What Management Said
Read the full Q2 2026 transcript ↗Earlier this morning, we issued a press release and a detailed earnings presentation, which is available on our investor relations website. We have provided reconciliation of these measures to GAAP in our earnings release to the extent reasonably available. In order to ensure participation by everyone on the line today, please limit yourself to one question and return to the queue for any additional follow-ups. We delivered an outstanding second quarter with record results across our diversified global platform.
Highlights in the quarter include our highest level of distributable earnings in nearly four years, at $472 million, which includes record distributable earnings in both Carlyle AlpInvest and Global Credit. Record FRE of $358 million, up 11% year-over-year, driven by record fee-related performance revenue and record capital markets fees. Our fundraising momentum is exceptional, with $56 billion of inflows over the last 12 months, a 10% increase from the prior year. As we enter our fundraising super cycle, we've already attracted $30 billion of organic inflows in the first half of 2026, another firm record.
We raised an anchor commitment of $5 billion towards the first close of our U.S. We launched a dedicated defense and industrials platform and announced its first transaction, the acquisition of Secturion Systems, an NSA-certified hardware data encryption provider. Looking forward, we expect to have nearly all of our core strategies in the market raising capital over the next few years. This will support accelerating revenue and earnings across our platform, underpinning our conviction in our three-year strategic plan.
What went well
- Carlyle delivered one of its strongest quarters in years, with its highest distributable earnings in nearly four years at $472 million ($1.07 per share) and record Fee Related Earnings of $358 million, up 11% year over year at a 47% margin.
- Fundraising momentum was exceptional: nearly $17 billion of inflows in the quarter, $56 billion over the trailing 12 months (up 10%), and a firm-record $30 billion of organic inflows in the first half as Carlyle enters its fundraising 'super cycle.'
- Total assets under management reached a record $485 billion, and net realized performance revenues increased more than five-fold from the first quarter.
- Carlyle remained an industry leader in realizations, returning nearly $7 billion to clients in the quarter and $37 billion over the past year, with its U.S. buyout strategy returning 23% of fair value over the last 12 months, more than twice the industry average.
- Capital markets/transaction fees hit a record $111 million (more than double a year ago) and fee-related performance revenues a record $89 million, while the wealth platform's evergreen AUM reached a record $20 billion, up more than 60% year over year.
- The firm launched a dedicated defense and industrials platform (with its first deal, Secturion Systems), raised a $5 billion anchor for its next U.S. buyout fund, and returned capital via a record $304 million of buybacks and a $0.35 dividend.
What went wrong
- On a U.S. GAAP basis, total revenues fell about 29% year over year to $1,123.5 million and diluted EPS dropped to $0.37 from $0.87 (GAAP net income of $137 million), reflecting the volatility of unrealized performance allocations rather than underlying operating momentum.
- The compensation ratio ticked up to roughly 47%, and management deferred meaningful FRE margin expansion to 2027-2028 as it invests in people, AI/technology, and the wealth platform.
- Transaction/capital markets fees and net realized performance revenues are inherently lumpy; management cautioned that Q3 and Q4 transaction flows would likely be lower than the strong second quarter.
- Insurance solutions AUM (about $86-$87 billion) was roughly flat year to date, awaiting the Unum block reinsurance transaction expected to close later this year.
- Parts of the wealth channel, particularly credit, had been quieter, though management said that appears to be abating.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Compensation ratio | FY2026 | ~47% (roughly consistent with 2025 as the firm invests for growth) |
| FRE margin | 2027-2028 | Expected to tick up as super-cycle fundraising flows through the financials |
| Fundraising super cycle | Multi-year | Reaffirmed ~$200 billion; nearly all core/flagship strategies in market over the next ~24 months |
| Unum block reinsurance | Later in 2026 | Expected to close later this year, adding more than $5 billion to Global Credit AUM |
| Share repurchases | Ongoing | $1.6 billion remaining after a record $304 million deployed in the quarter |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Distributable earnings | $472M ($1.07/share) | Best pre-tax DE quarter in nearly four years, powered by record FRE and a substantial step-up in net realized performance revenue. |
| Fee Related Earnings | Record $358M (+11%, 47% margin) | Record fee-related performance revenue and record capital markets/transaction fees across the platform. |
| GAAP total revenues | $1,123.5M (-28.6%) | Lower unrealized performance allocations versus the prior-year quarter; GAAP revenue is volatile for alternative managers. |
| GAAP diluted EPS | $0.37 (vs $0.87) | GAAP net income attributable to Carlyle of $137 million; pre-tax margin of 24.4%. |
