BlackRock (NYSE:BLK) released third-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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The full earnings call is available at https://events.q4inc.com/attendee/578472586
Summary
BlackRock Inc. reported a 38% year-over-year increase in earnings per share for Q3 2026, with operating margins reaching 47.8%.
The company achieved $205 billion in net inflows during the quarter, with 11% organic base fee growth, marking its ninth consecutive quarter with 5% or more growth.
Revenue grew by 19% to $7.8 billion, driven by organic base fee growth, higher markets, and increased performance and technology services fees.
The firm’s strategic initiatives include expanding in AI infrastructure and digital transformation, leading to significant inflows across ETFs, private markets, and systematic strategies.
Management highlighted the importance of leveraging public and private market blends and technology to maintain durable growth, with significant client engagement and a strong global presence.
BlackRock’s future outlook remains positive, with expectations of continuing momentum in Q4, driven by seasonal strength in iShares and private markets fundraising.
Full Transcript
Jen, Operator
Good morning. My name is Jen and I will be your conference facilitator today. At this time I’d like to welcome everyone to the BlackRock Incorporated third quarter 2026 earnings teleconference. Our hosts for today’s call will be Chairman and Chief Executive Officer Lawrence D. Fink, Chief Financial Officer Martin S. Small, President Rob Kapito, and General Counsel Christopher J. Meade. All lines have been placed on mute to prevent any background noise.
After the speakers’ remarks, there will be a question and answer period. If you’d like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you’d like to withdraw your question, please press star two. Thank you, Mr. Meade. You may begin your conference.
Chris Meade, General Counsel & Chief Legal Officer
Good morning everyone. I’m Chris Meade, the General Counsel of BlackRock. Before we begin, I’d like to remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that BlackRock’s actual results may, of course, differ from these statements. As you know, BlackRock has filed reports with the SEC which list some of the factors that may cause the results of BlackRock to differ materially from what we say today.
BlackRock assumes no duty and does not undertake to update any forward-looking statements. So with that, I’ll turn it over to Martin.
Martin Small, Chief Financial Officer
Thanks, Chris, and good morning everyone. It’s my pleasure to present results for the third quarter of 2026. Before I turn it over to Larry, I’ll review our financial performance and business results. Our earnings release discloses both GAAP and as-adjusted financial results. A reconciliation between GAAP and our as-adjusted results has been included in the tables attached to today’s press release. I’ll be focusing primarily on our as-adjusted results.
A year ago, our clients were focused on managing uncertainty around inflation, rates, and growth. Today they’re focused on capturing the opportunities created by technology and artificial intelligence. They’re focused on infrastructure investment and a renaissance for income investing. They’re aiming to secure returns fueled from a new wave of productivity and innovation. There’s more money in motion across global capital markets, and there’s expanding opportunities for BlackRock and our clients.
They’re powered by earnings-driven returns, higher yields, and broader opportunities to diversify and manage risk through our whole-portfolio approach. The breadth of our platform is deepening our relationships with clients across all channels, retail and institutional, and all over the world. Capital is flowing into the infrastructure required to power AI and digital transformation. Wealth portfolios are broadening beyond traditional allocations into personalized solutions delivered at scale, and retirement is being reshaped by growing demand for income and broader investment access.
When clients need advice on capital markets, portfolio construction, or a partner to deploy capital at scale across public and private markets, they’re coming to BlackRock. We’ve methodically invested through cycles to build a scaled platform, one that can connect clients across public and private markets with technology. It’s paying off now in our results and in the accelerating pipeline ahead. Clients entrusted us with nearly $870 billion of net inflows over the last 12 months, driving 10% organic base fee growth.
That’s not one product or one region carrying the firm. It’s broad-based across client channels, asset classes, and geographies. As we set out in our 2030 plan at last year’s Investor Day, we’re driving growth in higher-value, higher base-fee-rate categories, and our business mix across public, private, and technology is creating more durable and all-weather growth in revenue and earnings. Shareholders are benefiting from that growth. In our first comparable quarter since the HPS close, year-on-year EPS growth accelerated to over 35%.
High momentum across our business is translating into stronger financial outcomes. We again delivered double-digit growth in revenue, operating income, and earnings per share, with all three measures reaching new records. Our scaled and disciplined financial rubric are helping translate growth into the bottom line. Our operating margin reached 47.8%, up 320 basis points year over year. In the third quarter BlackRock generated $205 billion of net inflows.
Organic base fee growth of 11% marks our ninth consecutive quarter at or above 5%. Our growth continues to broaden across active ETFs, private markets, systematic SMAs, digital assets, and technology. These capabilities are scaling simultaneously, demonstrating the power of BlackRock’s platform breadth and the durability of our growth model. Third quarter revenue of $7.8 billion was 19% higher year over year, driven by organic base fee growth, the impact of higher markets on average AUM, higher performance fees, and higher technology services and subscription revenue.
Operating income of $3.3 billion was up 27% year over year. Earnings per share of $15.93 increased 38% versus a year ago, also reflecting higher non-operating income and a lower diluted share count in the current quarter. Non-operating results for the quarter included $164 million of net investment gains, primarily due to mark-to-market non-cash gains linked to our minority investments in Securitize and Circle. Our as-adjusted tax rate for the third quarter was approximately 24%.
