AllianceBernstein LP
10/23/2025 | Press release | Distributed by Public on 10/23/2025 04:50
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
Our total assets under management ("AUM") as of September 30, 2025 were $860.1 billion, up $31.0 billion, or 3.7%, compared to June 30, 2025, and up $54.2 billion, or 6.7%, compared to September 30, 2024. During the third quarter of 2025 AUM increased due to market appreciation of $33.3 billion, offset by net outflows of $2.3 billion (Institutional net outflows of $1.8 billion and Retail net outflows of $1.7 billion were offset by Private Wealth net inflows of $1.2 billion).
Institutional AUM increased $11.4 billion, or 3.4%, to $351.4 billion during the third quarter of 2025, due to market appreciation of $13.2 billion, offset by net outflows of $1.8 billion. Gross sales increased sequentially from $3.7 billion during the second quarter of 2025 to $14.0 billion during the third quarter of 2025. Redemptions and terminations decreased sequentially from $3.7 billion to $2.8 billion.
Retail AUM increased $11.5 billion, or 3.3%, to $356.2 billion during the third quarter of 2025, due to market appreciation of $13.2 billion, offset by net outflows of $1.7 billion. Gross sales increased sequentially from $19.4 billion during the second quarter of 2025 to $22.6 billion during the third quarter of 2025. Redemptions and terminations decreased sequentially from $21.8 billion to $20.4 billion.
Private Wealth AUM increased $8.1 billion, or 5.6%, to $152.5 billion during the third quarter of 2025, due to market appreciation of $6.9 billion and net inflows of $1.2 billion. Gross sales increased sequentially from $4.8 billion during the second quarter of 2025 to $5.8 billion during the third quarter of 2025. Redemptions and terminations decreased sequentially from $5.2 billion to $4.6 billion.
Net revenues of $1.1 billion for the third quarter of 2025 increased $51.7 million, or 4.8%, compared to the third quarter of 2024. The increase was primarily due to higher investment advisory base fees of $38.9 million, higher distribution revenues of $21.2 million and higher net dividend and interest revenues of $3.0 million, partially offset by lower performance-based fees of $6.8 million and lower other revenues of $5.4 million.
Operating expenses for the third quarter of 2025 increased $133.5 million, or 18.5%, to $853.7 million from $720.2 million in the third quarter of 2024. The increase was primarily due to a prior period gain of $128.5 million related to a fair value remeasurement of the contingent payment liability associated with our acquisition of AB CarVal in 2022, higher employee compensation and benefits expense of $25.9 million and higher promotion and servicing expense of $20.7 million, partially offset by lower general and administrative ("G&A") expense of $37.6 million and lower interest on borrowings of $1.3 million.
Operating income decreased $81.8 million, or 22.4%, to $283.5 million from $365.3 million in the third quarter of 2024 and our operating margin decreased to 24.3% in the third quarter of 2025 from 33.2% in the third quarter of 2024.
Market Environment
U.S. Equities
U.S. equity markets delivered strong returns in the third quarter of 2025, benefitting from resilient consumer spending, benign inflation readings and strong GDP growth. Earnings momentum also supported the equity rally, with consensus estimates indicating a year-over-year earnings growth of approximately 7-8% for the S&P 500 in the third quarter of 2025. The S&P 500 returned 8.1% during the current quarter, reaching record highs. Market breadth improved notably, with small-cap stocks outperforming large-caps, driving 12.4% returns for the Russell 2000 in the current quarter. The rally was led by the information technology and communication services sectors while sectors like energy and utilities lagged, constrained by volatile commodity prices and margin pressure. While AI-levered companies continued to drive outsized gains, the strength in small- and mid-cap segments lent confidence in broader participation.
Global and Non-U.S. Equities
Eurozone equities maintained their positive momentum as economic data stabilized and fiscal policy remained supportive with the MSCI European Economic and Monetary Union index returning 4.3% (gross, Euro terms) during the third quarter of 2025. U.K. equities also recorded strong gains, with the MSCI U.K. returning 7.8% (gross U.K. terms) as a weaker British pound aided companies with international operations. Japanese equities saw strong performance, with the TOPIX Index returning 11.4%, supported by improving corporate earnings outlook and yen weakness that boosted exporters. Emerging market equities had a strong quarter with the MSCI Emerging Markets index generating 11.0% returns (gross, USD terms), driven by a strong rally in Chinese equities following additional fiscal stimulus, liquidity injections, and trade talk progression between the U.S. and China.
Index
Global Bonds
Government bonds showed mixed performance in the third quarter of 2025, with U.S. Treasury yields decreasing, while U.K., German, and Japanese yields increased. In the U.S., the Federal Reserve ("the Fed") implemented a well-anticipated 25 basis point policy rate cut in September, its first cut of the year, citing signs of a slowing labor market and softer job data. The Fed's updated forecasts from the September Summary of Economic Projections indicated a more dovish outlook, with expectations of slightly lower GDP growth and inflation trending towards target. In contrast, eurozone and Japanese sovereign bonds fell, driven by political turmoil and increased fiscal spending.
Credit markets performed well, with investment-grade corporates tightening spreads, while high-yield bonds and emerging-market debt saw strong returns driven by improved risk sentiment. Globally, sovereign and corporate bonds benefited from the decline in yields, although inflation and fiscal worries in certain regions limited overall returns. In the U.S., core bonds advanced, with the Bloomberg U.S. Aggregate Bond Index returning 2.0% over the third quarter.
Relationship with EQH and its Subsidiaries
EQH (our parent company) and its subsidiaries are our largest client. EQH is collaborating with AB in order to improve the risk-adjusted yield for the General Accounts of EQH's insurance subsidiaries by investing additional assets at AB, including the utilization of AB's higher-fee, longer-duration alternative offerings. During the second quarter of 2023, Equitable Financial Life Insurance Company, a subsidiary of EQH ("Equitable Financial"), committed to an additional $10 billion in permanent capital to build out AB's private illiquid offerings, including private alternatives and private placements, deployment of which is approximately 70% complete. The initial $10 billion commitment from 2021 has been fully deployed. We expect this anticipated capital from EQH's insurance subsidiaries will continue to accelerate both organic and inorganic growth in our private alternatives business, allowing us to continue to deliver for our clients, employees, unitholders and other stakeholders. For example, included in the initial $10 billion commitment by EQH is $750 million in capital deployed through AB CarVal.
Permanent capital means investment capital of indefinite duration, for which commitments may be withdrawn under certain conditions. Such conditions primarily include potential regulatory restrictions, lacking sufficient liquidity to fund the capital commitments to AB and AB's inability to identify attractive investment opportunities which align with the investment strategy. Although EQH's insurance subsidiaries have indicated their intention over time to provide this investment capital to AB, they have no binding commitment to do so. While the withdrawal of their commitment could potentially slow down our introduction of certain products, the impact to our overall operations would not be material.
Assets Under Management
Assets under management by distribution channel are as follows:
| As of September 30, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||
| Institutions | $ | 351.4 | $ | 335.2 | $ | 16.2 | 4.8 | % | |||||||||||||||
| Retail | 356.2 | 334.5 | 21.7 | 6.5 | |||||||||||||||||||
| Private Wealth | 152.5 | 136.2 | 16.3 | 11.9 | |||||||||||||||||||
| Total | $ | 860.1 | $ | 805.9 | $ | 54.2 | 6.7 | % | |||||||||||||||
Index
Assets under management by investment service are as follows:
| As of September 30, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||
| Equity | |||||||||||||||||||||||
| Actively Managed | $ | 281.3 | $ | 271.3 | $ | 10.0 | 3.7 | % | |||||||||||||||
|
Passively Managed(1)
|
77.3 | 68.9 | 8.4 | 12.2 | |||||||||||||||||||
| Total Equity | 358.6 | 340.2 | 18.4 | 5.4 | |||||||||||||||||||
| Fixed Income | |||||||||||||||||||||||
| Actively Managed | |||||||||||||||||||||||
| Taxable | 214.3 | 216.2 | (1.9) | (0.9) | |||||||||||||||||||
| Tax-exempt | 85.8 | 71.2 | 14.6 | 20.5 | |||||||||||||||||||
| 300.1 | 287.4 | 12.7 | 4.4 | ||||||||||||||||||||
|
Passively Managed(1)
|
10.1 | 11.4 | (1.3) | (11.8) | |||||||||||||||||||
| Total Fixed Income | 310.2 | 298.8 | 11.4 | 3.8 | |||||||||||||||||||
|
Alternatives/Multi-Asset Solutions(2)
|
|||||||||||||||||||||||
| Actively Managed | 177.9 | 155.9 | 22.0 | 14.1 | |||||||||||||||||||
|
Passively Managed(1)
|
13.4 | 11.0 | 2.4 | 21.8 | |||||||||||||||||||
| Total Alternatives/Multi-Asset Solutions | 191.3 | 166.9 | 24.4 | 14.6 | |||||||||||||||||||
| Total | $ | 860.1 | $ | 805.9 | $ | 54.2 | 6.7 | % | |||||||||||||||
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services.
