Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview (1)
Our total Assets Under Management (" AUM ") as of December 31, 2025 were $866.9 billion, up $74.7 billion, or 9.4%, during 2025. The increase was primarily driven by market appreciation of $86.0 billion, partially offset by net outflows of $11.3 billion (reflecting Institutional net outflows of $4.6 billion and Retail net outflows of $9.1 billion, offset by Private Wealth Management net inflows of $2.4 billion).
Institutional AUM increased $32.8 billion, or 10.2%, to $354.2 billion during 2025, primarily due to market appreciation of $37.0 billion, partially offset by net outflows of $4.6 billion. Gross sales increased $13.7 billion, from $13.0 billion in 2024 to $26.7 billion in 2025. Redemptions and terminations decreased $2.3 billion, from $14.9 billion in 2024 to $12.6 billion in 2025.
Retail AUM increased $22.1 billion, or 6.6%, to $356.4 billion during 2025, primarily due to market appreciation of $31.3 billion, partially offset by net outflows of $9.1 billion. Gross sales decreased $9.7 billion, from $99.9 billion in 2024 to $90.2 billion in 2025. Redemptions and terminations increased $15.8 billion, from $71.7 billion in 2024 to $87.5 billion in 2025.
Private Wealth Management AUM increased $19.8 billion, or 14.4%, to $156.3 billion during 2025, primarily due to market appreciation of $17.7 billion and net inflows of $2.4 billion. Gross sales increased $2.3 billion, from $20.8 billion in 2024 to $23.1 billion in 2025. Redemptions and terminations increased $0.8 billion, from $19.9 billion in 2024 to $20.7 billion in 2025.
Bernstein Research Services (" BRS ") revenue decreased $96.2 million, or 100.0%, during 2025. The decrease was due to the deconsolidation of the BRS business and contribution of the business to the joint ventures, on April 1, 2024. For further discussion, see Note 24 Divestitures to our consolidated financial statements in Item 8 .
Our 2025 net revenues of $4.5 billion increased $55.5 million, or 1.2%, compared to the prior year. The increase was primarily due to higher investment advisory base fees of $175.1 million and higher distribution revenues of $91.8 million, partially offset by lower Bernstein Research Services revenue of $96.2 million due to the deconsolidation of the BRS business, lower performance-based fees of $85.7 million, higher investment losses of $17.4 million and lower other revenues of $8.6 million.
Our operating expenses of $3.5 billion increased $129.1 million, or 3.9%, compared to operating expenses of $3.4 billion in the prior year. The increase was primarily due to the recognition of a gain on contingent payment arrangements of $121.0 million in the prior year and higher promotion and servicing expense of $76.8 million, partially offset by lower general and administrative expenses of $42.2 million, lower employee compensation and benefits expense of $11.3 million and lower interest on borrowings of $15.2 million. The change in contingent payment arrangements was primarily due to the recognition of a gain of $128.5 million in 2024 related to a fair value remeasurement of the contingent payment liability associated with our acquisition of AB CarVal in 2022.
Our operating income decreased $73.6 million, or 6.5%, to $1.1 billion compared to 2024 and our operating margin decreased to 23.0% in 2025 from 24.7% in 2024.
Market Environment
U.S. Equities
U.S. stocks finished higher in the fourth quarter of 2025, despite a long government shutdown and signs of a cooling labor market. The S&P 500 gained 2.7% for the quarter and delivered about 18% for the year, its third straight year of double‑digit returns. Small‑cap stocks, represented by the Russell 2000, rose 2.2% in the fourth quarter and ended the year up 13%. Value stocks outpaced growth late in the year, and sectors such as health care and other defensive areas outperformed. Energy stocks lagged as oil prices softened, while utilities saw mixed results. The Federal Reserve cut interest rates by 0.25% in December, its third cut of the year, and signaled a more cautious approach for 2026. This added some late‑year volatility and profit‑taking, especially in smaller companies.
(1) Percentage change figures are calculated using assets under management rounded to the nearest million, while financial statement amounts are rounded to the nearest hundred thousand.
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G lobal and Non-U.S. Equities
International stocks outperformed U.S. stocks in the fourth quarter of 2025 and posted stronger full‑year returns for the first time in several years. A weaker U.S. dollar, more attractive valuations, and investors shifting away from U.S. mega‑cap technology companies all helped performance. Eurozone markets ended near multi‑year highs, rising 41% for the year (USD, gross), with financials benefiting from lower interest rates and improving loan quality. The U.K. market also finished near multi‑year highs, gaining 35% in 2025 (USD, gross), supported by globally focused financials, mining, defense, and commodity‑related companies; domestic‑focused businesses lagged due to softer consumer demand. In Japan, stocks continued to climb as expectations for fiscal support grew and the Bank of Japan took initial steps toward normalizing policy. Emerging markets also posted positive fourth‑quarter results and beat developed markets for the year, helped by strong performance in Korea and Taiwan, as well as in Chile, South Africa, Brazil, Mexico, and India. China in the year amid profit‑taking and property‑market , and Saudi Arabia trailed.
Global Bonds
Bond markets moved through shifting interest‑rate expectations in the fourth quarter of 2025. Cooling inflation and a 0.25% rate cut by the Federal Reserve helped shorter‑term yields fall. Ten‑year U.S. Treasury yields ended the year near 4.2%, and the yield curve steepened as longer‑term rates held steady. Core bonds posted positive returns; mortgage‑backed securities outperformed Treasuries, and municipal bonds benefited from seasonal demand. Corporate credit also held up well, with investment‑grade spreads tightening slightly and high‑yield and emerging‑market debt supported by stronger risk appetite. Outside the U.S., bond performance was mixed as markets in the U.K., Germany, and Japan reacted to changing fiscal and monetary signals. For 2025 overall, the Bloomberg Global Aggregate Index returned 8.2% (USD, unhedged), and the Bloomberg U.S. Aggregate Index returned 7.3%, thanks largely to declining short‑term rates.
Relationship with EQH and its Subsidiaries
EQH (our parent company) and its subsidiaries are our largest client. EQH is collaborating with AB in order to improve the risk-adjusted yield for the General Accounts of EQH's insurance subsidiaries by investing additional assets at AB, including the utilization of AB's higher-fee, longer-duration alternative offerings. In mid-2021, Equitable Financial Life Insurance Company, a subsidiary of EQH (" Equitable Financial "), agreed to provide an initial $10 billion in permanent capital to build out AB's private illiquid offerings, including private alternatives and private placements. Deployment of the initial $10 billion in permanent capital is now complete. In addition, during the second quarter of 2023, EQH committed to provide an additional $10 billion in permanent capital, deployment of which is substantially complete. We expect this anticipated capital from EQH's insurance subsidiaries will continue to accelerate both organic and inorganic growth in our private alternatives business, allowing us to continue to deliver for our clients, employees, unitholders and other stakeholders.
Permanent capital means investment capital of indefinite duration, for which commitments may be withdrawn under certain conditions. Such conditions primarily include potential regulatory restrictions, lacking sufficient liquidity to fund the capital commitments to AB and AB's inability to identify attractive investment opportunities which align with the investment strategy. Although EQH’s insurance subsidiaries have indicated their intention over time to provide this investment capital to AB, they have no binding commitment to do so. While the withdrawal of their commitment could potentially slow down our introduction of certain products, the impact to our overall operations would not be material.
Joint Venture with Societe Generale
On April 1, 2024, AB and Societe Generale (" SocGen ") formed a global joint venture with two joint venture holding companies, one outside of North America (the " ROW JV ") and one within North America (" NA JV ", and together the " JVs "). As of December 31, 2025, AB owned a majority interest in the NA JV while SocGen owned a majority interest in ROW JV. AB deconsolidated the BRS business and retained the Bernstein Private Wealth Management business within its existing U.S. broker dealer Sanford C. Bernstein & Co., LLC.
As a result of the greater value of the business AB contributed to the JVs, SocGen paid AB $304.0 million in cash to equalize the value of the contributions by AB and SocGen to the JVs. The cash payment of $304.0 million included $102.6 million of prepaid consideration for an option, exercisable by AB during the next five years, that would result in SocGen having a 51% ownership of the NA JV (the " AB option ") and bringing the transaction ownership terms back in line with the Initial Plan. AB's option could only be exercised upon receipt of appropriate regulatory approvals.
During the third quarter of 2025, appropriate regulatory approval for SocGen to increase its ownership to 51% was received and AB issued formal notice of its intent to exercise the AB option. On January 1, 2026 AB entered into an Amended and Restated Shareholder agreement with SocGen (the " Amendment Agreement ") and exercised the AB option to deliver a 17.7% interest in the NA JV to SocGen resulting in AB owning a 49% interest in the NA JV and SocGen having a majority interest of 51%. The prepaid consideration received was in excess of the carrying value of the 17.7% equity in the NA JV resulting in an estimated gain of $48.4 million recognized in the first quarter of 2026.
