Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW.
Our revenues and net income are derived primarily from investment advisory services provided globally to individual and institutional investors in a broad range of investment solutions across equity, fixed income, multi-asset, and alternatives capabilities. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; trust services; and other advisory services.
Investment advisory fees depend largely on the total value and composition of our assets under management. Accordingly, fluctuations in financial markets and in the composition of assets under management affect our revenues and results of operations.
We incur significant expenditures to develop new products and services and improve and expand our capabilities and distribution channels in order to attract new clients and additional investments from our existing clients. These efforts often involve costs that precede any future revenues we may recognize from an increase to our assets under management.
The investment management industry continues to evolve and face challenging trends, including the shift in market share from traditional active strategies to passive products, persistent downward fee pressure, demand for lower cost investment vehicles, and an ever-changing regulatory landscape. In this environment, we maintain ample liquidity and resources that allow us to take advantage of attractive growth opportunities and deliver new capabilities that meet the evolving needs of our clients globally. At the same time, we have developed a broad and ongoing plan to further align our expense growth with our anticipated revenue growth, which will allow us to realign resources and continue investing in existing and future capabilities.
In 2025, we took several steps to execute on this plan, including targeted role eliminations, outsourcing and expanding some of our technology capabilities through trusted vendor partnerships, and the decision to exit certain owned buildings with plans to dispose of the properties in 2026.
The impact of these actions has been recorded as a restructuring charge in the consolidated statements of income and is discussed later in Item 7. and Item 8. These measures also help offset ongoing inflationary pressures on compensation and contractual spending. Our strategic investments include hiring investment and distribution professionals, adopting new technologies, offering new products, and growing and diversifying our business through innovative global partnerships.
MARKET TRENDS.
Major U.S. stock market indices rose in 2025. After a challenging start to 2025 stemming from new U.S. tariff and trade policies, equities advanced starting in April, as the U.S. and China made efforts to improve their trade relationship, economic growth and corporate earnings remained favorable, investors favored artificial intelligence-related businesses and other high-growth companies, and Congress passed tax legislation that should provide some fiscal stimulus to the economy. In addition, signs of a weakening labor market in the latter part of the year prompted the Federal Reserve to reduce short-term interest rates, despite continued elevated inflation. The central bank lowered rates in September, October, and December.
Developed non-U.S. equity markets outperformed U.S. stocks in U.S. dollar terms, helped by a weaker dollar versus major non-U.S. currencies. In Europe, equity markets were mostly positive in dollar terms. Stocks in Spain and Austria fared best, surging 80%, while equities in Finland, Ireland, and Italy advanced close to 60%. UK stocks rose 35%. Developed Asian markets were also mostly positive with stocks in Hong Kong climbing 35% and Japanese stocks rising 25%.
Stocks in emerging markets outperformed equities in developed markets in U.S. dollar terms. In the emerging Asian, Latin American, and the emerging Europe, Middle East, and Africa (EMEA) regions, markets were mostly positive.
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Returns of several major equity market indexes for 2025 are as follows:
S&P 500 Index
NASDAQ Composite Index (1)
Russell 2000 Index
MSCI EAFE (Europe, Australasia, and Far East) Index
MSCI Emerging Markets Index
(1) Returns exclude dividends
Global bond returns were positive in 2025. In the U.S., Treasury bill yields, which tend to track the federal funds target rate, declined about 70 basis points (0.70%) for the year, as the Federal Reserve reduced the federal funds target rate by 25 basis points (0.25%) three times in the final months of the year. At the end of the year, the federal funds target rate was in the 3.50% to 3.75% range. Short- and intermediate-term U.S. Treasury yields had a comparable decline, but the 10-year U.S. Treasury note yield fell 40 basis points (0.40%), from 4.58% to 4.18%. The 30-year U.S. Treasury bond yield rose modestly for the year.
In the U.S. investment-grade bond universe, mortgage-backed securities performed best, but corporate bonds and non-agency commercial mortgage-backed securities also did well. Treasuries and asset-backed securities slightly lagged. Tax-free municipal bonds underperformed taxable bonds, but high yield corporates outperformed the investment-grade bond market.
Bonds in developed non-U.S. markets produced positive returns in U.S. dollar terms, helped by a weaker dollar versus major non-U.S. currencies. In the eurozone, longer-term bond yields increased in many countries, though policymakers for the European Central Bank reduced short-term interest rates four times in the first half of 2025. In the UK, longer-term bond yields fell slightly for the year, as the Bank of England reduced the Bank Rate by 25 basis points (0.25%) four times in 2025. The euro strengthened more than 13% versus the U.S. dollar, while the British pound rose more than 7%. In Japan, long-term government bond yields climbed as the Bank of Japan raised its benchmark interest rate to 0.50% in January and to 0.75% in December. Bond yields were also pressured higher by late-year concerns that new Prime Minister Sanae Takaichi will pursue aggressive fiscal stimulus funded by debt issuance. The yen rose marginally versus the dollar.
Emerging markets bonds produced strong positive returns in U.S. dollar terms. Bonds denominated in local currencies generally outperformed dollar-denominated bonds, as many emerging markets currencies appreciated versus the dollar, boosting returns to U.S. investors.
Returns of several major bond market indexes for 2025 are as follows:
Bloomberg Barclays U.S. Aggregate Bond Index
J.P. Morgan Global High Yield Index
Bloomberg Barclays Municipal Bond Index
Bloomberg Barclays Global Aggregate Ex-U.S. Dollar Bond Index
J.P. Morgan Emerging Markets Bond Index Plus
Bank of America US High Yield Index
Credit Suisse Leveraged Loan Index
ASSETS UNDER MANAGEMENT. (1)
Assets under management ended 2025 at $1,775.6 billion, an increase of $169.0 billion from the end of 2024. This increase was driven by net market appreciation and income, net of distributions not reinvested, of $216.7 billion, offset by net cash outflows of $56.9 billion. Beginning on July 1, 2025, assets under management include managed account - model delivery portfolios assets, which had $9.2 billion in assets as of that date, and are reflected in the increase from December 31, 2024.
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The following table details changes in our assets under management, by asset class, during the last three years:
(in billions)
Equity
Fixed income, including money market
Multi-asset (2)
Alternatives (3)
Total
Assets under management at December 31, 2022
Net cash flows prior to manager-driven distributions
Manager-driven distributions
Net cash flows
Net market appreciation (depreciation) and income (4)
Change during the period
Assets under management at December 31, 2023
Net cash flows prior to manager-driven distributions
Manager-driven distributions
Net cash flows
Net market appreciation (depreciation) and income (4)
Change during the period
Assets under management at December 31, 2024
Managed account - model delivery assets (5)
Net cash flows prior to manager-driven distributions
Manager-driven distributions
Net cash flows
Net market appreciation (depreciation) and income (4)
Change during the period (net cash flows and market appreciation (depreciation) and income)
Assets under management at December 31, 2025
(1) Includes assets in which T. Rowe Price and its affiliates have full discretionary authority and, beginning in 2025, managed account - model delivery assets.
(2) The underlying assets under management of the multi-asset products have been aggregated and presented in this category and not reported in the equity and fixed income columns.
(3) The alternatives asset class includes strategies authorized to invest more than 50% of its holdings in private credit, leveraged loans, mezzanine, real assets/CRE, structured products, stressed/distressed, non-investment grade CLOs, special situations, business development companies, or that have absolute return as its investment objective. Generally, only those strategies with longer than daily liquidity are included. Unfunded capital commitments were $21.6 billion at December 31, 2025, $16.2 billion at December 31, 2024, and $11.6 billion at December 31, 2023, and are not reflected in fee basis AUM above.
(4) Includes net distributions not reinvested of $6.8 billion in 2025, $5.9 billion in 2024, and $2.9 billion in 2023.