Index
Changes in assets under management for the three-month, nine-month and twelve-month periods ended September 30, 2025 are as follows:
| Distribution Channel | |||||||||||||||||||||||
| Institutions | Retail |
Private Wealth |
Total | ||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | 340.0 | $ | 344.7 | $ | 144.4 | $ | 829.1 | |||||||||||||||
| Long-term flows: | |||||||||||||||||||||||
| Sales/new accounts | 14.0 | 22.6 | 5.8 | 42.4 | |||||||||||||||||||
| Redemptions/terminations | (2.8) | (20.4) | (4.6) | (27.8) | |||||||||||||||||||
| Cash flow/unreinvested dividends | (13.0) | (3.9) | - | (16.9) | |||||||||||||||||||
| Net long-term (outflows) inflows | (1.8) | (1.7) | 1.2 | (2.3) | |||||||||||||||||||
| Market appreciation | 13.2 | 13.2 | 6.9 | 33.3 | |||||||||||||||||||
| Net change | 11.4 | 11.5 | 8.1 | 31.0 | |||||||||||||||||||
| Balance as of September 30, 2025 | $ | 351.4 | $ | 356.2 | $ | 152.5 | $ | 860.1 | |||||||||||||||
| Balance as of December 31, 2024 | $ | 321.4 | $ | 334.3 | $ | 136.5 | $ | 792.2 | |||||||||||||||
| Long-term flows: | |||||||||||||||||||||||
| Sales/new accounts | 22.2 | 67.7 | 16.5 | 106.4 | |||||||||||||||||||
| Redemptions/terminations | (9.0) | (64.5) | (14.8) | (88.3) | |||||||||||||||||||
| Cash flow/unreinvested dividends | (15.9) | (8.8) | - | (24.7) | |||||||||||||||||||
| Net long-term (outflows) inflows | (2.7) | (5.6) | 1.7 | (6.6) | |||||||||||||||||||
| Transfers | 0.5 | (0.1) | (0.4) | - | |||||||||||||||||||
| Market appreciation | 32.2 | 27.6 | 14.7 | 74.5 | |||||||||||||||||||
| Net change | 30.0 | 21.9 | 16.0 | 67.9 | |||||||||||||||||||
| Balance as of September 30, 2025 | $ | 351.4 | $ | 356.2 | $ | 152.5 | $ | 860.1 | |||||||||||||||
| Balance as of September 30, 2024 | $ | 335.2 | $ | 334.5 | $ | 136.2 | $ | 805.9 | |||||||||||||||
| Long-term flows: | |||||||||||||||||||||||
| Sales/new accounts | 24.3 | 94.1 | 21.6 | 140.0 | |||||||||||||||||||
| Redemptions/terminations | (12.9) | (85.0) | (19.6) | (117.5) | |||||||||||||||||||
| Cash flow/unreinvested dividends | (20.2) | (13.7) | - | (33.9) | |||||||||||||||||||
| Net long-term (outflows) inflows | (8.8) | (4.6) | 2.0 | (11.4) | |||||||||||||||||||
|
Adjustments(1)
|
- | - | 0.7 | 0.7 | |||||||||||||||||||
| Transfers | 0.5 | (0.1) | (0.4) | - | |||||||||||||||||||
| Market appreciation | 24.5 | 26.4 | 14.0 | 64.9 | |||||||||||||||||||
| Net change | 16.2 | 21.7 | 16.3 | 54.2 | |||||||||||||||||||
| Balance as of September 30, 2025 | $ | 351.4 | $ | 356.2 | $ | 152.5 | $ | 860.1 | |||||||||||||||
(1)This adjustment is due to a change in fee policy related to certain fixed income assets effective October 1, 2024.
Index
| Investment Service | |||||||||||||||||||||||||||||||||||||||||
|
Equity Actively Managed |
Equity
Passively
Managed(1)
|
Fixed Income Actively Managed - Taxable |
Fixed Income Actively Managed - Tax- Exempt |
Fixed
Income
Passively
Managed(1)
|
Alternatives/ Multi-Asset Solutions(2)
|
Total | |||||||||||||||||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | 273.4 | $ | 70.8 | $ | 214.5 | $ | 79.5 | $ | 10.2 | $ | 180.7 | $ | 829.1 | |||||||||||||||||||||||||||
| Long-term flows: | |||||||||||||||||||||||||||||||||||||||||
| Sales/new accounts | 10.9 | 2.8 | 15.4 | 7.6 | - | 5.7 | 42.4 | ||||||||||||||||||||||||||||||||||
| Redemptions/terminations | (14.1) | (0.1) | (8.9) | (3.5) | (0.1) | (1.1) | (27.8) | ||||||||||||||||||||||||||||||||||
| Cash flow/unreinvested dividends | (3.2) | (1.5) | (10.7) | - | (0.1) | (1.4) | (16.9) | ||||||||||||||||||||||||||||||||||
| Net long-term (outflows) inflows | (6.4) | 1.2 | (4.2) | 4.1 | (0.2) | 3.2 | (2.3) | ||||||||||||||||||||||||||||||||||
| Transfers | 0.5 | (0.5) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Market appreciation | 13.8 | 5.8 | 4.0 | 2.2 | 0.1 | 7.4 | 33.3 | ||||||||||||||||||||||||||||||||||
| Net change | 7.9 | 6.5 | (0.2) | 6.3 | (0.1) | 10.6 | 31.0 | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | 281.3 | $ | 77.3 | $ | 214.3 | $ | 85.8 | $ | 10.1 | $ | 191.3 | $ | 860.1 | |||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | 263.4 | $ | 68.3 | $ | 209.3 | $ | 76.2 | $ | 10.3 | $ | 164.7 | $ | 792.2 | |||||||||||||||||||||||||||
| Long-term flows: | |||||||||||||||||||||||||||||||||||||||||
| Sales/new accounts | 32.4 | 3.8 | 37.2 | 19.3 | 0.2 | 13.5 | 106.4 | ||||||||||||||||||||||||||||||||||
| Redemptions/terminations | (40.2) | (2.1) | (30.5) | (11.6) | (0.2) | (3.7) | (88.3) | ||||||||||||||||||||||||||||||||||
| Cash flow/unreinvested dividends | (7.1) | (2.3) | (13.8) | - | (0.8) | (0.7) | (24.7) | ||||||||||||||||||||||||||||||||||
| Net long-term (outflows) inflows | (14.9) | (0.6) | (7.1) | 7.7 | (0.8) | 9.1 | (6.6) | ||||||||||||||||||||||||||||||||||
| Transfers | 0.5 | (0.5) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Market appreciation | 32.3 | 10.1 | 12.1 | 1.9 | 0.6 | 17.5 | 74.5 | ||||||||||||||||||||||||||||||||||
| Net change | 17.9 | 9.0 | 5.0 | 9.6 | (0.2) | 26.6 | 67.9 | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | 281.3 | $ | 77.3 | $ | 214.3 | $ | 85.8 | $ | 10.1 | $ | 191.3 | $ | 860.1 | |||||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | 271.3 | $ | 68.9 | $ | 216.2 | $ | 71.2 | $ | 11.4 | $ | 166.9 | $ | 805.9 | |||||||||||||||||||||||||||
| Long-term flows: | |||||||||||||||||||||||||||||||||||||||||
| Sales/new accounts | 44.2 | 4.0 | 47.5 | 27.8 | 0.2 | 16.3 | 140.0 | ||||||||||||||||||||||||||||||||||
| Redemptions/terminations | (54.1) | (2.3) | (40.8) | (14.8) | (0.6) | (4.9) | (117.5) | ||||||||||||||||||||||||||||||||||
| Cash flow/unreinvested dividends | (12.3) | (3.7) | (14.5) | 0.2 | (1.1) | (2.5) | (33.9) | ||||||||||||||||||||||||||||||||||
| Net long-term (outflows) inflows | (22.2) | (2.0) | (7.8) | 13.2 | (1.5) | 8.9 | (11.4) | ||||||||||||||||||||||||||||||||||
|
Adjustments (3)
|
- | - | 0.2 | 0.5 | - | - | 0.7 | ||||||||||||||||||||||||||||||||||
| Transfers | 0.5 | (0.5) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Market appreciation | 31.7 | 10.9 | 5.7 | 0.9 | 0.2 | 15.5 | 64.9 | ||||||||||||||||||||||||||||||||||
| Net change | 10.0 | 8.4 | (1.9) | 14.6 | (1.3) | 24.4 | 54.2 | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | 281.3 | $ | 77.3 | $ | 214.3 | $ | 85.8 | $ | 10.1 | $ | 191.3 | $ | 860.1 | |||||||||||||||||||||||||||
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services
(3)This adjustment is due to a change in fee policy related to certain fixed income assets effective October 1, 2024.
Index
Net long-term inflows (outflows) for actively managed investment services as compared to passively managed investment services for the three-month, nine-month and twelve-month periods ended September 30, 2025 are as follows:
| Periods Ended September 30, 2025 | |||||||||||||||||
| Three-months | Nine-months | Twelve-months | |||||||||||||||
| (in billions) | |||||||||||||||||
| Actively Managed | |||||||||||||||||
| Equity | $ | (6.4) | $ | (14.9) | $ | (22.2) | |||||||||||
|
Fixed Income
|
(0.1) | 0.6 | 5.4 | ||||||||||||||
| Alternatives/Multi-Asset Solutions | 3.1 | 8.7 | 8.3 | ||||||||||||||
| Total Actively Managed | (3.4) | (5.6) | (8.5) | ||||||||||||||
| Passively Managed | |||||||||||||||||
| Equity | 1.2 | (0.6) | (2.0) | ||||||||||||||
|
Fixed Income
|
(0.2) | (0.8) | (1.5) | ||||||||||||||
| Alternatives/Multi-Asset Solutions | 0.1 | 0.4 | 0.6 | ||||||||||||||
| Total Passively Managed | 1.1 | (1.0) | (2.9) | ||||||||||||||
| Total net long-term (outflows) | $ | (2.3) | $ | (6.6) | $ | (11.4) | |||||||||||
Average assets under management by distribution channel and investment service are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in billions) | (in billions) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Channel: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Institutions | $ | 343.5 | $ | 328.4 | $ | 15.1 | 4.6 | % | $ | 332.7 | $ | 321.8 | $ | 10.9 | 3.4 | % | ||||||||||||||||||||||||||||||||||
| Retail | 349.5 | 324.4 | 25.1 | 7.7 | 339.2 | 309.3 | 29.9 | 9.7 | ||||||||||||||||||||||||||||||||||||||||||
| Private Wealth | 147.8 | 133.1 | 14.7 | 11.1 | 141.9 | 128.2 | 13.7 | 10.7 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 840.8 | $ | 785.9 | $ | 54.9 | 7.0 | % | $ | 813.8 | $ | 759.3 | $ | 54.5 | 7.2 | % | ||||||||||||||||||||||||||||||||||
| Investment Service: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity Actively Managed | $ | 276.1 | $ | 267.2 | $ | 8.9 | 3.3 | % | $ | 266.3 | $ | 259.6 | $ | 6.7 | 2.6 | % | ||||||||||||||||||||||||||||||||||
|
Equity Passively Managed(1)
|
74.3 | 67.3 | 7.0 | 10.4 | 70.6 | 65.0 | 5.6 | 8.5 | ||||||||||||||||||||||||||||||||||||||||||
| Fixed Income Actively Managed - Taxable | 212.8 | 212.3 | 0.5 | 0.2 | 211.2 | 211.0 | 0.2 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||
| Fixed Income Actively Managed - Tax-exempt | 82.2 | 68.6 | 13.6 | 19.8 | 79.6 | 65.3 | 14.3 | 21.9 | ||||||||||||||||||||||||||||||||||||||||||
|
Fixed Income Passively Managed(1)
|
10.1 | 11.3 | (1.2) | (10.7) | 10.2 | 11.2 | (1.0) | (9.0) | ||||||||||||||||||||||||||||||||||||||||||
|
Alternatives/Multi-Asset Solutions(2)
|
185.3 | 159.2 | 26.1 | 16.4 | 175.9 | 147.2 | 28.7 | 19.5 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 840.8 | $ | 785.9 | $ | 54.9 | 7.0 | % | $ | 813.8 | $ | 759.3 | $ | 54.5 | 7.2 | % | ||||||||||||||||||||||||||||||||||
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services.
