BlackRock, Inc. (BLK.US) Q3 Earnings Call: Massive Financing Demand for AI Infrastructure, Computing Power May Become a New Asset Class

BlackRock, Inc. (BLK.US) released its Q3 2026 results before the U.S. market open on October 14, followed by a conference call. Data showed that BlackRock, Inc.'s Q3 revenue was $7.752 billion, up 19% year-over-year, above the market expectation of $7.4 billion to $7.52 billion; adjusted earnings per share were $15.93, up 38% year-over-year, more than 11% above the market expectation range of $14.10 to $14.32. Under GAAP, net income was $1.659 billion and diluted earnings per share were $10.57, up 25% year-over-year. Scale and fund flows were the biggest highlights of the quarter. As of September 30, the company's assets under management (AUM) reached a record $15.49 trillion, up 15% year-over-year; third-quarter net inflows were $205 billion, including $135 billion of net inflows into iShares ETFs, $66.4 billion of net inflows into active products, and $27.4 billion of net outflows from institutional index products. Over the past 12 months, cumulative net inflows were $869 billion, corresponding to 10% organic base fee growth; third-quarter annualized organic base fee growth was 11%. Management elaborated on the call on AI infrastructure financing demand and the judgment that computing power is becoming an asset class. For American Electric Power Company, Inc.'s power grid alone, ensuring power supply, and data center Core and Shell construction, $7 trillion to $9 trillion will be needed over the coming years; the enterprise cost of a 1-gigawatt data center is about $50 billion, of which about 40% is GPUs and chips, and 60% is power, grid, and construction. BlackRock, Inc. is actively participating in related financing, for example partnering with Meta to finance its planned $14 billion data center in Texas. Management also proposed that computing capacity may become a new asset class, following a development path similar to the mortgage-backed securities (MBS) market in the 1980s, when the MBS market grew from a few billion dollars to several trillion dollars, with the key being data, standardized performance metrics, and risk analysis frameworks; BlackRock, Inc. hopes to become the center of this potential new market, and in the long term related financing has the opportunity to be securitized into tradable structures for a broader set of clients. The following are the specific contents of BlackRock, Inc.'s third-quarter earnings call. Management Statements Christopher Meade (General Counsel and Chief Legal Officer): Good morning, everyone. I'm Chris Meade, General Counsel of BlackRock, Inc. Before we begin, I'd like to remind everyone that during this call we may make some forward-looking statements. Please note that BlackRock, Inc.'s actual results may, of course, differ from these statements. As you know, BlackRock, Inc. has filed reports with the SEC that list some factors that could cause BlackRock, Inc.'s results to differ materially from what we say today. BlackRock, Inc. does not undertake and is not obligated to update any forward-looking statements. I'll now turn it over to Martin. Martin Small (Senior Managing Director, Chief Financial Officer and Global Head of Corporate Strategy): Thank you, Chris, and good morning, everyone. It's a pleasure to present our third-quarter 2026 results. Before I hand it over to Larry, I'll review the financial performance and business results. Our earnings release discloses both GAAP and adjusted financial results. A reconciliation of GAAP to adjusted results is included in the appendix to today's press release. I will primarily discuss adjusted results. A year ago, clients were focused on managing uncertainty around inflation, interest rates, and growth. Today, they are focused on capturing the opportunities created by technology and artificial intelligence. They are focused on infrastructure investment and a renaissance in income investing. They want returns driven by a new wave of productivity and innovation. More capital is flowing through global capital markets, and the opportunities for BlackRock, Inc. and its clients are expanding. These opportunities are being driven by earnings-powered returns, higher yields, and broader opportunities to diversify and manage risk through a whole-portfolio approach. The breadth of our platform is deepening relationships with clients across all channels, retail and institutional, around the world. Capital is flowing into the infrastructure powering AI and digital transformation. Wealth portfolios are moving beyond traditional allocations toward personalized solutions delivered at scale. Retirement is being reshaped by income needs and broader access to investments. When clients need capital markets advice, portfolio construction, or a partner to deploy capital at scale across public and private markets, they come to BlackRock, Inc. We have invested methodically through cycles and built a scaled platform that can connect clients across public and private markets through technology. This is showing up in our results and in an accelerating pipeline. Over the past 12 months, clients have entrusted us with nearly $870 billion