We continue to estimate that 25% is a reasonable projected tax run rate for the fourth quarter of 2026. The actual effective tax rate may differ because of non-recurring or discrete items or potential changes in tax legislation. Third quarter base fee and securities lending revenue of $6 billion increased 20% year over year, reflecting the positive impact of market beta on average AUM, organic base fee growth, and higher securities lending revenue.
On an equivalent day count basis, our annualized effective fee rate was approximately flat compared to the second quarter. Sustained client demand for high-value categories, including private markets, active ETFs, and systematic, continues to support fee rates on net inflows that are well above the firm’s blended effective fee rate. Performance fees of $630 million increased 22% from a year ago, primarily reflecting higher revenue from alternatives, including $110 million of performance fees from HPS.
Quarterly technology services and subscription revenue was up 14% compared to a year ago, reflecting sustained demand for our full range of technology offerings. Annual contract value, or ACV, increased 12% year over year. On a constant-currency basis, we estimate ACV would have increased 13% from a year ago. We remain committed to low- to mid-teens ACV growth over the long term. Total expense increased 14% year over year, primarily driven by higher compensation, sales, asset and account, and G&A expense.
Employee compensation and benefit expense was up 12% year over year, reflecting higher incentive compensation linked to higher operating income and higher performance-related compensation versus the prior year period. Sales, asset and account expense increased 22% compared to a year ago, driven by higher distribution and servicing costs and direct fund expense. G&A expense was up 6% year over year, primarily due to higher technology investment spend, consistent with our G&A outlook provided in January.
After annualizing for the impact of HPS and Preqin, we continue to expect a mid-single-digit percentage increase in full-year G&A. We continue to deliver margin expansion on recurring fee-related earnings. Excluding the impact of all performance fees and related compensation, our adjusted operating margin for the third quarter would have been 48.6%, up 230 basis points year over year. Our capital management strategy remains consistent. We invest first in the business and then return excess cash to shareholders through a combination of dividends and share repurchases.
In the third quarter we repurchased $550 million worth of shares. At present, based on our capital spending plans for the year and subject to market and other conditions, we anticipate repurchasing at least $550 million worth of shares in the fourth quarter. That’s consistent with our previous guidance communicated in July. Turning to flows, BlackRock’s third quarter net inflows of $205 billion were diversified across product types, client channels, regions, and active and index strategies.
ETFs generated $135 billion of net inflows in the third quarter. Index bond ETFs and precision ETFs led the way, generating $61 billion and $41 billion of net inflows, respectively. Continued demand for our growing lineup of active ETFs added $22 billion of net inflows. Our digital assets ETPs raised $8 billion in the quarter. Our ETFs have now delivered a sixth consecutive quarter of double-digit organic base fee growth, powered by higher-value ETF categories such as active and precision.
Retail net inflows of $23 billion were driven by sustained momentum in liquid alternatives, broad-based demand for our U.S. active fixed income offerings, and continued inflows across Appirio and SpiderRock. Institutional active net inflows of $44 billion were positive across all product types and were led by strength in private markets, fixed income, systematic equities, and liquid alternatives. Institutional index net outflows of $27 billion were concentrated in low-fee index equities.
In private markets, we saw $15 billion of net inflows, mainly from deployment across infrastructure and private credit and the onboarding of a real estate mandate. This quarter we updated our earnings supplement to provide greater transparency into our private markets activity and drivers of fee-paying AUM. These include metrics such as fundraising, deployment, total AUM, and dry powder, which can be found on pages 9 through 11 of our earnings supplement.
Finally, our cash management platform generated $31 billion of net inflows in the third quarter. These results include fundings into customized liquidity solutions, demand for government funds, and continued growth from Circle. At our Investor Day in June 2025, we set out a vision and a business plan for BlackRock in 2035. Quarters into the plan, we’re delivering at or well above its targets: higher and more consistent organic base fee growth; a more all-weather, durable mix of asset management and technology capabilities across public and private markets; consistent operating margin expansion; and higher earnings per share. This third quarter notched another strong step on our way to 2030. In more uneven markets, we generated record revenue, operating income, and EPS, a more than 47% operating margin, and 11% organic base fee growth. The opportunities ahead for BlackRock continue to expand. Clients are looking for a partner that can connect the whole portfolio to navigate a new environment of capital scarcity, higher long-term yields, and a redesign of diversification.
I don’t believe we can evaluate the investment environment as risk-on or risk-off any longer. This new environment is about capital allocation acumen. It’s about financing advantages through scale, access, and breadth of opportunities. And it’s about redesigning diversification across the client portfolio. Our industry is being reshaped by the blending of public and private markets and growing demand for technology and data to secure success in client portfolios.
These conditions play directly to BlackRock’s strengths. Client engagement is higher than ever, and we enter our seasonally strongest fourth quarter with significant momentum across the firm and a long runway for growth ahead. With that, I’ll turn it over to Larry.
Larry Fink, Chairman and Chief Executive Officer
Thank you, Martin. Good morning everyone and thank you for joining the call. We built BlackRock to be a partner to clients everywhere capital markets are moving. We advise clients holistically across public markets, private markets and technology. We do it with a global perspective, but with a local lens. And that reach, that ability to cover every corner of a client’s whole portfolio, puts BlackRock at the center of how capital is moving in the world today.
