StepStone Group reported a quarter marked by strong operating fundamentals and material GAAP accounting distortions. On a reported basis, QQ3 2025 delivered a GAAP net loss of $287 million, or $2.61 per share, driven by a non-cash change in fair value related to the potential buy-in of the StepStone Private Wealth profits interests. Excluding this item, adjusted results were positive: adjusted net income of $52.7 million and earnings per share of $0.44, led by growth in fee-related earnings (FRE) and higher net realized performance fees. Management emphasized the strength of core business momentum, including record FRE of $74.1 million (up 46% YoY) and FRE margin of 39%, as well as a robust rise in fee-earning AUM to over $114 billion (up ~28% YoY), with total fee-earning assets plus undeployed fee-earning capital (UFEC) at roughly $136 billion, up ~23% YoY.
Key drivers of the quarter included broad-based AUM growth across structures, deployment of UFEC (over $6.5 billion activated in the quarter, with more than $2 billion deployed), and notable private wealth and infrastructure milestones. The inaugural $1.2 billion infrastructure co-investment fund and private wealth platform expansion to over $7 billion (including a $600 million CredX secondary transaction) were highlighted as meaningful demand indicators and proof points of diversification success. Management stressed that the strong quarterly results reflect a longer-term, diversified growth trajectory rather than a single-quarter phenomenon and cited a healthy pipeline across SMAs, commingled funds, and private wealth investments.
Looking forward, StepStone reiterated a constructive long-run outlook: continued growth in fee-earning AUM, ongoing activation of UFEC, and continued cross-sell across platforms. While no formal FY23/24 guidance was provided, management articulated optimism around margin expansion on a trailing twelve-month basis and the potential for NII accretion from wealth-related buy-ins, even as GAAP results may remain volatile due to accounting treatment of wealth-related earn-outs and similar items.