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Subsequent to the Amendment Agreement, on January 1, 2026, AB entered into a Contribution Agreement (the " Contribution Agreement ") with SocGen, to bring the ownership back in line with the intent of the Initial Plan. Prior to the Contribution Agreement, SocGen and AB had a 51% and 49% interest in both JVs, respectively. Under the Contribution Agreement AB contributed its 49% interest in NA JV, and SocGen contributed its 51% interest in NA JV, for an equal interest in newly issued shares of ROW JV resulting in a single JV comprised of the operations and interest of both JVs (the " AB/SG JV "). AB still maintains its additional option to sell its ownership interests in the AB/SG JV to SocGen after five years from the Initial Close, at the fair market value of AB’s interests in the AB/SG JV, subject to regulatory approval. The ultimate objective of SocGen and AB is for SocGen to eventually own 100% of the AB/SG JV after five years.
For further discussion, see Note 24 Divestitures to our consolidated financial statements in Item 8.
AB Holding
AB Holding’s principal source of income and cash flow is attributable to its investment in AB Units. The AB Holding financial statements, notes to the financial statements and management’s discussion and analysis of financial condition and results of operations (“ MD&A ”) should be read in conjunction with those of AB.
Results of Operations
Years Ended December 31
% Change
(in thousands, except per unit amounts)
Net income attributable to AB Unitholders
Weighted average equity ownership interest
Equity in net income attributable to AB Unitholders
Income taxes
Net income of AB Holding
Net income per AB Holding Unit
Distributions per AB Holding Unit (1)
(1) Distributions reflect the impact of AB’s non-GAAP adjustments.
AB Holding had net income of $299.8 million in 2025 compared to $423.4 million in 2024, reflecting lower net income attributable to AB Unitholders and lower weighted average equity ownership interest. AB Holding had net income of $423.4 million in 2024 compared to $264.2 million in 2023, reflecting higher net income attributable to AB Unitholders and higher weighted average equity ownership interest.
AB Holding's partnership gross income is derived from its interest in AB. AB Holding’s income taxes, which reflect a 3.5% federal tax on its partnership gross income from the active conduct of a trade or business, are computed by multiplying certain AB qualifying revenues by AB Holding’s ownership interest in AB, multiplied by the 3.5% tax rate. Certain AB qualifying revenues are primarily U.S. investment advisory fees. AB Holding’s effective tax rate was 9.9%, 8.4% and 11.9% in 2025, 2024 and 2023, respectively. The increase in AB Holdings effective tax rate in 2025 is primarily driven by one-time items in the prior year not subject to the gross revenue tax. See Note 6 to AB Holding’s financial statements in Item 8 for a further description.
As supplemental information, AB provides the performance measures “adjusted net revenues,” “adjusted operating income” and “adjusted operating margin,” which are additional metrics management uses in evaluating and comparing the period-to-period operating performance of AB. Management uses these additional metrics in evaluating performance because they present a clearer picture of AB's operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, acquisition-related expenses, interest expense and other adjustment items. Similarly, management believes that these management operating metrics help investors better understand the underlying trends in AB's results and, accordingly, provide a valuable perspective for investors. Such measures are not based on generally accepted accounting principles (“ non-GAAP measures ”).
We provide the non-GAAP measures "adjusted net income" and "adjusted net income per Unit" because our quarterly distribution per unit is typically our adjusted net income per unit (which is derived from adjusted net income).
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These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating margin, and they may not be comparable to non-GAAP measures presented by other companies. Management uses both GAAP and non-GAAP measures in evaluating the company’s financial performance. The non-GAAP measures alone may pose limitations because they do not include all of AB’s revenues and expenses. Further, adjusted net income per AB Holding Unit is not a liquidity measure and should not be used in place of cash flow measures. See “Management Operating Metrics” in this Item 7 .
The impact of these adjustments on AB Holding’s net income and net income per AB Holding Unit are as follows:
Years Ended December 31
(in thousands, except per unit amounts)
AB non-GAAP adjustments (2)
AB Income tax (expense) benefit on non-GAAP adjustments
AB non-GAAP adjustments, after taxes
AB Holding’s weighted average equity ownership interest in AB
Impact on AB Holding’s net income of AB non-GAAP adjustments
Net income - GAAP basis
Impact on AB Holding’s net income of AB non-GAAP adjustments
Adjusted net income
Net income per AB Holding Unit, GAAP basis
Impact of AB non-GAAP adjustments
Adjusted net income per AB Holding Unit
(2) Includes all AB non-GAAP adjustments to pre-tax income.
The degree to which AB’s non-GAAP adjustments impact AB Holding’s net income fluctuates based on AB Holding's ownership percentage in AB.
Tax Legislation
For a discussion of tax legislation, see “Risk Factors - Structure-related Risks” in Item 1A .
Capital Resources and Liquidity
During the year ended December 31, 2025, net cash provided by operating activities was $352.4 million, compared to $340.5 million during the corresponding 2024 period. The increase primarily resulted from higher cash distributions received from AB of $8.8 million. During the year ended December 31, 2024, net cash provided by operating activities was $340.5 million, compared to $294.0 million during the corresponding 2023 period. The increase primarily resulted from higher cash distributions received from AB of $47.7 million.
There was no cash used in or provided by investing activities during the years ended December 31, 2025, 2024 and 2023.
During the year ended December 31, 2025, net cash used in financing activities was $352.4 million, compared to $340.5 million during the corresponding 2024 period. The increase was primarily due to higher cash distributions to Unitholders of $11.2 million. During the year ended December 31, 2024, net cash used in financing activities was $340.5 million, compared to $294.0 million during the corresponding 2023 period. The increase was primarily due to higher cash distributions to Unitholders of $45.1 million and lower capital contributions from AB of $1.4 million.
Management believes that AB Holding will have the resources it needs to meet its financial obligations as a result of the cash flow AB Holding realizes from its investment in AB. AB Holding’s cash inflow is comprised entirely of distributions from AB. These distributions are subsequently distributed (net of taxes paid) in their entirety to AB Holding’s Unitholders. As a result, AB Holding has no liquidity risk as it only pays distributions to AB Holding’s Unitholders to the extent of distributions received from AB (net of taxes paid).
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Cash Distributions
AB Holding is required to distribute all of its Available Cash Flow, as defined in the AB Holding Partnership Agreement, to its Unitholders (including the General Partner). Available Cash Flow typically is the adjusted net income per Unit for the quarter multiplied by the number of units outstanding at the end of the quarter. Management anticipates that Available Cash Flow will continue to be based on adjusted net income per Unit. If management determines, with the concurrence of the Board of Directors, that certain adjustments to Available Cash Flow are necessary or unnecessary, such adjustments will be made in future periods. See Note 2 to AB Holding’s financial statements in Item 8 for a description of Available Cash Flow.
Commitments and Contingencies
For a discussion of commitments and contingencies, see Note 7 to AB Holding’s financial statements in Item 8 .
Assets Under Management
Assets under management by distribution channel are as follows:
As of December 31
% Change
(in billions)
Institutions
Retail
Private Wealth Management
Total
Assets under management by investment service are as follows:
As of December 31
% Change
(in billions)
Equity
Actively Managed
Passively Managed (1)
Total Equity
Fixed Income
Actively Managed
Taxable (3)
Tax–exempt
Total
Passively Managed (1)
Total Fixed Income
Alternatives/Multi-Asset Solutions (2)(3)
Actively Managed
Passively Managed (1)
Total Alternatives/Multi-Asset Solutions
Total
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
(3) Approximately $12.1 billion of private placements was transferred from Taxable Fixed Income into Alternatives/Multi-Asset during 2024 to better align with standard industry practice for asset class reporting purposes.
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Changes in assets under management during 2025 and 2024 are as follows:
Distribution Channel
Institutions
Retail
Private
Wealth
Management
Total
(in billions)
Balance as of December 31, 2024
Long-term flows:
Sales/new accounts
Redemptions/terminations
Cash flow/unreinvested dividends
Net long-term (outflows) inflows
Transfers
Market appreciation
Net change
Balance as of December 31, 2025
Balance as of December 31, 2023
Long-term flows:
Sales/new accounts
Redemptions/terminations
Cash flow/unreinvested dividends
Net long-term (outflows) inflows
Adjustments (1)
Transfers
Market appreciation
Net change
Balance as of December 31, 2024
(1) This adjustment is due to a change in fee policy related to certain fixed income assets effective October 1, 2024.