And it’s showing up in our results. Third quarter earnings per share rose 38%. Our operating margins reached 47.8. Organic base fee growth of 11% growth, reflecting net inflows of 205 billion year to date. Net inflows and organic base fee growth are both more than 45% higher than this time last year. Our results reflect the scale of BlackRock today. We generated net inflows across every asset class, every client type, every region and across both active and index.
AUM is up over $2 trillion in the last year and it has now reached 15.5 trillion. We’ve now operated for a full year with GIP, HPS and Preqin as part of BlackRock. This quarter is the clearest view yet of the earnings power of our integrated platform. It’s helping us serve more clients’ needs and create more value for shareholders. For the first time in my career, and that’s 50 years of a career, I’m seeing genuine shortages of capital. Governments are running historically large deficits, while at the same time demand for private capital is rising across the economy.
Governments need financing for infrastructure. Companies need to fund a generational AI buildout. Individuals need better ways to invest and retire. Everyone is rethinking how they deploy capital and BlackRock is at the center of many of these conversations. We’re both a trusted advisor and a destination for global client capital. That’s driving meaningful activity across the firm and a growing pipeline for the future. This is especially visible through our work with the leading companies at the center of the AI buildup.
We have long standing relationships with these hyperscalers and sovereign wealth funds and pension funds and corporate clients around the world. These long term relationships are now underpinning some of the largest financing engagements in the market. We partnered with Meta on the financing of its planned $14 billion data center in Texas, bringing together infrastructure investments from GIP, private financing capabilities, HPS. We’re also working alongside leading technology companies to create dedicated pools of financing for the customers to expand compute capabilities and capacity.
In the near term, these can supply private placements into high grade insurance mandates. But over time there’s even a larger opportunity to securitize them into tradable structures for a much broader set of clients. Rob Capito and I have lived through this playbook before. In the early 1980s, mortgages were loans sitting on banks’ balance sheets, illiquid and hard to price. Fannie Mae and Freddie Mac began pooling them, but that alone didn’t make them tradable.
What made them tradable was data. Years of performance history and understanding how the performance would move with interest rates and with the changes of the broader economy. Once investors had a trusted time series of data, issuers had a standard to build against and the market opened up for a much bigger group of investors. That combination took the MBS market from a few billion dollars when I started to the trillions of dollars it is today. Compute capacity is now following a similar path and we intend at BlackRock to be the center of it, as we were then in the beginnings of the mortgage-backed securities market.
BlackRock is particularly well positioned to help develop this market because we combine capital formation but most importantly technology and data and scale. Thousands of investment professionals just participated in the Aladdin community using our analytics and risk framework to make investment decisions. AI is amplifying the value of Aladdin as we accelerate innovation and create better analytics. As compute capacity emerges as an asset class, the markets will need trusted data, standardized performance metrics and a common framework for risk analytics.
These are the capabilities we’ve spent decades building. They now differentiate BlackRock working alongside technology companies and investors to establish the infrastructure this potential new market will need and require. These opportunities underscore the strategic logic behind our private markets acquisitions. We’re already mobilizing capital at a greater scale than ever before. Our AI infrastructure partnership recently made its first deployment with the closing of Align Data Center transaction which had an approximately $40 billion enterprise value.
We raised $68 billion in private markets over the last 12 months. In private credit, higher base fees are supporting stronger income for investors, making private credit an increasingly attractive source of yield and portfolio diversification. We raised 25 billion in private credit in our first full year with HPS. We’re seeing especially strong traction with insurance companies rotating or adding to high grade solutions. We expect that to accelerate into year end and into 2027.
Across private markets, we have a strong pipeline of future capital raises and deployment opportunities. Clients want scaled capital markets access across their entire portfolio. And that’s how iShares have led the growth of the ETF industry. iShares flows were again led by our index bond ETFs with 61 billion in net inflows, as investors shifted into long and short end of the curve. We also saw strong demand for our AI-linked exposures. Our semiconductor and South Korea ETFs were among the highest inflowing products.
What sets iShares apart is the breadth and the precision of what we offer. Whatever view an investor holds, they can express it through iShares. The ETF wrapper is also evolving how investors access actively managed strategies. And iShares is leading the industry with $60 billion of active inflows in 2026, including a record $22 billion inflows this quarter. iShares Active AUM has doubled in the last year to more than 160 billion. We’re already tracking ahead of the $500 million Avenue revenue mission that we laid out last summer.
Investment performance is what ultimately drives active net returns and flows. Performance and scale reinforce each other. BlackRock’s technological driven process delivered investment insights across vast sets of securities. And that scale is what powers consistent performance. Over 90% of our systematic equity AUM is above benchmark or peer median. That performance powered a second straight record quarter across our broader systematic active equity business.
Systematic Equity generated nearly $30 billion of net inflows in the third quarter and more than $60 billion of net inflows in 2026. Our systematic equity flows are up 50% compared to last year. And the total AUM is now approaching $500 billion of active investments. We’re seeing the same dynamic in fixed income. Approximately 85% of our taxable fixed income assets are above benchmark or peer median over three and five years. That consistency is why clients keep bringing us more of their portfolio.
Active fixed income net inflows of 14 billion reflected strength across both institutional and retail channels. Clients turn to strategy like Strategic Income Opportunities and Total Return to capture income in a higher rate environment. Rick and his team has built this performance over decades and we’re boarding it across new wrappers, including our lineup of fixed income ETFs. Clients are also capturing income opportunities at the short end of the curve.
