Private equity firm Carlyle Group (NASDAQ: CG) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 12.6% year on year to $782.5 million. Its non-GAAP profit of $0.87 per share was 15% below analysts’ consensus estimates.

Is now the time to buy CG? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Carlyle’s third quarter results drew a negative market reaction as the firm missed Wall Street’s revenue and profit expectations, driven by a 12.6% year-over-year decline in sales and weaker performance in private equity realizations. Management attributed the underperformance primarily to a quieter quarter for private equity exits and volatile public markets, while highlighting ongoing strength in credit and secondary solutions. CEO Harvey Schwartz acknowledged, “It’s just part of the private equity business. It’s hard to control when deals close, and it is what it is,” emphasizing the multi-quarter nature of deal activity and the focus on long-term trends over short-term results.

Looking forward, Carlyle’s management remains focused on accelerating growth across its credit, insurance, and wealth management platforms, supported by strong pipelines and continued product innovation. CEO Harvey Schwartz pointed to opportunities in asset-backed finance and insurance, while also highlighting the expected launch of new flagship wealth products in the coming year. Management believes that increased demand for alternative investment solutions and a pickup in private equity deal flow will drive improved performance, with CFO Justin Plouffe noting, “We feel very good about the momentum across the platform…we’ll have a bigger pickup in private equity flows into next year.”

Key Insights from Management’s Remarks

Management attributed the quarter’s results to subdued private equity realizations, steady progress in credit and secondary solutions, and ongoing investment in new product platforms.

• Private equity realizations lagged: Carlyle delivered fewer exits in its private equity business this quarter, resulting in lower transaction-related income and weighing on overall financial performance. Management noted that the timing of deal closings is inherently variable, and that a significant pipeline of pending transactions could drive stronger results in upcoming quarters.

• Credit and solutions momentum: Strength in Carlyle’s global credit platform and AlpInvest secondaries business helped offset the weakness in private equity. Management highlighted robust inflows into asset-backed finance and collateralized loan obligations (CLOs), viewing these as areas with structural growth potential and less dependency on traditional M&A cycles.

• Diversification strategy emphasized: Over half of fee-related earnings now stem from global credit and secondaries, up from about a quarter five years ago. This shift reflects management’s intent to reduce reliance on private equity exit timing and to build a more resilient earnings base.

• Global wealth inflows accelerating: Carlyle’s global wealth channel achieved its highest fundraising quarter on record, reaching $3 billion in inflows and benefiting from evergreen product adoption and new partnerships like the one with Oracle Red Bull Racing. Management stressed that these initiatives are still in the early innings and will support longer-term growth.

• Capital management and investment: The firm issued $800 million of 10-year debt to extend its liability profile and support new investments, while also returning over $200 million to shareholders through buybacks. Management reiterated that investment in growth—particularly in credit and wealth—is the top capital allocation priority.

Drivers of Future Performance

Carlyle’s outlook is shaped by expectations for accelerating private equity deal activity, continued expansion in credit and insurance, and new product launches in global wealth.

• Private equity pipeline recovery: Management expects a significant increase in private equity realizations and deal activity in the coming quarters, citing a strong backlog of announced transactions and the anticipated IPO of portfolio company Medline. They believe this should drive improved performance in carry and fee income.

• Credit and insurance platform expansion: Carlyle is prioritizing growth in asset-backed finance, direct lending, and insurance solutions, particularly through its Fortitude Re partnership. Management views these areas as offering recurring fee streams and less sensitivity to market cycles, with plans for new reinsurance vehicles and product innovation.

• Wealth management product roll-outs: The company will launch additional flagship wealth products, such as the CPEP evergreen fund, to broaden its client base and deepen advisor relationships. Management sees continued strong demand for alternative investment vehicles, which should enhance fundraising and fee-related earnings over the next year.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the closure and monetization of Carlyle’s $5 billion pipeline of private equity transactions, including the Medline IPO; (2) sustained growth and fee generation in asset-backed finance, direct lending, and insurance partnerships like Fortitude Re; and (3) the rollout and adoption of new evergreen wealth products. Execution against these milestones will be critical in assessing the durability of Carlyle’s earnings diversification strategy.

Carlyle currently trades at $53.32, down from $56.58 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

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