(5) Amount represents the net assets as of July 1, 2025 and all activity for the second half of 2025 is presented in the lines that follow.
Investment advisory clients outside the United States account for 8.8% of our assets under management at December 31, 2025 and December 31, 2024 and 8.6% at December 31, 2023.
The following table details our assets under management and net flows in our target date retirement products, which are included in the multi-asset column shown above:
(in billions)
Assets under management
Net cash flows
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Our net cash outflows in 2025 were driven primarily by growth-oriented equity strategies. These outflows were partially offset by net cash inflows in fixed income, target date retirement products, and alternatives strategies. Financial intermediaries and institutional clients were the main sources of net outflows in 2025. From a geography perspective, net outflows were predominantly from U.S. clients invested in equity strategies, though all regions experienced net outflows. For 2024, net outflows were driven primarily by growth-oriented equity strategies and a multi-asset sub-advised variable annuity outflow. These outflows were partially offset by net cash inflows in our target date retirement products, fixed income and alternatives strategies. Financial intermediaries were the main sources of net outflows in 2024. Geographically, while the EMEA and APAC regions experienced net inflows, these were outweighed by outflows in the Americas. For 2023, net outflows were driven primarily by our growth-oriented equity strategies sourced from Americas financial intermediaries and institutional clients. These outflows were partially offset by net cash inflows in our multi-asset strategies, predominately our target date retirement products, and alternatives strategies. From a geography perspective, net outflows were predominantly from U.S. clients invested in equity strategies, though all regions experienced net outflows.
Our multi-asset investment division provides advisory solutions that include investment insights, strategic asset allocation design, tactical asset allocation recommendations, and portfolio rebalancing services. The assets in these solutions, predominantly in the United States, were $27.8 billion at December 31, 2025, compared with $8.0 billion at December 31, 2024.
We provide participant accounting and plan administration for defined contribution retirement plans that primarily invest in our U.S. mutual funds, collective investment trusts and funds managed outside of the our complex. As of December 31, 2025, our assets under administration were $314 billion, of which $178 billion were assets we manage.
INVESTMENT PERFORMANCE. (1)
Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. Our performance disclosures include specific asset classes, assets under management weighted performance, U.S. fund performance against passive peers, and composite performance against benchmarks. The following tables present investment performance for the one-, three-, five-, and 10-years ended December 31, 2025. Past performance is not a guarantee nor a reliable indicator of future performance.
% of U.S. funds that outperformed Morningstar median (2),(3)
1 year
3 years
5 years
10 years
Equity
Fixed income
Multi-asset
All funds
% of U.S. funds that outperformed passive peer median (2),(4)
1 year
3 years
5 years
10 years
Equity
Fixed income
Multi-asset
All funds
% of composites that outperformed benchmarks (5)
1 year
3 years
5 years
10 years
Equity
Fixed income
All composites
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AUM Weighted Performance
% of U.S. funds AUM that outperformed Morningstar median (2),(3)
1 year
3 years
5 years
10 years
Equity
Fixed income
Multi-asset
All funds
% of U.S. funds AUM that outperformed passive peer median (2),(4)
1 year
3 years
5 years
10 years
Equity
Fixed income
Multi-asset
All funds
% of composites AUM that outperformed benchmarks (5)
1 year
3 years
5 years
10 years
Equity
Fixed income
All composites
As of December 31, 2025, 68 of 141 (48.2%) of the firm's rated U.S. mutual funds (across primary share classes) received an overall rating of 4 or 5 stars. By comparison, 32.5% of Morningstar's fund population is given a rating of 4 or 5 stars (6) . In addition, 60.4% (6) of AUM in the firm's rated U.S. mutual funds (across primary share classes) ended 2025 with an overall rating of 4 or 5 stars.
(1) The investment performance reflects that of T. Rowe Price U.S. mutual funds, ETFs, and composites.
(2) Source: © 2026 Morningstar, Inc. All rights reserved. The information contained herein: 1) is proprietary to Morningstar and/or its content providers; 2) may not be copied or distributed; and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
(3) Source: Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that outperformed the Morningstar category median. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $329B for 1 year, $319B for 3 years, $317B for 5 years, and $316B for 10 years.
(4) Passive Peer Median was created by T. Rowe Price using data from Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, funds with fewer than three peers, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of a retail fund.This analysis compares T. Rowe Price active funds with the applicable universe of passive/index open-end funds and ETFs of peer firms. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that outperformed the passive peer universe. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $272B for 1 year, $262B for 3 years, $260B for 5 years, and $252B for 10 years.
(5) Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared to official GIPS composite primary benchmark. The top chart reflects the percentage of T. Rowe Price composites with 1 year, 3 year, 5 year, and 10 year track record that are outperforming their benchmarks. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,565B for 1 year, $1,557B for 3 years, $1,551B for 5 years, and $1,512B for 10 years.
(6) The Morningstar Rating™ for funds is calculated for funds with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Morningstar gives its best ratings of 5 or 4 stars to the top 32.5% of all funds (of the 32.5%,10% get 5 stars and 22.5% get 4 stars). The Overall Morningstar Rating™ is derived from a weighted average of the performance figures associated with a fund’s 3, 5, and 10 year (if applicable) Morningstar Rating™ metrics.
RESULTS OF OPERATIONS.
The following table and discussion set forth information regarding our consolidated financial results for 2025, 2024 and 2023 on a U.S. GAAP and a non-GAAP basis. The non-GAAP basis adjusts for the impact of our consolidated investment products, the impact of market movements on the deferred compensation liabilities and related economic hedges, investment income related to certain other investments, acquisition-related amortization and costs, impairment charges, and certain nonrecurring charges and gains, including the restructuring charges.
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2025 compared to 2024
2024 compared to 2023
(in millions, except per-share data)
$ Change
% Change (1)
$ Change
% Change (1)
U.S. GAAP basis
Investment advisory fees
Capital allocation-based income (2)
Net revenues
Operating expenses
Net operating income
Non-operating income (loss)
Net income to T. Rowe Price Group
Diluted earnings per common share
Weighted average common shares outstanding assuming dilution
Adjusted basis (3)
Operating expenses
Operating expenses, excluding accrued carried interest related compensation
Net operating income
Non-operating income (loss)
Net income to T. Rowe Price Group
Diluted earnings per common share
Assets under management (AUM) (in billions)
Average AUM
Ending AUM
Investment advisory annualized effective fee rate (EFR) (in bps)
EFR without performance-based fees
EFR with performance-based fees
(1) n/m - the percentage change is not meaningful.
(2) Capital allocation-based income represents the change in accrued carried interest.
(3) See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management's Discussion and Analysis.
Results Overview - 2025 compared to 2024
Net revenues consist of investment advisory revenues; performance-based advisory fees; administrative, distribution, services, and other fees; and capital allocation-based income. More than 90% of our net revenues are related to investment advisory fees. Total net revenues were $7,314.8 million in 2025, a 3.1% increase compared to $7,093.6 million in 2024. The increase was driven primarily by higher investment advisory fees on higher average assets under management, as well as higher capital allocation-based income, which was partially offset by lower performance-based advisory fees.
Investment advisory fees are generally earned based on the value and composition of our assets under management, which change based on fluctuations in financial markets and net cash flows. As our average assets under management increase or decrease in a given period, the level of our investment advisory fee revenue for that same period generally fluctuates in a similar manner. Our annualized effective fee rates can be impacted by market or cash flow related shifts among asset classes and products, including those with tiered-fee structures, along with price changes we make in existing products.
The average annualized effective fee rate earned for 2025 declined from 2024 primarily due to client flows and transfers shifting assets under management toward lower-fee strategies and products, partially offset by market appreciation.