of net inflows, driving 10% organic base fee growth. This is not one product or one region carrying the company; it is broad-based growth across client channels, asset classes, and geographies. As we laid out in our 2030 plan at last year's Investor Day, we are driving growth in higher-value, higher-base-fee categories, and our mix across public, private, and technology is creating more durable, all-weather revenue and earnings growth. Shareholders are benefiting from the growth. In the first comparable quarter after the HPS closing, EPS growth accelerated to more than 35%. The strong momentum in the business is translating into stronger financial results. We once again delivered double-digit growth in revenue, operating income, and earnings per share, with all three metrics at records. Our scaled and disciplined financial framework is helping convert growth into the bottom line. Operating margin reached 47.8%, up 320 basis points year-over-year. In the third quarter, BlackRock, Inc. generated $205 billion of net inflows. Organic base fee growth was 11%, the ninth consecutive quarter at or above 5%. Growth continued to broaden across active ETFs, private markets, systematic, SMA, digital assets, and technology. These capabilities are scaling at the same time, demonstrating the power of BlackRock, Inc.'s platform breadth and the durability of its growth model. Third-quarter revenue was $7.8 billion, up 19% year-over-year, driven by organic base fee growth, the impact of higher markets on average AUM, higher performance fees, and higher technology services and subscription revenue. Operating income was $3.3 billion, up 27% year-over-year. Earnings per share were $15.93, up 38% year-over-year, also reflecting higher non-operating income and lower diluted share count in the quarter. Quarterly non-operating results included $164 million of net investment gains, primarily from non-cash mark-to-market gains on minority investments in Securitize and Circle. The third-quarter adjusted tax rate was approximately 24%. We continue to estimate that 25% is a reasonable expected tax rate for the fourth quarter of 2026. The actual effective tax rate may differ due to non-recurring or discrete items or potential changes in tax law. Third-quarter base fees and securities lending revenue were $6 billion, up 20% year-over-year, reflecting the positive impact of market beta on average AUM, organic base fee growth, and higher securities lending revenue. On an equivalent-day basis, the annualized effective fee rate was roughly flat compared with the second quarter. Continued client demand for higher-value categories, including private markets, active ETFs, and systematic, continued to support net inflow fee rates well above the company's blended effective fee rate. Performance fees were $630 million, up 22% year-over-year, primarily reflecting higher alternative product revenue, including $110 million of performance fees from HPS. Quarterly technology services and subscription revenue grew 14% year-over-year, reflecting continued demand for our full suite of technology products. Annual contract value (ACV) grew 12% year-over-year. On a constant-currency basis, we estimate ACV grew 13% year-over-year. We remain committed to long-term low-to-mid-teens ACV growth. Total expenses grew 14% year-over-year, primarily driven by higher compensation, sales asset and account expenses, and G&A expenses. Employee compensation and benefits expense grew 12% year-over-year, reflecting higher incentive compensation tied to higher operating income and higher performance-related compensation than the prior-year period. Sales, asset, and account expenses grew 22% year-over-year, driven by higher distribution and servicing costs and direct fund expenses. G&A expenses grew 6% year-over-year, primarily due to higher technology investment spending. Consistent with the G&A outlook we provided in January, after annualizing the HPS and Preqin impact, we continue to expect mid-single-digit percentage growth in G&A for the full year. We continue to deliver margin expansion on recurring fee-related earnings. Excluding all performance fees and related compensation, third-quarter adjusted operating margin would have been 48.6%, up 230 basis points year-over-year. Our capital management strategy remains consistent. We first invest in the business, then return excess cash to shareholders through a combination of dividends and share repurchases. In the third quarter, we repurchased $550 million of stock. Currently, based on this year's capital expenditure plans and subject to market and other conditions, we expect to repurchase at least $550 million of stock in the fourth quarter, consistent with the prior guidance communicated in July. Turning to flows. BlackRock, Inc.'s third-quarter net inflows were $205 billion, spread across product types, client channels, geographies, and active and index strategies. ETFs had third-quarter net inflows of $135 billion. Index bond ETFs and precision ETFs led, with net inflows of $61 billion and $41 billion, respectively. Continued demand for our growing active ETF lineup added $22 billion of net inflows. Our digital asset ETPs gathered $8 billion in the quarter. Our