting higher borrowing costs.
- • Credit and insurance net realizations rose 43% to $70 million, with the firm a leader in financing AI infrastructure, including $9 billion in one Anthropic project reportedly yielding above 10%.
- • Management projects realizations will rise considerably in the fourth quarter and expects an "outstanding" 2027, though shares had fallen 23% year to date before the rally.
Summary
The firm's key strength in the quarter was capital raising. Blackstone posted inflows of $63.3 billion, lifting assets under management to $1.37 trillion. Fee-related earnings rose 6% to $1.6 billion. President Jon Gray said "there's been no private credit apocalypse," addressing investor concerns about the sector.
Exit activity was weaker. According to LSEG, global M&A fell 41% in the third quarter compared with the prior quarter, dipping below $1 trillion for the first time since mid-2025. Blackstone's net realizations, the proceeds it earns from exits, fell 34% to $332 million, with private equity down 49% to $194 million. The real estate division reported a 21% decline to $54 million. CFO Michael Chae said higher rates had a particular impact on slower-growing assets such as US multifamily and some European properties. A $1.3 billion loan tied to Blackstone's multifamily portfolio was recently moved to special servicing, with Morningstar noting the borrower has been selling properties to repay it. Several IPOs, including those of Blackstone-backed data center operators AirTrunk and Firmus, have been postponed.
The credit and insurance unit was a bright spot, with net realizations up 43% to $70 million. Blackstone has been a leading financier of AI infrastructure, including $9 billion in one Anthropic project where it reportedly achieved a yield above 10%. Gray described capital needs in the AI sector as "unprecedented in our lifetimes" and said the firm expects to be able to command higher yields as credit spreads widen on AI-related debt.
Management expects realizations to increase considerably in the fourth quarter, with 2027 described as "outstanding." The average price target of $137.43 from 25 analysts tracked by Zacks Investment Research implies roughly 25% upside from current levels.
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