Capital allocation-based income will fluctuate quarter-to-quarter to reflect the adjustment to accrued carried interest for the change in value of certain affiliated funds assuming the funds’ underlying investments were realized as of the end of the period.
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Operating expenses on a U.S. GAAP basis were $5,126.0 million in 2025, an increase of 7.7% compared to $4,760.3 million in 2024. On a non-GAAP basis, operating expenses were $4,666.5 million, an increase of 3.7% compared to $4,498.8 million in 2024.
Compared to 2024, the increase in U.S. GAAP operating expenses was primarily due to the restructuring charge as well as higher technology and facility costs, compensation and related costs, and distribution and servicing costs. These increases were partially offset by lower advertising and promotion costs. The drivers of the increase in non-GAAP operating expenses were the same as those for the increase in U.S. GAAP operating expenses with the exception of the restructuring charge, which is excluded from our non-GAAP operating expenses measures.
We currently estimate our 2026 non-GAAP operating expenses, excluding non-GAAP accrued carried interest compensation, will grow in the range of 3%-6% from the 2025 amount of $4,608.0 million. We could elect to adjust our expense growth should unforeseen circumstances arise, including significant market movements.
Operating margin was 29.9% in 2025 compared to 32.9% in 2024. The decrease is primarily driven by the restructuring charge recognized in 2025, which largely contributed to operating expense growth exceeding net revenue growth.
Diluted earnings per share was $9.24 in 2025 compared to $9.15 in 2024. The increase in GAAP basis diluted earnings per share was primarily due to higher non-operating income and fewer outstanding shares, partially offset by lower operating income.
On a non-GAAP basis, diluted earnings per share was $9.72 in 2025 compared to $9.33 in 2024. The increase was primarily due to fewer outstanding shares and higher net income.
See our non-GAAP reconciliations later in this Management's Discussion and Analysis section.
Results Overview - 2024 compared to 2023
Investment advisory fees are earned based on the value and composition of our assets under management, which change based on fluctuations in financial markets, investment performance, and net cash flows. As our average assets under management increase or decrease in a given period, the level of our investment advisory fees for that same period generally fluctuate in a similar manner. Our annualized effective fee rates can be impacted by market or cash flow related shifts among asset and share classes, shifts among vehicles, price changes in existing products, and asset level changes in products with tiered-fee structures.
Investment advisory fees earned in 2024 increased 12.1% compared to 2023 as average assets under management increased $199.6 billion, or 14.7%, to $1,561.9 billion.
The average annualized effective fee rate, excluding performance-based advisory fees, earned on our assets under management was 41.0 basis points in 2024, compared to 41.9 basis points earned in 2023. Our effective fee rate has declined largely due to a mix shift in assets toward lower fee products and asset classes from client flows and transfers, partially offset by higher market returns. The average annualized fee rate, excluding performance-based fees, was 40.5 basis points for the fourth quarter of 2024.
Operating expenses were $4,760.3 million in 2024, an increase of 6.4% compared to 2023. The increase was primarily driven by higher compensation costs, distribution and servicing costs, and advertising and promotion costs. Additionally, 2023 included a $82.4 million reduction in operating expenses related to the remeasurement of the contingent consideration liability compared to a $13.4 million reduction in 2024.
On a non-GAAP basis, operating expenses were $4,498.8 million, an increase of 5.6% compared to 2023. The increase in our non-GAAP operating expenses was primarily driven by higher costs across compensation and benefits, distribution and servicing, advertising, professional fees, and a nonrecurring recovery of general and administrative costs recognized in 2023. These increases were partially offset by lower external research fees, lower accrued carried interest compensation, and higher capitalized labor. In 2024, the firm changed its approach to paying for external research, consistent with regulations and general industry practice.
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Operating margin was 32.9% in 2024 compared to 30.7% in 2023. The increase is primarily driven by net revenue growth outpacing operating expense growth primarily due to higher average assets under management.
Diluted earnings per share was $9.15 in 2024 compared to $7.76 in 2023. The increase in GAAP basis diluted earnings per share was primarily due to higher operating income and a lower effective tax rate.
On a non-GAAP basis, diluted earnings per share was $9.33 in 2024 compared to $7.59 in 2023. The increase was primarily due to higher operating income and a lower effective tax rate.
See our non-GAAP reconciliations later in this Management's Discussion and Analysis section.
Net revenues
2025 compared to 2024
2024 compared to 2023
(in millions)
$ Change
% Change (1)
$ Change
% Change (1)
Investment advisory fees
Equity
Fixed income, including money market
Multi-asset
Alternatives
Performance-based advisory fees
Capital allocation-based income
Change in accrued carried interest
Acquisition-related amortization and impairments
Administrative, distribution, services, and other fees
Administrative and other fees
Distribution and servicing fees
Net revenues
Average AUM (in billions):
Equity
Fixed income, including money market
Multi-asset
Alternatives
Average AUM
Investment advisory annualized effective fee rate (EFR) (in bps)
EFR without performance-based fees
EFR with performance-based fees
(1) n/m - the percentage change is not meaningful.
Investment advisory fees. The relationship between the change in average assets under management and the change in investment advisory fees for 2025, 2024 and 2023 are presented above.
For 2025 and 2024, the increases in investment advisory fees were due to higher average AUM as stronger market returns and appreciation were slightly offset by net outflows in each of the last two years.
Performance-based advisory fees in each period were primarily from alternatives strategies, and the decline in 2025
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from prior periods were primarily related to lower overall market returns.
Capital allocation-based income includes the change in accrued carried interest along with acquisition-related amortization and impairments. For 2025, the change in accrued carried interest increased net revenues by $149.5 million compared to $134.1 million for 2024. The year‑over‑year change reflects relative performance and market impacts between 2025 and 2024. Additionally, the decrease in acquisition-related amortization and impairments for 2025 compared to 2024 period was primarily due to higher impairments recognized in 2024.The firm realized carried interest of $117.8 million compared to $139.6 million in 2024.
For 2024, capital allocation-based income increased net revenues by $46.6 million. This amount includes an increase of $134.1 million in accrued carried interest from investments in affiliated investment funds, partially offset by $87.5 million of non-cash amortization and impairments related to acquisition-date asset basis differences. Impairments recognized in 2024 were $36.6 million. The firm realized carried interest of $139.6 million compared to $109.8 million in 2023.
A portion of the capital allocation-based income is passed through to employees and recognized in compensation and related costs, with the unpaid amount reported as non-controlling interest in the consolidated balance sheet. In 2025, we recognized compensation expense of $30.8 million, consisting of $58.5 million related to the change in accrued carried interest offset in part by $27.7 million in amortization and impairment charges. For 2024, we recognized compensation expense of $5.4 million, consisting of $42.5 million related to the change in accrued carried interest offset in part by $37.1 million in amortization and impairment charges.
Administrative, distribution, services, and other fees in 2025 were $593.9 million, an increase of $5.9 million compared to 2024. The increase was primarily driven by higher recordkeeping and transfer agent servicing activities provided to the T. Rowe Price mutual funds. Beginning in the third quarter of 2025, revenue from managed account model delivery assets and certain other advisory services is reported in investment advisory fees. This change muted the increases mentioned above, as more than $28 million of revenue in the second half of 2025 is now reported in investment advisory fees.
For 2024, the increase was primarily driven by higher average assets on which we earn non-discretionary advisory services revenue and higher transfer agent servicing activities provided to the T. Rowe Price mutual funds.
Net revenues are presented after the elimination of $4.2 million for 2025, $3.6 million for 2024, and $2.1 million for 2023, earned from our consolidated investment products. The corresponding expenses recognized by these consolidated investment products were also eliminated from operating expenses.
