Invesco Q3 2026: adjusted EPS up 18% to $0.72 on $35.1B of inflows; GAAP EPS dipped on a tax comparison

Invesco, the fund company behind the Invesco QQQ ETF that tracks the Nasdaq-100, earned $294.5 million for common shareholders in the third quarter of 2026, or $0.65 per diluted share, against $301.3 million and $0.66 a year earlier. That small decline is a tax comparison, not a weaker business. Pre-tax income rose 33.8% to $463.9 million, but Q3 2025 had a one-off tax benefit (an effective tax rate of -2.8%, against 23.3% now). On the company's adjusted basis, EPS rose 18.0% to $0.72, and adjusted operating margin reached 40.7%, up from 34.2%.

Invesco makes money by charging a small annual fee on assets under management (AUM), the total value of client money it runs. Clients added $35.1 billion of net long-term inflows (new money into long-term funds minus withdrawals, not counting money-market cash), the 13th straight quarter of inflows, and quarter-end AUM was $2,537.8 billion, up 19.4% from a year ago.

This analysis is based on the earnings release (8-K Exhibit 99.1) filed October 27, 2026. The full 10-Q isn't filed yet, so details such as the fee rate by product and full MD&A commentary aren't available.

Key metrics

Net revenues is Invesco's own measure: operating revenues minus fees passed straight on to brokers and other distributors, plus 100% of its Chinese joint venture. Net revenue yield is net revenues divided by average AUM, annualized; the release defines the measure but doesn't print it, so the figures above are our arithmetic (×4) from its numbers. One basis point (bp) is 0.01%, so 22 bps is $2.20 a year on every $1,000 managed.

Where the money came in, and where it left

The pattern from Q2 continues: money goes into ETFs and index funds, which charge less, and leaves the actively managed bond and stock funds. Two changes stand out. Fundamental Equities outflows shrank to $1.9 billion from $7.7 billion in Q2. And Fundamental Fixed Income turned negative (-$2.6 billion), after contributing to the $1.5 billion of nine-month inflows.

By client type, retail clients added $41.7 billion while institutional clients (pension funds, insurers and similar) withdrew $6.6 billion from long-term funds. By region, EMEA led with $15.9 billion, then the Americas ($10.3 billion) and Asia Pacific ($8.9 billion).

Separately, money-market funds took in $52.9 billion, $48.7 billion of it from institutional clients. That cash is not counted in long-term flows because clients often park it short-term, and money-market funds earn lower fees.

Markets worked against AUM this quarter: net market losses took $26.4 billion off AUM, and currency moves added $4.5 billion. Quarter-end AUM still rose 2.7% from June, and average AUM rose 6.0%, because assets were higher through most of the quarter than at its start. QQQ was the exception to the market losses, with a $2.1 billion market gain.

Why revenue grew slower than assets

Average AUM rose 21.8% from a year ago; net revenues rose 16.5%. The gap is the fee rate. On our arithmetic, net revenue yield was about 22.0 bps, down from about 22.4 bps in Q2 and 23.0 bps a year ago. Most of the new money is going into ETFs, index funds and QQQ, which charge less per dollar than active funds.

The year-over-year revenue lines still show QQQ's conversion to a fee-paying open-end ETF on December 20, 2025. Investment management fees rose $327.5 million (+27.6%) to $1,512.2 million, "primarily driven by management fees for QQQ... and higher average AUM." Service and distribution fees fell $87.5 million because QQQ's pass-through service revenue went away. Costs moved with it: third-party distribution, service and advisory costs rose $85.4 million "primarily due to higher third-party costs for QQQ," and marketing rose $15.8 million (+78.6%) on QQQ advertising. The conversion will still lift year-over-year comparisons in Q4 2026, because Q4 2025 included only the last 11 days of QQQ fees. From Q1 2027, both periods include them.

Margins: costs fell while revenue rose

Compared with Q2, net revenues rose $52.6 million (+4.0%) and adjusted operating expenses fell $11.0 million, so adjusted operating income rose 12.8% to $562.3 million. Operating margin, the share of revenue left after running the business and before interest and tax, rose to 40.7% from 37.5% on the adjusted measure.

The GAAP margin rose by about the same amount (to 23.3% from 19.9%), but partly for a different reason. GAAP employee compensation fell $52.9 million from Q2, mostly because of a $43.7 million smaller mark-to-market charge on deferred compensation: some staff bonuses are tied to the value of investments, so their cost goes up and down with markets. Invesco hedges that exposure, and the adjusted measure leaves it out. Another $9.7 million was the timing of expenses for retirement-eligible employees.

Year over year, adjusted operating expenses rose $39.2 million (+5.0%), mainly from $29.3 million more variable (bonus) pay and $15.1 million more marketing, partly offset by lower salaries after the Q4 2025 divestitures. Headcount is 7,416, down 11.4% from 8,368. Net revenues grew three times as fast as adjusted costs, and that is what drove the margin up.

