Rising markets lifted T. Rowe Price's AUM to a record $1.89 trillion and net revenue 10.7% to $1.91 billion, but clients still withdrew a net $6.5 billion and a lower fee rate kept advisory fees growing slower than assets; GAAP EPS rose 28.6% to $2.88 (adjusted $2.57, +14.7%).
Revenue
$1.9B
+10.7% YoY
Net income
$632M
+25.1% YoY
Diluted EPS
$2.88
+28.6% YoY
Operating margin
28.3%
T. Rowe Price's revenue rose 10.7% on market gains, and clients withdrew less money than a year earlier
T. Rowe Price Group reported Q2 2026 net revenues of $1,907.4 million, up 10.7% from Q2 2025. GAAP net income rose 25.1% to $632.0 million, or $2.88 per diluted share (up 28.6%). The main driver was the stock market, not new client money.
Some background first. An asset manager like T. Rowe Price earns most of its money as a small annual fee on the savings it invests for clients. That pool of money is called assets under management (AUM), and it is the firm's main measure of size. AUM can change for two reasons: markets move the value of what the firm already holds, or clients add or withdraw money. The second is called net flows (money coming in minus money going out). Net flows show whether clients are choosing the firm. Market moves are outside its control.
In Q2 both factors pointed in opposite directions. Rising markets added $190.2 billion to AUM, while clients withdrew a net $6.5 billion. Ending AUM hit a record $1,893.4 billion, 12.9% higher than a year earlier.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Net revenues
$1,907.4M
$1,723.3M
+10.7%
Investment advisory fees
$1,744.8M
$1,567.6M
+11.3%
Operating margin (GAAP)
28.3%
27.8%
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Operating margin is the share of revenue left after paying the costs of running the business, before investment gains, interest and tax. A basis point (bp) is 0.01%, so a 38.1 bps fee means the firm collects about $3.81 a year for every $1,000 it manages. Q2 2025 flow and AUM figures come from the Q2 2025 earnings release. Model-delivery assets have been counted in AUM since July 1, 2025.
Revenue grew more slowly than assets because of lower average fees
According to the 10-Q, investment advisory fees rose 11.3% "as average assets under management increased $248.9 billion or 15.7%." Fees grew about 4 points less than assets because the average fee rate dropped from 39.6 to 38.1 basis points. The company says "client flows and transfers drove a mix shift in assets under management toward lower fee products and asset classes, partially offset by market appreciation."
The fee breakdown by asset class shows where the mix changed:
Advisory fees by asset class
Q2 2026
Q2 2025
YoY
Avg AUM YoY
Equity
$1,011.9M
$923.6M
+9.6%
+13.0%
Multi-asset
$529.5M
$455.9M
+16.1%
+21.5%
Fixed income (incl. money market)
$113.5M
$105.5M
+7.6%
+10.6%
Alternatives
$89.9M
$82.6M
+8.8%
+13.0%
Multi-asset grew fastest. This category includes the target-date retirement funds, which held $622.0 billion at quarter-end. Target-date funds took in $1.7 billion in Q2 and $6.6 billion in the first half. In every asset class, fees grew more slowly than average assets. That means the fee pressure affects the whole business, not one product line.
Administrative and other fees fell 3.7% to $144.2 million. This is mostly an accounting change: since Q3 2025, model-delivery revenue has been reported under advisory fees.
Flows: stock-fund withdrawals got smaller but still outweighed everything else
Q2 2026 net flows by asset class
Net flows
Equity
−$13.5B
Fixed income, incl. money market
+$4.6B
Multi-asset
+$0.4B
Alternatives
+$2.0B (after $0.5B manager-driven distributions)
Total
−$6.5B
In Q2 2025, equity outflows were $18.1 billion and total outflows were $14.9 billion. Outflows were also smaller than in Q1 2026, when clients withdrew a net $13.7 billion (first-half outflows of $20.2B minus Q2's $6.5B). CEO Rob Sharps said the firm had "positive flows in May and June." He also said "fundamental active equity remains under pressure." Actively managed stock funds are T. Rowe Price's core business. Equity outflows for the first half totalled $36.1 billion.
