Starwood Property Trust Inc reported QQ2 2025 results showing a modest revenue decline against a backdrop of a diversified mortgage/real estate portfolio. Revenue came in at USD 475.9 million, down 2.83% year over year, with gross profit of USD 418.3 million and EBITDA of USD 303.2 million. Net income was USD 127.7 million and earnings per share (diluted) USD 0.38, reflecting a robust profitability backdrop supported by the company’s diversified lending and investing segments, even as financing costs remained elevated. The quarterly metrics show a material QoQ improvement in operating profitability (operating income USD 292.9 million; EBITDAR 0.637x) driven by favorable cost management and portfolio mix, offset somewhat by higher interest expense (USD 316.1 million) and a meaningful swing in cash flow dynamics.
From a cash flow perspective, operating cash flow was negative USD 87.4 million, with free cash flow negative USD 96.4 million. The company funded activity through financing activities (net inflow USD 821.8 million) while investing activities consumed USD 952.4 million, yielding a net cash decrease of USD 217.5 million for the period and leaving USD 474.9 million in cash at period end. The balance sheet remains liquidity-rich with a substantial cash balance and sizable non-current assets (including goodwill and intangible assets) and a solid equity base. The dividend payout ratio stood at approximately 1.28x earnings, consistent with many mortgage REITs targeting steady distribution policies, though funded in part from sources beyond current period net income.
Overall investment implications: Starwood remains positioned to deliver steady recurring income through its four-segment lending and investing platform (Commercial & Residential Lending, Infrastructure Lending, Property, Investing & Servicing). However, near-term profitability is sensitive to interest costs and financing activity, and the company exhibits negative cash flow from operations, underscoring the ongoing importance of access to favorable funding markets and active portfolio management. Investors should monitor the stability of distributable earnings, net debt dynamics, and any shifts in portfolio yield versus hedging costs as key drivers of cash flow sustainability.