Bubble or no bubble, this is the best stock for AI exposure: analyst
Introduction & Market Context
Equitable Holdings (NYSE:EQH) presented its third quarter 2025 earnings results on November 4, showcasing a mixed financial performance. While the company reported adjusted non-GAAP operating earnings per share of $1.67, exceeding analyst expectations of $1.63, revenue fell significantly short at $1.45 billion compared to forecasts of $3.53 billion. This substantial revenue miss contributed to a 3.59% decline in EQH's stock price, which closed at $48.86 following the earnings announcement.
Despite the revenue challenges, Equitable highlighted its record assets under management and administration (AUM/A) of $1.1 trillion, representing a 7% increase year-over-year and 9% growth year-to-date. This asset growth underscores the company's expanding scale and potential for future earnings generation.
As shown in the following quarterly highlights, Equitable is focusing on three core growth areas while deploying capital strategically:
Quarterly Performance Highlights
Equitable reported non-GAAP operating earnings of $455 million, or $1.48 per share for Q3 2025. After adjusting for notable items, earnings reached $510 million or $1.67 per share, representing a 2% year-over-year increase on a per share basis. However, the company posted a net loss of $1.3 billion, primarily driven by the closing of the RGA reinsurance transaction.
The consolidated results show the relative contribution of each business segment to adjusted operating earnings, with Retirement accounting for 66%, Asset Management (AB) contributing 25%, and Wealth Management representing 9% of the total.
Business segment performance varied across the company's divisions. The Retirement segment showed positive momentum with net inflows of $1.1 billion in the quarter, representing a 3% annualized organic growth rate. Asset Management reported net inflows of $1.7 billion (excluding RGA impact), while Wealth Management demonstrated strong advisory net inflows of $2.2 billion, translating to a 12% annualized organic growth rate.
The following chart illustrates the key drivers of Q3 business results, highlighting sequential growth in net interest margin and fee-based revenues:
Strategic Initiatives
Equitable's Wealth Management division has emerged as a significant growth driver, with impressive organic growth rates and rising revenue per advisor. The segment has already nearly reached its 2027 earnings target of $200 million, with current trailing twelve-month earnings at $197 million, representing a 95% increase from 2022.
The company's strategic focus on wealth management is evidenced by its announced acquisition of Stifel Independent Advisors, which will add more than 110 advisors and approximately $9 billion in client assets. This acquisition, expected to close in the first half of 2026, aligns with Equitable's strategy to scale adjacent businesses.
Another key strategic focus area is the expansion of AB's Private Markets and Insurance platforms. Private Markets AUM has grown from $56 billion in 2022 to $80 billion year-to-date in 2025, a 43% increase. The company is targeting $90-100 billion by 2027. Similarly, Third Party Insurance General Account AUM has increased by 36% from 2021 to YTD 2025.
Equitable has been actively managing its capital to enhance shareholder value. In Q3 2025, the company returned $757 million to shareholders, including $676 million in share repurchases. Additionally, Equitable reduced debt and hybrids by $665 million during the quarter. The company projects full-year 2025 cash generation of $2.6-2.7 billion.
Investment Portfolio Strategy
Equitable maintains a conservative, high-quality investment portfolio to support its long-term obligations. The $109 billion General Account Investment Portfolio is primarily allocated to corporate bonds (43%), structured credit (25%), and other fixed maturities (20%). The fixed maturity portfolio, valued at $80 billion, is predominantly invested in high-quality securities, with 70% rated Aaa, Aa, or A, and an average portfolio rating of A2.
The company's alternative investment portfolio has delivered consistent returns over time, with an average return of approximately 10% since 2017. While the quarterly returns have fluctuated, ranging from 2% in 2023 to 29% in 2021, Equitable expects this portfolio to deliver 8-12% annual returns over the long term. For Q3 2025, alternative investments generated an 8% annualized return, at the low end of the target range.
Forward-Looking Statements
Despite the revenue challenges in Q3, Equitable's management remains confident in achieving its 2027 financial targets. The company reaffirmed its commitment to a 12-15% EPS compound annual growth rate by 2027, supported by strategic investments and organic growth across its core businesses.
CEO Mark Pearson emphasized the company's focus on its three core growth businesses: retirement, asset management, and wealth management, highlighting the synergies and flywheel benefits among these segments. CFO Robin Raju expressed confidence in the company's momentum heading into the fourth quarter.
The company's key messages underscore its strategic priorities and growth outlook:
Equitable's sensitivity analysis provides insight into potential impacts from market fluctuations. A 10% change in equity markets could affect after-tax non-GAAP operating earnings by approximately $150 million, while a 50 basis point shift in interest rates could impact earnings by $40-45 million. This information helps investors understand the company's exposure to market variables.
While Equitable's presentation paints an optimistic picture of growth and strategic investments, investors should consider the significant revenue miss and subsequent stock price decline in their assessment. The company's ability to translate its record AUM/A into consistent revenue growth will be crucial for meeting its ambitious 2027 targets and delivering long-term shareholder value.
Full presentation:
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