The 10-Q's industry overview names "passive strategies taking market share from traditional active strategies" and "continued downward fee pressure" as structural trends. Passive strategies are low-cost index funds that simply track a market. The firm's own performance data explains part of the pressure: only 47% of its U.S. equity funds beat the median passive peer over 1 year, and 42% over 3 years. Against the Morningstar category median of all funds, 54% of equity funds outperformed over 1 year, but only 42% over 5 years.
Why GAAP earnings grew faster than underlying earnings
GAAP EPS of $2.88 is $0.31 higher than adjusted EPS of $2.57. The gap mostly comes from market gains on the firm's own investments, not from the fund business:
Gains on seed capital and consolidated funds. Seed capital is the firm's own money used to launch new funds. Removing these gains lowers EPS by $0.22 ("other non-operating income") and $0.19 (consolidated investment products). GAAP non-operating income was $369.1 million, compared with $38.5 million on an adjusted basis.
Deferred compensation is roughly a wash. Rising markets increased the value of employee deferred-pay accounts. That added $126.5 million to compensation expense, which was offset by $133.7 million of gains on the investments that hedge those accounts. About half of the 9.8% increase in GAAP operating expenses came from this item, according to the 10-Q.
Acquisition costs (+$0.11) and restructuring (+$0.02) work the other way. Adjusted EPS excludes these costs.
Adjusted net income rose 11.5% to $565.0 million. That is close to the revenue growth rate and a better guide to the core business than the 25.1% GAAP figure. Adjusted operating expenses rose 4.9% to $1,203.2 million, well below the 10.7% revenue growth, so adjusted operating income grew 15.4%. The 10-Q says higher costs came from an interim bonus accrual, $13.6 million more in distribution costs, and higher technology spending. The firm had 7,544 employees at June 30, 6.4% fewer than a year earlier. A $6.7 million restructuring charge, mostly severance, is part of its ongoing expense-management program.
Share buybacks also helped EPS. Diluted share count fell 2.8% to 214.2 million. In the first half, T. Rowe Price spent $497.5 million to buy back 5.3 million shares at an average $94.44. It also raised its quarterly dividend 2.4% to $1.30.
Takeaway: T. Rowe Price's profit growth this quarter came from rising markets, not from clients. Average AUM rose 15.7%, but advisory fees rose only 11.3% because the average fee fell 1.5 bps. Clients also withdrew $13.5 billion from equity funds, which carry the firm's highest fees. On an underlying basis, earnings grew 11.5%, not the 25% the GAAP figure suggests.
Outlook
Management gave limited numerical guidance. It expects a 2026 effective tax rate of 23.0%–26.0% and capital expenditures of about $270 million, nearly all for technology. It continues to point to ETFs, separately managed accounts (SMAs) and strategic partnerships as growth areas.
Our view: Q2 shows that T. Rowe Price's earnings still depend mostly on the stock market. Rising markets added $190.2 billion to AUM, about 29 times the $6.5 billion clients withdrew. That helps if markets hold up, but a market decline would reverse it with no inflows to cushion the hit. Watch two things in Q3:
Do net flows stay positive? Management reported inflows in May and June. A full quarter of inflows would be the first real evidence that ETFs, target-date funds and fixed income can outweigh equity-fund outflows.
Does the fee rate keep falling? The rate dropped 0.3 bps from Q1 to Q2. If money keeps moving to cheaper products, revenue will keep growing more slowly than assets. That puts more weight on expense control to protect margins. Adjusted costs grew 4.9% this quarter.
Source: T. Rowe Price Group Form 10-Q for the quarter ended June 30, 2026, and the Q2 2026 earnings release (Form 8-K Exhibit 99.1, July 31, 2026). Q2 2025 comparisons for net flows are from the Q2 2025 earnings release (August 1, 2025).