BLK — Q2 2026 Financial Report Analysis

Revenue up 31%, but markets and an acquisition did most of the work

BlackRock's second quarter of 2026 was its strongest on the headline numbers in years: total revenue of $7,084 million, up 30.6% from $5,423 million a year earlier, and GAAP operating income of $2,461 million, up 42.2%. Assets under management — AUM, the total value of client money BlackRock manages and the base on which almost all of its fees are charged — ended the quarter at $15.345 trillion, up 22.5% from $12.528 trillion a year ago.

The size of those increases is real, but the composition matters. Three separate forces are stacked on top of each other, and only one of them is what an investor would normally call organic growth:

1. Rising markets. AUM grew $1.450 trillion during the quarter alone (from $13.895 trillion at March 31). Net inflows — new client money in, minus money withdrawn — were $191.7 billion of that. In other words, roughly 87% of the quarter's AUM increase came from the market value of existing portfolios going up, not from winning new money. Over the trailing twelve months the filing puts net market appreciation at $2.0 trillion, "primarily driven by US and global equity market appreciation," against $868 billion of total net inflows and a $111 billion drag from a stronger US dollar.
2. The HPS acquisition. BlackRock closed its purchase of private-credit manager HPS Investment Partners on July 1, 2025 — one day after the end of the year-ago comparison quarter. So Q2 2026 includes HPS and Q2 2025 includes none of it. Management quantifies the effect: approximately $230 million of the quarter's base fees came from HPS, plus an unquantified share of the performance-fee jump.
3. Genuine organic growth, which management cites as "organic base fee growth" alongside the market and HPS effects, and which shows up most cleanly in flows: $199.1 billion of long-term net inflows in the quarter.

The numbers

Operating margin is the share of revenue left after the costs of running the business, before interest, investment gains and tax. "As adjusted" is BlackRock's own non-GAAP version, which strips out acquisition accounting items — see the section below on why the two diverge by more than 11 percentage points this quarter.

Where the revenue came from

Base fees — the recurring management fees BlackRock charges as a percentage of AUM, and the core of the business — were $5,726 million including securities lending, up $1,272 million. Management attributes the increase to "the positive impact of market beta on average AUM" (i.e. markets rising lifted the asset base the fee is charged on), organic base fee growth, and the ~$230 million from HPS. Securities lending revenue specifically — fees from lending out portfolio holdings to short sellers and other borrowers — was $239 million versus $171 million, on "higher spreads."

Performance fees more than tripled, to $305 million from $94 million. These are fees earned only when a fund beats a hurdle, so they are the most volatile line in the P&L. The filing attributes the jump to "higher revenue from alternative products, including the impact of the HPS Transaction, and higher revenue from long-only products." A quarter of performance-fee strength that large is not a run rate, and HPS-style private credit funds crystallise fees on their own schedules.

Technology services and subscription revenue — Aladdin, BlackRock's risk and portfolio management software sold to other institutions, plus the Preqin private-markets data business acquired in March 2025 — was $566 million, up 13.4%. This is the slowest-growing but most predictable revenue line, and at 8% of total revenue it is not yet big enough to change the shape of the company.

Flows: the mix is shifting toward higher-fee products

The $199.1 billion of long-term net inflows in the quarter were not evenly spread, and the direction of the mix is more informative than the total:

Over the trailing twelve months the filing states institutional index net outflows of $102 billion were "concentrated in low-fee index equity offerings," while institutional active inflows of $106 billion were led by $74 billion of multi-asset money from outsourcing mandates and target-date funds, and $46 billion of private markets inflows "led by private credit and infrastructure." Money is leaving the cheapest products and arriving in more expensive ones. That is why base fees (+28.6%) grew faster than the period-end asset base (+22.5%), rather than tracking it.

Two flow lines are worth flagging as weak spots. Digital assets AUM fell to $48.8 billion from $60.7 billion at March 31 — only $3.1 billion of that was client withdrawals, so roughly $8.7 billion was the crypto holdings themselves losing value. Institutional index has now shed $102 billion over twelve months; the fee impact is small by design, but it means BlackRock's largest single AUM bucket outside ETFs is shrinking.