ETFs have now delivered double-digit organic base fee growth for the sixth consecutive quarter, driven by higher-value ETF categories such as active and precision. Retail net inflows were $23 billion, driven by continued momentum in liquid alternatives, broad demand for U.S. active fixed income products, and continued inflows into Aperio and SpiderRock. Institutional active net inflows were $44 billion, positive across all product types, led by private markets, fixed income, systematic equity, and liquid alternatives. Institutional index had net outflows of $27 billion, concentrated in lower-fee index equity. Private markets net inflows were $15 billion, primarily from infrastructure and private credit deployment and the addition of a real estate mandate. During the quarter, we updated our earnings supplement to provide greater transparency into private markets activity and the drivers of fee-paying AUM. These metrics include fundraising, deployment, total AUM, and investable funds, and can be found on pages 9 to 11 of the earnings supplement. Finally, our cash management platform had third-quarter net inflows of $31 billion. These results include inflows into customized liquidity solutions, demand for government funds, and continued growth with Circle. At our June 2025 Investor Day, we laid out BlackRock, Inc.'s 2030 vision and business plan. Five quarters into the plan, we are meeting or exceeding our targets: higher, more durable organic base fee growth; a more all-weather, durable mix of asset management and technology capabilities across public and private markets; continued operating margin expansion and higher earnings per share. The third quarter was another solid step on the path to 2030. In a more uneven market, we generated record revenue, operating income, and EPS, with operating margin above 47% and organic base fee growth of 11%. The opportunity ahead for BlackRock, Inc. continues to expand. Clients are looking for a partner that can connect the whole portfolio, navigate a new environment of capital scarcity, higher long-term yields, and redesigned diversification. I don't think we can simply assess the investment environment anymore as risk-on or risk-off. The new environment is about capital allocation capability, about financing advantages gained through scale, channels, and breadth of opportunity, and about redesigning diversification in client portfolios. Our industry is being reshaped by the convergence of public and private markets and by client portfolio demand for technology and data. These conditions align directly with BlackRock, Inc.'s strengths. Client engagement is higher than ever, and as we enter the seasonally strongest fourth quarter, the company has significant momentum and a long growth runway. I'll now turn it over to Larry. Laurence Fink (Founder, Chairman and Chief Executive Officer): Thank you, Martin. Good morning, everyone, and thank you for joining the call. We built BlackRock, Inc. to be our clients' partner wherever capital is flowing in the capital markets. We provide clients with advice across public markets, private markets, and technology. We do it with a global perspective but a local lens. This reach, the ability to cover every corner of a client's whole portfolio, puts BlackRock, Inc. at the center of where capital is moving in the world today and is reflected in our results. Third-quarter earnings per share grew 38%. Operating margin reached 47.8%, and organic base fee growth was 11%, reflecting $205 billion of net inflows. Year-to-date net inflows and organic base fee growth are both more than 45% higher than the same period last year. Our results reflect the scale of BlackRock, Inc. today. We generated net inflows in every asset class, every client type, every region, and across both active and index. AUM has grown by more than $2 trillion over the past year and now stands at $15.5 trillion. We have now been operating with GIP, HPS, and Preqin as part of BlackRock, Inc. for a full year. This quarter is the clearest view yet of the earnings potential of our integrated platform. It helps us serve more client needs and create more value for shareholders. In my careera 50-year careerthis is the first time I have seen a true shortage of capital. Governments are running historic large deficits while the economy's demand for private capital is rising. Governments need infrastructure financing, companies need to finance generational AI buildouts, and individuals need better ways to invest and retire. Everyone is rethinking how to deploy capital, and BlackRock, Inc. is at the center of many of those conversations. We are both a trusted advisor and a destination for capital from clients around the world. This is driving meaningful activity and a future growth pipeline for the company. This is especially evident in our work with leading companies at the core of the AI buildout. We have long-standing relationships with these hyperscalers, sovereign wealth funds, pensions, and corporate clients around the world. These long-term relationships now underpin some of the largest financing transactions in the market. We are working with Meta to finance its planned $14 billion data center in Texas, bringing