Blackstone heads into its third-quarter report with a striking disconnect. Last quarter, management sounded more confident than it had in some time, shifting from defending its private credit franchise to staking out a leadership role in AI infrastructure. Since then the stock has fallen 9.4% while the S&P 500 gained 5.2%. That 14.7-point gap means the market is either looking past the near-term earnings dip or doubting the growth story itself. This report, due before the open on October 22, has to show which.
The headline numbers will not flatter the company, and that was expected. Consensus calls for earnings of $1.31 per share, down 13.8% from $1.52 a year ago, on revenue of $3.37 billion, up 9.1%. Management signaled this softness in July. It said net realizations would slow sequentially in the third quarter before a stronger fourth quarter and 2027. A drop from last quarter's $5.04 billion in revenue is therefore no surprise. The Earnings Whisper of $1.34 sits only modestly above consensus, so the bar is slightly elevated but not demanding. A small beat would be ordinary; what matters is the composition of earnings.
The most important test is whether the newer fee engines keep firing while realizations pause. Transaction and advisory fees hit a record $321 million last quarter, up 52% sequentially. That surge was tied to a run of large AI and energy deals:
- the $35 billion Broadcom compute financing platform
- the Google TPU NeoCloud venture
- a $5.3 billion Williams investment
- the Nippon Life partnership
If those fees hold near record levels, investors gain evidence that the AI push produces recurring revenue, not just headlines. A sharp fall would suggest the second quarter was a lumpy peak. Fee-related performance revenues, which rose 60% on strength in BXP and B-REIT, deserve similar scrutiny.
Base management fees remain the weak link. Management guided to mid-single-digit growth for the quarter and again pushed double-digit growth out to 2027. Any slippage below that pace would undercut the reacceleration thesis the bull case depends on. Several building blocks for that reacceleration should start appearing now:
- inflows from the Wellington and Vanguard alliance funds, expected later in the third quarter
- first subscriptions to the BXHF perpetual hedge fund
- capital from the $2 billion BXDC data center REIT IPO
Private wealth flows also bear watching. B-CRED still saw $1.2 billion of net outflows last quarter, with redemption requests above its 5% cap. Further moderation would ease concerns about retail appetite for private credit. A reversal toward heavier outflows would revive them.
Investor mood has soured. Sentiment has swung from mildly bullish before the last report to moderately bearish now. The stock trades near $110, well below its 200-day moving average of about $127 and just above its post-earnings low of $109.01. That is a long way from the $150 high reached after July's results. The previous quarter's trough near $107 is not far below, making that zone a meaningful support test. A beaten-down stock sitting on support lowers the hurdle for a relief rally if the underlying trends hold. Weak flows, however, could easily push it through.
Also worth tracking is the store of future earnings. Net accrued performance revenue reached a four-year high of $6 per share last quarter, and the data center platform grew to roughly $185 billion. Management also flagged a multi-billion dollar gain on the sale of under-construction data center assets. Progress on these fronts would support its claim that realizations are deferred rather than lost. Management itself cautioned about possible exuberance in AI investing and about shortages of chips and power. Investors should therefore look for evidence that deal pace is not being constrained.
Ultimately, this quarter is less about beating $1.31 than about proving the bridge to 2027 is being built on schedule. Rising transaction fees, steady base fee growth, early alliance and hedge fund inflows, and improving B-CRED flows would confirm July's upbeat narrative. Falling short on several of those at once would suggest the market's skepticism has been justified.