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Operating expenses
2025 compared to 2024
2024 compared to 2023
(in millions)
$ Change
% Change (1)
$ Change
% Change (1)
Compensation, benefits, and related costs
Acquisition-related retention agreements
Capital allocation-based income compensation (2)
Market-related change in deferred compensation liabilities
Total compensation and related costs
Distribution and servicing
Advertising and promotion
Product and recordkeeping related costs
Technology, occupancy, and facility costs
General, administrative, and other
Change in fair value of contingent consideration
Acquisition-related amortization and impairment costs
Restructuring charge
Total operating expenses
Total adjusted operating expenses (3)
(1) n/m - The percentage change is not meaningful.
(2) Capital allocation-based income compensation represents the change in accrued carried interest compensation along with acquisition-related, non-cash amortization and impairments.
(3) See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management's Discussion and Analysis.
Compensation, benefits, and related costs were $2,644.3 million for 2025, an increase of $40.9 million, or 1.6%, compared to 2024. The increase was driven by higher salaries, benefits and long-term incentive compensation. These increases were partially offset by lower temporary personnel costs, net of capitalized labor, and other employee-related costs. The firm employed 7,773 associates at December 31, 2025, a decrease of 4.7% from the end of 2024. The average headcount for first half of 2025 was 8,089, an increase of 2.5% compared to the first half of 2024. Additionally, the average headcount for 2025 was 7,969, a decrease of 0.2% compared to 2024. The decrease in associates from 2024 was primarily driven by the workforce action in July 2025 as part of our broad plan to reduce expense growth and realign resources.
For 2024, compensation, benefits, and related costs were $2,603.4 million, an increase of $152.7 million, or 6.2%, compared to 2023. The increase was driven by a higher bonus pool on an increase in revenue and higher salaries and related benefits partially offset by higher capitalized labor and lower other employee related costs.
Distribution and servicing costs were $383.5 million for 2025, an increase of $29.4 million, or 8.3%, compared to $354.1 million in 2024. For 2024, distribution and services costs were $354.1 million, an increase of $64.2 million, or 22.1%, compared to 2023. The increases in 2025 and 2024 were primarily driven by higher average assets under management distributed through intermediaries.
The costs in this expense category include amounts paid to third-party intermediaries that source the assets of certain share classes of our U.S. mutual funds, ETFs, and our international products, such as our Japanese ITMs and SICAVs. These costs are offset entirely by the investment advisory revenue we earn from these products, or in the case of the Advisor and R share classes of the U.S. mutual funds are recognized in administrative, distribution, services, and other fees.
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Advertising and promotion costs were $107.4 million for 2025, a decrease of $22.2 million, or 17.1%, compared to 2024. The decrease was primarily driven by lower media spending from the absence of the prior year’s elevated media costs related to a specific campaign and broader marketing initiatives.
For 2024, advertising and promotion costs were $129.6 million, an increase of $15.4 million, or 13.5%, compared to 2023. The increase was primarily driven by higher media advertising.
Product and recordkeeping related costs were $312.9 million for 2025, an increase of $15.4 million, or 5.2%, compared to 2024. The increase was primarily driven by higher recordkeeping related costs and higher custody fees related to our trust products from higher assets under management.
For 2024, product and recordkeeping related costs were $297.5 million for 2024, an increase of $6.5 million, or 2.2%, compared to 2023. The increase was primarily driven by higher product related costs to be reimbursed from our sponsored investment products partially offset by lower recordkeeping related costs.
Technology, occupancy, and facility costs were $723.6 million for 2025, an increase of $79.5 million or 12.3%, compared to 2024. The increase was driven by higher technology-related costs, including hosted solutions and depreciation, as well as higher occupancy and facility costs related to our new corporate headquarters, which we began occupying in March 2025.
For 2024, technology, occupancy, and facility costs were $644.1 million, an increase of $11.5 million or 1.8%, compared to 2023. The increase was due to ongoing investment in our technology capabilities, primarily hosted solutions, partially offset by lower facility costs as 2023 included the rent cost of two London facilities until we occupied our new building in September 2023.
General, administrative, and other expenses were $441.9 million for 2025, an increase of $8.1 million or 1.9%, compared to 2024. The increase was primarily driven by higher charitable contributions and other general and administrative costs, partially offset by lower travel-related expenses and lower external research fees.
For 2024, general, administrative, and other expenses were $433.8 million, an increase of $12.5 million or 3.0% compared to 2023. The increase was primarily due to a cost recovery recognized in 2023 that did not recur in 2024, higher professional fees and travel costs. These increases were partially offset by lower external research fees and other general and administrative costs. In 2024, the firm changed its approach to paying for external research, consistent with regulations and general industry practice.
Change in fair value of contingent consideration. Our contingent consideration consists of an earnout arrangement as part of the 2021 acquisition of OHA in which additional purchase price may be due to the sellers upon satisfying or exceeding certain defined revenue targets. Each reporting period, we record the fair value of the contingent consideration due under this arrangement. Reduced revenue expectations resulted in a reduction in the fair value of the contingent consideration liability of $13.4 million in 2024 and $82.4 million in 2023. The fair value of the contingent consideration liability as of December 31, 2025 and 2024 is zero.
Acquisition-related amortization and impairment costs primarily relate to the indefinite- and definite-lived intangible assets identified and separately recognized, at fair value, on acquisition date. In 2025, we recognized acquisition-related amortization and impairment costs of $111.3 million, a decrease of $45.4 million or 29.0%, compared to 2024. The decline was largely due to impairment charges recorded in 2024 for the trade name intangible asset that did not recur in 2025, as well as lower amortization expense resulting from the reduced carrying amount of our definite‑lived intangible asset base.
For 2024, we recognized acquisition-related amortization and impairment costs of $156.7 million, an increase of $22.5 million, compared to 2023. The increase was primarily driven by impairment charges related to the trade name intangible asset.
The impairment charges in all periods were the result of reduced growth expectations for both investment management and incentive fees compared to when the acquisition closed in 2021.
The remaining weighted average amortization period for our definite-lived intangible assets is 2.8 years. Should conditions that led us to recognize impairment charges worsen, additional impairments may be recognized in future
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periods.
Restructuring charge of $177.3 million for 2025 relates to actions taken under our previously announced broad and ongoing expense management program, which is designed to reduce expense growth and realign resources to support investment in existing and future capabilities. The charge includes accelerated depreciation and impairment charges related to certain owned real estate of $127.3 million as well as compensation‑related costs, primarily severance.
Non-operating income (loss)
Non-operating activity for the years ended December 31, 2025, 2024 and 2023 are as follows:
(in millions)
2025 compared to 2024
2024 compared to 2023
$ Change
$ Change
Net gains (losses) from non-consolidated investment products
Cash and discretionary investments
Dividend income
Market-related gains (losses) and equity in earnings (losses)
Total cash and discretionary investments
Seed capital investments
Dividend income
Market-related gains (losses) and equity in earnings (losses)
Total seed capital investments
Total cash, discretionary, and seed investments
Net gains (losses) recognized upon deconsolidation
Investments used to hedge the deferred compensation liabilities
Total net gains (losses) from non-consolidated investment products
Other investment income
Net gains (losses) on investments
Net gains (losses) on consolidated investment products
Other gains (losses), including foreign currency gains (losses)
Non-operating income (loss)
Adjusted non-operating income (loss) (1)
(1) See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management's Discussion and Analysis.
Higher average cash balances increased dividend income in 2025 despite declining money-fund yields from 2024 and 2023. Market returns remained positive, contributing to continued gains within our investment portfolio.