together GIP's infrastructure investing and HPS's private financing capabilities. We are also working with leading technology companies to create dedicated financing pools for their customers to expand compute and capacity. In the near term, these can be provided to high-grade insurance mandates as private placements. But in the long term, there is a larger opportunity to securitize them into tradable structures for a broader set of clients. Rob Kapito and I have seen this script before. In the early 1980s, mortgages were loans on bank balance sheets, illiquid and difficult to price. Fannie Mae and Freddie Mac began packaging them, but that alone was not enough to make them tradable. What made them tradable was data, years of performance history, and an understanding of how performance changes with interest rates and the broader economy. Once investors had credible time series of data and issuers had construction standards, the market opened to a broader set of investors. That combination grew the MBS market from a few billion dollars when I was starting out to several trillion dollars today. Computing capacity is now following a similar path, and we intend to make BlackRock, Inc. the center of it, just as we were in the early days of the mortgage-backed securities market. BlackRock, Inc. is particularly well suited to help develop this market because we combine capital formation, but most importantly technology, data, and scale. Thousands of investment professionals just attended the Aladdin community, using our analytics and risk frameworks to make investment decisions. AI is amplifying the value of Aladdin, and we are accelerating innovation and creating better analytics. As computing capacity becomes an asset class, the market will need credible data, standardized performance metrics, and common risk analysis frameworks. These are capabilities we have spent decades building. They now differentiate BlackRock, Inc. in working with technology companies and investors to build the infrastructure needed for this potential new market. These opportunities highlight the strategic logic behind our private markets acquisitions. We are already mobilizing capital at a larger scale than ever before. Our AI infrastructure partnership recently completed its first deployment, completing the Aligned Data Centers transaction at an enterprise value of approximately $40 billion. Over the past 12 months, we raised $68 billion in private markets. In private credit, higher base fees support stronger income for investors, making private credit an increasingly attractive source of yield and portfolio diversification. We raised $25 billion in private credit in the first full year after integrating with HPS. We are seeing particularly strong momentum as insurers rotate into or add high-grade solutions. This is expected to accelerate into year-end and 2027. Across private markets, we have a strong pipeline of future fundraising and deployment opportunities. Clients want scaled capital markets access across the whole portfolio, and that is how iShares is leading ETF industry growth. iShares inflows were again led by index bond ETFs, with $61 billion of net inflows, as investors moved to both the long end and short end of the curve. We also saw strong demand for AI-related exposure. Our semiconductor and Korea ETFs were among the highest-flow products. What differentiates iShares is the breadth and precision we offer. Whatever view an investor has, it can be expressed through iShares. The ETF wrapper is also changing how investors access actively managed strategies, with iShares leading the industry with $60 billion of active inflows in 2026, including a record $22 billion in the quarter. iShares active AUM has doubled over the past year to more than $160 billion. We have already exceeded the $50 billion revenue ambition we laid out last summer. Investment performance ultimately drives active net returns and inflows. Performance and scale reinforce each other. BlackRock, Inc.'s technology-driven processes provide investment insight across a broad range of securities, and scale drives consistent performance. More than 90% of our systematic equity AUM is above benchmark or peer median. This performance is driving a second consecutive record quarter for the broader systematic active equity business. Systematic equity generated nearly $30 billion of net inflows in the third quarter and more than $60 billion in 2026. Our systematic equity inflows grew 50% year-over-year, and total AUM is now approaching $500 billion in active investments. We see the same dynamic in fixed income. About 85% of taxable fixed income assets are above benchmark or peer median over 3- and 5-year periods. This consistency is why clients continue to bring us more portfolios. Active fixed income net inflows were $14 billion, reflecting strength in both institutional and retail channels. Clients are turning to strategies such as Strategic Income Opportunities and Total Return to capture income in a higher-rate environment. Rick and the team have built this performance over decades, and we are porting it into new wrappers, including our fixed income ETF lineup. Clients are also capturing income