Key Takeaways Ares Capital shares rose 2.3% as Q4 core EPS met estimates despite a 9.1% yearly decline.Ares Capital Q4 total investment income increased 4.5% to $793M, helped by fees and interest.Ares Capital made $5.83B in Q4 gross commitments and exited $4.75B, with a $29.5B portfolio.Shares of Ares Capital Corporation (ARCC) gained 2.3% following the announcement of fourth-quarter and full-year 2025 results. Quarterly core earnings of 50 cents per share met the Zacks Consensus Estimate. The bottom line f ...

Core Viewpoint - The recent selloff in software stocks reflects concerns over the disruptive potential of AI, particularly large language models (LLMs), which have shifted from being a supportive factor to a potential threat for established companies in the sector [1][2][9]. Group 1: Market Performance - The S&P 500 software and services index fell nearly 4% on Tuesday and an additional 0.73% on Wednesday, marking six consecutive sessions of losses and erasing approximately $830 billion in market value since January 28 [1][11]. - The software sector has declined nearly 13% over six sessions and is down 26% from its peak in October [11]. - Major technology companies, including Nvidia, Meta Platforms, Alphabet, and Oracle, experienced significant declines, with Nvidia dropping 3.4% and Oracle falling 5.1% [14][18]. Group 2: AI Disruption Concerns - The selloff was triggered by a new legal tool from Anthropic's Claude LLM, which highlights the increasing encroachment of LLMs into the application layer of enterprise businesses [2][3]. - Analysts express concerns that the success of AI LLMs is not guaranteed due to their lack of specialized data crucial for various industries [8]. - The competitive landscape for established companies is perceived to be narrowing as AI products gain traction, raising fears about their long-term viability [10][18]. Group 3: Broader Market Implications - The decline in software stocks has broader implications for asset managers, with concerns that weakness in the software sector could lead to credit issues for alternative asset managers [12]. - A group of asset managers, including Apollo and Blackstone, saw their shares fall between 3% and 11% due to these concerns, although they recovered slightly on Wednesday [12]. - The overall market also faced pressure, with the S&P 500 and Nasdaq Composite losing 0.51% and 1.51%, respectively [14]. Group 4: Expert Opinions - Nvidia's CEO stated that fears of AI replacing software are "illogical," suggesting that the market may be overreacting to the potential of AI [15][18]. - Analysts from JPMorgan and The Wealth Consulting Group argue that the selloff may be exaggerated, positing that improved AI tools could enhance software development and margins rather than replace them [16][17].

Looking ahead, Lem said changes in base rates typically take about a quarter to be fully reflected in results, and the decline in base rates during the fourth quarter is expected to create roughly $0.01 per share of earnings headwind in the first quarter of 2026, “assuming all else equal.” He also reminded investors that origination volumes and related capital structuring service fees tend to be seasonally slower in the first quarter than in the fourth.Core earnings per share were $0.50 in the fourth quarte ...

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Core View - Ares Capital Corporation (ARCC) reported strong financial results for 2025, with core earnings per share (EPS) of $2.01 for the full year, fully covering dividends and achieving a return on equity (ROE) exceeding 10% [5][20]. - The company ended 2025 with a net asset value (NAV) per share of $19.94, reflecting a modest increase from the previous year [21]. - ARCC's portfolio remains well-diversified, with over 600 borrowers and a record $29.5 billion in total portfolio at fair value, marking a 10% increase year-over-year [29][30]. Financial Performance - Core EPS for Q4 2025 was $0.50, consistent with the previous quarter but down from $0.55 a year ago, primarily due to declining base rates [19]. - GAAP net income per share for 2025 was $1.86, down from $2.44 in 2024 [19]. - The company generated over $470 million in gross gains from its equity co-investment portfolio during 2025, with an average internal rate of return (IRR) exceeding 25% [12][13]. Investment Activity - ARCC achieved a record $15.8 billion in new investment commitments for 2025, with over $5.8 billion originated in Q4 alone, representing a 50% increase from 2024 [28]. - The majority of new lending activity in 2025 came from incumbent borrowers, with a significant increase in transaction activity in the second half of the year [6][8]. - The company added over 100 new borrowers to its portfolio in 2025, a new record, reflecting its broad market reach and specialized industry verticals [8][9]. Portfolio Quality - The average portfolio leverage decreased by approximately a quarter turn of EBITDA from the prior year, with an average interest coverage ratio improving to 2.2 times [11][31]. - Non-accruals at cost remained stable at 1.8%, well below historical averages, indicating strong credit quality [35]. - The weighted average organic EBITDA growth rate of ARCC's borrowers was over three times that of GDP, demonstrating robust performance relative to the broader market [11]. Market Outlook - The company remains confident in its competitive advantages, including its experienced team and strong market relationships, which are expected to support future performance [6][7]. - ARCC anticipates continued growth opportunities from strategic investments and a healthy credit performance outlook, despite potential headwinds from lower short-term interest rates [17][20]. - The company is well-positioned to capitalize on market opportunities, supported by a diversified capital base and a strong liquidity position of over $6 billion [25][26]. Dividend Outlook - ARCC plans to maintain its dividend level, supported by a strong earnings power and over two quarters of spillover income available for distribution [26][15]. - The first quarter 2026 dividend is set at $0.48 per share, continuing a track record of stable or increasing dividends for 66 consecutive quarters [26]. - The company believes its current dividend level is achievable in the prevailing interest rate environment [15].