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Investment Service
Equity
Actively
Managed
Equity
Passively
Managed (1)
Fixed
Income
Actively
Managed-
Taxable
Fixed Income
Actively
Managed-Tax-
Exempt
Fixed
Income
Passively
Managed (1)
Alternatives/
Multi-Asset
Solutions (2)
Total
(in billions)
Balance as of December 31, 2024
Long-term flows:
Sales/new accounts
Redemptions/terminations
Cash flow/unreinvested dividends
Net long-term (outflows) inflows
Transfers
Market appreciation
Net change
Balance as of December 31, 2025
Balance as of December 31, 2023
Long-term flows:
Sales/new accounts
Redemptions/terminations
Cash flow/unreinvested dividends
Net long-term (outflows) inflows
Adjustments (3)
Transfers (4)
Market appreciation (depreciation)
Net change
Balance as of December 31, 2024
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
(3) This adjustment is due to a change in fee policy related to certain fixed income assets effective October 1, 2024.
(4) Approximately $12.1 billion of private placements was transferred from Taxable Fixed Income into Alternatives/Multi-Asset during 2024 to better align with standard industry practice for asset class reporting purposes.
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Net long-term (outflows) inflows for actively managed investment services as compared to passively managed investment services during 2025 and 2024 are as follows:
Years Ended December 31
(in billions)
Actively Managed
Equity
Fixed Income
Alternatives/Multi- Asset Solutions
Total
Passively Managed
Equity
Fixed Income
Alternatives/Multi- Asset Solutions
Total
Total net long-term (outflows)
Average assets under management by distribution channel and investment service are as follows:
Years Ended December 31
% Change
(in billions)
Distribution Channel:
Institutions
Retail
Private Wealth Management
Total
Investment Service:
Equity Actively Managed
Equity Passively Managed (1)
Fixed Income Actively Managed – Taxable
Fixed Income Actively Managed – Tax-exempt
Fixed Income Passively Managed (1)
Alternatives/Multi-Asset Solutions (2)
Total
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
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During 2025, our Institutional channel average AUM of $337.6 billion increased $14.7 billion, or 4.5%, compared to 2024, while ending AUM increased $32.8 billion, or 10.2%, to $354.2 billion from December 31, 2024. The $32.8 billion increase in AUM resulted primarily from market appreciation of $37.0 billion, partially offset by net outflows of $4.6 billion.
During 2024, our Institutional channel average AUM of $322.9 billion increased $18.3 billion, or 6.0%, compared to 2023, while ending AUM increased $4.3 billion, or 1.3%, to $321.4 billion from December 31, 2023. The $4.3 billion increase in AUM resulted primarily from market appreciation of $20.7 billion, partially offset by net outflows of $16.5 billion. Market depreciation of $7.6 billion in the fourth quarter of 2024 drove the ending AUM balance down as compared to our average AUM for 2024.
During 2025, our Retail channel average AUM of $343.5 billion increased $28.2 billion, or 8.9%, compared to 2024, primarily due to this AUM increasing $22.1 billion, or 6.6%, to $356.4 billion from December 31, 2024. The $22.1 billion increase in AUM resulted primarily from market appreciation of $31.3 billion, partially offset by net outflows of $9.1 billion.
During 2024, our Retail channel average AUM of $315.3 billion increased $53.3 billion, or 20.4%, compared to 2023, primarily due to this AUM increasing $47.5 billion, or 16.6%, to $334.3 billion from December 31, 2023. The $47.5 billion increase in AUM resulted primarily from market appreciation of $34.2 billion and net inflows of $13.4 billion.
During 2025, our Private Wealth Management channel average AUM of $144.9 billion increased $14.6 billion, or 11.3%, compared to 2024, primarily due to this AUM increasing $19.8 billion, or 14.4%, to $156.3 billion from December 31, 2024. The $19.8 billion increase in AUM resulted primarily from market appreciation of $17.7 billion and net inflows of $2.4 billion.
During 2024, our Private Wealth Management channel average AUM of $130.3 billion increased $16.6 billion, or 14.6%, compared to 2023, primarily due to this AUM increasing $15.2 billion, or 12.6%, to $136.5 billion from December 31, 2023. The $15.2 billion increase in AUM resulted from market appreciation of $13.6 billion, net inflows of $0.9 billion and an adjustment of $0.7 billion.
Absolute investment composite returns, gross of fees, and relative performance as of December 31, 2025 compared to benchmarks for certain representative Institutional equity and fixed income services are as follows:
1-Year
3-Year (1)
5-Year (1)
Income (fixed income)
Absolute return
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)
High Income (fixed income)
Absolute return
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged)
Global Plus - Hedged (fixed income)
Absolute return
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged)
Intermediate Municipal Bonds (fixed income)
Absolute return
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg)
U.S. Core Fixed Income (fixed income)
Absolute return
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)
Emerging Market Debt (fixed income)
Absolute return
Relative return (vs. JPM EMBI Global/JPM EMBI)
Sustainable Global Thematic
Absolute return
Relative return (vs. MSCI ACWI Index)
International Strategic Core Equity
Absolute return
Relative return (vs. MSCI EAFE Index)
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1-Year
3-Year (1)
5-Year (1)
U.S. Small & Mid Cap Value
Absolute return
Relative return (vs. Russell 2500 Value Index)
U.S. Large Cap Value
Absolute return
Relative return (vs. Russell 1000 Value Index)
U.S. Small Cap Growth
Absolute return
Relative return (vs. Russell 2000 Growth Index)
U.S. Large Cap Growth
Absolute return
Relative return (vs. Russell 1000 Growth Index)
U.S. Small & Mid Cap Growth
Absolute return
Relative return (vs. Russell 2500 Growth Index)
Concentrated U.S. Growth
Absolute return
Relative return (vs. S&P 500 Index)
Select U.S. Equity
Absolute return
Relative return (vs. S&P 500 Index)
Strategic Equities
Absolute return
Relative return (vs. Russell 3000 Index)
Global Core Equity
Absolute return
Relative return (vs. MSCI ACWI Index)
U.S. Strategic Core Equity
Absolute return
Relative return (vs. S&P 500 Index)
Select U.S. Equity Long/Short
Absolute return
Relative return (vs. S&P 500 Index)
Global Strategic Core Equity
Absolute return
Relative return (vs. S&P 500 Index)
(1) Reflects annualized returns.
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Consolidated Results of Operations
Years Ended December 31
% Change
(in thousands, except per unit amounts)
Net revenues
Expenses
Operating income
Non-operating income
Pre-tax income
Income taxes
Net income
Net income of consolidated entities attributable to non-controlling interests
Net income attributable to AB Unitholders
Net income per AB Unit
Distributions per AB Unit
Operating margin (1)
(1) Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues.
Net income attributable to AB Unitholders for the year ended December 31, 2025 decreased $190.8 million from the year ended December 31, 2024. The decrease primarily is due to (in millions):
Lower gain on divestiture
Lower gain on contingent payment arrangements
Lower Bernstein Research Services revenue
Lower performance based fees
Higher promotion and servicing expense
Higher investment losses
Lower other revenues
Higher base advisory fees
Higher distribution revenues
Lower general and administrative expense
Lower interest on borrowings
Lower net income of consolidated entities attributable to non-controlling interest
Lower employee compensation and benefits expense
Other
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Net income attributable to AB Unitholders for the year ended December 31, 2024 increased $408.6 million from the year ended December 31, 2023. The increase primarily was due to (in millions):
Higher base advisory fees
Higher distribution revenues
Higher gain on divestiture
Higher gain on contingent payment arrangements (1)
Higher performance-based fees
Higher other revenues
Lower interest expense
Lower Bernstein Services Research revenues (2)
Higher promotion and servicing expenses
Higher income tax expense
Higher employee compensation and benefits expense
Higher investment losses
Higher general and administrative expenses
Lower net dividend and interest income
Other
(1) During 2024, we recognized a gain of $128.5 million in contingent payment arrangements in the consolidated statements of income related to a fair value remeasurement of the contingent payment liability associated with our acquisition of AB Carval in 2022.
(2) On April 1, 2024, AB and SocGen, a leading European bank, completed their transaction to form a jointly owned equity research provider and cash equity trading partner for institutional investors. AB deconsolidated the BRS business and contributed the business to the JVs. For further discussion, see Note 24 Divestiture to our consolidated financial statements contained in Item 8.
Units Outstanding
Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (“ Exchange Act ”). A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority to repurchase AB Holding Units on our behalf in accordance with the terms and limitations specified in the plan. Repurchases are subject to regulations promulgated by the SEC, as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the fourth quarter expired at the close of business on December 26, 2025. We may adopt additional plans in the future to engage in open-market purchases of AB Holding Units for anticipated obligations under our incentive compensation award program and for other corporate purposes.
Cash Distributions
We are required to distribute all of our Available Cash Flow, as defined in the AB Partnership Agreement, to our Unitholders and the General Partner. Available Cash Flow typically is the adjusted net income per Unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. Management anticipates that Available Cash Flow will continue to be based on adjusted net income per Unit. If management determines, with the concurrence of the Board of Directors, that certain adjustments to Available Cash Flow are necessary or unnecessary, such adjustments will be made in future periods. See Note 2 to our consolidated financial statements contained in Item 8 for a description of Available Cash Flow.