The table above shows the net investment income of the underlying products of the consolidated investment products, not just the income from our ownership share. The table below displays how consolidated investment products affected the individual lines of our consolidated statements of income and the portion attributable to our interest.The impact of consolidating investment products on the individual lines of our consolidated statements of income for 2025, 2024, and 2023 is as follows:
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2025 compared to 2024
2024 compared to 2023
(in millions)
$ Change
$ Change
Operating expenses reflected in net operating income
Net investment income (loss) reflected in non-operating income
Impact on income before taxes
Net income (loss) attributable to our interest in the consolidated investment products
Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors)
Impact on income before taxes
Provision for income taxes
The following table reconciles the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2025, 2024, and 2023:
Statutory U.S. federal income tax rate
State income taxes, net of federal income tax benefits
Net (income) losses attributable to redeemable non-controlling interests (1)
Net excess tax benefits from stock-based compensation plans activity
Valuation allowances
Other items
Effective income tax rate
Adjusted effective tax rate
(1) Net income attributable to redeemable non-controlling interests represents the portion of earnings held in the firm's consolidated investment products, which are not taxable to the firm despite being included in pre-tax income.
Our effective tax rate for 2025 was 23.2%, compared to 24.3% for 2024 and 26.3% for 2023. The decrease in our effective tax rate in 2025 from 2024 was primarily due to lower state taxes resulting from prior period settlements. Additionally, the impact of redeemable non-controlling interest contributed to the lower U.S. GAAP effective tax rate compared to 2024.
For 2024, the decrease in our effective tax rate from 2023 was primarily due to lower valuation allowances recognized in 2024. These favorable impacts were slightly offset by higher state taxes.
The non-GAAP tax rate primarily adjusts for the impact of the consolidated investment products, including net income attributable to redeemable non-controlling interests.
Our effective tax rate will continue to experience volatility in future periods due to, among other things, the impact on the stock-based compensation tax benefits recognized from market fluctuations in our stock price, changes in the mix of our earnings among countries with differing tax laws or rates, and changes in the valuation allowance of foreign-based deferred tax assets. As of December 31, 2025, total valuation allowances recorded were $130.1 million, of which nearly all is related to UK-based deferred tax assets. We intend to continue maintaining a full valuation allowance on these and future UK- based deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Our U.S. GAAP effective tax rate is also impacted by changes in the proportion of net income that is attributable to our redeemable non-controlling interests and non-controlling interests reflected in permanent equity.
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We currently estimate our effective tax rates for the full-year 2026 will be in the range of 23.0% to 27.0% on a GAAP basis, and 24.0% to 27.0% on a non-GAAP basis.
The Organization of Economic Co-operation and Development (OECD) has issued Pillar Two Model Rules (Pillar Two) introducing a global 15% minimum tax effective January 1, 2024 within certain countries in which we operate. In addition, on January 5, 2026, the OECD published administrative guidance (the “side-by-side package”) designed to simplify the Pillar Two tax regime for multinational enterprise groups with an ultimate parent entity in certain countries, primarily the U.S. Our current assessment is that Pillar Two should have no material impact on the company's consolidated results of operations, cash flows, and overall financial position. We will continue to evaluate the impact of Pillar Two as its rules evolve.
NON-GAAP INFORMATION AND RECONCILIATION.
We believe the non-GAAP financial measures below provide relevant and meaningful information to investors about our core operating results. These measures have been established in order to increase transparency for the purpose of evaluating our core business, for comparing current results with prior period results, and to enable more appropriate comparison with industry peers. However, non-GAAP financial measures should not be considered a substitute for financial measures calculated in accordance with U.S. GAAP and may be calculated differently by other companies.
The following schedules reconcile certain U.S. GAAP financial measures to non-GAAP financial measures for each of the last three years:
(in millions, except per-share amount)
Operating expenses
Net operating income
Non-operating income (loss)
Provision (benefit) for income taxes (6)
Net income attributable to T. Rowe Price Group
Diluted earnings per share (7)
U.S. GAAP Basis (FS line item)
Non-GAAP adjustments:
Acquisition-related:
Investment and NCI amortization and impairments (1) (Capital allocation-based income and Compensation and related costs)
Acquisition-related retention arrangements (1) (Compensation and related costs)
Intangible assets amortization and impairments (1)
Total acquisition-related
Deferred compensation liabilities (2) (Compensation and related costs)
Restructuring charge (3)
Consolidated investment products (4)
Other non-operating income (5)
Adjusted Basis
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(in millions, except per-share amount)
Operating expenses
Net operating income
Non-operating income (loss)
Provision (benefit) for income taxes (6)
Net income attributable to T. Rowe Price Group
Diluted earnings per share (7)
U.S. GAAP Basis (FS line item)
Non-GAAP adjustments:
Acquisition-related:
Investment and NCI amortization and impairments (1) (Capital allocation-based income and Compensation and related costs)
Acquisition-related retention arrangements (1) (Compensation and related costs)
Contingent consideration (1)
Intangible assets amortization and impairments (1)
Total acquisition-related
Deferred compensation liabilities (2) (Compensation and related costs)
Consolidated investment products (4)
Other non-operating income (5)
Adjusted Basis
(in millions, except per-share amount)
Operating expenses
Net operating income
Non-operating income (loss)
Provision (benefit) for income taxes (6)
Net income attributable to T. Rowe Price Group
Diluted earnings per share (7)
U.S. GAAP Basis (FS line item)
Non-GAAP adjustments:
Acquisition-related:
Investment and NCI amortization and impairments (1) (Capital allocation-based income and Compensation and related costs)
Acquisition-related retention arrangements (1) (Compensation and related costs)
Contingent consideration (1)
Intangible assets amortization and impairments (1)
Total acquisition-related
Deferred compensation liabilities (2) (Compensation and related costs)
Consolidated investment products (4)
Other non-operating income (5)
Adjusted Basis
(1) These non-GAAP adjustments remove the impact of acquisition-related amortization of intangible assets, the recurring fair value remeasurements of the contingent consideration liability, if any, amortization of acquired investment and non-controlling interest basis differences and amortization of compensation-related arrangements. We believe adjusting for these charges helps the reader's ability to understand our core operating results and increases comparability period to period.
(2) This non-GAAP adjustment eliminates the compensation expense impact from market valuation changes in deferred compensation liabilities, including the supplemental savings plan and, starting in Q4 2024, restricted fund units, and the related net gains (losses) on investments used as economic hedges against the related liabilities. The liabilities are adjusted
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based on the performance of hypothetical investments selected by participants. We use investment products to economically hedge the market risk associated with the supplemental savings plan liability and the expected settlement value of unvested restricted fund units. We believe it is useful to offset the non-operating investment income (loss) of the hedges against the related compensation expense and remove the net impact to help the reader's ability to understand the firm's core operating results and to increase comparability period to period.
(3) This non-GAAP adjustment removes accelerated depreciation and impairment charges related to certain owned real estate, as well as compensation expenses, primarily severance, resulting from actions taken as part of our broad and ongoing plan to reduce expense growth and realign resources to invest in existing and future capabilities. We believe this adjustment helps the reader’s ability to understand our core operating results and increases comparability period to period.
(4) This non-GAAP adjustment removes the impact of the consolidated investment products by adding back their operating expenses and subtracting their investment income. The operating expense adjustment represents their operating expenses net of related investment advisory and administrative fees. The adjustment to net income attributable to T. Rowe Price Group represents the consolidated investment products' net income, net of redeemable non-controlling interests. We believe this adjustment helps the reader’s ability to understand our core operating results and increases comparability period to period.
(5) This non-GAAP adjustment removes non-operating income (loss) earned on those investments that are not economic hedges for the deferred compensation liabilities and are not part of the cash and discretionary investment portfolio. We retain gains from cash and discretionary investments in our non-GAAP measures, as they are considered part of our core operations. We believe adjusting for the remaining non-operating income (loss) helps the reader’s ability to understand the firm's core operating results and increases comparability period to period. Additionally, we do not emphasize this portion of non-operating income (loss) when assessing the firm's performance.