Why GAAP and adjusted profit are so far apart

GAAP operating margin of 34.7% and adjusted operating margin of 45.9% differ by 11.2 percentage points — $455 million of expense this quarter. Nearly all of it is acquisition accounting rather than cash operating cost:

Intangible amortization doubled to $276 million, "primarily reflecting amortization of intangible assets acquired in the HPS Transaction." This is a non-cash charge that writes down the value assigned to client relationships and contracts bought in the deal — it will keep running for years and it is a real economic cost of the acquisition, even though BlackRock excludes it from adjusted earnings. Goodwill and intangibles now stand at $62.6 billion, or 36% of the company's $175.9 billion of total assets: a reminder of how much of BlackRock's balance sheet is acquired rather than built.

The six-month figures contain a much larger and more distorting version of the same thing. Year-to-date GAAP operating margin is 38.3% against 32.0% a year ago — a 630 basis point jump — but that is flattered by a $538 million gain from a fall in the fair value of contingent consideration (the extra payment owed to GIP and HPS sellers if performance targets are hit, whose value moves with BlackRock's own share price), versus a $172 million charge in the prior-year period. That $710 million swing is an accounting mark, not operating performance. Adjusted six-month operating margin, which excludes it, was 45.2% versus 43.2% — a 200 basis point improvement, which is the honest number.

Why EPS grew less than operating income

Operating income rose 42.2% but diluted earnings per share rose only 19.6%. Three things account for the gap:

• A one-off gain in the prior year. Non-operating income (net of minority interests in consolidated funds) fell $226 million year over year, "driven primarily by a $330 million noncash pre-tax gain in the second quarter of 2025 related to Circle Internet Group." The comparison base was inflated.
• More shares. HPS was paid for almost entirely in 8.5 million exchangeable Subco Units rather than cash, which lifted the diluted share count to 164.6 million from 156.3 million — a 5.3% increase. Profit is now being divided among more claims. Up to approximately 13.8 million shares in total may eventually be issued if the maximum contingent consideration is earned and all retention awards vest.
• Partially offsetting: a lower effective tax rate, 25.2% versus 26.9%.

Capital returns continued at a normal pace rather than an accelerated one: $5.73 per share in dividends in the quarter ($11.46 year to date, $1.9 billion including Subco distributions), and 0.8 million shares and share equivalents repurchased for approximately $900 million in the first half, against six-month operating cash flow (excluding consolidated funds) of $3.1 billion. Roughly 8.4 million shares remain authorised for repurchase. Book value per share rose to $371.70 from $317.55.

Takeaway: Strip out the year-ago absence of HPS, the $330 million Circle gain in the prior-year base and the $710 million contingent-consideration swing, and the underlying story is a 260 basis point improvement in adjusted operating margin plus a mix shift out of low-fee institutional index money into private credit, active multi-asset and ETFs. That is a good quarter — but 87% of the AUM increase came from markets rising, which means the same mechanism that produced this revenue growth can reverse it without BlackRock losing a single client.

What to watch next

BlackRock does not issue revenue or earnings guidance in the 10-Q, so there is no management forecast to hold it to. Two dated, filing-confirmed items do shape the next report:

• Third quarter 2026 accounting change. On July 1, 2026 a contractual provision that could have forced cash settlement of the HPS Subco Units expired. As a result, in Q3 BlackRock will reclassify a portion of that minority interest, and approximately $2.6 billion of contingent consideration covering 2.8 million Subco Units, from liabilities into equity. This shifts items off the liability side of the balance sheet; it is a reclassification, not a cash event, but it will change the shape of the equity and liability lines and should reduce future fair-value remeasurement noise in operating income.
• The HPS comparison base disappears. Q3 2026 will be the first quarter compared against a period that already included HPS. Reported revenue growth should therefore step down sharply from 30.6% — not because the business slowed, but because the acquisition stops being incremental to the comparison.

Our own read on trajectory: the durable part of this quarter is the fee mix, not the growth rate. Private markets AUM of $329 billion is up from $215 billion a year ago and is drawing inflows at $15.4 billion a quarter at fee rates far above index products, and performance fees from that platform are now material enough to move the P&L — which cuts both ways, since they are also the line most likely to disappear in a weak quarter. The vulnerabilities are equally visible in the filing: an asset base whose growth is overwhelmingly market-driven, continued outflows from institutional index, a $62.6 billion goodwill and intangibles balance whose amortization will suppress GAAP earnings for years, and a share count that has permanently risen 5% to pay for the growth.