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Management Operating Metrics
We are providing the non-GAAP measures “adjusted net revenues,” “adjusted operating income,” “adjusted operating margin” and "adjusted net income per AB Unit" because they are additional operating metrics management uses in evaluating and comparing period-to-period operating performance. Management uses these additional metrics in evaluating performance because they present a clearer picture of our operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, acquisition-related expenses, interest expense and other adjustment items. Similarly, we believe that these management operating metrics help investors better understand the underlying trends in our results and, accordingly, provide a valuable perspective for investors.
These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating margin, and they may not be comparable to non-GAAP measures presented by other companies. Management uses both accounting principles generally accepted in the United States of America (" US GAAP ") and non-GAAP measures in evaluating our financial performance. The non-GAAP measures alone may pose limitations because they do not include all of our revenues and expenses.
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Years Ended December 31
(in thousands)
Net revenues, US GAAP basis
Adjustments:
Distribution-related adjustments:
Distribution revenues
Investment advisory services fees
Pass-through adjustments:
Investment advisory services fees
Other revenues
Impact of consolidated company-sponsored funds
Incentive compensation-related items
Equity method investments:
Equity loss on JV
(Gain) on other equity method investments
Adjusted net revenues
Operating income, US GAAP basis
Adjustments:
Real estate
Incentive compensation-related items
EQH award compensation
Retirement plan settlement loss
Acquisition-related expenses (income)
Equity method investments:
Equity loss on JV
(Gain) on other equity method investments
AB Funds reimbursement expense
Sub-total of non-GAAP adjustments before interest on borrowings
Interest on borrowings
Sub- total of non-GAAP adjustments
Less: Net income of consolidated entities attributable to non-controlling interests
Adjusted operating income
Non-operating income, US GAAP basis
Less: Interest on borrowings
Less: Gain on divestiture
Adjusted non-operating (expense)
Adjusted pre-tax income
Less: Adjusted income taxes
Adjusted net income
Net income per AB Unit, GAAP basis
Impact of non-GAAP adjustments
Adjusted net income per AB Unit
Operating margin, GAAP basis
Impact of non-GAAP adjustments
Adjusted operating margin
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Adjusted operating income for the year ended December 31, 2025 increased $47.9 million, or 4.2%, from the year ended December 31, 2024. The increase primarily was due to (in millions):
Higher investment advisory base fees
Lower general and administrative expenses
Lower promotion and servicing expenses
Lower Bernstein Services Research revenues
Lower performance-based fees
Higher employee compensation and benefits expense
Lower investment gains
Lower net dividend and interest revenue
Other
Adjusted operating income for the year ended December 31, 2024 increased $188.9 million, or 19.9%, from the year ended December 31, 2023. The increase primarily was due to (in millions):
Higher investment advisory base fees
Higher performance-based fees
Lower general and administrative expenses
Lower promotion and servicing expenses
Higher investment gains
Higher other revenues
Lower Bernstein Services Research revenues
Higher employee compensation and benefits expense
Lower net dividend and interest revenue
Other
Adjusted Net Revenues
Net Revenue, as adjusted, is reduced to exclude all of the company's distribution revenues, which are recorded as a separate line item on the consolidated statement of income, as well as a portion of investment advisory services fees received that is used to pay distribution and servicing costs. For certain products, based on the distinct arrangements, certain distribution fees are collected by us and passed through to third-party client intermediaries, while for certain other products, we collect investment advisory services fees and a portion is passed through to third-party client intermediaries. In both arrangements, the third-party client intermediary owns the relationship with the client and is responsible for performing services and distributing the product to the client on our behalf. We believe offsetting distribution revenues and certain investment advisory services fees is useful for our investors and other users of our financial statements because such presentation appropriately reflects the nature of these costs as pass-through payments to third parties that perform functions on behalf of our sponsored mutual funds and/or shareholders of these funds. Distribution-related adjustments fluctuate each period based on the type of investment products sold, as well as the average AUM over the period. Also, we adjust distribution revenues for the amortization of deferred sales commissions as these costs, over time, will offset such revenues.
We adjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agent and shareholder servicing fees. Also, we adjust for certain investment advisory and services fees passed through to our investment advisors. These fees do not affect operating income, as such, we exclude these fees from adjusted net revenues. We also adjust for certain pass through costs associated with the transition of services to the JVs entered into with SocGen. These amounts are expensed by us and passed to the JVs for reimbursement. These fees do not affect operating income, as such, we exclude these fees from adjusted net revenues.
We adjust for the revenue impact of consolidating company-sponsored investment funds by eliminating the consolidated company-sponsored investment funds' revenues and including AB's fees from such consolidated company-sponsored investment funds and AB's investment gains and losses on its investments in such consolidated company-sponsored investment funds that were eliminated in consolidation.
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Adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments. Also, we adjust for certain acquisition-related pass-through performance-based fees and performance related compensation.
We also adjust net revenues to exclude our portion of the equity income or loss associated with our equity method investments, including our investment in the JVs and reinsurance sidecars, as we don't consider this activity part of our core business operations and these investments generate non-cash volatility which distort core earnings performance. Effective April 1, 2024 following the close of the transaction with SocGen, we record all income or loss associated with the JVs as an equity method investment income (loss). As we no longer consider this activity part of our core business operations and our intent is to fully divest from both joint ventures, we consider these amounts temporary, and as such, we exclude these amounts from our adjusted net revenues.
Adjusted Operating Income
Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) the impact on net revenues and compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee long-term incentive compensation-related investments, (3) the equity compensation paid by EQH to certain AB executives, (4) retirement plan settlement loss, (5) acquisition-related expenses (income), (6) income (loss) related to our equity method investments, (7) AB Funds reimbursement expense, (8) interest on borrowings and (9) the impact of consolidated company-sponsored investment funds.
Real estate charges (credits) incurred during the fourth quarter of 2019 through the fourth quarter of 2020, while excluded in the period in which the charges (credits) were recorded, are included ratably over the remaining applicable lease term.
Prior to 2009, a significant portion of employee compensation was in the form of long-term incentive compensation awards that were notionally invested in AB investment services and generally vested over a period of four years. AB economically hedged the exposure to market movements by purchasing and holding these investments on its balance sheet. All such investments had vested as of year-end 2012 and the investments have been delivered to the participants, except for those investments with respect to which the participant elected a long-term deferral. Fluctuation in the value of these investments, which also impacts compensation expense, is recorded within investment gains and losses on the income statement. Management believes it is useful to reflect the offset achieved from economically hedging the market exposure of these investments in the calculation of adjusted operating income and adjusted operating margin. The non-GAAP measures exclude gains and losses and dividends and interest on employee long-term incentive compensation-related investments included in revenues and compensation expense.
The board of directors of EQH granted to Seth Bernstein, our CEO, equity awards in connection with EQH's IPO. Additionally, equity awards were granted to Mr. Bernstein and other AB executives for their membership on the EQH Management Committee. These individuals may receive additional equity or cash compensation from EQH in the future related to their service on the Management Committee. Any awards granted to these individuals by EQH are recorded as compensation expense in AB’s consolidated statement of income. The compensation expense associated with these awards has been excluded from our non-GAAP measures because they are non-cash and are based upon EQH's, and not AB's, financial performance.
The (gains) losses associated with the termination of our defined benefit retirement plan are non-cash, short term in nature and not considered a part of our core operating results when comparing financial results from period to period.
Acquisition-related expenses have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers. Acquisition-related expenses include professional fees, the recording of changes in estimates or fair value remeasurements to, and accretion expense related to, our contingent payment arrangements associated with our acquisitions, certain compensation-related expenses and amortization of intangible assets for contracts acquired. During 2025, we recorded an impairment charge of $4.0 million associated with a smaller historical acquisition in 2020.
During 2024, we recognized a gain of $128.5 million in contingent payment arrangements in the consolidated statement of income related to a fair value remeasurement of the contingent payment liability associated with our acquisition of AB Carval in 2022. The fair value remeasurement was due to updated assumptions of future performance associated with the liability. We also recorded an impairment of $2.5 million of the contingent consideration payable associated with a small acquisition made in 2020 due to the loss of investment management contracts. In addition, we recorded an intangible asset impairment charge of $4.4 million associated with various historical acquisitions.
During 2023, we recorded an expense of $28.4 million due to a change in estimate related to the contingent consideration associated with the acquisition of Autonomous LLC in 2019. The change in estimate was based upon better than expected revenues during the 2023 performance evaluation period. We recorded $14.1 million as contingent payment arrangement expense and $14.3 million as compensation and benefits expense in the consolidated statement of income. The charges to compensation and benefits expense are due to certain service conditions and special awards included in the acquisition agreement.