Cash net inflows of 31 billion included several scaled mandates from clients, consolidating fragmented liquidity programs into more customized solutions with BlackRock. Income is especially critical in retirement. In recent years we innovated to deliver an option for guaranteed income in retirement through LifePath Paycheck and last month we introduced our LifePath Solutions framework. It’s designed to bring capabilities historically reserved for the largest retirement plans to a broader set of plan sponsors.
Our $700 billion global LifePath platform reflects more than 30 years of expertise and gives us a distinctive ability to meet the challenging client needs. Our brand and reputation are further strengthening through initiatives like BlackRock Future Builders. As part of the program, BlackRock Foundation is deploying capital to connect workers to skilled trade training. It’s also embedding financial education and digital savings tools to help workers build a more durable economic security from their first paycheck all the way through to their retirement.
Many of our international pension and corporate clients are navigating structural shifts in retirement saving plans as defined contribution models continue to grow worldwide. For example, plan sponsors in the Netherlands need a partner who can help them manage the shift from defined benefits to defined contribution at scale. And we’ve already onboarded multiple pension mandates in connection with this transaction. Last month, the pension fund for the Dutch construction industry named BlackRock as its preferred candidate for an $80 billion outsourced fiduciary mandate, citing our global scale, our execution capabilities and our technology.
We’re advising clients and government around the world on building durable retirement systems and deepening their local capital markets. And when capital is moving across borders, much of it moves through platforms like ours. Foreign investments is moving into the US equities and funds in record amounts. That activity is beneficial to BlackRock, with a third of our long term net inflows coming from clients outside the United States. It’s even more pronounced in systematic equity with more than 70% of the net inflows coming from international clients.
Europe and Asia each saw double digit organic base fee growth and the Middle East delivered over 20% organic base fee growth. We have a long term local presence and years of expertise in executing in these regions. It’s showing up in strong engagement in some of our highest value growth engines including systematic equity, private markets, retirement and technology. Aladdin underpins everything we deliver to clients. Our ACV grew 12% in the third quarter, reflecting both new onboardings and existing clients expanding the relationship across our technology stack.
We have a comprehensive public and private market workflow and data offerings through Aladdin, eFront and Preqin. As private markets become a larger part of client portfolios, the need for transparency, the need for risk management, the need for portfolio analytics can only increase. That’s a natural extension of Aladdin’s role as an operating system for entire portfolio for investors worldwide. Our results prove the power and potential of our integrated firm.
Our shareholders are participating in that growth through a 38% increase in the earnings per share, a more than 47% operating margin and double digit organic base fee growth. BlackRock brings together issuer relationships built over decades through public market platforms, financing expertise, investment performance and the technology and data that connect it all. That combination is differentiating BlackRock in every category where we compete and in every region in which we operate.
It’s why BlackRock has winning mandates at the cutting edge of the capital markets. From hyperscalers to compute financing to pension outsourcing to Aladdin and Preqin partnerships, we’re having accelerated momentum and a broad pipeline spanning whole portfolios, private markets, retirement and throughout our international platforms. More clients are turning to BlackRock as a destination for capital and for a partner for their growth. I’m confident in the opportunities and growth ahead for BlackRock, for our clients and importantly for our shareholders.
Operator let’s open it up for questions.
Jen, Operator
At this time I’d like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. If you do ask a question, please take your phone off its speaker setting and use your handset. To avoid any potential feedback, please limit yourself to one question. If you have a follow up, please re-enter the queue. We’ll pause for just a moment to compile the Q&A roster. Your first question comes from Michael Cho of J.P.
Michael Cho, Analyst at J.P. Morgan
Hi, good morning. Thanks for taking my question. I just wanted to touch on organic base fee growth during the quarter. It saw some nice acceleration and we can see from the different contributors the growth that helped drive that. And Martin, I think you called out a few drivers as well, but wondering if you can unpack maybe where you’re seeing increasing and maybe increasingly sustained contribution inside some of the various businesses that you highlighted.
Larry Fink, Chairman and Chief Executive Officer
Martin, why don’t you take that? Great.
Martin Small, Chief Financial Officer
Thanks, Mike. So I’d start by saying we’re continuing to execute on the 2030 plan that’s to deliver that durable premium organic base fee growth. Third quarter organic base fee growth was 11%. That’s nine consecutive quarters at or above our 5% long term target. And it’s also the fifth consecutive quarter at or above 8%. I think we’ve demonstrated that BlackRock can sustainably deliver in that 6 to 8% range. And there’s clearly the ability to move above it to high single digits, low double digits in periods of elevated client activity.
And you see that in high value category and strong markets that can be driven by client preferences, can be driven by increased exposure to international markets, precision semiconductors, the onboarding of large mandates and the timing. Also I think of private markets fundraising and deployment. Organic base fee growth this quarter I think as Larry and I referenced it, was very well diversified across the platform. We had strong contributions from the systematic businesses, active management, broadly deployment from our AI partnership, fundraising and fee paying on day one in our infrastructure.