(6) The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 24.3% for 2025, 24.5% for 2024 and 27.2% for 2023.
(7) This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to
T. Rowe Price Group divided by the weighted-average common shares outstanding assuming dilution. The calculation of adjusted net income allocated to common stockholders is as follows:
Year ended
(in millions)
Adjusted net income attributable to T. Rowe Price Group
Less: adjusted net income allocated to outstanding restricted stock and stock unit holders
Adjusted net income allocated to common stockholders
CAPITAL RESOURCES AND LIQUIDITY.
Stockholders' equity attributable to T. Rowe Price Group increased to $10.9 billion at December 31, 2025 from $10.3 billion at December 31, 2024, and tangible book value increased to $7.9 billion at December 31, 2025 from $7.3 billion at December 31, 2024.
Sources of Liquidity
We have ample liquidity, including cash and investments in T. Rowe Price products, as follows:
(in millions)
Cash and cash equivalents
Discretionary investments
Total cash and discretionary investments
Redeemable seed capital investments
Investments used to hedge the deferred compensation liabilities
Total cash and investments in T. Rowe Price products attributable to T. Rowe Price Group
Our discretionary investment portfolio is primarily comprised of short duration bond funds, which typically yield higher than money market rates. Of our cash and cash equivalents, $730.6 million at December 31, 2025 and $653.9 million at December 31, 2024 were held by subsidiaries located outside the U.S. Our cash and discretionary investment portfolio experienced market gains and dividends of $177.5 million in 2025 and $148.7 million in 2024.
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Given the availability of our financial resources and cash expected to be generated through future operations, we do not maintain an available external source of additional liquidity.
Our seed capital investments are redeemable, although we generally expect to be invested several years for the products to build an investment performance history and until unrelated third-party investors substantially reduce our relative ownership percentage.
The cash and investment presentation on the consolidated balance sheet is based on the accounting treatment for the cash equivalent or investment item. The following table details how T. Rowe Price Group’s interests in cash and investments relate to where they are presented on the consolidated balance sheet as of December 31, 2025.
(in millions)
Cash and cash equivalents
Investments
Net assets of consolidated investment products (1)
Total
Cash and discretionary investments
Redeemable seed capital investments
Investments used to hedge the deferred compensation liabilities
Total cash and investments in T. Rowe Price products attributable to T. Rowe Price Group
Investments in affiliated private investment funds (2)
Investments in affiliated collateralized loan obligations
Investment in UTI and other investments
Total cash and investments attributable to T. Rowe Price Group
Redeemable non-controlling interests
As reported on the consolidated balance sheet at December 31, 2025
(1) The consolidated investment products are generally those products we provided seed capital at the time of their formation and we have a controlling interest. These products generally represent U.S. mutual funds, ETFs, and funds regulated outside the U.S. The $893.7 million represents the total value at December 31, 2025 of our interest in the consolidated investment products. The total net assets of the T. Rowe Price investment products at December 31, 2025 of $1,929.7 million includes assets of $1,951.0 million, less liabilities of $21.3 million as reflected in the consolidated balance sheets in Item 8. Financial Statements of this Form 10-K.
(2) Includes $157.1 million of non-controlling interests in consolidated entities held by related parties, which we cannot sell in order to obtain cash for general operations.
Our consolidated balance sheet reflects the assets and liabilities of those investment products we consolidate, as well as redeemable non-controlling interests for the portion of these investment products that are held by unrelated third-party investors. Although we can redeem our net interest in these investment products at any time, we cannot directly access or sell the assets held by the products to obtain cash for general operations. Additionally, the assets of these investment products are not available to our general creditors. Our interest in these investment products was primarily used as initial seed capital and is recategorized as discretionary when it is determined by management that the seed capital is no longer needed. We assess the discretionary products and, when we decide to liquidate our interest, we seek to do so in a way as to not impact the product and, ultimately, the unrelated third-party investors.
Uses of Liquidity
We paid $5.08 per share in regular dividends in 2025, an increase of 2.4% over the $4.96 per share paid in 2024. Further, we expended $624.6 million in 2025 to repurchase nearly 6.2 million shares, or 2.8%, of our outstanding common stock at an average price of $101.15 per share. These dividends and repurchases were funded using existing cash balances and cash generated from operations. While opportunistic in our approach to stock buybacks, we will generally repurchase our common stock over time to offset the dilution created by our equity-based compensation plans.
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Since the end of 2022, we have returned $4.6 billion to stockholders through stock repurchases and regular quarterly dividends, as follows:
(in millions)
Recurring dividend
Stock repurchases
Total returned to stockholders
Total
We anticipate property, equipment, software and other capital expenditures, including internal labor capitalization, for the full-year 2026 to be about $270 million, of which more than three-quarters is planned for technology initiatives. We expect to fund our anticipated capital expenditures with operating cash flows and other available resources.
Cash Flows
The following tables summarize the cash flows for 2025, 2024 and 2023, that are attributable to T. Rowe Price Group, our consolidated investment products, and the related eliminations required in preparing the consolidated statement of cash flows.
(in millions)
Cash flow attributable to T. Rowe Price Group
Cash flow attributable to consolidated investment products
Eliminations
As reported
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation, amortization and impairments of property, equipment and software
Amortization and impairment of acquisition-related assets and retention agreements
Stock-based compensation expense
Net (gains) losses recognized on investments
Total non-cash adjustments
Net (investments) redemptions in sponsored investment products used to economically hedge deferred compensation liabilities
Net change in trading securities held by consolidated investment products
Other changes
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents of consolidated investment products
Net change in cash and cash equivalents during year
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
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(in millions)
Cash flow attributable to T. Rowe Price Group
Cash flow attributable to consolidated investment products
Eliminations
As reported
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation, amortization and impairments of property, equipment and software
Amortization and impairment of acquisition-related assets and retention agreements
Fair value remeasurement of contingent consideration liability
Stock-based compensation expense
Net (gains) losses recognized on investments
Total non-cash adjustments
Net (investments) redemptions in sponsored investment products used to economically hedge deferred compensation liabilities
Net change in trading securities held by consolidated investment products
Other changes
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents of consolidated investment products
Net change in cash and cash equivalents during year
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
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(in millions)
Cash flow attributable to T. Rowe Price Group
Cash flow attributable to consolidated investment products
Eliminations
As reported
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation, amortization and impairments of property, equipment and software
Amortization and impairment of acquisition-related assets and retention agreements
Fair value remeasurement of contingent consideration liability
Stock-based compensation expense
Net (gains) losses recognized on investments
Total non-cash adjustments
Net (investments) redemptions in sponsored investment products used to economically hedge deferred compensation liabilities
Net change in trading securities held by consolidated investment products
Other changes
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents of consolidated investment products
Net change in cash and cash equivalents during year
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Operating activities
During 2025, operating activities attributable to T. Rowe Price Group provided cash flows of $2,489.5 million, an increase of $175.6 million from $2,313.9 million provided during 2024. The increase was primarily driven by a $162.0 million increase in cash flows related to timing differences associated with the cash settlement of our assets and liabilities. Additionally, net investments in 2025 into investment products that economically hedge our deferred compensation liabilities were $58.6 million lower than made in 2024. These increases to operating cash flows were offset in part by a $13.0 million decrease in net income and a $32.0 million decrease in the add-back for non-cash items as detailed in the 2025 table above. The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying products.