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We also adjust operating income to exclude our portion of the equity income or loss associated with our equity method investments, including our investment in the JVs and reinsurance sidecar, as we don't consider this activity part of our core business operations and these investments generate non-cash volatility which distort core earnings performance. Effective April 1, 2024, following the close of the transaction with SocGen, we record all income or loss associated with the JVs as an equity method investment (income) loss. As we no longer consider this activity part of our core business operations and our intent is to fully divest from both joint ventures, we consider these amounts temporary, and as such, we exclude these amounts from our adjusted operating income.
During the first quarter of 2025, we identified an error in the billing practices of a third-party service provider, who had overbilled certain AB mutual funds for omnibus account services, sub-accounting services, and related transfer agency expenses in prior years. In the second quarter, at the request of the mutual fund Board, AB agreed to reimburse the affected funds for the entirety of the overpayment plus interest. During the third quarter of 2025, we resolved this matter with the service provider and recovered a portion of the overbilled amounts. We have adjusted operating income to exclude these amounts. We believe adjusting for these costs is useful for our investors and other users of our financial statements as such presentation appropriately reflects the non-core nature of this expenditure.
We adjust operating income to exclude interest on borrowings in order to align with our industry peer group.
We adjust for the operating income impact of consolidating certain company-sponsored investment funds by eliminating the consolidated company-sponsored funds' revenues and expenses and including AB's revenues and expenses that were eliminated in consolidation. We also exclude the limited partner interests we do not own.
Adjusted Net Income per AB Unit
As previously discussed, our quarterly distribution is typically our adjusted net income per Unit (which is derived from adjusted net income) for the quarter multiplied by the number of general and limited partnership interests outstanding at the end of the quarter. Adjusted net income is derived from adjusted operating income less interest expense and adjusted income taxes. Adjusted income taxes, used in calculating adjusted net income, are calculated using the GAAP effective tax rate adjusted for non-GAAP income tax adjustments.
Adjusted Operating Margin
Adjusted operating margin allows us to monitor our financial performance and efficiency from period to period without the volatility noted above in our discussion of adjusted operating income and to compare our performance to industry peers on a basis that better reflects our performance in our core business. Adjusted operating margin is derived by dividing adjusted operating income by adjusted net revenues.
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Net Revenues
The components of net revenues are as follows:
Years Ended December 31
% Change
(in thousands)
Investment advisory and services fees:
Institutions:
Base fees
Performance-based fees
Retail:
Base fees
Performance-based fees
Private Wealth Management:
Base fees
Performance-based fees
Total:
Base fees
Performance-based fees
Bernstein Research Services (1)
Distribution revenues
Dividend and interest income
Investment (losses) gains
Other revenues
Total revenues
Less: broker-dealer related interest expense
Net revenues
(1) On April 1, 2024, AB and SocGen, a leading European bank, completed their transaction to form a jointly owned equity research provider and cash equity trading partner for institutional investors. AB deconsolidated the BRS business and contributed the business to the JVs. For further discussion, see Note 24 Divestiture to our consolidated financial statements contained in Item 8.
Investment Advisory and Services Fees
Investment advisory and services fees are the largest component of our revenues. These fees generally are calculated as a percentage of the value of AUM as of a specified date, or as a percentage of the value of average AUM for the applicable billing period, and vary with the type of investment service, the size of account and the total amount of assets we manage for a particular client. Accordingly, fee income generally increases or decreases as AUM increase or decrease and is affected by market appreciation or depreciation, the addition of new client accounts or client contributions of additional assets to existing accounts, withdrawals of assets from and termination of client accounts, purchases and redemptions of mutual fund shares, shifts of assets between accounts or products with different fee structures, and acquisitions. Our average basis points realized (investment advisory and services fees divided by average AUM) generally approximate 30 to 105 basis points for actively managed equity services, 10 to 65 basis points for actively managed fixed income services and 1 to 50 basis points for passively managed services. Average basis points realized for other services could range from 3 basis points for certain Institutional third party managed services to 190 basis points for certain Private Wealth Management alternative services. These ranges include all-inclusive fee arrangements (covering investment management, trade execution and other services) for our Private Wealth Management clients.
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We calculate AUM using established market-based valuation methods and fair valuation (non-observable market) methods. Market-based valuation methods include: last sale/settle prices from an exchange for actively-traded listed equities, options and futures; evaluated bid prices from recognized pricing vendors for fixed income, asset-backed or mortgage-backed issues; mid prices from recognized pricing vendors and brokers for credit default swaps; and quoted bids or spreads from pricing vendors and brokers for other derivative products. Fair valuation methods include: discounted cash flow models or any other methodology that is validated and approved by our Valuation Committee and sub-committee (the " Valuation Committee" ) ( see paragraph immediately below for more information regarding our Valuation Committee). Fair valuation methods are used only where AUM cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities.
The Valuation Committee consisting of senior officers and employees, oversees a consistent framework of pricing and valuation of all investments held in client and AB portfolios. The Valuation Committee has adopted a Statement of Pricing Policies describing principles and policies that apply to pricing and valuing investments held in these portfolios. We also have a Pricing Group, which is overseen by the Valuation Committee and is responsible for managing the pricing process for all investments.
We sometimes charge our clients performance-based fees. In these situations, we charge a base advisory fee and are eligible to earn an additional performance-based fee or incentive allocation that is calculated as either a percentage of absolute investment results or a percentage of investment results in excess of a stated benchmark over a specified period of time. Some performance-based fees include a high-watermark provision, which generally provides that if a client account underperforms relative to its performance target (whether absolute or relative to a specified benchmark), it must gain back such underperformance before we can collect future performance-based fees. Therefore, if we fail to achieve our performance target for a particular period, we will not earn a performance-based fee for that period and, for accounts with a high-watermark provision, our ability to earn future performance-based fees will be impaired. We are eligible to earn performance-based fees on 7.3%, 7.6% and 0.4% of the assets we manage for institutional clients, private wealth clients and retail clients, respectively (in total, 4.5% of our AUM).
Our investment advisory and services fees increased by $89.4 million, or 2.6%, in 2025, due to a $175.1 million, or 5.5%, increase in base fees, offset by a $85.7 million, or 31.6%, decrease in performance-based fees. The increase in base fees is primarily due to a 7.5% increase in average AUM. Our investment advisory and services fees increased by $466.7 million, or 15.7%, in 2024, due to a $340.6 million, or 12.0%, increase in base fees and a $126.1 million increase in performance- based fees.
Performance-based fees decreased $85.7 million, or 31.6%, in 2025, primarily due to lower performance fees earned on our Global Opportunistic Credit fund, Global Multi-Strategy fund, Securitized Assets fund, Private Credit fund and Select Equity Long/Short fund, partially offset by higher performance fees earned on our International Small Cap fund, European Loan Opportunities fund and US Select Equity fund. Performance-based fees increased $126.1 million, or 87.0%, in 2024, primarily due to higher performance-based fees earned on Financial Services Opportunities fund, Global Opportunistic Credit fund, Global Multi-Strategy fund and US Select Equity Long/Short fund, partially offset by lower performance-based fees earned on International Small Cap fund.
Institutional base fees increased $4.5 million, or 0.7%, in 2025, primarily due to a 4.5% increase in average AUM, partially offset by a lower portfolio fee rate. Retail base fees increased $91.1 million, or 6.1%, in 2025, primarily due to a 8.9% increase in average AUM, partially offset by a lower portfolio fee rate. Private Wealth base fees increased $79.5 million, or 7.6%, in 2025, primarily due to an 11.3% increase in average AUM, partially offset by a lower portfolio fee rate. Institutional base fees increased $6.9 million, or 1.1%, in 2024, primarily due to a 6.0% increase in average AUM, partially offset by a lower portfolio fee rate. Retail base fees increased $228.4 million, or 17.9%, in 2024, primarily due to a 20.4% increase in average AUM, partially offset by a lower portfolio fee rate. Private Wealth base fees increased $105.3 million, or 11.2%, in 2024, primarily due to a 14.6% increase in average AUM, partially offset by a lower portfolio fee rate.
Bernstein Research Services
E ffective April 1, 2024, AB deconsolidated the BRS business. For further discussion, see Note 24 Divestitures to our consolidated financial statements in Item 8.
Prior to the deconsolidation of the BRS business, we earned revenues for providing investment research to, and executing brokerage transactions for, institutional clients. These clients compensated us principally by directing us to execute brokerage transactions on their behalf, for which we earned commissions, and to a lesser extent, by paying us directly for research through commission sharing agreements or cash payments.
Revenues from Bernstein Research Services decreased $96.2 million, or 100.0%, in 2025. The decrease was driven by the deconsolidation of the BRS business in 2024.
Revenues from Bernstein Research Services decreased $289.9 million, or 75.1%, in 2024. The decrease was driven by the deconsolidation of the BRS business
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Distribution Revenues
Two of our subsidiaries act as distributors and/or placement agents of company-sponsored mutual funds and receive distribution services fees from certain of those funds as full or partial reimbursement of the distribution expenses they incur. Period-over-period fluctuations of distribution revenues typically are in line with fluctuations of the corresponding average AUM of these mutual funds.
