T. Rowe Price (TROW) began 2025 with a resilient first quarter, navigating a challenging environment with steady revenues and strong investment performance, particularly in retirement and value equity strategies. Net revenues rose modestly to $1.76 billion, a 0.8% increase year-over-year, while GAAP operating income edged up 1.7% to $596.3 million, reflecting disciplined cost management. GAAP operating expenses were nearly flat at $1.17 billion, while adjusted expenses climbed 5.9% to $1.14 billion, largely due to higher compensation, distribution, and technology spending.

Despite top-line stability, GAAP net income fell 14.5% to $490.5 million, driven by a steep drop in non-operating income and lower performance-based fees. Correspondingly, GAAP diluted EPS declined 13.7% to $2.15, while adjusted EPS was $2.23, down 6.3%. The GAAP operating margin held steady at 33.8%, but the adjusted margin contracted to 36.1%, down from 39.3% a year earlier, reflecting the mix shift in revenues and elevated expense levels.

Assets under management ended the quarter at $1.57 trillion, slightly down from year-end but up 1.6% from the prior year. Average AUM rose 9.2% YoY, underscoring market appreciation and client interest in select strategies. However, net client outflows totaled $8.6 billion, continuing a multi-quarter trend, albeit at a slower pace than the $19.3 billion seen in Q4 2024. Flows were mixed across products—target date and multi-asset strategies attracted $6.3 billion and $5.5 billion, respectively, while fixed income added $5.4 billion, driven by institutional clients. Meanwhile, equities saw significant outflows of $19.2 billion, and alternatives declined slightly due to manager-driven distributions.

Fee pressure remains a headwind, with the effective fee rate (excluding performance-based fees) declining to 40.0 basis points, down from 41.6 bps a year earlier. This reflects a continued shift toward lower-cost investment vehicles like ETFs and collective trusts, as well as a reduced equity mix. Still, over 60% of T. Rowe Price’s funds outperformed their peer groups across 1-, 3-, 5-, and 10-year periods, with target date products showing especially strong long-term performance—99% beat peers over 3-, 5-, and 10-year spans.

From a capital perspective, the company remains active in shareholder returns. Dividends were increased to $1.27 per share, marking the 39th consecutive annual hike, with $289 million paid in Q1. Share repurchases totaled $217.5 million during the quarter, with $283 million repurchased by the end of April. In total, $506 million was returned to shareholders in Q1.

Looking ahead, management expects continued flow improvement versus 2024, though a full return to net inflows is unlikely this year given persistent challenges in active equity. Growth is expected in retirement, ETFs, fixed income, and alternatives, with a healthy pipeline for large mandates. The company also revised its 2025 expense outlook downward, now expecting adjusted operating expenses to grow 1–3%, reflecting tighter cost discipline.

Overall, T. Rowe Price is showing resilience amid shifting industry dynamics, leveraging investment performance and strategic growth in lower-cost, scalable platforms, while actively managing expenses and delivering strong capital returns.