I'll research ARES (Ares Management Corporation) before writing the preview. Let me gather recent earnings history, filings, and current news.I have the recent history. Let me read the most recent quarter's earnings call and release, plus the year-ago Q2 for context.Let me get the year-ago Q2 2025 release for comparison and research the Leonard Green acquisition news and estimates.Let me get more detail on the Leonard Green acquisition talks and recent developments.I now have what I need. Let me write the earnings preview.
Ares heads into Q2 as a company still compounding at ~20%+ across its core metrics, but whose stock has been cut roughly in half from its January highs on fears that have little to do with the actual results it has been printing. The tension between a strong operating story and a fearful tape is the whole ballgame this quarter.
ARES entered 2026 near $166 and touched ~$176 in early January. It then collapsed to a ~$96.50 low on March 12 before a choppy recovery. As of July 30 the stock closed at $124.15 — down ~25% YTD and still ~30% below the January peak.
| Date | Price |
|---|---|
| Jan 6 (high) | ~$176 |
| Mar 12 (low) | ~$96.50 |
| Jun 15 (recovery high) | ~$135 |
| Jul 30 | $124.15 |
This is a stock that has de-rated hard even as fundamentals kept growing — the multiple, not the earnings, has been the story. That matters for Friday: the bar on the print itself is arguably low, but sentiment on the forward-looking debates (retail credit flows, AI/software risk, credit cycle) is where the stock will be won or lost.
The trajectory going in (Q1 2026, reported May 1): - AUM $644B, +18% YoY; fee-paying AUM $400B, +19% - Management fees crossed $1B for the first time ever, +22% YoY - FRE $464M, +26%; FRE margin 42.4%, +90bps YoY - Realized income $503M, +24%; after-tax RI/share $1.24, +14% - Record Q1 gross fundraising of $30B (+46% YoY); available capital >$158B (~$100B+ in credit dry powder)
The year-ago comp (Q2 2025): after-tax RI/share $1.03, FRE $409.1M, GAAP net income $137.1M, dividend $1.12. AUM was $572B; management fees grew 24%+.
What to watch on the tape Friday: - FRE and FRE margin — management guided to the upper end of its 0–150bp annual margin-expansion target, aided by GCP integration synergies and the data-center business flipping from an FRE drag to a contributor once the new global digital infrastructure fund starts paying on committed capital. - Fundraising — Ares said it is "on track for another record year." Q2 2025 was its second-highest quarter ever, so watch whether momentum held despite retail-credit noise. - Management fee growth — the durable, FRE-rich core; look for continued ~20%+ growth and the AUM-not-yet-paying-fees backlog (~19% of future FPAUM growth). - Dividend — a bump is likely; the Q1 dividend of $1.35 was +20% YoY, consistent with the ~20% dividend-growth target.
Full-year framework to hold management to: FRE growth 16–20%, realized income 20–25%, dividend ~20%, and FRE margin expansion at the high end of 0–150bps.
(a) Retail / non-traded BDC redemptions. The most-watched swing factor. Last quarter flows into the two U.S. private-credit wealth vehicles moderated, and there were elevated repurchase requests — but management stressed these came from a limited number of family offices and smaller/non-U.S. institutions, with 95%+ of investors not redeeming. Crucially, Ares argues the impact is small: the two funds are ~4.5% of FPAUM, and even a full year of 5% quarterly redemptions with zero inflows would cut FPAUM by only ~1%, because deployment simply reallocates to institutional funds and SMAs. Watch for (1) whether redemptions stabilized or worsened, and (2) continued strength in the other six wealth products (infra, secondaries, European DL, sports/media) that have been offsetting the U.S. credit softness. The reaffirmed $125B 2028 wealth fundraising target is a credibility marker.
(b) AI disruption of the software loan book. This is the newest and most narrative-sensitive fear. Ares' framing last quarter: software is ~6% of total AUM / <8% of private-credit AUM, senior-secured at ~40% LTV. A 9-week independent review by a top-3 consulting firm classified 86% of the software-oriented portfolio as low AI-disruption risk, 13% medium, 1% high — with medium-to-high representing <2% of U.S./European DL AUM and <1% of firm AUM. Only one software name is on non-accrual. Look for updated marks and any change to that risk framework; the market has been discounting far more damage than management's data implies.
(c) The credit cycle / deployment cadence. Q1 U.S. direct-lending activity was soft — industry middle-market M&A deal count fell ~41% YoY on geopolitical (Iran) and rate uncertainty — but Ares said the pipeline was rebuilding and is at "record" levels firm-wide, with dislocation actually improving spreads, fees and terms. Management explicitly said it sees no signs of an impending default cycle (near-10% EBITDA growth, mid-40s LTVs, 2.2x interest coverage, sub-normal non-accruals). Q2 is the quarter to confirm that the "pencils are back up" comment translated into real deployment, and whether the second-half deployment reacceleration seen in 2025 is repeating.
Just days before the print, reports surfaced that Ares has held talks to acquire Leonard Green & Partners — a deal that press coverage says could more than quadruple the size of Ares' private-equity business. Expect this to dominate Q&A. Key questions: is it live, how would it be funded (Ares runs an asset-light balance sheet), and does a large PE acquisition fit the credit-and-real-assets-centric identity investors currently pay for? Given the stock's de-rating, the market will scrutinize capital allocation and dilution closely. Any confirmation, denial, or "we don't comment" will be a headline driver.
The operating business has kept compounding — management fees over $1B, FRE +26%, AUM $644B, record fundraising — while the stock has been repriced as if a credit and retail-flows accident is underway. For Q2 to work, Ares likely needs to: (1) show retail redemptions stabilizing and non-U.S.-credit wealth flows still strong, (2) reinforce the benign software/AI and credit-quality data, (3) confirm deployment reaccelerating off the Q1 lull, and (4) handle the Leonard Green question without spooking the balance-sheet and capital-allocation narrative. A clean print plus reassurance on those debates sets up a sentiment-driven re-rate; conversely, any crack in the flows or credit-quality story will feed the bear case that has already halved the stock.
Note: figures for Q1 2026 and Q2 2025 are drawn from Ares' earnings releases and call transcripts; I did not have access to published Q2 2026 sell-side consensus, so estimate comparisons above are framed against management's stated full-year growth targets rather than a specific consensus EPS.