Distribution revenues increased $91.8 million, or 12.6%, in 2025, primarily due to an 11.9% increase in the corresponding average AUM of these mutual funds. Distribution revenues increased $140.4 million, or 23.9%, in 2024, primarily due to a 20.0% increase in the corresponding average AUM of these mutual funds.
Dividend and Interest Income and Broker-Dealer Related Interest Expense
Dividend and interest income consists primarily of investment income and interest earned on customer margin balances and U.S. Treasury Bills as well as dividend and interest income in our consolidated company-sponsored investment funds. Broker-dealer related interest expense principally reflects interest accrued on cash balances in customers’ brokerage accounts.
Dividend and interest income decreased $24.9 million, or 15.1%, in 2025, primarily due to lower interest earned on U.S. Treasury Bills and customer margin balances. Broker-dealer related interest expense decreased $21.5 million, or 25.5%, in 2025, primarily due to lower interest paid on cash balances in customers' brokerage accounts.
Dividend and interest income decreased $34.1 million, or 17.1%, in 2024, primarily due to lower interest earned on U.S. Treasury Bills and customer margin balances. Broker-dealer related interest expense decreased $23.0 million, or 21.4%, in 2024, primarily due to lower interest paid on cash balances in customers' brokerage accounts.
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Investment (Losses) Gains
Investment (losses) gains consist primarily of realized and unrealized investment gains or losses on: (i) employee long-term incentive compensation-related investments, (ii) U.S. Treasury Bills, (iii) seed capital investments, (iv) derivatives and (v) investments in our consolidated company-sponsored investment funds. Investment gains (losses) also include equity in earnings of proprietary investments in limited partnership hedge funds that we sponsor and manage and equity gains (losses) related to our equity method investments.
Investment (losses) gains are as follows:
Years Ended December 31
(in thousands)
Long-term incentive compensation-related investments:
Realized gains
Unrealized gains (losses)
Investments held by consolidated company-sponsored investment funds:
Realized gains (losses)
Unrealized gains
Seed capital investments:
Realized gains (losses)
Seed capital and other
Derivatives
Unrealized gains (losses)
Seed capital and other
Derivatives
Brokerage-related investments:
Realized gains (losses)
Unrealized (losses) gains
Equity method investments:
(Loss) on JVs
Gain on other equity method investments
Other Revenues
Other revenues consist of fees earned for transfer agency services provided to company-sponsored mutual funds, fees earned for administration and recordkeeping services provided to company-sponsored mutual funds and the General Accounts of EQH and its subsidiaries, and other miscellaneous revenues. Other revenues decreased $8.6 million, or 6.0%, in 2025, primarily due to lower shareholder servicing fees partially offset by certain reimbursements for services provided to the JVs. Other revenues increased $41.5 million, or 40.9%, in 2024, primarily due to certain reimbursements for services provided to the JVs.
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Expenses
The components of expenses are as follows:
Years Ended December 31
% Change
(in thousands)
Employee compensation and benefits
Promotion and servicing:
Distribution-related payments
Amortization of deferred sales commissions
Trade execution, marketing, T&E and other
General and administrative
Contingent payment arrangements
Interest on borrowings
Amortization of intangible assets
Total
Employee Compensation and Benefits
Employee compensation and benefits consist of base compensation (including salaries and severance), annual short-term incentive compensation awards (cash bonuses), annual long-term incentive compensation awards, commissions, fringe benefits and other employment costs (including recruitment, training, temporary help and meals).
Compensation expense as a percentage of net revenues was 39.5%, 40.3% and 42.6% for the years ended December 31, 2025, 2024 and 2023, respectively. Compensation expense generally is determined on a discretionary basis and is primarily a function of our firm’s current-year financial performance. The amounts of incentive compensation we award are designed to motivate, reward and retain top talent while aligning our executives' interests with the interests of our Unitholders. Senior management, together with the Compensation and Workplace Practices Committee of the Board of Directors of AllianceBernstein Corporation (“ Compensation Committee ”), continue to believe that the appropriate metric to consider in determining the amount of incentive compensation is the ratio of adjusted employee compensation and benefits expense to adjusted net revenues. Adjusted net revenues used in the adjusted compensation ratio are the same as the adjusted net revenues presented as a non-GAAP measure ( discussed earlier in this Item 7 ). Adjusted employee compensation and benefits expense is total employee compensation and benefits expense minus other employment costs such as recruitment, training, temporary help and meals (which were 1.0%, 1.0% and 1.1% of adjusted net revenues for 2025, 2024 and 2023, respectively), and excludes the impact of mark-to-market vesting expense, as well as dividends and interest expense, associated with employee long-term incentive compensation-related investments and the amortization expense associated with the awards issued by EQH to some of our firm's executives relating to their roles as members of the EQH Management Committee. Senior management, with the approval of the Compensation Committee, has established as an objective that adjusted employee compensation and benefits expense, excluding the impact of performance-based fees, generally should not exceed 50% of our adjusted net revenues in any year, except in or unusual circumstances. Our ratios of adjusted compensation expense as a percentage of adjusted net revenues were 48.3%, 47.9% and 49.0%, respectively, for the years ended December 31, 2025, 2024 and 2023.
In 2025, employee compensation and benefits expense decreased $11.3 million, or 0.6%, primarily due to lower incentive compensation of $37.7 million and lower base compensation of $7.0 million, partially offset by higher commissions of $31.3 million. In 2024, employee compensation and benefits expense increased $32.6 million, or 1.8%, primarily due to higher incentive compensation of $92.9 million and higher commissions of $27.9 million, partially offset by lower base compensation of $87.8 million primarily driven by the Bernstein Research Services deconsolidation.
Promotion and Servicing
Promotion and servicing expenses include distribution-related payments to financial intermediaries for distribution of AB mutual funds and amortization of deferred sales commissions paid to financial intermediaries for the sale of back-end load shares of AB mutual funds. Also included in this expense category are costs related to trade execution and clearance, travel and entertainment, advertising and promotional materials.
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Promotion and servicing expenses increased $76.8 million, or 7.8%, in 2025. The increase was due to higher distribution-related payments of $70.8 million and higher amortization of deferred sales commissions of $25.5 million, partially offset by lower trade execution and clearance expenses of $16.3 million primarily driven by the Bernstein Research Services deconsolidation. Promotion and servicing expenses increased $119.7 million, or 13.9%, in 2024. The increase was due to higher distribution- related payments of $132.1 million, higher amortization of deferred sales commissions of $21.2 million and higher transfer fees of $11.1 million, partially offset by lower trade execution and clearance expenses of $47.1 million primarily driven by the Bernstein Research Services deconsolidation.
General and Administrative
General and administrative expenses include portfolio services fees, technology fees, professional fees and office-related expenses (occupancy, communications and similar expenses). General and administrative expenses as a percentage of net revenues were 12.3%, 13.4% and 14.0% for the years ended December 31, 2025, 2024 and 2023, respectively. General and administrative expenses decreased $42.2 million, or 7.0%, in 2025. The decrease was primarily due to lower office-related expenses of $60.0 million principally driven by our early exit from our previous New York office location in 2024, lower professional fees of $5.3 million and lower other taxes of $4.5 million, partially offset by a one time gain in the prior year period related to the recognition of a $20.8 million government incentive grant received in connection with the relocation of our headquarters to Nashville, Tennessee, a retirement plan settlement loss of $17.7 million in the current year and a $5.8 million AB funds reimbursement expense (net of $8.5 million recovered during the third quarter of 2025) related to a disputed billing practice of a third-party service provider.
General and administrative expenses increased $17.6 million, or 3.0%, in 2024. The increase was primarily due to higher office and related expenses of $13.3 million, losses related to the settlement of the retirement plan in 2024 of $13.1 million, higher portfolio services expenses of $7.3 million, higher other state income taxes of $6.3 million and higher charitable contributions of $5.3 million, partially offset by the recognition of a $20.8 million government incentive grant received in connection with our headquarters relocation to Nashville, Tennessee and lower errors of $3.3 million.
Contingent Payment Arrangements
Contingent payment arrangements reflect changes in estimates of contingent payment liabilities associated with acquisitions in current and previous periods, as well as accretion expense of these liabilities.
During 2025, there were no changes in estimates related to our contingent payment arrangements.
During 2024, we recognized a gain of $128.5 million in contingent payment arrangements in the consolidated statement of income related to a fair value remeasurement of the contingent payment liability associated with our acquisition of AB CarVal (the " CarVal Acquisition ") in 2022. The fair value remeasurement was due to updated assumptions of future performance associated with the liability. In December 2024, the company agreed to finalize its contingent consideration liability with AB CarVal for a value of $134.0 million. This liability will be paid predominantly in AB Units issued within 10 days of December 31, 2027. Given the liability is no longer contingent, during 2024, the present value of the liability of approximately $118.8 million was reclassified to accounts payable and accrued expenses on the consolidated statements of financial condition. The current carrying value of the liability as of December 31, 2025 of $123.8 million will accrete up to $134.0 million through December 31, 2027. This expense is recognized as general and administrative expenses on the consolidated statements of income.