Our Institutional channel third quarter average AUM of $343.5 billion increased $15.1 billion, or 4.6%, compared to the third quarter of 2024, while Institutional channel third quarter ending AUM increased $16.2 billion, or 4.8%, to $351.4 billion from September 30, 2024. The $16.2 billion increase in AUM resulted primarily from market appreciation of $24.5 billion, partially offset by net outflows of $8.8 billion.
Index
Our Retail channel third quarter average AUM of $349.5 billion increased $25.1 billion, or 7.7%, compared to the third quarter of 2024, while Retail channel third quarter ending AUM increased $21.7 billion, or 6.5%, to $356.2 billion from September 30, 2024. The $21.7 billion increase resulted primarily from market appreciation of $26.4 billion, partially offset by net outflows of $4.6 billion.
Our Private Wealth channel third quarter average AUM of $147.8 billion increased $14.7 billion, or 11.1%, compared to the third quarter of 2024, while Private Wealth channel third quarter ending AUM increased $16.3 billion, or 11.9%, to $152.5 billion from September 30, 2024. The $16.3 billion increase resulted primarily from market appreciation of $14.0 billion and net inflows of $2.0 billion.
Absolute investment composite returns, gross of fees, and relative performance as of September 30, 2025 compared to benchmarks for certain representative Institutional equity and fixed income services are as follows:
| 1-Year |
3-Year(1)
|
5-Year(1)
|
|||||||||||||||
| Income (fixed income) | |||||||||||||||||
| Absolute return | 5.6 | % | 8.7 | % | 2.7 | % | |||||||||||
| Relative return (vs. Bloomberg Barclays U.S. Aggregate Index) | 2.7 | 3.8 | 3.1 | ||||||||||||||
| High Income (fixed income) | |||||||||||||||||
| Absolute return | 8.2 | 12.6 | 6.4 | ||||||||||||||
| Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged) | (0.4) | (0.2) | 0.7 | ||||||||||||||
| Global Plus - Hedged (fixed income) | |||||||||||||||||
| Absolute return | 3.3 | 5.6 | 0.8 | ||||||||||||||
| Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged) | 0.3 | 0.4 | 0.4 | ||||||||||||||
| Intermediate Municipal Bonds (fixed income) | |||||||||||||||||
| Absolute return | 2.8 | 4.9 | 2.0 | ||||||||||||||
| Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg) | 0.3 | 0.7 | 0.7 | ||||||||||||||
| U.S. Core Plus (fixed income) | |||||||||||||||||
| Absolute return | 4.1 | 6.1 | 0.4 | ||||||||||||||
| Relative return (vs. Bloomberg Barclays U.S. Aggregate Index) | 1.3 | 1.1 | 0.9 | ||||||||||||||
| Emerging Market Debt (fixed income) | |||||||||||||||||
| Absolute return | 8.4 | 13.4 | 2.9 | ||||||||||||||
| Relative return (vs. JPM EMBI Global/JPM EMBI) | 0.7 | 2.1 | 0.7 | ||||||||||||||
| Sustainable Global Thematic | |||||||||||||||||
| Absolute return | 3.5 | 15.2 | 7.5 | ||||||||||||||
| Relative return (vs. MSCI ACWI Index) | (13.8) | (7.9) | (6.1) | ||||||||||||||
| International Strategic Core Equity | |||||||||||||||||
| Absolute return | 17.0 | 22.2 | 11.1 | ||||||||||||||
| Relative return (vs. MSCI EAFE Index) | 2.0 | 0.5 | (0.1) | ||||||||||||||
| U.S. Small & Mid Cap Value | |||||||||||||||||
| Absolute return | 2.5 | 13.6 | 15.1 | ||||||||||||||
| Relative return (vs. Russell 2500 Value Index) | (6.5) | (1.8) | 0.1 | ||||||||||||||
Index
| 1-Year |
3-Year(1)
|
5-Year(1)
|
|||||||||||||||
| U.S. Large Cap Value | |||||||||||||||||
| Absolute return | 11.2 | 20.1 | 17.3 | ||||||||||||||
| Relative return (vs. Russell 1000 Value Index) | 1.8 | 3.2 | 3.4 | ||||||||||||||
| U.S. Small Cap Growth | |||||||||||||||||
| Absolute return | 3.8 | 15.2 | 5.0 | ||||||||||||||
| Relative return (vs. Russell 2000 Growth Index) | (9.7) | (1.5) | (3.4) | ||||||||||||||
| U.S. Large Cap Growth | |||||||||||||||||
| Absolute return | 16.7 | 26.4 | 14.6 | ||||||||||||||
| Relative return (vs. Russell 1000 Growth Index) | (8.8) | (5.2) | (2.9) | ||||||||||||||
| U.S. Small & Mid Cap Growth | |||||||||||||||||
| Absolute return | 5.1 | 15.2 | 5.4 | ||||||||||||||
| Relative return (vs. Russell 2500 Growth Index) | (7.5) | (0.8) | (2.3) | ||||||||||||||
| Concentrated U.S. Growth | |||||||||||||||||
| Absolute return | 7.0 | 16.8 | 10.7 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (10.6) | (8.1) | (5.8) | ||||||||||||||
| Select U.S. Equity | |||||||||||||||||
| Absolute return | 19.3 | 24.6 | 17.8 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | 1.7 | (0.4) | 1.3 | ||||||||||||||
| Strategic Equities | |||||||||||||||||
| Absolute return | 14.8 | 23.5 | 16.0 | ||||||||||||||
| Relative return (vs. Russell 3000 Index) | (2.6) | (0.6) | 0.3 | ||||||||||||||
| Global Core Equity | |||||||||||||||||
| Absolute return | 9.4 | 19.9 | 11.0 | ||||||||||||||
| Relative return (vs. MSCI ACWI Index) | (7.9) | (3.2) | (2.6) | ||||||||||||||
| U.S. Strategic Core Equity | |||||||||||||||||
| Absolute return | 13.6 | 22.1 | 15.1 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (4.0) | (2.8) | (1.4) | ||||||||||||||
| Select U.S. Equity Long/Short | |||||||||||||||||
| Absolute return | 12.1 | 14.8 | 11.6 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (5.5) | (10.1) | (4.9) | ||||||||||||||
| Global Strategic Core Equity | |||||||||||||||||
| Absolute return | 12.8 | 20.6 | 13.3 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (4.4) | (3.1) | (1.1) | ||||||||||||||
(1)Reflects annualized returns.
Index
Consolidated Results of Operations
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per unit amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,137,147 | $ | 1,085,489 | $ | 51,658 | 4.8 | % | $ | 3,306,661 | $ | 3,217,583 | $ | 89,078 | 2.8 | % | ||||||||||||||||||||||||||||||||||
| Expenses | 853,670 | 720,208 | 133,462 | 18.5 | 2,564,721 | 2,411,016 | 153,705 | 6.4 | ||||||||||||||||||||||||||||||||||||||||||
| Operating income | 283,477 | 365,281 | (81,804) | (22.4) | 741,940 | 806,567 | (64,627) | (8.0) | ||||||||||||||||||||||||||||||||||||||||||
| Non-operating income | - | - | - | - | - | 134,555 | (134,555) | n/m | ||||||||||||||||||||||||||||||||||||||||||
| Pre-tax income | 283,477 | 365,281 | (81,804) | (22.4) | 741,940 | 941,122 | (199,182) | (21.2) | ||||||||||||||||||||||||||||||||||||||||||
| Income taxes | 17,085 | 14,255 | 2,830 | 19.9 | 46,566 | 50,389 | (3,823) | (7.6) | ||||||||||||||||||||||||||||||||||||||||||
| Net income | 266,392 | 351,026 | (84,634) | (24.1) | 695,374 | 890,733 | (195,359) | (21.9) | ||||||||||||||||||||||||||||||||||||||||||
| Net income of consolidated entities attributable to non-controlling interests | 7,129 | 5,054 | 2,075 | 41.1 | 4,845 | 17,262 | (12,417) | (71.9) | ||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to AB Unitholders | $ | 259,263 | $ | 345,972 | $ | (86,709) | (25.1) | $ | 690,529 | $ | 873,471 | $ | (182,942) | (20.9) | ||||||||||||||||||||||||||||||||||||
| Net income per AB Unit | $ | 0.88 | $ | 1.20 | $ | (0.32) | (26.7) | $ | 2.34 | $ | 3.02 | $ | (0.68) | (22.5) | ||||||||||||||||||||||||||||||||||||
| Distributions declared per AB Unit | $ | 0.94 | $ | 0.85 | $ | 0.09 | 10.6 | % | $ | 2.66 | $ | 2.45 | $ | 0.21 | 8.6 | % | ||||||||||||||||||||||||||||||||||
|
Operating margin (1)
|
24.3 | % | 33.2 | % | 22.3 | % | 24.5 | % | ||||||||||||||||||||||||||||||||||||||||||
(1)Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues.