During 2024, operating activities attributable to T. Rowe Price Group provided cash flows of $2,313.9 million, an increase of $255.3 million from $2,058.6 million provided during 2023. The increase was primarily driven by a $311.4 million increase in net income and a $215.6 million increase in the add-back for non-cash items as detailed in the 2024 table above. These increases to operating cash flows were offset in part by a $158.8 million decrease in cash flows related to timing differences associated with the cash settlement of our assets and liabilities. Additionally, in 2024, we made $112.9 million more net investments in sponsored investment products used to economically hedge our deferred compensation liabilities compared to 2023. The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying products.
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Investing activities
Net cash provided by investing activities that are attributable to T. Rowe Price Group totaled $59.5 million in 2025 compared to net cash used in investing activities of $187.9 million in 2024. In 2025, we decreased our property and equipment expenditures by $149.2 million, primarily due to the completion of our new corporate headquarters in early 2025, and decreased our other investing activity by $83.0 million. Net investing activities from our investments in sponsored investment products generated net proceeds of $422.3 million in 2025 compared to $407.1 million in 2024. We eliminate our capital in those investment products we consolidate in preparing our consolidated statements of cash flows. The remaining change in reported cash flows from investing activities of $47.3 million is related to the net cash removed from our balance sheet from consolidating and deconsolidating investment products.
Net cash used in investing activities that are attributable to T. Rowe Price Group totaled $187.9 million in 2024 compared to $310.2 million in 2023. Net investing activities from our investments in sponsored investment products generated net proceeds of $407.1 million in 2024 compared to $36.1 million in 2023. In 2024, we increased our property and equipment expenditures by $115.5 million and our other investing activity by $133.2 million. We eliminate our capital in those investment products we consolidate in preparing our consolidated statements of cash flows. The remaining change in reported cash flows from investing activities of $41.0 million was related to the net cash removed from our balance sheet from consolidating and deconsolidating investment products.
Financing Activities
Net cash used in financing activities attributable to T. Rowe Price Group totaled $1,820.6 million in 2025 compared to $1,542.8 million in 2024. During 2025, we used $620.9 million to repurchase nearly 6.2 million shares compared to $337.2 million to repurchase 3.0 million shares in 2024. In 2025, cash flow related to common stock issued under stock compensation plans increased by $11.0 million compared to 2024. In addition, the $7.4 million increase in dividends paid in 2025 was a result of the 2.4% increase in our quarterly dividend per share. The remaining change in reported cash flows from financing activities is attributable to a $63.0 million decrease in net subscriptions from redeemable non-controlling interest holders of our consolidated investment products during 2025.
Net cash used in financing activities attributable to T. Rowe Price Group totaled $1,542.8 million in 2024 compared to $1,437.4 million in 2023. During 2024, we used $337.2 million to repurchase nearly 3.0 million shares compared to $254.4 million to repurchase 2.4 million shares in 2023. The $13.9 million increase in dividends paid in 2024 was a result of the 1.6% increase in our quarterly dividend per share. In addition, in 2024, net distributions to non-controlling interests in consolidated entities decreased by $6.6 million and cash flow related to common stock issued under stock compensation plans decreased by $15.3 million compared to 2023. The remaining change in reported cash flows from financing activities is attributable to a $247.4 million increase in net subscriptions from redeemable non-controlling interest holders of our consolidated investment products during 2024.
MATERIAL CASH COMMITMENTS.
Our material cash commitments primarily include our obligations related to our deferred compensation liabilities, facility leases, and other contractual amounts that will be due for the purchase of goods or services to be used in our operations. Some of these contractual amounts may be cancellable under certain conditions and may involve termination fees. We expect to fund these cash commitments from future cash flows from operations.
Our obligations under our deferred compensation liabilities are disclosed on our consolidated balance sheet with more information included in Note 12 and Note 18 to the consolidated financial statements. Our lease obligations are disclosed in Note 7 to the consolidated financial statements. Additionally, there are unrecognized tax benefits discussed in Note 10 to our consolidated financial statements. The note references above are in Item 8. of this Form 10-K.
While most of our other material cash commitments consist of goods and services used in our operations, these commitments primarily consist of obligations related to long-term software licensing, maintenance contracts, and outsource contracts.
We also have outstanding commitments to fund additional contributions to investment partnerships totaling $199.3 million. The vast majority of these additional contributions will be made to investment partnerships in which we have an existing investment. In addition to such amounts, a percentage of prior distributions may be called under certain circumstances.
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As part of the OHA acquisition, T. Rowe Price committed $500 million to fund OHA product launches through 2026. As of December 31, 2025, T. Rowe Price has a $287 million remaining commitment to OHA products. T. Rowe Price has also entered into certain earnout and other arrangements as part of that acquisition. For more detail on these arrangements, see Note 5 and Note 16 to our consolidated financial statements in Item 8. of this Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES.
The preparation of financial statements often requires the selection of specific accounting methods and policies from among several acceptable alternatives. Further, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in our consolidated balance sheets, the revenues and expenses in our consolidated statements of income, and the information that is contained in our significant accounting policies and notes to the consolidated financial statements. These policies and estimates are considered critical because they had a material impact or are reasonably likely to have a material impact on our consolidated financial statements and because they require management to make significant judgments, assumptions or estimates. Making these estimates and judgments requires the analysis of information concerning events that may not yet be complete and of facts and circumstances that may change over time. Accordingly, actual amounts or future results can differ materially from those estimates that we currently include in our consolidated financial statements, significant accounting policies, and notes.
We present those significant accounting policies used in the preparation of our consolidated financial statements as an integral part of those statements within this 2025 Annual Report on Form 10-K. In the following discussion, we highlight and explain further certain of those policies and estimates that are most critical to the preparation and understanding of our financial statements.
Consolidation
We consolidate all subsidiaries and investment products in which we have a controlling financial interest. We are deemed to have a controlling interest when we own the majority of the voting interest of an entity or are deemed to be the primary beneficiary of a variable interest entity (VIE). VIEs are entities that lack sufficient equity to finance its activities or the equity holders do not have defined power to direct the activities of the entity normally associated with an equity investment. Our analysis to determine whether an entity is a VIE or a voting interest entity (VOE) involves judgment and considers several factors, including an entity’s legal organization, capital structure, the rights of the equity investment holders, our ownership interest in the entity, and our contractual involvement with the entity. We continually review and reconsider our VIE or VOE conclusions upon the occurrence of certain events, such as changes to our ownership interest, changes to an entity’s legal structure, or amendments to governing documents. Our VIEs are primarily sponsored investment products and our variable interest consists of our equity ownership in and investment management fees earned from these entities.
We are the primary beneficiary if we have the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the VIE that could potentially be significant. Our SICAV funds and other investment products regulated outside the U.S. are determined to be VIEs. We have interests in certain investment partnerships that are also considered VIEs, including entities that have interests in general partners of affiliated private investment funds, which are also VIEs. We consolidate the entities that hold the interest in the general partners; however, the entities are not the primary beneficiaries of the affiliated private investment funds.
Other-than-temporary impairments of equity method investments
We evaluate our equity method investments for impairment when events or changes in circumstances indicate that the carrying value of the investment exceeds its fair value, and the decline in fair value is other than temporary. For our investments in our affiliated private investment funds, we consider the length of time and the extent to which market value has been less than cost, any specific events that may influence the operations of the funds and our intent and ability to retain the investment for a period of time to allow for any anticipated recovery in market value. We generally believe an assessment period of four consecutive quarters of sustained market losses is a reasonable period to allow for an anticipated market recovery.