Mid market strategies, Precision ETFs, Aperio and Spider Rock, tax aware as well as cash. Just a few financial highlights I think might be helpful to unpack just the breadth that we’re delivering in sort of core asset allocation, portfolio diversifiers, tax aware strategies in private markets. If you were to take the 524 billion of year to date flows, about 220 billion are in the 5 to 10 bps range. Let’s call that broad asset allocation models, core exposures that clients use for long term holdings.
About 270 billion was in the 10 to 60 basis point range. And that’s where you’re going to find kind of active ETFs, you’re going to find country funds, you’re going to find exposures that are about managing diversification and also tactical opportunities. And the balance of the flows above 60 basis points are going to be in private markets. They’re going to be in liquid alternatives where we had $25 billion of flows in the quarter with 15 billion in private markets, 9 billion in hedge fund strategies and liquid alternatives.
We said mix as being strong and durable. And we think that durability really comes from two places. It’s from what we’ve talked about consistently as being structural growers. These are just categories that when markets are strong they’re going to grow faster and when markets are weak they’ll still grow. That’s ETFs, that’s active management, private market, systematic SMA solutions that’s showing up in our pipeline. We’ve got several scaled outsourcing relationships that we expect to fund at the end of the year and in 27 and we’ve done one, a number of these high grade insurance mandates, they’re going to drive growth as they’re deployed over the coming months and days. So that future organic base fee growth I think is strong on the come and we have line of sight to it in private markets. Our fundraising plan remains diversified across infrastructure, private credit, multi alternatives. We have some strategies that are fee paying on raise and others that scale with deployment and that’s going to also support near term revenue, longer term growth and this sustained ability to deliver at least in that 6 to 8% range.
Second, we’re a consolidator. If you look at flows in the industry over the last several years, the top five asset managers are consolidating around 80% of those. But there’s still just this extraordinary amount of industry fragmentation by assets and revenue. So the opportunity to consolidate share in a very, very big fragmented market where every investor wants to consolidate its relationships to get the most out of its partner. That consolidation of share for us is an avenue of sustained organic growth.
Clients really want to do more with BlackRock. You see it in the flows. We’ve seen it in the momentum in this quarter and this last year. I think it gives the management team here a lot of confidence that we’re on the right track and a lot of optimism about our ability to deliver this sustained organic growth that’s above target.
Jen, Operator
Your next question comes from Michael Cypress of Morgan Stanley.
Michael Cypress, Analyst at Morgan Stanley
Good morning. Hey, thanks for taking the question. Wanted to ask about what you’re seeing and hearing from asset owner clients, given the recent move that we’ve seen higher in terms of long term interest rates and to what extent are you seeing clients changing how they’re thinking about relative value, where they’re allocating incremental capital. And if you could maybe tie this into the significant AI infrastructure build-out that’s underway. How sensitive do you think that investment opportunity is to higher financing costs and are you seeing any sort of changes in the pace or the economics of those AI projects?
Larry Fink, Chairman and Chief Executive Officer
Let me turn it to Rob and I’ll finish up.
Rob Kapito, President
So I remember the last time you asked that question, Michael, many years ago. And the answer was bonds are back. And I would say right now, clearly interest rates are going to be impacted by all of the obvious things, inflation, energy prices, capital supply and demand imbalances and worldwide deficits, geopolitics. And we are expecting more volatility until we can find a balance. That right now suggests slightly higher rates, especially in the longer end of the curve.
But let me say that we think fixed income demand remains at the early innings. As you know, for years investors were forced to take equity risk to generate meaningful income. And today that has changed dramatically. The 10 year Treasury yields more than 5%. Real rates are close to 3%. And in strategies that you know that we have like BINC and SIO, we are able to generate yields around 7% in a diversified high quality portfolio. Now these are bellwether returns for creating what Larry mentioned our goal of resiliency and durability in portfolios.
But what is particularly compelling is that historically for intermediate term bond portfolios, future returns usually tend to track starting yields quite closely. In other words, investors don’t need a heroic market outcome. Much of the return opportunity is already embedded in today’s income levels. So we’re seeing clients recognize that opportunity. Fixed income generated 78 billion of net inflows in the third quarter and 205 billion year to date, reflecting demand for high quality income and more resilient portfolio construction.
And that environment plays directly to BlackRock strengths. Investors can earn attractive levels of income without taking significant duration, volatility and drawdown risk. So if rates stabilize slightly from here, we think there is substantial room for fixed income. Allocations can either grow and our clients now can use the better wrappers that we have for fixed income, especially in bond ETFs. And they are looking to lock in these yields going forward.
Larry Fink, Chairman and Chief Executive Officer
Related to data centers and financing, let’s put in the context of the overall federal deficits. Federal deficits after 232 years was $8 trillion. 26 years later, that’s 40 trillion. And so the demand and the need to financing the deficits are at obviously record levels. In talking about the need for unlocking private capital, we are seeing that unlock, which is fantastic for the United States and fantastic for our potential growth. But unlocking private capital means a lot of financing, whether it’s financing for AI and data centers or financing for companies like Humana, where we announced the big financing yesterday or last week when we announced the financing for AT&T. That is one of the special ingredients for growth in the United States, that the role of the capital markets is playing a larger, larger component. The competition’s capital is growing between the federal deficits matured at record levels and now we’re unlocking private capital. And demand for capital in the private sector is growing. And all that means is at this moment, it means we’re going to have structurally higher interest rates for longer and especially out the curve and I think that’s with us.