opportunities at the short end of the curve. Cash net inflows were $31 billion, including several scaled mandates where clients consolidated fragmented liquidity programs into more customized BlackRock, Inc. solutions. Income is especially critical in retirement. In recent years, we have innovated through LifePath Paycheck to provide guaranteed retirement income options. Last month, we launched the LifePath Solutions framework. It is designed to bring capabilities historically reserved for the largest retirement plans to a broader set of plan sponsors. Our $700 billion global LifePath platform reflects more than 30 years of expertise and gives us a unique ability to meet challenging client needs. Our brand and reputation are further strengthened through initiatives such as BlackRock Future Builders. As part of the program, Blackrock Debt Strategies Fund Inc will deploy capital to connect workers with skilled trades training. It also embeds financial education and digital savings tools to help workers build more durable economic security from their first paycheck to retirement. Many international pension and corporate clients are navigating structural shifts in retirement savings plans as defined contribution models continue to grow globally. For example, Dutch plan sponsors need partners to help them manage the shift from defined benefit to defined contribution at scale. We have already added several pension mandates in connection with this transition. Last month, the Dutch construction industry pension fund named BlackRock, Inc. the preferred candidate for its $80 billion outsourced fiduciary mandate, citing our global scale, execution capabilities, and technology. We are advising clients and governments around the world on building durable retirement systems and deepening local capital markets. When capital moves across borders, much of it moves through platforms like ours. Foreign investment is flowing into U.S. equities and funds at record amounts. This activity benefits BlackRock, Inc., with one-third of our long-term net inflows coming from clients outside the United States. It is even more pronounced in systematic equity, where more than 70% of net inflows come from international clients. Both Europe and Asia delivered double-digit organic base fee growth, and the Middle East grew global base fees by more than 20%. We have long-standing local presence and years of execution expertise in these regions. This is reflected in strong engagement across our highest-value growth engines, including systematic equity, private markets, retirement, and technology. Aladdin underpins everything we deliver to clients. Third-quarter ACV grew 12%, reflecting new additions and existing clients expanding their technology stack relationships. We provide comprehensive public and private markets workflows and data products through Aladdin, eFront, and Preqin. As private markets become a larger part of client portfolios, the demand for transparency, risk management, and portfolio analytics will only increase. This is a natural extension of Aladdin's role as the whole-portfolio operating system for global investors. Our results demonstrate the power and potential of an integrated company. Shareholders are participating in growth through 38% earnings per share growth, operating margin above 47%, and double-digit organic base fee growth. BlackRock, Inc. brings together decades of issuer relationships built through our public markets platform, financing expertise, investment performance, and the technology and data that connect it all. This combination differentiates BlackRock, Inc. across every category in which we compete and every region in which we operate. That is why BlackRock, Inc. is winning mandates at the forefront of capital markets, from hyperscalers to compute financing, from pension outsourcing to Aladdin and Preqin partnerships. Our momentum is accelerating, and our pipeline is broad, spanning whole portfolio, private markets, retirement, and our entire international platform. More clients are looking to BlackRock, Inc. as a destination for capital and a growth partner. I am confident in the opportunities and growth ahead for BlackRock, Inc., our clients, and our shareholders. Operator, let's open the line for questions. Q&A Session Operator We will now begin the question-and-answer session. Michael Cho, JPMorgan I'd like to talk about organic base fee growth this quarter. We saw a nice acceleration. You can see the contributors driving inflows. Martin, you mentioned several drivers. Could you elaborate on which of the businesses you highlighted are increasing their contribution and may be more durable? Martin Small Thank you, Mike. First, we continue to execute on the 2030 plan, which is to deliver durable premium organic base fee growth. Third-quarter organic base fee growth was 11%, the ninth consecutive quarter at or above our 5% long-term target, and the fifth consecutive quarter at or above 8%. I think we have demonstrated that BlackRock, Inc. can sustainably deliver in the 6% to 8% range. In periods of high client activity and strong markets, there is clearly the ability to rise to mid-to-high single digits or low double digits. This can be