Net income attributable to AB Unitholders for the three months ended September 30, 2025 decreased $86.7 million, or 25.1%, from the three months ended September 30, 2024. The decrease is primarily due to (in millions):
| Lower prior period gain on adjustment of contingent payment arrangements | $ | (126.0) | |||
| Higher employee compensation and benefits expense | (25.9) | ||||
| Higher promotion and servicing expense | (20.7) | ||||
| Lower performance-based fees | (6.8) | ||||
| Lower other revenue | (5.4) | ||||
| Higher base advisory fees | 38.9 | ||||
| Lower general and administrative expense | 37.6 | ||||
| Higher distribution revenues | 21.2 | ||||
| Higher net dividend and interest revenue | 3.0 | ||||
| Other | (2.6) | ||||
| $ | (86.7) | ||||
Index
Net income attributable to AB Unitholders for the nine months ended September 30, 2025 decreased $182.9 million, or 20.9%, from the nine months ended September 30, 2024. The decrease is primarily due to (in millions):
| Lower gain on divestiture | $ | (134.6) | |||
| Lower prior period gain on adjustment of contingent payment arrangement | (121.0) | ||||
| Lower Bernstein Research Services revenue | (96.2) | ||||
| Higher promotion and servicing expense | (63.5) | ||||
| Higher investment losses | (15.7) | ||||
| Higher employee compensation and benefits expense | (9.9) | ||||
| Lower other revenues | (5.8) | ||||
| Higher base advisory fees | 133.8 | ||||
| Higher distribution revenues | 80.0 | ||||
| Lower general and administrative expense | 25.3 | ||||
| Lower interest on borrowings | 14.4 | ||||
| Lower net income of consolidated entities attributable to non-controlling interest | 12.4 | ||||
| Other | (2.1) | ||||
| $ | (182.9) | ||||
Units Outstanding; Unit Repurchases
Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended ("Exchange Act"). A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority to repurchase AB Holding Units on our behalf in accordance with the terms and limitations specified in the plan. Repurchases are subject to regulations promulgated by the SEC, as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the third quarter of 2025 expired at the close of business on October 22, 2025. We may adopt additional plans in the future to engage in open-market purchases of AB Holding Units for anticipated obligations under our incentive compensation award program and for other corporate purposes.
Cash Distributions
We are required to distribute all of our Available Cash Flow, as defined in the AB Partnership Agreement, to our Unitholders and the General Partner. Available Cash Flow typically is the adjusted net income per Unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management anticipates that Available Cash Flow will continue to be based on adjusted net income per unit, unless management determines, with concurrence of the Board of Directors, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation. See Note 6 to our condensed consolidated financial statements contained in Item 1for a description of Available Cash Flow.
Management Operating Metrics
We are providing the non-GAAP measures "adjusted net revenues," "adjusted operating income" and "adjusted operating margin" because they are additional operating metrics management uses in evaluating and comparing period-to-period operating performance. Management uses these additional metrics in evaluating performance because they present a clearer picture of our operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, acquisition-related expenses, interest expense and other adjustment items. Similarly, we believe that these management operating metrics help investors better understand the underlying trends in our results and, accordingly, provide a valuable perspective for investors.
We provide the non-GAAP measures "adjusted net income" and "adjusted net income per unit" because our quarterly distribution per unit is typically our adjusted net income per unit (which is derived from adjusted net income).
These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating
Index
margin, and they may not be comparable to non-GAAP measures presented by other companies. Management uses both accounting principles generally accepted in the United States of America ("US GAAP") and non-GAAP measures in evaluating our financial performance. The non-GAAP measures alone may pose limitations because they do not include all of our revenues and expenses.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (in thousands, except per unit amounts) | ||||||||||||||||||||||||||
| Net revenues, US GAAP basis | $ | 1,137,147 | $ | 1,085,489 | $ | 3,306,661 | $ | 3,217,583 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Distribution-related adjustments: | ||||||||||||||||||||||||||
| Distribution revenues | (210,424) | (189,216) | (607,811) | (527,811) | ||||||||||||||||||||||
| Investment advisory services fees | (18,876) | (18,017) | (60,969) | (57,457) | ||||||||||||||||||||||
| Pass-through adjustments: | ||||||||||||||||||||||||||
| Investment advisory services fees | (13,970) | (12,256) | (40,385) | (39,256) | ||||||||||||||||||||||
| Other revenues | (15,433) | (20,987) | (46,471) | (50,197) | ||||||||||||||||||||||
| Impact of consolidated company-sponsored investment funds | (7,059) | (5,182) | (4,679) | (16,848) | ||||||||||||||||||||||
| Incentive compensation-related items | (2,404) | (2,286) | (11,369) | (6,353) | ||||||||||||||||||||||
| Equity method investments: | ||||||||||||||||||||||||||
| Equity loss on JVs | 16,162 | 7,550 | 35,606 | 35,443 | ||||||||||||||||||||||
| (Gain) on other equity method investments | (471) | - | (3,263) | - | ||||||||||||||||||||||
| Adjusted net revenues | $ | 884,672 | $ | 845,095 | $ | 2,567,320 | $ | 2,555,104 | ||||||||||||||||||
| Operating income, US GAAP basis | $ | 283,477 | $ | 365,281 | $ | 741,940 | $ | 806,567 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Real estate | - | (206) | - | (618) | ||||||||||||||||||||||
| Incentive compensation-related items | 1,214 | 742 | 2,756 | 2,590 | ||||||||||||||||||||||
| EQH award compensation | 344 | 291 | 1,017 | 797 | ||||||||||||||||||||||
| Retirement plan settlement (gain) loss | (2,442) | - | 17,733 | - | ||||||||||||||||||||||
| Acquisition-related expenses (income) | 12,545 | (112,906) | 38,571 | (78,890) | ||||||||||||||||||||||
| Equity method investments: | ||||||||||||||||||||||||||
| Equity loss on JVs | 16,162 | 7,550 | 35,606 | 35,443 | ||||||||||||||||||||||
| (Gain) on other equity method investments | (471) | - | (3,263) | - | ||||||||||||||||||||||
| AB Funds reimbursement (income) expense | (8,500) | - | 5,796 | - | ||||||||||||||||||||||
| Total of non-GAAP adjustments before interest on borrowings | 18,852 | (104,529) | 98,216 | (40,678) | ||||||||||||||||||||||
| Interest on borrowings | 7,167 | 8,456 | 22,768 | 37,139 | ||||||||||||||||||||||
| Sub-total of non-GAAP adjustments | 26,019 | (96,073) | 120,984 | (3,539) | ||||||||||||||||||||||
| Less: Net income of consolidated entities attributable to non-controlling interests | 7,129 | 5,054 | 4,845 | 17,262 | ||||||||||||||||||||||
| Adjusted operating income | $ | 302,367 | $ | 264,154 | $ | 858,079 | $ | 785,766 | ||||||||||||||||||
| Non-Operating income, US GAAP basis | $ | - | $ | - | $ | - | $ | 134,555 | ||||||||||||||||||
| Less: Interest on borrowings | 7,167 | 8,456 | 22,768 | 37,139 | ||||||||||||||||||||||
| Less: Gain on divestiture | - | - | - | 134,555 | ||||||||||||||||||||||
| Adjusted non-operating (expense) | $ | (7,167) | $ | (8,456) | $ | (22,768) | $ | (37,139) | ||||||||||||||||||
| Adjusted pre-tax income | $ | 295,200 | $ | 255,698 | $ | 835,311 | $ | 748,627 | ||||||||||||||||||
| Less: Adjusted income taxes | 17,802 | 9,972 | 52,458 | 40,052 | ||||||||||||||||||||||
Index
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Adjusted net income | $ | 277,398 | $ | 245,726 | $ | 782,853 | $ | 708,575 | ||||||||||||||||||
| Net income per AB Unit, GAAP basis | $ | 0.88 | $ | 1.20 | $ | 2.34 | $ | 3.02 | ||||||||||||||||||
| Impact of non-GAAP adjustments | 0.06 | (0.35) | 0.31 | (0.57) | ||||||||||||||||||||||
| Adjusted net income per AB Unit | $ | 0.94 | $ | 0.85 | $ | 2.65 | $ | 2.45 | ||||||||||||||||||
| Operating margin, GAAP basis | 24.3 | % | 33.2 | % | 22.3 | % | 24.5 | % | ||||||||||||||||||
| Impact of non-GAAP adjustments | 9.9 | (1.9) | 11.1 | 6.3 | ||||||||||||||||||||||
| Adjusted operating margin | 34.2 | % | 31.3 | % | 33.4 | % | 30.8 | % | ||||||||||||||||||
Adjusted operating income for the three months ended September 30, 2025 increased $38.2 million, or 14.5%, from the three months ended September 30, 2024, primarily due to higher investment advisory base fees of $35.6 million, lower general and administrative ("G&A") expense of $23.8 million and higher investment gains compared to losses in the prior year of $8.2 million, partially offset by higher employee compensation and benefits expense of $24.6 million and lower performance-based fees of $5.9 million.
Adjusted operating income for the nine months ended September 30, 2025 increased $72.3 million, or 9.2%, from the nine months ended September 30, 2024, primarily due to higher investment advisory base fees of $123.7 million, lower G&A expense of $48.3 million and lower promotion and servicing expense of $14.8 million, partially offset by lower BRS revenues of $96.2 million due to the BRS deconsolidation, lower net dividend and interest revenue of $5.7 million, lower performance-based fees of $4.9 million and higher employee compensation and benefits expense of $3.2 million.
Adjusted Net Revenues
Net Revenue, as adjusted, is reduced to exclude all of the company's distribution revenues, which are recorded as a separate line item on the consolidated statement of income, as well as a portion of investment advisory services fees received that is used to pay distribution and servicing costs. For certain products, based on the distinct arrangements, certain distribution fees are collected by us and passed through to third-party client intermediaries, while for certain other products, we collect investment advisory services fees and a portion is passed through to third-party client intermediaries. In both arrangements, the third-party client intermediary owns the relationship with the client and is responsible for performing services and distributing the product to the client on our behalf. We believe offsetting distribution revenues and certain investment advisory services fees is useful for our investors and other users of our financial statements because such presentation appropriately reflects the nature of these costs as pass-through payments to third parties that perform functions on behalf of our sponsored mutual funds and/or shareholders of these funds. Distribution-related adjustments fluctuate each period based on the type of investment products sold, as well as the average AUM over the period. Also, we adjust distribution revenues for the amortization of deferred sales commissions as these costs, over time, will offset such revenues.
We adjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agent and shareholder servicing fees. Also, we adjust for certain investment advisory and services fees passed through to our investment advisors. These fees do not affect operating income, as such, we exclude these fees from adjusted net revenues. We also adjust for certain pass through costs associated with the transition of services to the JVs entered into with Societe Generale ("SocGen"). These amounts are expensed by us and passed to the JVs for reimbursement. These fees do not affect operating income, as such, we exclude these fees from adjusted net revenues
We adjust for the revenue impact of consolidating company-sponsored investment funds by eliminating the consolidated company-sponsored investment funds' revenues and including AB's fees from such consolidated company-sponsored investment funds and AB's investment gains and losses on its investments in such consolidated company-sponsored investment funds that were eliminated in consolidation.
Adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments. Also, we adjust for certain acquisition-related pass-through performance-based fees and performance related compensation.
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We also adjust net revenues to exclude our portion of the equity income or loss associated with our equity method investments, including our investment in the JVs and reinsurance sidecars, as we don't consider this activity part of our core business operations and these investments generate non-cash volatility which distort core earnings performance. Effective April 1, 2024 following the close of the transaction with SocGen, we record all income or loss associated with the JVs as an equity method investment income (loss). As we no longer consider this activity part of our core business operations and our intent is to fully divest from both joint ventures, we consider these amounts temporary, and as such, we exclude these amounts from our adjusted net revenues.
Adjusted Operating Income
Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) the impact on net revenues and compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee long-term incentive compensation-related investments, (3) the equity compensation paid by EQH to certain AB executives, (4) retirement plan settlement (gain) loss, (5) acquisition-related expenses (income), (6) income (loss) related to our equity method investments, (7) AB Funds reimbursement (income) expense, (8) interest on borrowings and (9) the impact of consolidated company-sponsored investment funds.
Real estate charges (credits) incurred during the fourth quarter of 2019 through the fourth quarter of 2020, while excluded in the period in which the charges (credits) were recorded, were included ratably over the remaining applicable lease term.
Prior to 2009, a significant portion of employee compensation was in the form of long-term incentive compensation awards that were notionally invested in AB investment services and generally vested over a period of four years. AB economically hedged the exposure to market movements by purchasing and holding these investments on its balance sheet. All such investments had vested as of year-end 2012 and the investments have been delivered to the participants, except for those investments with respect to which the participant elected a long-term deferral. Fluctuation in the value of these investments, which also impacts compensation expense, is recorded within investment gains and losses on the income statement. Management believes it is useful to reflect the offset achieved from economically hedging the market exposure of these investments in the calculation of adjusted operating income and adjusted operating margin. The non-GAAP measures exclude gains and losses and dividends and interest on employee long-term incentive compensation-related investments included in revenues and compensation expense.
The board of directors of EQH granted to Seth Bernstein, our CEO, equity awards in connection with EQH's IPO. Additionally, equity awards have been granted to Mr. Bernstein and other AB executives for their membership on the EQH Management Committee. These individuals may receive additional equity or cash compensation from EQH in the future related to their service on the Management Committee. Any awards granted to these individuals by EQH are recorded as compensation expense in AB's consolidated statement of income. The compensation expense associated with these awards has been excluded from our non-GAAP measures because they are non-cash and are based upon EQH's, and not AB's, financial performance.
The (gains) losses associated with the termination of our defined benefit retirement plan are non-cash, short term in nature and not considered a part of our core operating results when comparing financial results from period to period.
Acquisition-related expenses (income) have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers. Acquisition-related expenses (income) include professional fees, the recording of changes in estimates to, and accretion expense related to, our contingent payment arrangements associated with our acquisitions, certain compensation-related expenses and amortization of intangible assets for contracts acquired. During the three months ended September 30, 2024 we recognized a gain of $128.5 million in contingent payment arrangements in the condensed consolidated statement of income related to a fair value remeasurement of the contingent payment liability associated with our acquisition of AB Carval in 2022. The fair value remeasurement was due to updated assumptions of future performance associated with the liability.
We also adjust operating income to exclude our portion of the equity income or loss associated with our equity method investments, including our investment in the JVs and reinsurance sidecar, as we don't consider this activity part of our core business operations and these investments generate non-cash volatility which distort core earnings performance. Effective April 1, 2024 following the close of the transaction with SocGen, we record all income or loss associated with the JVs as an equity method investment (income) loss. As we no longer consider this activity part of our core business operations and our intent is to fully divest from both joint ventures, we consider these amounts temporary, and as such, we exclude these amounts from our adjusted operating income.
During the first quarter of 2025, we identified an error in the billing practices of a third-party service provider, who had overbilled certain AB mutual funds for omnibus account services, sub-accounting services, and related transfer agency expenses in prior years. In the second quarter, at the request of the mutual fund Board, AB agreed to reimburse the affected funds for the entirety of the overpayment plus interest. During the third quarter, we resolved this matter with the service provider and recovered a portion of the overbilled amounts. We have adjusted operating income to exclude these amounts. We
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believe adjusting for these costs is useful for our investors and other users of our financial statements as such presentation appropriately reflects the non-core nature of this expenditure.
We adjust operating income to exclude interest on borrowings in order to align with our industry peer group.
We adjust for the operating income impact of consolidating certain company-sponsored investment funds by eliminating the consolidated company-sponsored funds' revenues and expenses and including AB's revenues and expenses that were eliminated in consolidation. We also exclude the limited partner interests we do not own.
Adjusted Net Income per AB Unit
As previously discussed, our quarterly distribution is typically our adjusted net income per Unit (which is derived from adjusted net income) for the quarter multiplied by the number of general and limited partnership interests outstanding at the end of the quarter. Adjusted net income is derived from adjusted operating income less interest expense and adjusted income taxes. Adjusted income taxes, used in calculating adjusted net income, are calculated using the GAAP effective tax rate adjusted for non-GAAP income tax adjustments.
Adjusted Operating Margin
Adjusted operating margin allows us to monitor our financial performance and efficiency from period to period without the volatility noted above in our discussion of adjusted operating incomeand to compare our performance to industry peers on a basis that better reflects our performance in our core business. Adjusted operating margin is derived by dividing adjusted operating income by adjusted net revenues.
Index
Net Revenues
The components of net revenues are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Investment advisory and services fees: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Institutions: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | $ | 156,982 | $ | 160,146 | $ | (3,164) | (2.0)% | $ | 459,387 | $ | 464,324 | $ | (4,937) | (1.1) | % | |||||||||||||||||||||||||||||||||||
|
Performance-based fees(2)
|
3,979 | 7,080 | (3,101) | (43.8) | 36,330 | 18,830 | 17,500 | 92.9 | ||||||||||||||||||||||||||||||||||||||||||
| 160,961 | 167,226 | (6,265) | (3.7) | 495,717 | 483,154 | 12,563 | 2.6 | |||||||||||||||||||||||||||||||||||||||||||
| Retail: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | 409,391 | 388,165 | 21,226 | 5.5 | 1,185,563 | 1,102,211 | 83,352 | 7.6 | ||||||||||||||||||||||||||||||||||||||||||
|
Performance-based fees(2)
|
(632) | 345 | (977) | n/m | 7,377 | 16,668 | (9,291) | (55.7) | ||||||||||||||||||||||||||||||||||||||||||
| 408,759 | 388,510 | 20,249 | 5.2 | 1,192,940 | 1,118,879 | 74,061 | 6.6 | |||||||||||||||||||||||||||||||||||||||||||
| Private Wealth: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | 286,105 | 265,312 | 20,793 | 7.8 | 830,713 | 775,344 | 55,369 | 7.1 | ||||||||||||||||||||||||||||||||||||||||||
| Performance-based fees | 18,625 | 21,338 | (2,713) | (12.7) | 54,170 | 66,741 | (12,571) | (18.8) | ||||||||||||||||||||||||||||||||||||||||||
| 304,730 | 286,650 | 18,080 | 6.3 | 884,883 | 842,085 | 42,798 | 5.1 | |||||||||||||||||||||||||||||||||||||||||||
| Total: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | 852,478 | 813,623 | 38,855 | 4.8 | 2,475,663 | 2,341,879 | 133,784 | 5.7 | ||||||||||||||||||||||||||||||||||||||||||
| Performance-based fees | 21,972 | 28,763 | (6,791) | (23.6) | 97,877 | 102,239 | (4,362) | (4.3) | ||||||||||||||||||||||||||||||||||||||||||
| 874,450 | 842,386 | 32,064 | 3.8 | 2,573,540 | 2,444,118 | 129,422 | 5.3 | |||||||||||||||||||||||||||||||||||||||||||
|
Bernstein Research Services (1)
|
- | - | - | - | - | 96,222 | (96,222) | n/m | ||||||||||||||||||||||||||||||||||||||||||
| Distribution revenues | 210,424 | 189,216 | 21,208 | 11.2 | 607,811 | 527,811 | 80,000 | 15.2 | ||||||||||||||||||||||||||||||||||||||||||
| Dividend and interest income | 35,944 | 38,940 | (2,996) | (7.7) | 106,431 | 127,441 | (21,010) | (16.5) | ||||||||||||||||||||||||||||||||||||||||||
| Investment (losses) | (2,721) | (3,512) | 791 | (22.5) | (31,084) | (15,398) | (15,686) | 101.9 | ||||||||||||||||||||||||||||||||||||||||||
| Other revenues | 34,253 | 39,673 | (5,420) | (13.7) | 98,345 | 104,133 | (5,788) | (5.6) | ||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 1,152,350 | 1,106,703 | 45,647 | 4.1 | 3,355,043 | 3,284,327 | 70,716 | 2.2 | ||||||||||||||||||||||||||||||||||||||||||
| Less: broker-dealer related interest expense | 15,203 | 21,214 | (6,011) | (28.3) | 48,382 | 66,744 | (18,362) | (27.5) | ||||||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,137,147 | $ | 1,085,489 | $ | 51,658 | 4.8% | $ | 3,306,661 | $ | 3,217,583 | $ | 89,078 | 2.8 | % | |||||||||||||||||||||||||||||||||||
(1) Effective April 1, 2024, AB deconsolidated the Bernstein Research Services business.