Obviously as I spoke in my prepared remarks, I don’t see us having the ability to raise trillions and trillions of dollars of bespoke transactions related to data centers. The need to create a new financing vehicle for compute for chips is imperative for the US to continue to build out to the scale that is necessary. And once we build this out, the entire world is going to be needing to build this out. If you think about it, a 1 gigawatt data center in the United States is about a $50 billion enterprise cost. 40% of that is the cost of GPUs and chips. The other 60% is power grid, core and shell and all that comes together. It is, you know, we are now seeing financing for the data centers that are based on the lease of the credit. So that’s a. And but now what we are also with is the need to build out the scale of chips and compute. We’re going to democratize AI. The faster we could do this, the better we’ll be in broadening economic success. This is an imperative.
We cannot have just five companies or seven companies entirely buying out every chip production that is being produced right now. We need the ability to finance startup AI companies, startup companies. But each one of these companies need the ability to buy these new innovative compute chips. They don’t have a credit rating obviously. And so we have to come up with innovative ways. The best way is we could do an asset based financing related to the chips through data, through analytics.
Then we could help finance startup companies, the growth of new and young companies and it could transform America to grow at 3% or greater. And then the debt that I just talked about will not be as consequential because we can continue to grow our economy at 3 plus percent. Our debt to GDP should fall.
Jen, Operator
Your next question comes from Craig Siegenthaler with Bank of America.
Larry Fink, Chairman and Chief Executive Officer
Hey Craig, my team is making fun of me from that last comment.
Craig Siegenthaler, Analyst at Bank of America
Good morning Larry. Craig, hope everyone’s doing well. We wanted to dive a little deep into your tax aware suite both inside and outside the 200 billion plus that sits in Aperio. Where are you seeing the most demand? Can you quantify the 3Q flow? You gave us 7 billion of Aperio flows last quarter. And on the long short tax aware, specifically how you handling the capacity constraints that the two largest RIA custodians, they’ve actually been tightening inflows recently.
And does it even matter because these products are on so many other wealth management platforms, banks, online brokers in parallel?
Larry Fink, Chairman and Chief Executive Officer
Martin, why don’t you take that?
Martin Small, Chief Financial Officer
Hi Craig, thanks so much for the question. I heard basically three things: sort of demand overflows, a little bit of a breakdown and some color on the tax-aware strategies and the like. And then second, kind of the growth of long-short strategies and the financing of them in and on the custodian. So let me start by saying, just philosophically, we put the clients at the center of these strategies and, for taxable clients, maximizing returns means managing markets and taxes.
We’re seeing strong demand for tax-aware solutions. That’s direct indexing, it’s long-short, and it’s SpiderRock options-based strategy that help with concentrated stock positions and liquidity events. The Aperio platform has grown from about $40 billion of assets on acquisition to nearly $200 billion in five years. It’s continuing to see double-digit organic growth. Our direct indexing sort of traditional long-only AUM is $175 billion with about $13 billion of net inflows year to date.
In 26 long-short AUM is $19 billion with about $12 billion of net inflows year to date. 26 Aperio had $5 billion of net inflows in the third quarter including $4 billion into long-short and $1 billion into long-only. Our 26 flows in these tax-aware strategies of $25 billion are 70% higher than they were in 2025 where we had a record $15 billion and that’s our fifth straight record year in these strategies. Through SpiderRock we also offer options-based overlay capabilities that complement direct indexing and tax-aware long-short strategies as part of a broader whole-portfolio solution.
SpiderRock generated $3 billion of net inflows in 25. It’s now had three back-to-back record quarters in 2026 including $2 billion in the third quarter. So congratulations to Eric Metz and team. I’d say BlackRock’s really differentiating in this space based on service, the breadth of the platform, obviously delivering the outcomes. We’re really working with clients not just in the SMAs, but across ETFs, SMAs, direct indexing, long-short, public-private models, whole-portfolio orientation.
So that continues to grow well and we have a really strong pipeline ahead. In terms of the growth of long-short strategies and some of the dynamics happening with the custodians, I’d again start by saying we have a broad value proposition across a whole array of tax-advantaged strategies. Long-short is a category that’s seen rapid expansion and I’d say the industry custodial model and financing models, they’re adjusting. There are really compelling return and financing economics, Craig, for banks, for broker-dealers, the custodians.
And we see additional parties entering the market to finance that growth. Long-short industry assets reached $170 billion. I think that’s up—that’s three times year over year. And as I mentioned, our AUM is sort of closing in on $20 billion. Client demand for these strategies, very strong. As I mentioned, $4 billion of inflows into long-short. Our focus is really on doing everything we did in long-only. In long-only, we maximized the number of custodial attachment points we had all around the industry.
Our aim is to do the same thing and increase the number of financing counterparties for these strategies for the benefit of our clients. We’re broadening our platform relationships and we’d expect additional access points through distributors and custody partners. There’s been, I think, understandable and appropriate focus on many of these custodial changes. But we’ve got a diversified group of financing partners and distribution partners and several other providers that are ramping up their capacity.
We’re working very, very closely with our clients, who are sophisticated private wealth managers, on expanding access at the custodial platforms, on broadening the delivery options through new structures, alternative SMA options like SpiderRock and direct indexing. And then also just providing a lot of clear guidance, education, interfacing with all the partners and financing counterparties to make sure everybody manages the onboarding, the reporting, the operations, the financing with all the high-quality fiduciary care that our clients would expect.