driven by client preferences, increased international market and precision semiconductor exposure, large mandate additions, and the timing of private markets fundraising and deployment. Organic base fee growth this quarter, as Larry and I mentioned, was very diversified across the platform. There were strong contributions from systematic, broad active management, AI partnership deployment, middle-market infrastructure strategy fundraising and day-one fees, precision ETFs, Aperio and SpiderRock tax-aware, and cash. A few financial highlights may help illustrate the breadth we are delivering across core asset allocation, portfolio diversification, tax-aware strategies, and private markets. If you look at year-to-date inflows of $524 billion, about $220 billion is in the 5 to 10 basis point range, which you could call broad asset allocation models, core exposures clients hold for the long term. About $270 billion is in the 10 to 60 basis point range, including active ETFs, country funds, exposures that manage diversification and tactical opportunities. The remaining inflows above 60 basis points are in private markets and liquid alternatives, of which liquid alternatives had $25 billion of inflows this quarter, including $15 billion in private markets and $9 billion in hedge fund strategies and liquid alternatives. We view this mix as strong and durable. Durability comes from two places. First, what we have consistently called structural growers. These categories grow faster when markets are strong and still grow when markets are weak. They include ETFs, active management, private markets, and systematic SMA solutions. This is reflected in the pipeline. We have several scaled outsourcing relationships expected to fund at year-end and in 2027. We have also won several high-grade insurance mandates, and deployment over the coming months and days will drive growth. So forward organic base fee growth is strong and visible. In private markets, fundraising plans are spread across infrastructure, private credit, and multi-alternatives. We have strategies that charge fees at fundraising and strategies that scale with deployment. This also supports near-term revenue and the long-term ability to continue delivering at least 6% to 8%. Second, we are consolidators. Looking at industry flows over the past few years, the top five asset managers consolidated about 80% of flows. But by assets and revenue, the industry remains highly fragmented. In a hugely fragmented market, every investor wants to consolidate relationships to get the most value from partners, and our share of consolidation is a path to continued organic growth. Clients truly want to do more with BlackRock, Inc. This is visible in inflows, and the momentum this quarter and over the past year is visible. This gives the management team confidence and optimism. Michael Cyprys, Morgan Stanley I'd like to ask, given the recent rise in long-term interest rates, what are you seeing and hearing from asset owner clients? To what extent are clients changing their relative value thinking and incremental capital allocation? Could you connect that to the major AI infrastructure buildout underway? How sensitive do you think that investment opportunity is to higher financing costs? Are you seeing any changes in the pace or economics of AI projects? Robert Kapito (President and Board Member) I remember you asked this question years ago, and the answer used to be "bonds are back." Now I would say rates will be affected by all the obvious factors: inflation, energy prices, capital supply-demand imbalances, global deficits, GEO Group Inc politics. We expect more volatility before equilibrium is found, currently implying somewhat higher rates, especially at the long end of the curve. But fixed income demand is still early. For years investors were forced to take equity risk to generate meaningful income. That has changed dramatically today. The 10-year Treasury yield is above 5%, and real rates are close to 3%. In strategies like BINC and SIO, we can generate yields of about 7% in diversified high-quality portfolios. These are baseline returns that create the portfolio resilience and durability Larry mentioned. What is particularly attractive is that historically, future returns on intermediate bond portfolios tend to track starting yields closely. In other words, investors do not need heroic market outcomes. Much of the return opportunity is already embedded in today's income levels. We see clients recognizing this opportunity. Fixed income had $78 billion of net inflows in the third quarter and $205 billion year-to-date, reflecting demand for high-quality income and more resilient portfolio construction. This environment aligns directly with BlackRock, Inc.'s strengths. Investors can earn attractive income without taking significant duration, volatility, and drawdown risk. If rates stabilize from here, we think there is substantial room for growth in fixed income allocations. Clients can now use our better fixed income wrappers, especially bond ETFs, and want to lock in future yields. Laurence Fink On data centers and financing, put it in the context of the overall federal deficit. The federal deficit is $8 