(2) Approximately $0.8 million of performance-based fee revenue was reclassified from Retail performance-based fee revenue into Institutional performance-based fee revenue during the three months ended September 30, 2025.
Investment Advisory and Services Fees
Investment advisory and services fees are the largest component of our revenues. These fees generally are calculated as a percentage of the value of AUM as of a specified date, or as a percentage of the value of average AUM for the applicable billing period, and vary with the type of investment service, the size of account and the total amount of assets we manage for a particular client. Accordingly, fee income generally increases or decreases as AUM increase or decrease and is affected by market appreciation or depreciation, the addition of new client accounts or client contributions of additional assets to existing accounts, withdrawals of assets from and termination of client accounts, purchases and redemptions of mutual fund shares,
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shifts of assets between accounts or products with different fee structures, and acquisitions. Our average basis points realized (investment advisory and services fees divided by average AUM) generally approximate 30 to 105 basis points for actively managed equity services, 10 to 65 basis points for actively-managed fixed income services and 1 to 50 basis points for passively managed services. Average basis points realized for other services could range from 3 basis points for certain Institutional third party managed services to over 190 basis points for certain Retail and Private Wealth Management alternative services. These ranges include all-inclusive fee arrangements (covering investment management, trade execution and other services) for our Private Wealth Management clients.
We calculate AUM using established market-based valuation methods and fair valuation (non-observable market) methods. Market-based valuation methods include: last sale/settle prices from an exchange for actively-traded listed equities, options and futures; evaluated bid prices from recognized pricing vendors for fixed income, asset-backed or mortgage-backed issues; mid prices from recognized pricing vendors and brokers for credit default swaps; and quoted bids or spreads from pricing vendors and brokers for other derivative products. Fair valuation methods include: discounted cash flow models or any other methodology that is validated and approved by our Valuation Committee and sub-committee (the "Valuation Committee") (see paragraph immediately below for more information regarding our Valuation Committee). Fair valuation methods are used only where AUM cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities.
The Valuation Committee, consists of senior officers and employees, which oversees a consistent framework of pricing and valuation of all investments held in client and AB portfolios. The Valuation Committee has adopted a Statement of Pricing Policies describing principles and policies that apply to pricing and valuing investments held in these portfolios. We also have a Pricing Group, which is overseen by the Valuation Committee and is responsible for managing the pricing process for all investments.
We sometimes charge our clients performance-based fees. In these situations, we charge a base advisory fee and are eligible to earn an additional performance-based fee or incentive allocation that is calculated as either a percentage of absolute investment results or a percentage of investment results in excess of a stated benchmark over a specified period of time. Some performance-based fees include a high-watermark provision, which generally provides that if a client account underperforms relative to its performance target (whether absolute or relative to a specified benchmark), it must gain back such underperformance before we can collect future performance-based fees. Therefore, if we fail to achieve our performance target for a particular period, we will not earn a performance-based fee for that period and, for accounts with a high-watermark provision, our ability to earn future performance-based fees will be impaired. We are eligible to earn performance-based fees on 7.5%, 7.3% and 0.4% of the assets we manage for private wealth clients, institutional clients and retail clients, respectively (in total, 4.5% of our AUM).
For the three months ended September 30, 2025, our investment advisory and services fees increased by $32.1 million, or 3.8%, from the three months ended September 30, 2024, due to a $38.9 million, or 4.8%, increase in base fees, offset by a $6.8 million, or 23.6%, decrease in performance-based fees. The increase in base fees is primarily due to a 7.0% increase in average AUM. Performance-based fees decreased primarily due to lower performance fees earned on our Private Credit and Global Opportunistic Credit.
For the nine months ended September 30, 2025, our investment advisory and services fees increased by $129.4 million, or 5.3%, from the nine months ended September 30, 2024, due to a $133.8 million, or 5.7%, increase in base fees, offset by a $4.4 million, or 4.3%, decrease in performance-based fees. The increase in base fees is primarily due to a 7.2% increase in average AUM. Performance-based fees decreased primarily due to lower performance fees earned on our U.S. Select Equity Long/Short, Private Credit, Global Opportunistic Credit and Emerging Markets Value, partially offset by higher performance fees earned on our International Small Cap.
Institutional base fees for the three months ended September 30, 2025 decreased by $3.2 million, or 2.0%, from the three months ended September 30, 2024, primarily due to a decrease in portfolio fee rate, partially offset by a 4.6% increase in average AUM. Retail base fees for the three months ended September 30, 2025 increased $21.2 million, or 5.5%, from the three months ended September 30, 2024, primarily due to a 7.7% increase in average AUM, partially offset by a decrease in portfolio fee rate. Private Wealth base fees for the three months ended September 30, 2025 increased $20.8 million, or 7.8%, from the three months ended September 30, 2024, primarily due to a 11.1% increase in average AUM, partially offset by a decrease in portfolio fee rate.
Institutional base fees for the nine months ended September 30, 2025 decreased by $4.9 million, or 1.1%, from the nine months ended September 30, 2024, primarily due to a decrease in portfolio fee rate, partially offset by a 3.4% increase in average AUM. Retail base fees for the nine months ended September 30, 2025 increased $83.4 million, or 7.6%, from the nine months ended September 30, 2024, primarily due to a 9.7% increase in average AUM, partially offset by a decrease in portfolio fee
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rate. Private Wealth base fees for the nine months ended September 30, 2025 increased $55.4 million, or 7.1%, from the nine months ended September 30, 2024, primarily due to a 10.7% increase in average AUM, partially offset by a decrease in portfolio fee rate.
Bernstein Research Services
Bernstein Research Services revenue decreased $96.2 million, or 100%, compared to the nine months ended September 30, 2024 due to the deconsolidation of the BRS business effective April 1, 2024.
Distribution Revenues
Two of our subsidiaries act as distributors and/or placement agents of company-sponsored mutual funds and receive distribution services fees from certain of those funds as full or partial reimbursement of the distribution expenses they incur. Period-over-period fluctuations of distribution revenues typically are in line with fluctuations of the corresponding average AUM of these mutual funds.
Distribution revenues for the three months ended September 30, 2025 increased $21.2 million, or 11.2%, compared to the three months ended September 30, 2024, primarily due to the corresponding average AUM of these mutual funds increasing 10.2%. Distribution revenues for the nine months ended September 30, 2025 increased $80.0 million, or 15.2%, compared to the nine months ended September 30, 2024, primarily due to the corresponding average AUM of these mutual funds increasing 11.4% and a shift in product mix to mutual funds that have higher distribution rates.
Dividend and Interest Income and Broker-Dealer Related Interest Expense
Dividend and interest income consists primarily of investment income and interest earned on customer margin balances and U.S. Treasury Bills as well as dividend and interest income in our consolidated company-sponsored investment funds. Broker-dealer related interest expense principally reflects interest accrued on cash balances in customers' brokerage accounts.
For the three months ended September 30, 2025, dividend and interest income decreased $3.0 million, or 7.7%, compared to the three months ended September 30, 2024, primarily due to lower interest earned on customer margin accounts and U.S. Treasury Bills. Broker-dealer related interest expense for the three months ended September 30, 2025 decreased $6.0 million, or 28.3%, compared to the three months ended September 30, 2024, primarily due to lower interest paid on cash balances in customers' brokerage accounts, as a result of lower balances and lower interest rates.
For the nine months ended September 30, 2025, dividend and interest income decreased $21.0 million, or 16.5%, compared to the nine months ended September 30, 2024, primarily due to lower interest earned on customer margin accounts and U.S. Treasury Bills. Broker-dealer related interest expense for the nine months ended September 30, 2025 decreased $18.4 million, or 27.5%, compared to the nine months ended September 30, 2024, primarily due to lower interest paid on cash balances in customers' brokerage accounts, as a result of lower balances and lower interest rates.
Investment Gains (Losses)
Investment gains (losses) consist primarily of realized and unrealized investment gains or losses on: (i) employee long-term incentive compensation-related investments, (ii) U.S. Treasury Bills, (iii) seed capital investments, (iv) derivatives and (v) investments in our consolidated company-sponsored investment funds. Investment gains (losses) also include equity in earnings of proprietary investments in limited partnership hedge funds that we sponsor and manage and equity gains (losses) related to our equity method investments.
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Investment gains (losses) are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Long-term incentive compensation-related investments: | ||||||||||||||||||||||||||
| Realized gains (losses) | $ | 43 | $ | (14) | $ | 1,031 | $ | 7,110 | ||||||||||||||||||
| Unrealized gains (losses) | 1,917 | 1,649 | 2,584 | (2,417) | ||||||||||||||||||||||
| Investments held by consolidated company-sponsored investment funds: | ||||||||||||||||||||||||||
| Realized gains (losses) | 1,092 | 1,035 | 2,551 | (641) | ||||||||||||||||||||||
| Unrealized gains | 4,433 | 9,373 | 4,598 | 20,900 | ||||||||||||||||||||||
| Seed capital and other investments: | ||||||||||||||||||||||||||
| Realized (losses) gains: | ||||||||||||||||||||||||||
| Seed capital and other | (42) | 332 | 4,736 | 19 | ||||||||||||||||||||||
| Derivatives | (11,144) | (11,003) | (23,090) | (25,442) | ||||||||||||||||||||||
| Unrealized gains (losses): | ||||||||||||||||||||||||||
| Seed capital and other | 10,011 | 6,355 | 13,985 | 16,299 | ||||||||||||||||||||||
| Derivatives | 6,383 | (4,225) | (5,174) | 3,787 | ||||||||||||||||||||||
| Brokerage-related investments: | ||||||||||||||||||||||||||
| Realized gains (losses) | 112 | 25 | 162 | (279) | ||||||||||||||||||||||
| Unrealized gains (losses) | 165 | 511 | (124) | 709 | ||||||||||||||||||||||
| Equity method investments: | ||||||||||||||||||||||||||
| (Loss) on JVs | (16,162) | (7,550) | (35,606) | (35,443) | ||||||||||||||||||||||
| Gain on other equity method investments | 471 | - | 3,263 | - | ||||||||||||||||||||||
| $ | (2,721) | $ | (3,512) | $ | (31,084) | $ | (15,398) | |||||||||||||||||||
Other Revenues
Other revenues consist of fees earned for transfer agency services provided to company-sponsored mutual funds, fees earned for administration and recordkeeping services provided to company-sponsored mutual funds and the General Accounts of EQH and its subsidiaries, and other miscellaneous revenues. Other revenues for the three months ended September 30, 2025 decreased $5.4 million, or 13.7%, compared to the three months ended September 30, 2024, primarily due to a decrease in certain reimbursements for services provided to the JVs and lower shareholder servicing fees. Other revenues for the nine months ended September 30, 2025 decreased $5.8 million, or 5.6%, compared to the nine months ended September 30, 2024, primarily due to lower shareholder servicing fees, partially offset by higher reimbursements for services provided to the JVs.