But I think a lot more to come in this space. It serves a valuable place in a client’s portfolio.
Jen, Operator
Your next question comes from Michael Brown with UBS.
Michael Brown, Analyst at UBS
Good morning, thanks for taking—yeah, thanks for taking my question. Good morning. So clearly very impressive margin expansion this quarter. Maybe just a little bit of time unpacking some of the biggest drivers there. Maybe how we think about the puts and takes into 4Q—is the flattest, flat margins, quarter over quarter, a reasonable assumption? More broadly, you’re on track for roughly 200 basis points of expansion this year. Appreciating you don’t like to bake in beta into your outlook, but what does the margin expansion opportunity look like in 2027 assuming a typical market backdrop?
Larry Fink, Chairman and Chief Executive Officer
Martin, thanks.
Martin Small, Chief Financial Officer
So we continue to deliver industry-leading margins. That’s been part of our 2030 strategy. Our operating and recurring fee margins each expanded, as you mentioned, by 200 to 300 basis points year over year. Operating margin for the quarter was 47.8%. That’s up 320 basis points. Our margin ex performance fees and related comp was 48.6%, up 230 basis points. In terms of unpacking some of the puts and takes, our reported operating margin, I think you guys understand well, can vary quarter to quarter depending on the composition of performance fees, which have varied payout ranges depending on the strategy.
Our operating margin was higher this quarter partially due to the performance fee mix, but excluding performance fees and related comp, we still saw 230 basis points of expansion in our recurring fee margin. We’ve talked about building BlackRock around this whole portfolio, around the structural growth categories, investment solutions. Those structural growers are private markets, ETFs, SMAs, models, target date, technology, and flows and base fee growth.
In these categories they’re just all-weather, they’re less market-sensitive, and so we see them as playing a key part in driving structurally higher adjusted operating margins. The markets continue to have an impact on BlackRock’s margins both up and down, as you mentioned, but our 2030 goal of reaching over 30% of revenue from private markets and technology—that’s aimed to dampen that effect, empower more steady double-digit EPS growth and margin expansion, and also provide more resiliency in client portfolios.
The difference today is that we have the engines in the private markets of Global Infrastructure Partners and HPS, both of which came to BlackRock and operate at fee margins of north of 50%. Building on that and our other franchises, we think the outlook for margin growth can propel two things. First, we can see the margin on fee recurring earnings driving upwards towards the trajectories of all the best-in-class private markets names—so north of 50%.
We can do that through the acquired businesses, but we can also do it through highly scaled franchises that we have in ETFs, digital assets, and systematic equities, which have high operating leverage and the ability to grow and create more expansion and credibility. Then, with constructive markets, higher fee rates on flows, strong organic growth, we think we can lift the fully burdened adjusted operating margin of the company up even further as well.
We operate today at leading margins and we still see room to scale them going forward.
Jen, Operator
Your next question comes from Alex Blostein of Goldman Sachs.
Alex Blostein, Analyst at Goldman Sachs
Hey, good morning, Larry. I was hoping to pull on that string of questions around AF for maybe a couple more minutes. So obviously lots of discussion around the need for capital. I think it’s quite well understood and you obviously articulated that well as well. So as you think about which part of the ecosystem BlackRock feels most comfortable participating in today—whether it’s compute or the data center—which part of the capital structure? It feels like building a fully securitized, traded market around this could take some time.
So how much of a bridge you guys are likely to provide within this over the next couple of years, how it could translate into revenue opportunities for BlackRock and ultimately is there room to build out a capital markets syndication business around that as well, like we’ve seen with some of your alternative peers?
Larry Fink, Chairman and Chief Executive Officer
Let me start and then Martin will follow up. Good question. You’re right. It’s going to take time to get the data and analytics. It’ll take time to get rating agencies to opine on this new market and come up with metrics. It’s going to take time for Aladdin and eFront to have the data set so we could do the proper analytics. But it is a huge priority and we’re focused on it now. That being said, we are in the mix of almost every conversation. In the past week, I had conversations with every major hyperscaler.
It is a large opportunity both in the financing of GPUs. It is a large opportunity for GPU financing for our HBS team. It is a large opportunity for our GIP team in terms of the buildout and working alongside hyperscalers for data centers. As we—as I announced, we did close on the Aligned Data Centers platform. We’re actually looking at two more platforms throughout the world where we could play a larger, larger role. But what I said in my prepared remarks does really resonate.
As one of the largest shareholders of every major public hyperscaler and technology platform, we’re having broad-based conversations with all of them. Obviously many of them are looking not just to be building out in the United States, but building out in other parts of the world as compute is going to be necessary throughout the world. We’re engaged in that. We’re going to be a part of that and I do believe it is going to be a major source of opportunity.
That being said, the clients worldwide are hearing from some of our competitors at the same time. They’re all looking to do this—you know, the same type of financing. And so it really requires having the unique structuring capabilities, working with the hyperscalers, but then working with our clients in terms of what are they looking for, what type of structure are they looking for, what type of guarantees do they need in the back end if it’s compute.
So all of this is something that we are front and center and we’re working on and I do believe, as indicated in our private markets growth in our announcers, we’re involved, we’re getting more involved and I think this is a major platform for us to grow on. We’re presently in the market with a very large transaction now and we’ll know in the next number of months how that plays out. But we’re having conversations literally daily on opportunities that we could help out.