trillion in 232 years and $40 trillion in 26 years. So the need for deficit financing is at record levels. I have been talking about the need to unlock private capital. We are seeing that unlocking, and it is excellent for the United States and potential U.S. growth. But unlocking private capital means a lot of financing, whether for AI and data center financing, or like Humana, where we announced a large financing yesterday or last week, or AT&T financing. This is one of the exceptional components of U.S. growth, with capital markets playing an increasingly large role. So competition for capital is intensifying between record federal deficits and rising private-sector capital demand. All of this means that, for now, we will have structurally higher rates for longer, especially at the far end of the curve. I think this will stay with us. Clearly, as I said in my prepared remarks, I do not think we can raise trillions of dollars of customized transactions for data centers. Creating new financing tools for chips and compute is essential for the United States to continue building the necessary scale. Once we build it, the whole world will need to build. Think about the enterprise cost of a 1-gigawatt data center in the United States at about $50 billion, of which 40% is GPU and chip costs and the other 60% is power, grid, Core and Shell. All of that adds up. We now see data center financing based on lease credit. But we are also now witnessing the need to build chips and compute at scale. If we are going to democratize AI, the sooner the better, the more we can broaden economic success. This is necessary. We cannot have only five or seven companies buying up all current chip production. We need to be able to finance startup AI companies, each of which needs to buy these newly innovated compute chips. They do not have credit ratings, so we must innovate ways. The best way is asset-based chip financing through data and analytics, and then we can help finance startups and new young companies to grow and potentially grow the U.S. economy at 3% or higher. Then the debt I just talked about will not be as severe, because we can continue growing the economy above 3%, and debt as a share of GDP should decline. Craig Siegenthaler, BofA Securities We'd like to dig deeper into the tax-aware suite, including more than $200 billion in Aperio in and out. Where are you seeing the greatest demand? Can you quantify third-quarter inflows? Last quarter you gave Aperio inflows of $7 billion. On long-short tax-aware, how are you handling capacity constraints at the two major RIA custodians? They recently tightened inflows. Does that matter? Because the products are also entering many other wealth management platforms, banks, and online brokers. Martin Small Craig, thank you. I heard three things: demand overview and inflows, tax-aware strategy details, and long-short strategy growth and custodian financing. First, philosophically, we put clients at the center of these strategies. For taxable clients, maximizing returns means managing both markets and taxes. We see strong demand for tax-aware solutions. These include direct indexing, long-short, and SpiderRock option strategies that help with concentrated stock positions and liquidity events. The Aperio platform has grown from about $40 billion at acquisition to nearly $200 billion in five years. It continues to grow at double-digit organic rates. Traditional long-only direct indexing AUM is $175 billion, with about $13 billion of net inflows year-to-date in 2026. Long-short AUM is $19 billion, with about $12 billion of net inflows year-to-date in 2026. Aperio had $5 billion of net inflows in the third quarter, including $4 billion in long-short and $1 billion in long-only. In 2026, these tax-aware strategies had $25 billion of inflows, 70% higher than 2025, which was a record $15 billion, marking our fifth consecutive record year. Through SpiderRock, we also provide option overlay capabilities that complement direct indexing and tax-aware long-short strategies as part of broader whole-portfolio solutions. SpiderRock had $3 billion of net inflows in 2025. In 2026, it had three consecutive record quarters, including $2 billion in the third quarter. Congratulations to Eric Metz and the team. I think BlackRock, Inc. differentiates in this area based on service, platform breadth, and delivered results. We work with clients not only in SMA but across ETFs, SMA, direct indexing, long-short, public/private models, and whole-portfolio orientation. This continues to grow well, with a strong forward pipeline. On the long-short strategy and custodian dynamics, I will again first say that we have a broad value proposition across a wide range of tax-advantaged strategies. Long-short is a rapidly expanding category. Industry custody and financing models are adjusting. There are compelling returns and financing economics for banks, broker-dealers, and custodians, and we see more parties entering the market to finance growth. Long-short industry assets have reached $170 billion, tripling year-over-year. As I mentioned, our AUM is approaching $20 billion. Client demand for these strategies is very strong. As I mentioned, long-short inflows