WisdomTree Earnings Call Highlights Record AUM, Margin Gains

Wisdomtree, Inc. ((WT)) has held its Q4 earnings call. Read on for the main highlights of the call.

WisdomTree Leans Into Growth as Record AUM Fuels Margin Upside

WisdomTree’s latest earnings call carried a distinctly upbeat tone, underpinned by record assets under management (AUM), robust organic inflows, and clear proof of operating leverage. Management highlighted broad-based growth across regions, strategies, and new platforms, with rising revenues and expanding margins complemented by rapid traction in metals, European products, models/SMAs, and tokenization. While they acknowledged some near-term headwinds—seasonal compensation pressure, lumpier performance fees, modest quarterly outflows, and dilution from convertibles—the narrative was dominated by momentum and confidence in the scalability of the business.

Record and Rapidly Growing AUM

WisdomTree closed the year with AUM at a record $144.5 billion, up 5% sequentially and more than 30% year over year, underscoring both market tailwinds and inflows. That growth has continued into the new year, with global AUM reaching $160.8 billion—an additional $16 billion or 11% above year-end—driven by favorable market performance and nearly $2 billion of net inflows early in the year. This expanding asset base is the foundation for the firm’s improving revenue profile and operating leverage, reinforcing the view that WisdomTree is scaling into a larger, more diversified global asset manager.

Strong Organic Flows and Diversified Growth Engines

For the full year, WisdomTree generated $8.5 billion of net inflows, equating to an organic growth rate of around 8%. Importantly for investors, management emphasized that these flows were not concentrated in a single product or region but came from multiple growth engines across geographies and asset classes. This diversification reduces dependence on any one theme or market cycle and supports a more durable earnings trajectory, particularly valuable in an industry often characterized by volatile flows.

European Franchise Becomes a Major Growth Pillar

The European business emerged as one of the standout stories of the call. European listed product AUM surged from $30.7 billion to $53.3 billion—an increase of roughly 74%—supported by more than $6 billion in net inflows. Within that, the UCITS franchise drew $4.3 billion, and commodity products saw around $1 billion of inflows. Given that about 70% of European revenues are asset-based, this AUM expansion is translating directly into higher, more recurring revenue, turning Europe into a powerful profit center and strategic counterweight to the U.S. franchise.

Revenue Acceleration and Margin Expansion

The operational leverage in WisdomTree’s model was clearly on display. Adjusted revenues for the quarter climbed to $147.4 million, up 17% versus the prior quarter and about 33% year over year. For the full year, adjusted revenues grew roughly 15.4%, while adjusted operating margin expanded by nearly 300 basis points to 36.5%. This combination of double-digit revenue growth and rising margins signals that the firm’s cost base is scaling efficiently with AUM, a key attribute for investors focused on earnings power and valuation re-rating potential.

Ceres Acquisition and Private Assets Lift Revenue Quality

The acquisition of Ceres, completed on October 1, is already reshaping WisdomTree’s private assets profile. The deal added nearly $2 billion in farmland strategies and contributed about $12 million of revenue in the quarter, including $7.1 million of performance fees. Management highlighted that Ceres lifted annual revenue capture and operating margins by more than 200 basis points, indicating that these private strategies are higher-margin and higher-fee. This move into private markets diversifies revenue sources beyond traditional ETFs and positions WisdomTree to participate in longer-term structural demand for alternative assets.

Metals and Thematics Fuel High-Conviction Flows

Metals and thematic strategies have become another major growth leg. Metals AUM jumped 83%, supported by more than $1 billion of net inflows, and now accounts for roughly 28.5% of global AUM. Thematic products—especially in strategic and rare earth metals—are seeing extremely rapid adoption: one rare earth fund scaled from about $100 million in November to $700 million in short order, and three strategic metals funds together now total around $1.4 billion. These products tap into strong investor demand for targeted exposures tied to energy transition, technology, and commodity supercycle themes, giving WisdomTree differentiated offerings in a crowded ETF space.

Models, SMAs, and Tokenization Gain Real Traction

Beyond traditional funds, WisdomTree is making tangible progress in models, separately managed accounts (SMAs), and tokenized assets. Model assets under administration climbed to more than $6 billion, up from $3.8 billion at the end of 2024—roughly 58% growth—demonstrating increased advisor adoption of model portfolios. Tokenized AUM surged from essentially zero a year ago to about $770 million, and the WisdomTree Connect platform expanded from 4 to 29 onboarded institutions. Wallets holding WisdomTree assets now exceed 3,500. These metrics suggest that the firm is early but meaningfully establishing itself at the intersection of asset management and digital/tokenized infrastructure, a potential long-term differentiator.

