BX Dips on Real Estate & Data Center Woes, Posts Record Q4 AUM Balance

Shares of Blackstone BX tanked 4.1% yesterday despite reporting better-than-expected fourth-quarter 2024 results. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.BX’s distributable earnings of $1.69 per share surpassed the Zacks Consensus Estimate of $1.46. Also, the figure reflected a surge of 52% from the prior-year quarter. Blackstone Inc. Price, Consensus and EPS Surprise Blackstone Inc. price-consensus-eps-surprise-chart | Blackstone Inc. QuoteAdditionally, total segment revenues were $4.15 billion, soaring 64% year over year. The top line outpaced the Zacks Consensus Estimate of $3.79 billion. On a GAAP basis, BX’s revenues were $3.08 billion, rising substantially from $1.29 billion in the prior-year quarter. The increase was driven by record total assets under management (AUM) balance.Why Investors Turned Bearish on Blackstone Shares?Weak Real Estate segment performance was the primary reason behind investor apathy toward BX stock. The segment, which invests in warehouses and apartments through various funds, saw its base rates increasing during the fourth quarter. As such, segment’s fee-related earnings and distributable earnings declined. Further, segment’s total AUM and fee-earning AUM balances decreased. Image Source: Blackstone Inc.Apart from this, the current hot topic – DeepSeek, the low-cost artificial intelligence (AI) model from China – drew investors’ attention toward the company’s data center investments. Blackstone has almost $80 billion of leased data centers. The company president and chief operating officer Jonathan Gray, on the post-earnings conference call, noted that the developments related to DeepSeek are being closely monitored. Gary stated, “We have a very prudent approach when we think about data centers.” He expects lower costs will result in a wider usage of AI, leading to an increase in demand for data centers. He further added, “As usage goes up significantly, there's still a vital need for data centers. We still think it's a very important segment.”However, investors don’t seem to be very convinced about this, at least for the near term.Record High AUM Balance Supports Blackstone’s RevenuesAs of Dec. 31, 2024, BX’s fee-earning AUM jumped 9% year over year to $830.71 billion. The total AUM amounted to $1.13 trillion, up 8%. Similarly, its peers like BlackRock BLK and Invesco IVZ witnessed a rise in AUM balance. BLK’s AUM balance touched the record $11.55 trillion mark driven by net inflows, partially offset by market depreciation and negative forex impact. Also, IVZ recorded AUM balance of $1.85 trillion as of Dec. 31, 2024 and long-term net inflows were $25.6 billion.Also, Blackstone recorded net inflows of $57.5 billion in the quarter, bringing the full-year 2024 number to $171.5 billion. Quarterly gains were driven by the Private Equity and Credit and Insurance segments, which witnessed inflows of $11.6 billion and $34.2 billion, respectively.Stephen A. Schwarzman, chairman and CEO, said, “Blackstone reported one of the best quarters in our history. Earnings growth accelerated sharply, while the key drivers of our business – inflows, investment activity and realizations – all reached their highest levels in two-and-a-half years.” With the Federal Reserve starting monetary policy easing and the economic outlook remaining solid, Blackstone was able to deploy and commit almost $62 billion of capital in the fourth quarter. As of Dec. 31, 2024, Blackstone had undrawn capital available for investment or ‘total dry powder’ of $168.6 billion. Image Source: Blackstone Inc.Driven by improvement in AUM balance and solid quarterly inflows, BX’s net management and advisory fees (the largest component of GAAP revenues) rose 14% to $1.88 billion in the fourth quarter.In the fourth quarter of 2024, Blackstone’s total expenses (GAAP basis) were $$1.5 billion, which soared 59% year over year. The primary reason for the drastic rise in expenses was a 91% surge in compensation and benefits costs.Further, as of Dec. 31, 2024, this Zacks Rank #3 (Hold) company had $9.7 billion in total cash, cash equivalents and corporate treasury investments, and $19.1 billion in cash and net investments. The company has a $4.3-billion undrawn credit revolver. 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