Carlyle (CG)

Private equity firm Carlyle Group (NASDAQ:CG) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 12.6% year on year to $782.5 million. Its GAAP loss of $0 per share decreased from $0.95 in the same quarter last year.

Company Overview

Founded in 1987 with just $5 million in capital and named after the iconic New York hotel where the founders first met, The Carlyle Group (NASDAQ:CG) is a global investment firm that raises, manages, and deploys capital across private equity, credit, and investment solutions.

Asset management firms oversee investment portfolios for institutions and individuals. The industry benefits from the growing global wealth pool, retirement savings needs, and expansion into alternative investments (private equity, real estate, etc.). However, firms face significant pressure from the shift to lower-cost passive investment products, regulatory requirements for fee transparency, and increasing technology costs to stay competitive in portfolio management and client service.

Carlyle's main competitors include other publicly traded alternative asset managers such as Blackstone (NYSE:BX), KKR (NYSE:KKR), Apollo Global Management (NYSE:APO), and Ares Management (NYSE:ARES), along with other financial institutions that have significant alternative investment divisions.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Carlyle grew its revenue at a decent 10.9% compounded annual growth rate. Its growth was slightly above the average financials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Carlyle’s recent performance shows its demand has slowed as its annualized revenue growth of 2.6% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Carlyle missed Wall Street’s estimates and reported a rather uninspiring 12.6% year-on-year revenue decline, generating $782.5 million of revenue.

Assets Under Management (AUM) represents the total value of investments that a financial institution manages for its clients. These assets generate steady income through management fees, creating predictable revenue streams that remain stable so long as clients remain invested with the firm.

Carlyle’s AUM has grown at an annual rate of 14.3% over the last four years, a step above the broader financials industry. When analyzing Carlyle’s AUM over the last two years, we can see that growth decelerated to 9.8% annually. Fundraising or short-term investment performance were net contributors for the company over this shorter period since assets grew faster than total revenue. That said, assets aren't the be-all and end-all due to their unpredictable and cyclical nature.

Carlyle’s AUM punched in at $474 billion this quarter, beating analysts’ expectations by 6%. This print was 5.9% higher than the same quarter last year.

Assessing topline trends is important, but the profitability of this growth matters for the bottom line. For asset managers, we look at fee-related earnings, which is profits generated from the core fee-based business, excluding more volatile components like performance fees (carry) and investment income. This is essentially the recurring profits of the business.

Carlyle’s annual fee-related earnings growth over the last five years was 20.6%, a solid result.

As you’ve seen throughout this report, we supplement with a two-year look because a five-year view may miss recent changes in the business. Over the last two years, Carlyle’s fee-related earnings grew at an annualized pace of 23.6%, an exceptional result.

Carlyle’s fee-related earnings came in at $311.9 million this quarter, falling short of analysts’ expectations by 0.9%. These results represent 12.2% year-on-year growth.

ANI per share serves as the primary earnings metric for asset managers, representing adjusted net income on a per-share basis. It’s essentially the same adjusted EPS calculation used across various sectors.

ANI per share gives us a clearer picture of sustainable profitability by removing volatile investment gains/losses and exceptional expenses. The per-share calculation also reflects the impact of share repurchases or dilutive issuances, which directly affects what shareholders actually own.

Carlyle’s 20% annualized ANI per share growth over the past five years was remarkable but underperformed its 20.6% fee-related earnings growth. It also diluted shareholders across this stretch, a headwind for its results.

On a two-year basis, Carlyle’s annualized ANI per share growth accelerated to 23.9%. This performance was great and tracked its fee-related earnings over the same period. We note the company continued diluting shareholders during this timeframe, suppressing its ANI per share.

In Q3, Carlyle reported ANI per share of $0.87, up from $0.78 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term ANI per share growth than short-term movements.

You may wonder when we will analyze book value and return on equity (ROE) since Carlyle is a financials company. We pay less attention to these metrics for asset managers because they are not great measures of business quality.

Asset managers are fee-based, capital light firms that manage client capital rather than their own, so they are not balance sheet businesses. Additionally, book value fails to capture the value of brands, investment track records, and other intangibles, thus understating intrinsic value, while ROE can look artificially high due to the relatively smaller bases of equity capital needed to operate the business compared to banks and insurers.

Carlyle reported $2.22 billion of cash and $2.65 billion of debt on its balance sheet in the most recent quarter.

As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.

With $1.23 billion of fee-related earnings over the last 12 months, we view Carlyle’s 0.3× net-debt-to-earnings ratio as safe. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Carlyle blew past analysts’ AUM expectations this quarter. On the other hand, its revenue missed and its fee-related earnings fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 2.7% to $55.04 immediately following the results.

Updated: December 4, 2025 at 11:07 PM EST

Are you wondering whether to buy Carlyle or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

There are multiple reasons why we think Carlyle is an amazing business. For starters, its revenue growth was good over the last five years and is expected to accelerate over the next 12 months. On top of that, its remarkable EPS growth over the last five years shows its profits are trickling down to shareholders, and its AUM growth was impressive over the last five years.

Carlyle’s P/E ratio based on the next 12 months is 12.2x. Scanning the financials space today, Carlyle’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $65 on the company (compared to the current share price of $56.08), implying they see 15.9% upside in buying Carlyle in the short term.