| Transaction/capital markets fees | Record $111M (>2x) | Repositioning of the capital markets business three years ago now capturing higher transaction fees; high-quality, low-risk earnings tied to platform activity. |
| Carlyle AlpInvest | Record DE $96M; FRE $87M (+27%); AUM $112B (+16%) | Secondaries and portfolio finance strategies plus evergreen inflows; second single-asset secondary fund closed 4x its predecessor. |
| Global Credit | Record DE $158M (+30%); record FRE $138M | Record transaction fees of $93 million and record fee-related performance revenue of $54 million; AUM $211 billion (+4%). |
| Global Private Equity | FRE $134M; DE $219M (+~50% QoQ) | Significant increase in net realized performance revenue from Japan buyout and the sixth U.S. buyout fund; realized proceeds $3.9 billion. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Fundraising super cycle | Approaching super cycle | Just started; a firm-record $30 billion of organic H1 inflows achieved before leaning into flagship strategies, with nearly all core funds (U.S. buyout, secondaries, portfolio finance, credit) in market over the next two years; ~$200 billion target reaffirmed. | — |
| Realizations leadership | Industry-leading | Returned ~$7 billion to clients in the quarter and $37 billion over the past year; U.S. buyout returned 23% of fair value (>2x industry), with a strong forward pipeline supporting continued realizations. | — |
| Capital markets flywheel | Business repositioned three years ago | Record $111 million of transaction fees, now 'muscle memory' that scales with firm activity and new fund launches; lumpy quarter to quarter but a structural flywheel. | — |
| Wealth and retirement | Building the platform | Evergreen wealth AUM at a record $20 billion (+60%); selected by AllianceBernstein and SEI for 401(k)/target-date and CIT solutions expected to build in 2027; AlpInvest seen as uniquely suited to wealth. | — |
| Defense and industrials platform | Sector expertise within U.S. buyout | Launched a dedicated middle-market defense/industrials sleeve (first deal Secturion Systems), tapping ~$8 trillion of projected global defense spend over the decade; potential future wealth product under consideration. | — |
| AI and technology investment | — | As a ~2,500-person firm, Carlyle is investing in data science to improve investment outcomes and operations (not headcount reduction) and to enable its ~750,000 portfolio-company employees, viewing it as early innings over many years. | — |
| Capital-light model | Capital-light lean | Prefers capital-light but will deploy balance sheet selectively for maximum ROI (e.g., SPVs); treats balance-sheet capital as a scarce asset, always prioritizing business investment over buybacks. | — |
Q&A Summary
Steven Chubak (Wolfe Research) asked which funds will be in the market in the back half and how that informs fundraising and management-fee growth.
Justin Plouffe and Harvey Schwartz said H1 was among the best ever for organic inflows across many strategies, with nearly every flagship (secondaries, portfolio finance, credit opportunities, U.S. buyout, defense) coming to market over the next 24 months as the super cycle begins; they declined quarter-to-quarter guidance but stressed enormous, broad-based momentum, plus 60%+ wealth inflow growth.
Alexander Blostein (Goldman Sachs) asked about the MAI Capital acquisition and the AllianceBernstein private-market DC solution.
Schwartz said Carlyle has systematically built its wealth/retirement strategy (hiring a retirement head), sees the 401(k) and target-date channels as significant over time (building in 2027), and was selected by AllianceBernstein and SEI; MAI was a U.S. buyout portfolio-company investment, not a strategic wealth acquisition.
Brennan Hawken (BMO) asked why the comp ratio ticked up and how to think about margins.
Plouffe said the comp ratio should stay around 47% this year because Carlyle is investing back into people, AI/technology, and the wealth platform, with FRE margin expected to tick up in 2027-2028 as super-cycle fundraising flows through; the 2026 focus is growth.
Mike Brown (UBS) asked about the drivers and run rate of the capital markets business.
Schwartz said the capital markets strategy deployed three years ago is now part of the firm's culture and correlates with activity; quarterly numbers will move around (Q3/Q4 likely lower than the strong Q2) but the business will systematically grow with the firm and new fund launches, creating a powerful flywheel.
Patrick Davitt (Autonomous) asked about the realized performance-fee pipeline and visibility into the second half.
Plouffe said it is all about realizations, where Carlyle leads the market; some nice July deals already, though Q3 is seasonally lighter, and while realizations are hard to predict, the market-leading pace and open capital markets support continued net realized performance revenue momentum in the second half.
Michael Cyprys (Morgan Stanley) asked where AI is having the most measurable financial impact and how workflows are being redesigned.
Schwartz said that as a ~2,500-person firm the goal is not headcount reduction but using data science to run the business more effectively and improve investment outcomes, while enabling its portfolio companies; he called it an important multi-year initiative in early innings, with capital and talent being added.
More on Carlyle Group Inc.
Reported 2026-08-05 · figures from the Carlyle Group Inc. Q2 2026 earnings call.
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