Updated 2026 Operating Leverage Targets

Management used the call to sharpen its 2026 operating framework, underscoring confidence in further margin expansion. The compensation-to-revenue ratio is now expected in the 26%–28% range, about 2 percentage points lower than prior guidance, reflecting scale benefits and cost discipline. Gross margin is projected at 82%–83%, an improvement from 81.9%, with further upside if AUM continues to grow. Discretionary spend is guided to $80 million–$86 million, mainly to support marketing, sales, distribution, and Ceres integration, while interest expense is expected to run around $40 million in 2026 before declining as convertible notes are retired. The updated guidance portrays a business leaning into growth while still expanding profitability.

Q4 Flow Variability and Market Sensitivity

Despite a strong full-year inflow picture, management acknowledged that the fourth quarter saw modest outflows, highlighting that flows can be volatile from quarter to quarter. These movements relate to market rotations and shifting investor appetite across product categories, a reminder that even high-growth franchises are exposed to sentiment swings and macro conditions. Still, the firm framed the Q4 softness as noise against a far more positive full-year trend of broad-based inflows.

Higher Discretionary Spending and Near-Term Margin Risk

The decision to raise discretionary spending to $80 million–$86 million from $71 million last year signals a deliberate push to reinvest in the business. These funds will go toward ramping marketing, sales and distribution, and integrating Ceres. While these investments are intended to fuel future AUM and revenue growth, management acknowledged they may pressure near-term margins if market conditions soften or flows slow. For investors, this marks a classic trade-off: accept short-term earnings drag in exchange for potentially stronger long-term growth.

Seasonal Compensation Pressure in Q1

The company flagged normal but notable seasonality in compensation that will weigh on first-quarter results. The compensation-to-revenue ratio is expected to run around 30% in Q1 due to payroll taxes, benefits resets, and year-end bonus timing, before stepping down into the full-year range of 26%–28%. This dynamic could create temporary EPS headwinds early in the year even as the underlying profitability trend remains positive on an annual basis.

Lumpy Performance Fees and Revenue Forecasting Challenges

Ceres has introduced a new, less predictable revenue stream in the form of performance fees. In the latest quarter, performance fees from Ceres totaled $7.1 million, driven by farmland price appreciation and solar developments. Management cautioned that these fees—and similar non-recurring revenue items—are inherently lumpy and difficult to forecast. While they can provide powerful boosts to quarterly results, they add volatility to the earnings profile and require investors to distinguish between recurring and episodic earnings contributions.

Dilution and Financing Costs from Convertible Notes

WisdomTree also addressed the capital structure impact of its convertible notes. Weighted average diluted shares are expected to rise to 152 million–157 million from 145 million last year, implying roughly 7 million–12 million incremental shares linked to the converts based on recent stock price assumptions. Interest expense is forecast at about $40 million in 2026 until the notes are retired, partially offset by around $8 million of interest income. These factors introduce both dilution and financing costs that investors must weigh against the company’s growth and margin story.

Forward-Looking Guidance and Outlook

Looking ahead to 2026, WisdomTree laid out a detailed roadmap that blends growth investment with further profitability gains. The firm expects a compensation-to-revenue ratio of 26%–28% after a seasonally high first quarter, gross margins in the 82%–83% range with upside tied to AUM growth, and discretionary spending rising to $80 million–$86 million as it leans into marketing, distribution, and Ceres-related initiatives. Third-party distribution expense is projected at $17 million–$19 million and interest expense at about $40 million, while interest income should be roughly $8 million and the adjusted tax rate around 24%. Diluted share count is guided to 152 million–157 million, incorporating the potential impact of convertible notes. Overall, management’s guidance suggests confidence that rising AUM, expanding platforms, and disciplined cost management will more than offset the drag from higher spend and financing costs over the medium term.

In sum, WisdomTree’s earnings call painted the picture of a firm in the midst of a strong growth phase, with record and rising AUM, robust organic inflows, and clear margin expansion across its core and new businesses. Europe, metals, thematics, private assets, models, and tokenization are all contributing to a more diversified and higher-quality revenue mix. While the company faces typical near-term pressures—from seasonal compensation, lumpy performance fees, and dilution from convertibles—management’s guidance and strategic posture indicate a deliberate balance between investing for scale and delivering improving profitability, a combination that will be closely watched by investors seeking durable growth in asset management.