Carlyle Q4 2025 Earnings: AUM Growth Masks Persistent Earnings Fragility

What happened

In its Q4 2025 earnings call, Carlyle reported continued asset under management growth, driven by credit and secondaries, but fee-related earnings (FRE) growth remained subdued, missing consensus expectations. The call revealed that realized performance revenues stayed depressed at low levels, highlighting ongoing challenges in monetizing the $2.6 billion accrued carry balance due to weak buyout exits. Management emphasized progress on strategic bets like the AlpInvest secondaries program and the Lukoil deal, yet both face significant execution and geopolitical risks. Despite upgraded guidance to 'at least 10%' FRE growth for 2025, pending fee-earning AUM declined, signaling near-term fee activation headwinds. Overall, the quarter reinforced Carlyle's transition towards more recurring revenue streams, but earnings quality and volatility issues persist, keeping the investment case precarious.

Implication

The Q4 results underscore that Carlyle's shift to credit and secondaries hasn't yet translated into robust, high-quality earnings, necessitating a patient approach. Persistent weakness in buyout realizations suggests the accrued carry balance may not be quickly monetized, pressuring distributable earnings and stock multiples. Geopolitical risks from the Lukoil transaction, with a key OFAC deadline looming, add uncertainty and could derail near-term catalysts. Management's reliance on FRE growth targets must be consistently met to avoid further earnings misses and potential derating. Until evidence of double-digit FRE growth and stabilized carry emerges, the risk-reward profile favors waiting for a pullback near $50 or more definitive progress.

Thesis delta

The investment thesis remains centered on Carlyle's transition to a more diversified fee platform, but the Q4 earnings call confirms that execution is lagging, with FRE growth still fragile and carry realization weak. This reinforces the 'WAIT' rating, as the stock's current price near $59 offers limited margin of safety without proof that new growth engines can deliver durable earnings. Investors should closely monitor the next two quarters for FRE target achievement and the Lukoil deal outcome, as failure here could necessitate a downward reassessment.