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Expenses
The components of expenses are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | $ | 450,793 | $ | 424,893 | $ | 25,900 | 6.1 | % | $ | 1,310,878 | $ | 1,300,989 | $ | 9,889 | 0.8 | % | ||||||||||||||||||||||||||||||||||
| Promotion and servicing: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution-related payments | 208,435 | 192,230 | 16,205 | 8.4 | 606,615 | 545,120 | 61,495 | 11.3 | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred sales commissions | 20,872 | 15,005 | 5,867 | 39.1 | 62,183 | 40,152 | 22,031 | 54.9 | ||||||||||||||||||||||||||||||||||||||||||
| Trade execution, marketing, T&E and other | 36,907 | 38,312 | (1,405) | (3.7) | 114,239 | 134,243 | (20,004) | (14.9) | ||||||||||||||||||||||||||||||||||||||||||
| 266,214 | 245,547 | 20,667 | 8.4 | 783,037 | 719,515 | 63,522 | 8.8 | |||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 118,203 | 155,808 | (37,605) | (24.1) | 414,156 | 439,450 | (25,294) | (5.8) | ||||||||||||||||||||||||||||||||||||||||||
| Contingent payment arrangements | 43 | (125,947) | 125,990 | n/m | 149 | (120,831) | 120,980 | n/m | ||||||||||||||||||||||||||||||||||||||||||
| Interest on borrowings | 7,167 | 8,456 | (1,289) | (15.2) | 22,768 | 37,139 | (14,371) | (38.7) | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 11,250 | 11,451 | (201) | (1.8) | 33,733 | 34,754 | (1,021) | (2.9) | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 853,670 | $ | 720,208 | $ | 133,462 | 18.5 | % | $ | 2,564,721 | $ | 2,411,016 | $ | 153,705 | 6.4 | % | ||||||||||||||||||||||||||||||||||
Employee Compensation and Benefits
Employee compensation and benefits expense consists of base compensation (including salaries and severance), annual short-term incentive compensation awards (cash bonuses), annual long-term incentive compensation awards, commissions, fringe benefits and other employment costs (including recruitment, training, temporary help and meals).
Compensation expense as a percentage of net revenues was 39.6% and 39.1% for the three months ended September 30, 2025 and 2024, respectively. Compensation expense as a percentage of net revenues was 39.6% and 40.4% for the nine months ended September 30, 2025 and 2024, respectively. Compensation expense generally is determined on a discretionary basis and is primarily a function of our firm's current-year financial performance. The amounts of incentive compensation we award are designed to motivate, reward and retain top talent while aligning our executives' interests with the interests of our Unitholders. Senior management, with the approval of the Compensation and Workplace Practices Committee of the Board of Directors of AllianceBernstein Corporation ("Compensation Committee"), periodically confirms that the appropriate metric to consider in determining the amount of incentive compensation is the ratio of adjusted employee compensation and benefits expense to adjusted net revenues. Adjusted net revenues used in the adjusted compensation ratio are the same as the adjusted annual net revenues presented as a non-GAAP measure (discussed earlier in this Item 2). Adjusted employee compensation and benefits expense is total employee compensation and benefits expense minus other employment costs such as recruitment, training, temporary help and meals (which was 1.1% of adjusted net revenues for both the three and nine months ended September 30, 2025 and 1.0% of adjusted net revenues for both the three and nine months ended September 30, 2024), and excludes the impact of mark-to-market vesting expense, as well as dividends and interest expense, associated with employee incentive compensation-related investments and the amortization expense associated with the awards issued by EQH to some of our firm's executive officers relating to their roles as members of the EQH Management Committee. Senior management, with the approval of the Compensation Committee, has established as an objective that adjusted employee compensation and benefits expense, excluding the impact of performance-based fees, generally should not exceed 50.0% of our adjusted net revenues in any year, except in unexpected or unusual circumstances. Our ratio of adjusted compensation expense as a percentage of adjusted net revenues was 48.5% for the three and nine months ended September 30, 2025. Our ratio of adjusted compensation
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expense as a percentage of adjusted net revenues was 48.0% for the three months ended September 30, 2024 and 48.7% for the nine months ended September 30, 2024.
For the three months ended September 30, 2025, employee compensation and benefits expense increased $25.9 million, or 6.1%, compared to the three months ended September 30, 2024, primarily due to higher base compensation of $7.7 million, higher commissions of $6.1 million, higher fringe benefits of $5.5 million and higher incentive compensation of $5.4 million. For the nine months ended September 30, 2025, employee compensation and benefits expense increased $9.9 million, or 0.8%, compared to the nine months ended September 30, 2024, primarily due to higher commissions of $24.9 million, partially offset by lower base compensation of $15.6 million
Promotion and Servicing
Promotion and servicing expenses include distribution-related payments to financial intermediaries for distribution of AB mutual funds and amortization of deferred sales commissions paid to financial intermediaries for the sale of back-end load shares of AB mutual funds. Also included in this expense category are costs related to trade execution and clearance, travel and entertainment, advertising and promotional materials.
Promotion and servicing expenses increased $20.7 million, or 8.4%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily due to higher distribution-related payments of $16.2 million and higher amortization of deferred sales commissions of $5.9 million.
Promotion and servicing expenses increased $63.5 million, or 8.8%, during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily due to higher distribution-related payments of $61.5 million and higher amortization of deferred sales commissions of $22.0 million, partially offset by lower trade execution and clearance expense of $16.2 million due to the BRS deconsolidation.
General and Administrative
General and administrative expenses include portfolio services expenses, technology expenses, professional fees and office-related expenses (occupancy, communications and similar expenses). General and administrative expenses as a percentage of net revenues were 10.4% and 14.4% for the three months ended September 30, 2025 and 2024, respectively. General and administrative expenses as a percentage of net revenues were 12.5% and 13.7% for the nine months ended September 30, 2025 and 2024, respectively.
General and administrative expenses decreased $37.6 million, or 24.1%, during the three months ended September 30, 2025 compared to the corresponding period in 2024, primarily due to lower office-related expenses of $23.4 million principally driven by our early exit from our previous New York office location in 2024, a partial recovery of $8.5 million from a third-party service provider related to the recognition of the AB Funds reimbursement expense recognized in the second quarter of 2025, lower professional fees of $5.1 million and a final settlement of the pension obligation of $2.4 million, partially offset by higher portfolio services and related expenses of $3.3 million.
General and administrative expenses decreased $25.3 million, or 5.8%, during the nine months ended September 30, 2025 compared to the corresponding period in 2024, primarily due to lower office-related expenses of $58.0 million primarily driven by our early exit from our previous New York office location in 2024, lower professional fees of $10.9 million, lower other taxes of $4.4 million, partially offset by a one time gain in the prior year period related to the recognition of a $20.8 million government incentive grant received in connection with the relocation of our headquarters to Nashville, Tennessee, a retirement plan settlement loss of $17.7 million in the current year, a $5.8 million AB Funds reimbursement expense (net of $8.5 million recovered in the third quarter of 2025) related to a disputed billing practice of a third-party service provider and higher portfolio services and related expense of $4.5 million.
Contingent Payment Arrangements
Contingent payment arrangements reflect changes in estimates of contingent payment liabilities associated with acquisitions in current and previous periods, as well as accretion expense of these liabilities. There were no changes in our estimates during the nine months ended September 30, 2025. During the three months ended September 30, 2024 we recognized a gain of $128.5 million in contingent payment arrangements in the condensed consolidated statement of income related to a fair value remeasurement of the contingent payment liability associated with our acquisition of AB CarVal in 2022. The fair value remeasurement was due to updated assumptions of future performance associated with the liability.
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During the three months ended September 30, 2025 and 2024, we recognized zero and $2.6 million in accretion expense related to our contingent considerations payable. During the nine months ended September 30, 2025 and 2024, we recognized $0.1 million and $7.7 million in accretion expense related to our contingent considerations payable.
We made payments of approximately $1.0 million and $2.6 million, associated with our contingent consideration during the nine months ended September 30, 2025 and September 30, 2024, respectively, related to various smaller acquisitions.
Interest on Borrowings
Interest on borrowings reflects interest expense related to our debt and credit facilities. See Note 16 to AB's condensed consolidated financial statements contained in Item 1, for disclosures relating to our debt and credit facilities. For the three months ended September 30, 2025 interest on borrowings decreased $1.3 million, or 15.2%, compared to the three months ended September 30, 2024. The decrease was primarily due to lower weighted average interest rates. For the nine months ended September 30, 2025 interest on borrowings decreased $14.4 million, or 38.7%, compared to the nine months ended September 30, 2024. The decrease was primarily due to lower weighted average interest rates and lower weighted average borrowings.
Amortization of Intangible Assets
Amortization of intangible assets reflects our amortization of costs assigned to acquired investment management contracts with a finite life. These assets are recognized at fair value and generally are amortized on a straight-line basis over their estimated useful life. Amortization of intangible assets decreased $0.2 million during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Amortization of intangible assets decreased $1.0 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
Income Taxes
AB, a private limited partnership, is not subject to federal or state corporate income taxes. However, AB is subject to a 4.0% New York City unincorporated business tax ("UBT"). Our domestic corporate subsidiaries are subject to federal, state and local income taxes and generally are included in the filing of a consolidated federal income tax return. Separate state and local income tax returns also are filed. Foreign corporate subsidiaries generally are subject to taxes in the jurisdictions where they are located.