During 2023, we recorded a change in estimate related to the contingent consideration liability associated with the acquisition of Autonomous LLC in 2019 of $14.1 million. The change in estimate was based upon better than expected revenues during the 2023 performance evaluation period. These expenses resulting from changes to expected payments and the accretion of these obligations to their expected payment amounts are reflected within contingent payment arrangements in our consolidated statements of income.
For the years ended December 31, 2025, 2024 and 2023, we recognized $0.2 million, $9.0 million and $8.8 million, respectively, in accretion expense related to our contingent considerations payable.
Interest on Borrowings
Interest expense decreased $15.2 million in 2025, primarily due to lower weighted average interest rates and lower weighted average borrowings. Average daily borrowings for the EQH facilities and commercial paper were $591.6 million at a weighted average interest rate of 4.3% during 2025 compared to $762.4 million and 5.3% during 2024.
Interest expense decreased $10.9 million in 2024, primarily due to lower weighted average borrowings, partially offset by a slightly higher weighted average interest rate. Average daily borrowings for the EQH facilities and commercial paper were $762.4 million at a weighted average interest rate of 5.3% during 2024 compared to $1.0 billion and 5.1% during 2023.
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Amortization of Intangible Assets
Amortization of intangible assets reflects our amortization of costs assigned to acquired investment management contracts with a finite life. These assets are recognized at fair value and generally are amortized on a straight-line basis over their estimated useful life. Amortization of intangible assets decreased by $1.0 million in 2025. During 2025, we wrote off approximately $4.0 million of intangible assets associated with various historical acquisitions.
Amortization of intangible assets decreased by $0.9 million in 2024. During 2024, we wrote off approximately $4.4 million of intangible assets associated with various historical acquisitions.
Income Taxes
AB, a private limited partnership, is not subject to federal or state corporate income taxes. However, AB is subject to a 4.0% New York City unincorporated business tax ( “UBT” ). Our domestic corporate subsidiaries are subject to federal, state and local income taxes, and generally are included in the filing of a consolidated federal income tax return. Separate state and local income tax returns also are filed. Foreign corporate subsidiaries generally are subject to taxes in the jurisdictions where they are located.
Income tax expense decreased $3.5 million, or 5.4%, in 2025 compared to 2024. This decrease is due to lower pre-tax book income and one-time discrete items.
Income tax expense increased $36.1 million, or 124.2%, in 2024 compared to 2023. The increase is primarily driven by a one time tax benefit of $22.4 million resulting from the release of a valuation allowance on a capital loss tax asset due to a 2023 tax planning action, related to future restructuring of certain foreign subsidiaries that would not have a material impact on AB operations. This resulted in a higher effective tax rate in 2024 of 5.2% compared to 3.6% in 2023.
Net Income (Loss) of Consolidated Entities Attributable to Non-Controlling Interests
Net income (loss) of consolidated entities attributable to non-controlling interests primarily consists of limited partner interests owned by other investors in our consolidated company-sponsored investment funds. In 2025, we had $6.4 million of net income of consolidated entities attributable to non-controlling interests, primarily due to gains on investments held by our consolidated company-sponsored investment funds. In 2024, we had $20.2 million of net income of consolidated entities attributable to non-controlling interests, primarily due to gains on investments held by our consolidated company-sponsored investment funds.
Capital Resources and Liquidity
Cash flows from operating activities primarily include the receipt of investment advisory and services fees and other revenues offset by the payment of operating expenses incurred in the normal course of business. Our cash flows from operating activities have historically been positive and sufficient to support our operations. We do not anticipate this to change in the foreseeable future. Cash flows from investing activities generally consist of small capital expenditures and, when applicable, divestitures, capital activity related to our equity method investments and business acquisitions. Cash flows from financing activities primarily consist of issuance and repayment of debt and the repurchase of AB Holding units for our long-term deferred compensation plans. We are required to distribute all of our Available Cash Flow to our Unitholders and the General Partner.
During 2025, net cash provided by operating activities was $1.0 billion, compared to $1.4 billion during 2024. The decrease is primarily due to the net activity of our consolidated company-sponsored investment funds of $445.2 million, a decrease in accounts payable and accrued liabilities of $138.9 million, an increase in broker-dealer related net assets of $61.9 million and a decrease in accrued compensation and benefits expense of $52.8 million, partially offset by a decrease in fees receivable of $238.2 million and a decrease in deferred sales commissions of $87.2 million. During 2024, net cash provided by operating activities was $1.4 billion, compared to $0.9 billion during 2023. The change was primarily due to higher earnings of $312.5 million (after non-cash reconciling items), the net activity of our consolidated company-sponsored investment funds of $128.1 million, an increase in accounts payable and accrued expenses of $94.0 million and an increase in broker-dealer related payables (net of receivables and segregated U.S. Treasury Bills activity) of $87.9 million, partially offset by an increase in fees receivable of $140.8 million.
During 2025, net cash used in investing activities was $38.8 million, compared to $115.7 million during 2024. The change is due to a decrease in debt repayment received from equity method investments of $86.2 million, lower purchases of furniture, equipment and leasehold improvements of $83.6 million, a decrease in cash used related to the divestiture of the BRS business of $40.2 million and a decrease in capital contributions to equity method investments of $39.4 million. During 2024, net cash used in investing activities was $115.7 million, compared to $33.6 million during 2023. The change was primarily due to higher purchases of furniture, equipment and leasehold improvements of $88.7 million and cash used related to the divestiture of the BRS business of $40.2 million. The cash used in the divestiture included $304.0 million in cash proceeds received from SocGen offset by $338.2 million in cash contributed from the transferring balance sheet and $6.0 million in direct costs to sell. In addition, there was an increase in debt repayment from equity method investments of $86.2 million offset by capital contributions to equity method investments of $39.4 million.
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During 2025, net cash used in financing activities was $1.1 billion, compared to $1.6 billion during 2024. The change is primarily due to lower repayments of debt of $544.3 million and capital contributions from consolidated funds in the current year compared to cash distributions in the prior year (net impact of $305.3 million), partially offset by higher cash distributions to Unitholders of $169.4 million and lower proceeds from the issuance of private units to EQH of $150.0 million. During 2024, net cash used in financing activities was $1.6 billion, compared to $1.0 billion during 2023. The change is primarily due to higher repayments of debt of $608.6 million and higher cash distributions to Unitholders of $115.2 million, partially offset by proceeds from the issuance of private units to EQH of $150.0 million.
As of December 31, 2025, AB had $778.8 million of cash and cash equivalents (excluding cash and cash equivalents of consolidated company-sponsored investment funds), all of which is available for liquidity but consist primarily of cash on deposit for our broker-dealers related to various customer clearing activities and cash held by foreign subsidiaries of $496.8 million.
See Note 12 to our consolidated financial statements in Item 8 for disclosures relating to our debt and credit facilities. We use our debt and credit facilities to seed certain new investment products which may expose us to market risk, credit risk and material gains and losses. To reduce our exposure, we enter into various futures, forwards, options and swaps primarily to economically hedge certain of our seed money investments. While in most cases broad market risks are hedged and are effective in reducing our exposure, our hedges are imperfect and we may remain exposed to some market risk and credit-related losses in the event of non-performance by counterparties on these derivative instruments.
Our financial condition and access to public and private debt markets should provide adequate liquidity for our general business needs. Management believes that cash flow from operations and the issuance of debt and AB Units or AB Holding Units will provide us with the resources we need to meet our financial obligations. See “Risk Factors” in Item 1A and “Cautions Regarding Forward-Looking Statements” in this Item 7 for a discussion of credit markets and our ability to renew our credit facilities at expiration.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Guarantees
Under various circumstances, AB guarantees the obligations of its consolidated subsidiaries.
AB maintains an $800 million committed, unsecured senior revolving credit facility (the " Credit Facility ")with a group of commercial banks and lenders. The Credit Facility was amended and restated as of August 5, 2025 removing Sanford C. Bernstein & Co., as co-borrower. SCB LLC currently has three uncommitted lines of credit with three financial institutions. Two of these lines of credit permit us to borrow up to an aggregate of approximately $150.0 million, with AB named as an additional borrower, while the other line has no stated limit. AB has guaranteed the obligations of SCB LLC under these lines of credit. AB maintains guarantees totaling $150.0 million for SCB LLC’s three uncommitted lines of credit.
AB maintains a guarantee with a commercial bank, under which we guarantee the obligations in the ordinary course of business for SCB LLC, one of our U.S. based broker-dealers. In the event this entity is unable to meet its obligations, AB will pay the obligation when due or on demand.
