Blackstone's next trick is to stick the landing

TPG

24/10/2025 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Jonathan  Guilford

NEW YORK, Oct 23 (Reuters Breakingviews) - For private equity, there are plenty of signs the worst might be over. For everything else in private markets, the hard part is still to come. On Thursday, asset management titan Blackstone BX.N reported earnings some 20% above analysts’ expectations, boosted by the end of a dealmaking drought. Normalization, though, is double-edged: returns for boss Steve Schwarzman’s vast lending operation are narrowing, just as he needs to shovel vast sums of money out the door.

Blackstone’s earnings available to shareholders rose 48% year-over-year to $1.9 billion. Asset sales spiked to nearly $31 billion across the business. But even amid this results bonanza, the firm’s private equity unit is a standout: $871 million of earnings, more than double from 2024.

Signs of a buyout resurgence are everywhere, from Blackstone’s $18 billion club deal with peer TPG TPG.O to take down healthcare operator Hologic HOLX.O, to video-game developer Electronic Arts’ EA.O $55 billion sale to Silver Lake Partners. Worldwide private equity-backed M&A for the first nine months of the year is up 16.5% at $587 billion compared to the same period in 2024, according to LSEG.

Yet Blackstone and its ilk these days style themselves as alternative asset managers, stretching across credit, insurance and real estate. That’s been a big boon to their valuations, with shares of Schwarzman’s firm now trading at 26 times expected earnings over the next twelve months, per Visible Alpha. A mere bank like Goldman Sachs GS.N trades at under 14 times. Recently, that expansion has become something of a weakness. Blackstone’s stock is down 11% year-to-date, versus the S&P 500 Index’s .SPX 14% rise. Spectacular bankruptcies for auto-parts maker First Brands and lender Tricolor are raising fears about a wave of defaults.

Blackstone executives reasonably point to the role of their banking rivals on Wall Street in facilitating these failures. Yet private credit has been an easy game for a while. The pandemic and higher interest rates led to a dearth of financing which allowed the likes of Blackstone to build a loan book full of extremely high yields.

That period is ending. Earnings growth in Blackstone’s credit and insurance business slowed again this quarter, to 11% annualized, down from 26% a year ago. Gross returns for its private credit strategy of 2.6% are the lowest since rate hikes stopped in 2023.

Yet Blackstone needs more juicy investments than ever, with a massive $57 billion in dry powder sitting in its credit business. As the prospect of everyday Americans putting their retirement savings into alternatives approaches, there will be yet more to handle. Schwarzman is finally exiting the pandemic’s shadow. Now he needs to stick the landing.

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CONTEXT NEWS

Private equity, credit and real estate-focused asset manager Blackstone said on October 23 that it generated roughly $1.9 billion in earnings available to be distributed to shareholders in the third quarter. The result represents year-over-year growth of 48%, and beat analysts’ expectations by nearly 20%, according to Visible Alpha data.

Realizations, which represent asset sales, rose to $30.6 billion firm-wide, a record high and up 35% from the same period in the prior year. Earnings in Blackstone’s private equity segment reached $871 million, roughly doubling from 2024. In its credit and insurance business, earnings of $416 million were up 11% year-over-year.

Blackstone shares fall behind the market https://www.reuters.com/graphics/BRV-BRV/BRV-BRV/znpnnyozrpl/chart.png

(Editing by Aimee Donnellan; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on GUILFORD/ Jonathan.Guilford@thomsonreuters.com))