Income tax expense for the three months ended September 30, 2025 increased $2.8 million, or 19.9%, compared to the three months ended September 30, 2024 as a result of an increase in foreign income in jurisdictions that carry a higher tax rate. Income tax expense for the nine months ended September 30, 2025 decreased $3.8 million, or 7.6%, compared to the nine months ended September 30, 2024 as a result of a decrease in foreign income in jurisdictions that carry a higher tax rate. There were no material changes to uncertain tax positions (FIN 48 reserves) or valuation allowances against deferred tax assets for the three and nine months ended September 30, 2025.
Net Income (Loss) of Consolidated Entities Attributable to Non-Controlling Interests
Net income (loss) of consolidated entities attributable to non-controlling interests primarily consists of limited partner interests owned by other investors in our consolidated company-sponsored investment funds. For the three months ended September 30, 2025, we had $7.1 million of net income of consolidated entities attributable to non-controlling interests compared to net income of $5.1 million for the three months ended September 30, 2024. The increase is driven by higher net income of consolidated entities attributable to non-controlling interests. For the nine months ended September 30, 2025, we had $4.8 million of net income of consolidated entities attributable to non-controlling interests compared to net income of $17.3 million for the nine months ended September 30, 2024. The decrease is driven by lower net income of consolidated entities attributable to non-controlling interests. Period-to-period fluctuations result primarily from the number of consolidated company-sponsored investment funds and their respective market performance.
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CAPITAL RESOURCES AND LIQUIDITY
Cash flows from operating activities primarily include the receipt of investment advisory and services fees and other revenues offset by the payment of operating expenses incurred in the normal course of business. Our cash flows from operating activities have historically been positive and sufficient in supporting our operations. We do not anticipate this to change in the foreseeable future. Cash flows from investing activities generally consist of small capital expenditures and, when applicable, business acquisitions. Cash flows from financing activities primarily consist of issuance and repayment of debt and the repurchase of AB Holding Units for our long-term deferred compensation plans. We are required to distribute all of our Available Cash Flow to our Unitholders and the General Partner.
During the first nine months of 2025, net cash provided by operating activities was $948.1 million compared to net cash provided of $1.1 billion during the corresponding 2024 period. The decrease is primarily due to the net activity of our consolidated company-sponsored investment funds of $355.1 million, a decrease in accounts payable and accrued liabilities of $81.1 million and an increase in other investments of $35.8 million, partially offset by a decrease in fees receivable of $136.1 million, a decrease in deferred sales commissions of $61.8 million and a decrease in broker-dealer related net assets of $56.8 million.
During the first nine months of 2025, net cash used in investing activities was $27.8 million, compared to net cash used of $93.3 million during the corresponding 2024 period. The change is due to a decrease in debt repayment received from equity method investments of $86.2 million, lower purchases of furniture, equipment and leasehold improvements of $72.1 million, a decrease in cash used related to the divestiture of the BRS business of $40.2 million and a decrease in capital contributions to equity method investments of $39.4 million.
During the first nine months of 2025, net cash used in financing activities was $1.0 billion, compared to net cash used of $1.5 billion during the corresponding 2024 period. The change is primarily due to lower repayments of debt of $409.3 million and capital contributions from consolidated funds in the current year compared to cash distributions in the prior year (net impact of $205.8 million), partially offset by higher cash distributions to Unitholders of $136.8 million.
During the second quarter of 2025, EQH announced the final results of its cash tender offer and purchased a total of 19,682,946 AB Holding Units. During the third quarter, AB entered into an amended and restated Exchange Agreement (the "Amended Exchange Agreement") with EQH to increase the AB Units that remain available for exchange from 4,788,806 AB Units to 19,682,946 AB Units. At the time the Amended Exchange agreement was entered into, AB issued and exchanged 19,682,946 AB Units for AB Holding Units held by EQH. The acquired AB Holding Units from the exchange were retired, along with an equal number of AB Units.
As of September 30, 2025, AB had $740.9 million of cash and cash equivalents (excluding cash and cash equivalents of consolidated company-sponsored investment funds), all of which is available for liquidity but consists primarily of cash on deposit for our broker-dealers related to various customer clearing activities, and cash held by foreign subsidiaries of $499.3 million.
See Note 16 to AB's condensed consolidated financial statements contained in Item 1,for disclosures relating to our debt and credit facilities. We use our debt and credit facilities to seed certain new investment products which may expose us to market risk, credit risk and material gains and losses. To reduce our exposure, we enter into various futures, forwards, options and swaps primarily to economically hedge certain of our seed money investments. While in most cases broad market risks are hedged and are effective in reducing our exposure, our hedges are imperfect and we may remain exposed to some market risk and credit-related losses in the event of non-performance by counterparties on these derivative instruments.
Our financial condition and access to public and private debt markets should provide adequate liquidity for our general business needs. Management believes that cash flow from operations and the issuance of debt and AB Units or AB Holding Units will provide us with the resources we need to meet our financial obligations. See "Cautions Regarding Forward-Looking Statements" for a discussion of credit markets and our ability to renew our credit facilities at expiration.
COMMITMENTS AND CONTINGENCIES
AB's capital commitments, which consist primarily of operating leases for office space, generally are funded from future operating cash flows. See Note 13for discussion of lease commitments.
See Note 12for discussion of commitments and contingencies.
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CRITICAL ACCOUNTING ESTIMATES
The preparation of the condensed consolidated financial statements and notes to condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
There have been no updates to our critical accounting estimates during the third quarter of 2025, other than as noted below, from those disclosed in "Management's Discussion and Analysis of Financial Condition"in our Form 10-K for the year ended December 31, 2024.
Goodwill
Our acquisitions are accounted for under the acquisition method of accounting, where the cost of the acquisition is allocated on the basis of the estimated fair value of the assets acquired and the liabilities assumed. The excess of the purchase price over the fair value of identifiable assets acquired, net of liabilities assumed, results in the recognition of goodwill.
As of September 30, 2025, we had goodwill of $3.6 billion on the consolidated statement of financial condition which included $2.6 billion as a result of the Sanford C. Bernstein Inc. ("Bernstein") acquisition in 2000, $666.1 million as a result of the CarVal Investors L.P. ("CarVal") acquisition in 2022 and $291.9 million in regard to various smaller acquisitions.
We have determined that AB has only one reporting segment and reporting unit. We test our goodwill annually, as of September 30, for impairment or if certain events or changes in circumstances occur and trigger an interim impairment test. The carrying value of goodwill is also reviewed if facts and circumstances occur that suggest possible impairment, such as, but not limited to significant transactions including acquisitions or divestitures and significant declines in AUM, revenues, earnings or the price of an AB Holding Unit. Any of these changes in circumstances could suggest the possibility that goodwill is impaired, but none of these events or circumstances by itself would indicate that it is more likely than not that goodwill is impaired. Instead, they are merely recognized as triggering events for the consideration of impairment and must be viewed in combination with any mitigating or positive factors. A holistic evaluation of all events since the most recent quantitative impairment test must be done to determine whether it is more likely than not that the reporting unit is impaired.
For our annual impairment test, we utilize the market approach where the fair value of the reporting unit is based on its unadjusted market valuation (AB Units outstanding multiplied by AB Holding's Unit price) and earnings multiples. A goodwill impairment would be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The goodwill impairment test does not include a determination by management of whether a decline in fair value is temporary and it is important that management's determination of fair value reflect the impact of changing market conditions, including the severity and anticipated duration of any such changes. The price of a publicly traded AB Holding Unit serves as a reasonable starting point for valuing an AB Unit because each represents the same fractional interest in our underlying business. Our market approach analysis also includes comparable industry earnings multiples applied to our earnings forecast and assumes a control premium (when applicable).
ACCOUNTING PRONOUNCEMENTS
See Note 2 to AB's condensed consolidated financial statements contained in Item 1.
CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements provided by management in this report and in the portion of AB's Form 10-Q attached hereto as Exhibit 99.1are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately managed accounts, general economic conditions, the impact of tariffs and potential disruptions in international trade on financial markets, product and account performance, asset levels and economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. We caution readers to carefully consider such factors. Further, these forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see "Risk Factors" in Part I, Item 1Aof our Form 10-K for the year ended December 31, 2024
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and Part II, Item 1A in this Form 10-Q. Any or all of the forward-looking statements that we make in our Form 10-K, this Form 10-Q, other documents we file with or furnish to the SEC, and any other public statements we issue, may turn out to be wrong. It is important to remember that other factors besides those listed in "Risk Factors" and those listed belowcould also adversely impact our revenues, financial condition, results of operations and business prospects.
The forward-looking statements referred to in the preceding paragraph, most of which directly affect AB but also affect AB Holding because AB Holding's principal source of income and cash flow is attributable to its investment in AB, include statements regarding:
•Our belief that the cash flow AB Holding realizes from its investment in AB will provide AB Holding with the resources it needs to meet its financial obligations:AB Holding's cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding's ability to meet its financial obligations is dependent on AB's cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control.
•Our financial condition and ability to access the public and private capital markets providing adequate liquidity for our general business needs:Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to access public and private capital markets on reasonable terms may be limited by adverse market conditions, our firm's credit ratings, our profitability and changes in government regulations, including tax rates and interest rates.
•The outcome of litigation:Litigation is inherently unpredictable, and excessive damage awards do occur. Though we have stated that we do not expect any pending legal proceedings to have a material adverse effect on our results of operations, financial condition or liquidity, any settlement or judgment with respect to a legal proceeding could be significant and could have such an effect.
•The possibility that we will engage in open market purchases of AB Holding Units for anticipated obligations under our incentive compensation award program:The number of AB Holding Units AB may decide to buy in future periods, if any, for incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.
•Our determination that adjusted employee compensation expense, excluding the impact of performance-based fees, generally should not exceed 50% of our adjusted net revenues on an annual basis:Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.
AllianceBernstein LP published this content on October 23, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 23, 2025 at 10:51 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]