We also have two smaller guarantees with a commercial bank totaling approximately $1.9 million, under which we guarantee certain obligations in the ordinary course of business of one of our foreign subsidiaries.
In 2024, AB and SocGen completed a transaction forming the JVs. In connection with the transaction, Bernstein Institutional Services LLC (“ BIS ”), the U.S. broker-dealer subsidiary of the NA JV, entered into a credit facility agreement (the " BIS Credit Facility ") with SocGen, as lender, providing for up to $60.0 million of working capital. As a condition of the credit facility and until SocGen’s ownership exceeded 50% of NA JV, AB would provide a limited guarantee under which AB would guarantee up to its percentage ownership, currently 66.7% as of December 31, 2025, of any unpaid obligations of BIS. As of December 31, 2025, there were no unpaid obligations under this facility requiring a guarantee by AB. Effective February 28, 2025, the agreement was amended and the original maturity date of April 1, 2025 was extended to March 31, 2026. The current commitment under the facility was reduced from $60.0 million to $30.0 million. There were no other material amendments to the credit facility.
In addition, AB agreed to indemnify SocGen Canada (" SG Canada ") for certain obligations and liabilities in relation to Sanford C. Bernstein Canada (" SCB Canada ") until such time as SocGen exceeds 50% ownership of NA JV (the “ Canadian Regulatory Guarantee ”). Under the terms of the Canadian Regulatory Guarantee, SG Canada must guarantee the customer liabilities of SCB Canada to the full extent of its regulatory capital which fluctuates based upon business activity. AB agreed to indemnify SG Canada for 66.7% of any amounts paid by SG Canada under the Canadian Regulatory Guarantee. As of December 31, 2025, there were no unpaid obligations requiring a guarantee by AB.
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We have not been required to perform under any of the above agreements and currently have no outstanding liability in connection with these agreements. See Note 24 Divestitures to AB's consolidated financial statements in Item 8 for further discussion related to the BIS Credit Facility and Canadian Regulatory Guarantee.
Aggregate Contractual Obligations
We have various compensation and benefit obligations, including accrued salaries and fringes, commissions, payroll taxes, incentive payments and deferred compensation arrangements. The majority of our compensation and benefits obligations are paid out in less than one year, while the deferred compensation obligations are payable over various periods, with the majority payable over periods of up to three years. Accrued compensation and benefits as of December 31, 2025 totaled $349.3 million. This amount excludes our accrued international pension obligation. Offsetting our accrued compensation obligations are long- term incentive compensation-related investments and money market investments we funded totaling $56.4 million, which are included in our consolidated statement of financial condition. Any amounts reflected on the consolidated statement of financial condition as payables (to broker-dealers, brokerage clients and company-sponsored mutual funds) and accounts payable and accrued expenses are excluded from the aforementioned accrued compensation and benefits obligation amount.
We expect to make contributions to our qualified profit sharing plan of approximately $19.0 million in each of the next four years.
During the fourth quarter of 2024, we entered into a non-exclusive partnership with Reinsurance Group of America, Incorporated (“ RGA ”) under which we committed to invest $100.0 million in a reinsurance sidecar vehicle sponsored by RGA and focused on the U.S. asset-intensive reinsurance market. AB intends to manage private alternative assets for RGA’s general account as part of a separate transaction. As of December 31, 2025, we have funded $0.1 million of this commitment. The remaining commitment of up to $100.0 million can be called upon short notice at any future point.
During the third quarter of 2025, we entered into a non-exclusive partnership with Carlyle Investment Management L.L.C. (the " Asset Management Sponsor ") and Fortitude International Ltd. (the " Insurance Sponsor/and or their respective affiliates" ), and together (the " Sponsors ") under which we committed to invest $100.0 million in a reinsurance sidecar vehicle Carlyle FCA Re, L.P. (the " FCA Re Sideca r"). The FCA Re Sidecar is focused on reinsuring life and annuity liabilities in Asia. AB intends to manage private alternative assets for the Insurance Sponsor as part of a separate transaction. As of December 31, 2025, we have not funded any of this commitment.
See Note 13 to our consolidated financial statements in Item 8 for discussion of our leases.
See Note 12 to our consolidated financial statements in Item 8 for a discussion of our debt.
Contingencies
See Note 14 to our consolidated financial statements in Item 8 for a discussion of our commitments and contingencies.
Critical Accounting Estimates
The preparation of the consolidated financial statements and notes to consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
Management believes that the critical accounting policies and estimates discussed below involve significant management judgment due to the sensitivity of the methods and assumptions used.
Goodwill
Our acquisitions are accounted for under the acquisition method of accounting, where the cost of the acquisition is allocated on the basis of the estimated fair value of the assets acquired and the liabilities assumed. The excess of the purchase price over the fair value of identifiable assets acquired, net of liabilities assumed, results in the recognition of goodwill.
As of December 31, 2025, we had goodwill of $3.6 billion on the consolidated statement of financial condition, which included $666.1 million as a result of the CarVal Investors L.P. (" CarVal ") acquisition in 2022, $2.6 billion as a result of the Sanford C. Bernstein Inc. (“ Bernstein ”) acquisition in 2000 and $291.9 million in regard to various smaller acquisitions.
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We have determined that AB has only one reporting segment and reporting unit. We test our goodwill annually, as of September 30, for impairment or if certain events or changes in circumstances occur and trigger an interim impairment test. The carrying value of goodwill is also reviewed if facts and circumstances occur that suggest possible impairment, such as, but not limited to significant transactions including acquisitions or divestitures and significant declines in AUM, revenues, earnings or the price of an AB Holding Unit. Any of these changes in circumstances could suggest the possibility that goodwill is impaired, but none of these events or circumstances by itself would indicate that it is more likely than not that goodwill is impaired. Instead, they are merely recognized as triggering events for the consideration of impairment and must be viewed in combination with any mitigating or positive factors. A holistic evaluation of all events since the most recent quantitative impairment test must be done to determine whether it is more likely than not that the reporting unit is .
For our annual impairment test, we utilize the market approach where the fair value of the reporting unit is based on its unadjusted market valuation (AB Units outstanding multiplied by AB Holding's Unit price) and earnings multiples. A goodwill impairment would be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The goodwill impairment test does not include a determination by management of whether a decline in fair value is temporary and it is important that management's determination of fair value reflect the impact of changing market conditions, including the severity and anticipated duration of any such changes. The price of a publicly traded AB Holding Unit serves as a reasonable starting point for valuing an AB Unit because each represents the same fractional interest in our underlying business. Our market approach analysis also includes comparable industry earnings multiples applied to our earnings forecast and assumes a control premium (when applicable).
Loss Contingencies
Management continuously reviews with legal counsel the status of regulatory matters and pending or threatened litigation. We evaluate the likelihood that a loss contingency exists and record a loss contingency if it is both probable and reasonably estimable as of the date of the financial statements. See Note 14 to our consolidated financial statements in Item 8
Accounting Pronouncements
See Note 2 to our consolidated financial statements in Item 8.
Cautions Regarding Forward-Looking Statements
Certain statements provided by management in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately managed accounts, general economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. We caution readers to carefully consider such factors. Further, these forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see “Risk Factors” in Item 1A . Any or all of the forward-looking statements that we make in this Form 10-K, other documents we file with or furnish to the SEC, and any other public statements we issue, may turn out to be wrong. It is important to remember that other factors besides those listed in “Risk Factors” and those listed below could also impact our revenues, financial condition, results of operations and business prospects.
The forward-looking statements referred to in the preceding paragraph, most of which directly affect AB but also affect AB Holding because AB Holding’s principal source of income and cash flow is attributable to its investment in AB, include statements regarding:
• Our belief that the cash flow AB Holding realizes from its investment in AB will provide AB Holding with the resources it needs to meet its financial obligations: AB Holding’s cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding’s ability to meet its financial obligations is dependent on AB’s cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control.
• Our financial condition and ability to access the public and private capital markets providing adequate liquidity for our general business needs: Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to access public and private capital markets on reasonable terms may be limited by adverse market conditions, our firm’s credit ratings, our profitability and changes in government regulations, including tax rates and interest rates.
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• The outcome of litigation: Litigation is inherently unpredictable, and excessive damage awards do occur. Though we have stated, where applicable, that we do not expect any pending legal proceedings to have a material adverse effect on our results of operations, financial condition or liquidity, any settlement or judgment with respect to a legal proceeding could be significant, and could have such an effect.
• The possibility that we will engage in open market purchases of AB Holding Units for anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, for incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.
• Our determination that adjusted employee compensation expense, excluding the impact of performance-based fees, generally should not exceed 50% of our adjusted net revenues on an annual basis: Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.
• Our initiative to replace our investment management technology: While we believe that our initiative to replace our existing investment management technology will result in long term savings to the business based on reasonable assumptions as of the date of this report, the duration and complexity of the project creates a significant risk that our current assumptions may not be realized.
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