If you think about the need in the United States alone—between the need of building out our power grid, the need for securing power, and the need for the buildout of core and shell—we’re talking $7 to $9 trillion over the course of a number of years. Obviously that is a lot of financing and that’s just in the United States. You have other places in the world looking for the same type of financing capabilities too. So it’s going to be broad. It’s a role that the U.S. capital markets can play and it’s a big opportunity for BlackRock to be a part of this large opportunity. Martin, you want to go on and talk about more of that?
Martin Small, Chief Financial Officer
I just want to amplify, Alex, one thing that Larry said, sort of the CFO’s perspective on things. The future of Western capital markets, it’s here; it’s happening right now. And when we talk about the blending of public and private in portfolios, we’re not just talking about the client portfolio. We’re also talking about how companies finance themselves — the options, the flexibility, the fluidity across public and private markets in financing businesses directly off balance sheet through public-private structures.
There’s going to be so much more of that, and it’s imperative that it happens well in order to finance this incredible opportunity we have for productivity and innovation through AI. I think for BlackRock you’re going to see more transactions than you’ve seen already where we participate in the senior investment grade public debt markets or 144A; that we’re participating in kind of Holdco notes and mezzanine financing through insurance accounts; and we’re participating in equity and junior securities, especially through the HPS and GP platforms.
But the ability to deliver that whole cap stack financing and do it at great breadth across geographies, client types — we think that’s integral in providing financing solutions for the issuers, who we also think of very much as being our clients. So there’s just much more to come. I think that’s why Larry’s passion is so evident on these calls, which is these pockets are still specialist capital, and if we’re going to see a much broader participation, we need to see some weighting basically in the aggregate that becomes GPUs, data centers, compute, et cetera.
That’s going to require a tremendous amount of analytics, but it’s also required opening up pension plans and traditional fixed income allocations to these exposures. And so to your second question, just on syndication: we’re first and foremost a fiduciary business, and our objective is to source attractive investments and then put them in long-term client accounts that generate long-term recurring management fees. So when we originate, the focus is on where that investment can create the most value across our institutional, wealth, and insurance client portfolios.
Again, our advantage is the breadth of our client base. We have substantial demand across private credit funds, insurance mandates, customized client accounts, pension funds, OCR mandates. That gives us significant flexibility in matching assets against long-term capital. So our focus is really on growing fee-paying AUM, placing assets as a fiduciary into long-term portfolios. If and when there’s appropriate syndication and distribution revenues to secure, we will do so.
But any syndication and distribution revenues I think you all should think of as incremental to our model, not the primary driver of value creation. We think there’s a much larger opportunity that’s more durable in delivering private, high-grade private credit, infra debt across our platform and just deepening our client relationships over time.
Jen, Operator
Your next question comes from Dan Fannin of Jefferies.
Dan Fannin, Analyst at Jefferies
Thanks. Good morning. Good morning.
So Martin, wanted to unpack some of your earlier comments around flows, and you mentioned an accelerating pipeline. So curious, as you look at what you see as a bigger contributor, or what might be changing in some of the mix or asset classes or products, as what you’ve seen here thus far, you know, in the first kind of nine months of the year.
Martin Small, Chief Financial Officer
Thanks for the question. So the first thing I’d flag is we are heading into our seasonally strongest fourth quarter. We tend to see sort of 30 to 40% of iShares annual flows happening in the fourth quarter. So I’d expect as we get out into the end of the year here, we’ll see that typical seasonality in iShares flows. I think the difference will be that we’ll continue to see this mix towards higher value, higher fee rate categories in ETFs, including precision exposures, active ETFs, digital assets, factors and the like.
Second is, third quarter tends to be sort of softest around private markets fundraising, and so we’d expect to close out the fourth quarter with stronger fundraising towards our annual goals, which includes fee-paying day-one strategies, and then I’m more optimistic that we’re going to start seeing evergreen funds in the private markets in the fourth quarter and into the first half of next year really turn a corner. We’ve got about 20 billion in evergreens.
We’ve had about 1.2 billion basically in the quarter of flows, 800 million of gross subscriptions. So I see turning of the corner there. I’d flag that just, I think, an increase in base rates is going to bring back, I think, kind of constructive allocations to private credit and retail BDCs in the direct lending space. SOFR rates go up, private credit performance has been resilient — I think you’ll see, and we’re having very constructive conversations with distributors around that.
We still have redemptions in the queue; the industry rates are higher than they have been, but I think we’re heading for a much more constructive environment in Q4 and into the first half when it comes to the returns and the cash-on-cash yields from evergreen structures.
Jen, Operator
Ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink, do you have any closing remarks?
Larry Fink, Chairman and Chief Executive Officer
Thank you, operator. I want to thank everybody for joining this call this morning and for your continued interest in BlackRock. Our quarter’s result reflects the clearest view yet of the strength of our integrated platform. I think we can all see the investments we made are showing up in the growth well above argus. We’re just getting started on what we can achieve in the years ahead. We have growing momentum heading into the end of the year, and I’m confident in what’s ahead for us, our clients, and you, our shareholders.
Thank you everyone and have a very nice quarter.
Jen, Operator
This concludes today’s teleconference. You may now disconnect.
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