At first glance, BlackRock’s (BLK) second-quarter 2025 earnings report delivered exactly what investors wanted—record Assets Under Management (AUM) of $12.5 trillion and a 16% year-over-year jump in adjusted earnings per share (EPS). Yet, despite these strong results, the stock, which was hovering near all-time highs, fell 6% in post-earnings trading.
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While BlackRock’s stock has since rebounded, I believe that the unexpected knee-jerk reaction by the market was a misunderstanding that has since cleared up, leaving me Bullish on BLK despite some shortfalls in its second quarter.
BlackRock’s Q2 Deconstructed
A closer look at BlackRock’s second-quarter results reveals a mix of strengths and soft spots. The headline figure—record AUM of $12.5 trillion—marked an impressive 18% year-over-year increase. Since BlackRock’s core business is asset management, AUM can be viewed as the company’s engine. However, a larger engine doesn’t always mean greater efficiency. Not all AUM contributes equally to revenue; for example, assets in low-fee index funds generate significantly less income than those in higher-margin products, such as private credit. Still, with adjusted EPS at $12.05, it’s clear that BlackRock continues to operate efficiently.
On the downside, GAAP revenue came in at $5.42 billion—up 13% year-over-year, but just shy of analyst expectations. Since revenue and EPS are two of the most closely watched metrics during earnings season, this slight miss may have rattled investors.
Another potential red flag was net inflows of only $68 billion for the quarter. However, this figure was skewed by a single $52 billion partial redemption from one institutional client in a low-fee index fund. The transaction had minimal impact on profitability and does not reflect any underlying weakness in BlackRock’s business.
Performance fees, which are inherently variable, fell 43% year-over-year—an expected dip given their dependence on funds exceeding benchmark returns. That said, the company’s core, recurring revenue streams remained solid. Base fees and securities lending, BlackRock’s largest revenue driver, rose 15% to $4.5 billion. Meanwhile, revenue from its high-margin Technology Services segment jumped 26% to $499 million, underscoring the strength of its foundational business lines.
BLK’s Bullish Case Relies on a Strategic Pivot
Amid these headline results, BlackRock is integrating its recent acquisitions, including Global Infrastructure Partners (GIP) and Preqin. These investments contributed to the company’s $3.69 billion in second-quarter expenses—a 23% year-over-year increase that outpaced revenue growth of 13%. As a result, adjusted operating margins declined by 80 basis points year-over-year to 43.3%.
Still, this short-term margin compression is part of a broader strategic shift. BlackRock is aiming to raise $400 billion in gross private markets capital over the next five years. Meanwhile, its iShares ETF business continues to show strength, delivering 12% organic base fee growth in Q2. The acquisition of Preqin is already enhancing its Technology Services segment—particularly through Aladdin—as BlackRock doubles down on its ambition to manage capital, as well as lead in data and analytics.
These moves signal a larger evolution: BlackRock is expanding beyond traditional asset management into new frontiers, including digital assets, with the launch of the iShares Bitcoin Trust, and global partnerships, such as the Jio BlackRock joint venture in India. Together, these initiatives represent meaningful long-term growth opportunities that could redefine the company’s future revenue mix.
Not Forgetting BlackRock’s Bearish Case
On the flip side, there are several risks to BLK’s bullish case, worth keeping an eye on. One ongoing challenge is fee compression, as investor demand continues to shift toward low-cost passive products, which can pressure margins over time. Additionally, the integration of large and complex acquisitions, such as those by Global Infrastructure Partners (GIP), comes with its own set of risks.
Mergers of this scale often encounter operational friction, cultural mismatches, or delays in realizing synergies. Finally, like all asset managers, BlackRock remains exposed to macroeconomic volatility. A significant market downturn could weigh on both AUM levels and fee-based revenues, directly impacting performance.
Is BlackRock a Good Stock to Buy Now?
On Wall Street, BLK sports a Strong Buy consensus rating among analysts based on 13 Buy, one Hold, and zero Sell ratings in the past three months. BLK’s average price target of $1,168.79 implies an upside potential of almost 6%.
Last week, Craig Siegenthaler from Bank of America reiterated a Buy rating on BLK and set a price target of $1,224. The analyst expressed optimism, noting that “BlackRock is poised to lead in the target date fund market, particularly with its innovative approach to incorporating private equity and credit into these funds. The company’s acquisition of BGI and its partnerships with HPS and GIP have strengthened its position as a top private markets manager, with significant assets under management related to retirement funds.”
BlackRock’s Strategic Pivot Justifies Its Premium Valuation
The market has largely recalibrated its initial response to BlackRock’s second-quarter earnings, which, at first glance, presented mixed signals. A closer analysis reveals that the modest revenue miss and elevated expenses—driven by recent acquisitions—stemmed from temporary, non-recurring factors. More importantly, BlackRock is in the midst of a strategic transformation, positioning itself for the future of asset management where data and technology will serve as key differentiators.
Admittedly, much of this optimism is already reflected in the stock. BlackRock currently trades at a P/E ratio of 26.7—representing a 94% premium to the sector median of 13.75. Still, with year-over-year growth of 15.45%, outpacing industry peers by 142%, the premium appears at least partially justified. Looking ahead, BlackRock’s ability to successfully execute on this forward-looking strategy should help it maintain a leadership position in the evolving asset management landscape.