were $4 billion. Our focus is to do everything we have done in long-only. In long-only, we maximize industry custody access points. Our goal is to similarly increase financing counterparties for these strategies for the benefit of clients. We are expanding platform relationships and expect to increase access points through distributors and custody partners. There is understandable and appropriate focus on many custody changes. But we have diversified financing partners, distribution partners, and other providers, and we are increasing capacity. We are working closely with sophisticated private wealth management clients to expand access to custody platforms, broaden delivery options through new structures such as SpiderRock and alternative SMA options like direct indexing, and provide clear guidance, education, and engagement with all partners and financing counterparties to ensure onboarding, reporting, operations, and financing are managed with the high-quality fiduciary care clients expect. I think there is more in this area. It occupies a valuable place in client portfolios. Michael Brown, UBS Group AG Margin expansion this quarter was very impressive. Could you take a moment to break down the biggest drivers and how we should think about the puts and takes for the fourth quarter? Is a roughly flat margin quarter-over-quarter a reasonable assumption? More broadly, this year is on track for about 200 basis points of expansion. Thank you for not liking to include beta in guidance, but assuming a typical market backdrop, what is the opportunity for margin expansion in 2027? Martin Small Thank you. We continue to deliver industry-leading margins. This is part of the 2030 strategy. Both operating and recurring fee margins expanded 200 to 300 basis points year-over-year, as you mentioned. Third-quarter operating margin was 47.8%, up 320 basis points. Excluding performance fees and related compensation, margin was 48.6%, up 230 basis points. Breaking down the puts and takes, our reported operating margin can vary quarter to quarter due to changes in performance fee mix, with different payout ranges across strategies. The higher operating margin this quarter was partly due to performance fee mix. But excluding performance fees and related compensation, we still saw 230 basis points of recurring fee margin expansion. We have talked about building BlackRock, Inc. around the whole portfolio and around structural growth categories in investment solutions. These structural growers are private markets, ETFs, SMA, models, and target date technology, and inflows and base fee growth in these categories are all-weather and less sensitive to markets. So we think they play a key role in driving structurally higher adjusted operating margin. Markets continue to affect BlackRock, Inc.'s margin, both up and down, as you mentioned. But our 2030 target of more than 30% of revenue from private markets and technology is designed to dampen that impact, drive more stable double-digit EPS growth and margin expansion, while providing more resilience to client portfolios. What is different today is that we have private markets engines GIP and HPS, both operating at more than 50% FRE margins. On that basis, we think the margin growth outlook can drive two things. First, recurring fee-earning margin can rise toward the trajectory of first-class private markets companies, above 50%. We can achieve that through acquired businesses and through highly scaled, high-operating-leverage franchises such as ETFs, digital assets, and systematic equity that can grow and create more expansion and earnings. Second, in constructive markets, with higher-fee inflows and strong organic growth, we think we can further improve the company's fully burdened adjusted operating margin. We operate today with leading margins and still see room to scale in the future. Alexander Blostein, Goldman Sachs Group, Inc. I'd like to talk about AI for a few more minutes. There is a lot of discussion about capital needs, and the understanding is sufficient, and you articulated it well. Thinking about which part of the ecosystem BlackRock, Inc. is most comfortable participating in today, compute or data centers, and which part of the capital structure? Building a fully securitized trading market around this may take time. How much of a bridge might you provide over the next few years, and how does that a revenue opportunity for BlackRock, Inc.? Finally, is there room to build a capital markets syndication business like some alternative peers? Laurence Fink Let me start, and Martin can add. Good question. You are right that getting data and analytics takes time. It takes time for rating agencies to comment on a new market and propose metrics. Aladdin and Preqin need data sets to conduct proper analysis. But this is a huge priority, and we are focused on it now. That said, we are involved in almost every conversation. Over the past week, I spoke with every major hyperscaler. This is a big opportunity, both in GPU financing, which is a big opportunity for the HPS team, and in data center construction and working with hyperscalers, which is a big opportunity for the GIP team. As I announced, we completed the Al