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Intangible assets
Indefinite-lived intangible assets are tested for impairment annually, in the fourth quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the intangible asset is impaired. Management must first determine the level at which indefinite-lived intangible assets are tested for impairment (i.e., unit of account). We have concluded that the trade name and investment advisory agreement indefinite-lived intangible assets will be considered their own separate unit of account. Once the unit of account is determined, management has the option to first assess indefinite-lived intangible assets for qualitative factors to determine whether it is necessary to perform a quantitative impairment test. If a quantitative impairment test is required, the impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If required, fair value is generally determined using a discounted cash flow analysis where estimated future cash flows are discounted to arrive at a single present value amount. This approach includes inputs that require significant management judgment, the most relevant of which include revenue growth, discount rates, and tax rates. Changes in these inputs could produce different fair value amounts and therefore different conclusions. During 2025, we recognized $3.3 million of non-cash charges on the indefinite-lived investment advisory agreements intangible asset. The maximum future of indefinite-lived intangible assets that we could incur is the amount recognized in our consolidated balance sheets within intangible assets, $148.3 million as of December 31, 2025.
Definite-lived intangible assets are reviewed for impairment whenever events or circumstances indicate that the asset group's carrying amount may not be recoverable (i.e., the carrying amount is more than the undiscounted estimated future cash flows). Management must first determine the level at which definite-lived intangible assets are tested for impairment (i.e., asset group). The determination of the asset group is judgmental and the intangible assets can be grouped based on the lowest level for which identifiable cash flows are largely independent of identifiable cash flows for other groups of assets. Since each affiliated private investment fund has identifiable cash flows separate from other funds, we determined that the asset group for testing is each individual affiliated private investment fund. Once the asset group is identified, we next determine whether there are any triggering events that would cause us to believe that the carrying value would not be recoverable. If there is a triggering event, then we would perform a test of recoverability. Based on that test, if the carrying value is not recoverable, then a fair value measurement is required of the asset group to determine if the fair value is less than the asset group's carrying amount. If required, fair value would be determined using a discounted cash flow analysis where estimated future cash flows are discounted to arrive at a single present value amount. This approach includes inputs that require significant management judgment, the most relevant of which include revenue growth, discount rates, and tax rates. Any would be the difference between the fair value of the asset group and its carrying amount. During 2025, we recognized immaterial non-cash charges on these intangible assets.
Goodwill
We internally conduct, manage, and report our operations as one reportable business segment - investment advisory business. This reflects how the chief operating decision maker allocates resources and assesses performance. Accordingly, we have one reporting unit - our investment advisory business, consistent with our single operating segment, to which all goodwill has been assigned.
We evaluate the carrying amount of goodwill in our consolidated balance sheets for possible impairment on an annual basis in the fourth quarter of each year using a fair value approach. Goodwill would be considered impaired whenever its carrying amount exceeds the fair value of our investment advisory business. Our annual testing has demonstrated that the fair value of our investment advisory business (our market capitalization) exceeds our carrying amount (our stockholders’ equity) and, therefore, no impairment exists. Should we reach a different conclusion in the future, additional work would be performed to ascertain the amount of the non-cash impairment charge to be recognized. We must also perform impairment testing at other times if an event or circumstance occurs indicating that it is more likely than not that an impairment has been incurred. The maximum future impairment of goodwill that we could incur is the amount recognized in our consolidated balance sheets, $2.6 billion as of December 31, 2025.
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Provision for income taxes
We operate in numerous states and countries through our various subsidiaries and must allocate our income, expenses, and earnings under the various laws and regulations of each of these taxing jurisdictions. Accordingly, our provision for income taxes represents our total estimate of the liability that we have incurred in doing business each year in all of our locations. Annually, we file tax returns that represent our filing positions with each jurisdiction and settle our return liabilities. Each jurisdiction has the right to audit those returns and may take different positions with respect to income and expense allocations and taxable earnings determinations. From time to time, we may also provide for estimated liabilities associated with uncertain tax return filing positions that are subject to, or in the process of, being audited by various tax authorities. Because the determination of our annual provision is subject to judgments and estimates, actual results will vary from those recognized in our financial statements. As a result, we recognize additions to, or reductions of, income tax expense during a reporting period that pertain to prior period provisions as our estimated liabilities are revised and actual tax returns and tax audits are settled. We recognize any such prior period adjustment in the discrete quarterly period in which it is determined.
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including
future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. We recognize a valuation allowance for any portion of the deferred tax asset that is not expected to be realized based on the available positive and negative evidence. An increase in the valuation allowances increases the provision expense and effective tax rate. Furthermore, if we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would reduce the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
NEWLY ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE.
See Note 1 - Basis of Preparation and Summary of Significant Accounting Policies within Item 8. Financial Statements for a discussion of newly issued but not yet adopted accounting guidance.
FORWARD-LOOKING INFORMATION.
From time to time, information or statements provided by or on behalf of T. Rowe Price, including those within this report, may contain certain forward-looking information, including information or anticipated information relating to: our revenues, net income, and earnings per share of common stock; changes in the amount and composition of our assets under management; our expense levels; our effective tax rate; legal or regulatory developments; geopolitical instability; interest rates and currency fluctuations; and our expectations regarding financial markets, future transactions, dividends, stock repurchases, investments, new products and services, capital expenditures, changes in our effective fee rate, and other industry or market conditions. Readers are cautioned that any forward-looking information provided by or on behalf of T. Rowe Price is not a guarantee of future performance. Actual results may differ materially from those in forward-looking information because of various factors including, but not limited to, those discussed below and in Item 1A. Risk Factors, of this Form 10-K Annual Report. Further, forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events.
Our future revenues and results of operations will fluctuate primarily due to changes in the total value and composition of assets under our management. Such changes result from many factors, including, among other things: client-related cash inflows and outflows in our products, performance fees, capital allocation-based income, fluctuations in global financial markets that result in appreciation or depreciation of the assets under our management, our introduction of new investment products, and changes in retirement savings trends relative to participant-directed investments and defined contribution plans.
The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence; the relative investment performance of the T. Rowe Price mutual funds and other managed investment products compared to competing offerings and market indexes; the ability to maintain our investment management and administrative fees at appropriate levels; the impact of changes in interest rates and inflation; competitive conditions in the mutual fund, asset management, and broader financial services sectors; our level of success in implementing our strategy to expand our business; and our ability to attract and retain key personnel. Our revenues are substantially dependent on fees earned under contracts with the T. Rowe Price funds and could be adversely
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affected if the independent directors of one or more of the T. Rowe Price funds terminated or significantly altered the terms of the investment management or related administrative services agreements. Non-operating investment income will also fluctuate primarily due to the size of our investments, changes in their market valuations, and any other-than-temporary impairments that may arise or, in the case of our equity method investments, our proportionate share of the investees’ net income.
Our future results are also dependent upon the level of our expenses, which are subject to fluctuation for the following or other reasons: changes in the level of our advertising and promotion expenses in response to market conditions, including our efforts to expand our investment advisory business to investors outside the U.S. and to further penetrate our distribution channels within the U.S.; the pace and level of spending to support key strategic priorities; variations in the level of total compensation expense due to, among other things, bonuses, restricted stock units and other equity grants, other incentive awards, our supplemental savings plan, changes in our employee count and mix, and competitive factors; any goodwill, intangible asset or other asset impairment that may arise; fluctuation in foreign currency exchange rates applicable to the costs of our international operations; expenses and capital costs, such as technology assets, depreciation, amortization, and research and development, incurred to maintain and enhance our administrative and operating services infrastructure; the timing of the assumption of all third party research payments, unanticipated costs that may be incurred to protect investor accounts and the goodwill of our clients; and disruptions of services, including those provided by third parties, such as fund and product recordkeeping, facilities, communications, power, and the mutual fund transfer agent and accounting systems, as a result of extreme events, or otherwise.
Our business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax, and compliance requirements may have a substantial effect on our operations and results, including, but not limited to, effects on costs that we incur and effects on investor interest in investment products and investing in general or in particular classes of mutual funds or other investments.