Ares Capital (NasdaqGS:ARCC) Q4 2025 Earnings call February 04, 2026 12:00 PM ET Company ParticipantsBrian McKenna - Director of Equity ResearchJana Markowicz - Partner and COOJim Miller - Partner and PresidentJohn Stilmar - Partner and Co-Head of the Ares Public Markets Investor RelationsKort Schnabel - Partner, Co-Head for US Direct Lending, and CEOScott Lem - CFOConference Call ParticipantsArren Cyganovich - Managing Director and Senior Equity Research AnalystCasey Alexander - Managing Director and Senio ...

Ares Capital (NasdaqGS:ARCC) Q4 2025 Earnings call February 04, 2026 12:00 PM ET Company ParticipantsBrian McKenna - Director of Equity ResearchJana Markowicz - COOJim Miller - PresidentJohn Stilmar - Partner and Co-Head of the Ares Public Markets Investor RelationsKort Schnabel - CEOScott Lem - CFOConference Call ParticipantsArren Cyganovich - Managing Director and Senior Equity Research AnalystCasey Alexander - Managing Director and Senior Equity AnalystDerek Hewitt - AnalystDoug Harter - Director and Sen ...

Financial Data and Key Metrics Changes - The company reported GAAP net income per share of $0.41 for Q4 2025, down from $0.57 in the prior quarter and $0.55 in Q4 2024. For the full year, GAAP net income per share was $1.86, compared to $2.44 in 2024 [17] - Core earnings per share for Q4 2025 remained stable at $0.50, compared to $0.50 in the prior quarter but down from $0.55 a year ago. For the full year, core earnings per share were $2.01, down from $2.33 in 2024 [17] - The company generated a 10% core return on equity (ROE) for the year, consistent with historical averages [18] Business Line Data and Key Metrics Changes - The company achieved record gross originations of $15.8 billion in 2025, with Q4 originations exceeding $5.8 billion, a 50% increase from Q4 2024 [26] - New investment commitments accelerated in the second half of 2025, driven by M&A and LBO activities, with about half of new originations supporting M&A-driven transactions [26][27] - The portfolio at fair value increased to $29.5 billion, a 3% increase from the prior quarter and a 10% increase year-over-year [27] Market Data and Key Metrics Changes - The company added over 100 new borrowers in 2025, setting a new record, and ended the year with a diversified portfolio of 603 borrowers [27] - The weighted average organic EBITDA growth rate of portfolio companies was more than three times that of GDP, indicating strong performance relative to the broader economy [10] - Non-accruals at cost remained stable at 1.8%, consistent with prior levels and below historical averages [32] Company Strategy and Development Direction - The company emphasized its long-term competitive advantages, including team experience, market relationships, and rigorous credit standards, which are expected to support future performance [5] - The focus on specialized industry verticals, such as software and healthcare, has led to differentiated deal flow and a 50% increase in non-sponsored originations [9] - The company plans to maintain its dividend despite potential declines in short-term interest rates, supported by a strong balance sheet and spillover income [14][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic volatility and capitalize on market opportunities, particularly in the software sector [56] - The company is closely monitoring market conditions and believes it is well-positioned to benefit from any dislocations in the capital markets [56] - Management highlighted the importance of maintaining a diversified capital base to support consistent lending activities [34] Other Important Information - The company reported a total portfolio at fair value of $29.5 billion, with a net asset value of $14.3 billion, or $19.94 per share, reflecting a slight decrease from the previous quarter [19] - The company has a strong liquidity position, totaling over $6 billion, including available cash [23] - The first quarter 2026 dividend is set at $0.48 per share, payable on March 31, 2026 [24] Q&A Session Summary Question: Concerns about AI's impact on software business performance - Management expressed confidence in their software portfolio, emphasizing that they invest in foundational infrastructure software resistant to technology risk, including AI [38][40] Question: Characterization of deal flow and market conditions - Management noted that most deal flow consists of add-on acquisitions for existing portfolio companies, with limited resurgence in dividend transactions [50] Question: Market dislocation and spread widening - Management explained that recent market volatility did not lead to sustained spread widening, attributing this to the quick recovery of the broadly syndicated market [72][74] Question: Share repurchase program - Management confirmed that share repurchases are always considered based on stock trading levels, but no specific plans were disclosed [76]

Ares Capital Corporation Earnings Presentation Fourth Quarter 2025 Important Notice This presentation has been prepared for Ares Capital Corporation ("Ares Capital") for the benefit of its public stockholders. This presentation is solely for information purposes in connection with evaluating the business, operations and financial results of Ares Capital. This presentation does not constitute, and shall not be construed as, an offer to buy or sell, or the solicitation of an offer to buy or sell, any securiti ...

Ares Capital (ARCC) came out with quarterly earnings of $0.5 per share, in line with the Zacks Consensus Estimate . This compares to earnings of $0.55 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this private equity firm would post earnings of $0.5 per share when it actually produced earnings of $0.5, delivering no surprise.Over the last four quarters, the company has not been able to surpass consensus EPS estimates.Ares Capital, which belongs ...