What the headline numbers hide

• The GAAP EPS decline comes from last year's tax benefit. In Q3 2025 Invesco booked an income tax benefit of $9.7 million on $346.7 million of pre-tax income, from "the favorable resolution of a tax matter," including a $39.0 million deferred-tax revaluation and the reversal of a reserve for uncertain tax positions. This year it paid a normal 23.3% rate ($108.3 million). Pre-tax income rose 33.8% and operating income rose 61.1%, but net income fell 2.3%.
• Adjusted EPS growth is also held back. The $39.0 million deferred-tax item was removed from adjusted results, but the reserve reversal stayed in, so the adjusted tax rate was 11.2% in Q3 2025 against 25.1% now. Adjusted operating income rose 38.5%, yet adjusted EPS rose only 18.0%.
• GAAP vs adjusted gap ($0.65 vs $0.72). Adjusted net income adds back $8.0 million of amortization of acquired intangibles and a $26.2 million net market loss on deferred compensation and its hedge, minus tax effects. Neither is a cash operating cost. The adjusted margin also uses net revenues and counts 100% of the Chinese joint venture ($91.2 million of operating income this quarter), while Invesco only owns part of it. The share owned by others is taken out again in adjusted net income.
• Cash conversion is strong. Operating cash flow excluding consolidated investment products (funds Invesco must consolidate but whose cash it can't use) was $654.6 million, more than double net income of $294.5 million, against $585.5 million a year ago.
• Buybacks did little for EPS. Invesco bought back 2.1 million shares for $65 million (up from $50.0 million in Q2), but diluted shares averaged 452.5 million, only 0.5% fewer than a year ago. Lower preferred dividends ($37.0 million vs $44.4 million) were worth about 1.6 cents a share. Dividends paid in the quarter were $98.4 million to common shareholders and $37.0 million to preferred.

On balance the quarter is understated: GAAP EPS fell 1.5%, but pre-tax income rose 33.8%. The difference is a Q3 2025 tax benefit that did not repeat.

The preferred stock deal

On October 26, 2026, the day before results, Invesco repurchased $1.5 billion of its Series A preferred stock from MassMutual, paid for with a $1.5 billion five-year floating-rate bank term loan. That makes $3.0 billion repurchased over 18 months, and $1.0 billion remains. Preferred stock is a bond-like security that pays a fixed dividend (5.9% a year here) ahead of common shareholders. The quarterly preferred dividend of $14.75 per share on the remaining 1.0 million shares will be about $14.75 million, against $37.0 million now. That saves about $22 million a quarter, before the interest on the new loan. The release doesn't give the loan's rate.

Two caveats. First, the deal adds $1.5 billion of debt right after the company cut net debt by $393 million to $315.8 million in the quarter (debt $1,281.3 million, cash $965.5 million). Second, when Invesco repurchased $1.0 billion of the preferred in Q2 2025, it charged $159.3 million against common shareholders' earnings as a "cost of preferred share repurchase." The release doesn't say whether this repurchase brings a similar Q4 charge, so it is worth watching in the 10-Q and next quarter's results.

Did last time's read hold up?

Our Q2 2026 report named two things to watch: whether Fundamental Equities outflows (-$7.7 billion in Q2) would slow, and whether the fee rate would stabilize near 22 bps. The first held up: outflows slowed to $1.9 billion. The second partly held up: on our arithmetic the yield edged down again, to about 22.0 bps from 22.4 bps, so it is still slipping, but slowly. We also warned that market levels were the main swing factor. Net market losses did take $26.4 billion off AUM this quarter, but inflows and a higher average asset level more than made up for it.

Takeaway: Invesco's underlying earnings power rose much faster than its headline EPS shows: adjusted operating income rose 38.5% and pre-tax income 33.8%, while GAAP EPS slipped 1.5% only because of last year's tax benefit. The profit growth comes from scale: net revenues rose 16.5% while adjusted costs rose 5.0%. The weak point is the fee rate, which keeps edging down as new money goes into ETFs and money-market funds rather than active funds.

Outlook

The release gives no numerical guidance for revenue, margins or earnings. Management's stated aims are lower leverage, more balance-sheet flexibility and higher "earnings available to common shareholders." The preferred repurchase serves the last of these directly.

Our view: year-over-year growth will slow from Q1 2027, once QQQ's fees are in both periods. Earnings growth then depends on organic flows (6.3% annualized this quarter, down from 7.9% a year ago and 8.5% in Q2) and on market levels. For Q4, watch three things: whether the preferred buyback brings a one-time charge to common earnings, as the Q2 2025 deal did; the interest cost of the new $1.5 billion loan against the roughly $22 million of quarterly preferred dividends it removes; and whether the institutional outflows (-$6.6 billion) and the turn to outflows in Fundamental Fixed Income continue.

Source: Invesco Ltd. earnings release (Form 8-K, Exhibit 99.1) for the quarter ended September 30, 2026, filed October 27, 2026. Adjusted figures are the company's non-GAAP measures as reconciled in the release. The Form 10-Q had not been filed at the time of writing.