Ares (ARES)

Alternative asset manager Ares Management (NYSE:ARES) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 22% year on year to $1.5 billion. Its non-GAAP profit of $1.45 per share was 14% below analysts’ consensus estimates.

Company Overview

With roots in the leveraged finance group of Apollo Management, Ares Management (NYSE:ARES) is an alternative investment firm that manages private equity, credit, real estate, and infrastructure assets for institutional and high-net-worth clients.

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.

Ares Management competes with other alternative asset managers including Blackstone (NYSE:BX), KKR (NYSE:KKR), Apollo Global Management (NYSE:APO), The Carlyle Group (NASDAQ:CG), and Brookfield Asset Management (NYSE:BAM).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Ares grew its revenue at an excellent 21.3% compounded annual growth rate. Its growth surpassed the average financials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Ares’s annualized revenue growth of 20.3% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 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, Ares generated an excellent 22% year-on-year revenue growth rate, but its $1.5 billion of revenue fell short of Wall Street’s high expectations.

Assets Under Management (AUM) encompasses all client funds under a firm's investment management umbrella. The recurring fee structure on these assets provides consistent revenue generation, offering financial stability even during periods of poor investment returns, though sustained underperformance can impact future asset flows.

Ares’s AUM has grown at an annual rate of 27.9% over the last five years, much better than the broader financials industry and faster than its total revenue. When analyzing Ares’s AUM over the last two years, we can see that growth decelerated to 22.7% annually. Fundraising or short-term investment performance were net contributors for the company over this shorter period since assets grew faster than total revenue. But again, we put less weight on asset growth given how lumpy and cyclical it can be.

In Q4, Ares’s AUM was $622.5 billion, beating analysts’ expectations by 0.7%. This print was 28.5% higher than the same quarter last year.

Management fees represent the core revenue stream for investment firms, calculated as a percentage of assets under management. These fees provide steady income regardless of investment performance.

Over the past five years, Ares’s management fees grew by a terrific 25.4% per year but lagged its 27.9% annual growth in AUM, suggesting the firm reduced its average fees across its family of funds. A two-year view reveals that growth decelerated to 19.7% annualized, but this was still an acceptable result.

Ares’s management fees punched in at $993.7 million in Q4, in line with Consensus estimates. Wall Street opinions aside, management fees grew by 27.3% year on year.

Asset managers report ANI per share, which stands for adjusted net income per share. Make no mistake, this is essentially just the adjusted EPS that many other companies across various industries report.

This metric filters out the noise of investment mark-to-market changes and one-time charges to show true operational performance. The per-share calculation also captures the effect of capital allocation decisions like buybacks or new share offerings on shareholder value.

Ares’s 20.7% annualized ANI per share growth over the past five years was spectacular but underperformed its 32.6% fee-related earnings growth. It also diluted shareholders across this stretch, a headwind for its results.

On a two-year basis, Ares’s annualized ANI per share growth decelerated to 14.2%. While this performance was good on an absolute level, it lagged its fee-related earnings growth over the same period. We note the company continued diluting shareholders during this timeframe, suppressing its ANI per share.

In Q4, Ares reported ANI per share of $1.45, up from $1.23 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 Ares 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.

It was encouraging to see Ares beat analysts’ fee-related earnings expectations this quarter. We were also happy its AUM narrowly outperformed Wall Street’s estimates. On the other hand, its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.9% to $133.25 immediately following the results.

Updated: February 13, 2026 at 11:10 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Ares is a high-quality business worth owning. To begin with, its revenue growth was impressive over the last five years, and its growth over the next 12 months is expected to accelerate. On top of that, its AUM growth was exceptional over the last five years, and its spectacular EPS growth over the last five years shows its profits are trickling down to shareholders.

Ares’s P/E ratio based on the next 12 months is 20.6x. Some good news is baked into the stock given its multiple, but we’ll happily own Ares as its fundamentals really stand out. Investments like this should be held patiently for at least three to five years as they benefit from the power of long-term compounding, which more than makes up for any short-term price volatility that comes with relatively high valuations.

Wall Street analysts have a consensus one-year price target of $177.94 on the company (compared to the current share price of $133.83).