QQQ's conversion to an open-end ETF lifted revenue 14.2% and operating margin to 23.3% from 16.5% 8-K. Net income and diluted EPS ($0.65 vs $0.66) were flat against a year earlier, which had a tax benefit 8-K. A $1.5 billion term loan then funded a preferred buyback 8-K.
Invesco Ltd. · Q3 2026 · Reported 27 Oct 2026 · US
Key figures
Million USD | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
Revenue | 1,873.20 | 1,640.40 | +14.2 % |
Operating income | 436.50 | 270.90 | +61.1 % |
Net income | 355.60 | 356.40 | -0.2 % |
Diluted EPS | 0.65 USD/share | 0.66 USD/share | -1.5 % |
Operating cash flow | 475.00 | 606.20 | -21.6 % |
Operating margin | 23.3 % | 16.5 % | +6.8 pp |
Net margin | 19.0 % | 21.7 % | -2.7 pp |
Figures in USD, as reported. Margins are computed from the reported lines. Operating cash flow for the quarter are derived by subtracting year-to-date periods.
QQQ's conversion lifted operating income 61% as fees outgrew costs
Operating revenues rose 14.2% to $1,873.2 million and operating income rose 61.1% to $436.5 million, taking operating margin to 23.3% from 16.5% a year earlier 8-K. Management attributes the revenue gain mainly to QQQ management fees after its conversion to an open-end fund ETF in the fourth quarter of 2025, plus higher average AUM. Investment management fees rose $327.5 million, while service and distribution fees fell $87.5 million because QQQ's pass-through service revenues ended 8-K.
Operating expenses rose only $67.2 million against a $232.8 million revenue increase 8-K. Third-party distribution costs rose $85.4 million, mostly on QQQ and higher AUM, but employee compensation fell $27.8 million, including a $24.9 million smaller mark-to-market charge on deferred compensation liabilities 8-K. Part of the margin gain therefore comes from a market-linked compensation line, not only from scale. On company-defined measures, adjusted operating margin was 40.7% against 34.2% a year earlier 8-K.
Flat net income reflects a year-earlier tax benefit, not weaker operations
Net income was $355.6 million against $356.4 million, down 0.2%, and net margin fell to 19.0% from 21.7% 8-K. Net income attributable to Invesco was $294.5 million against $301.3 million 8-K. Diluted EPS was $0.65 against $0.66, with diluted shares at 452.5 million against 454.6 million, so the share count did not explain the gap 8-K.
The effective tax rate was 23.3% against (2.8%) a year earlier, when a favorable tax matter resolution included a deferred tax rate reduction and a reversal of an uncertain-tax-position reserve 8-K. Operating income growth was absorbed by that swing. Company-defined adjusted diluted EPS was $0.72 against $0.61, but the adjusted tax rate also rose, to 25.1% from 11.2% 8-K.
Cash conversion weakened and long-term flow growth is not like for like
Operating cash flow was $475.0 million against $606.2 million a year earlier, down 21.6%, derived from year-to-date figures. Cash conversion was 134% of net income against 170%. It stayed above net income.
Net long-term inflows were $35.1 billion against $28.9 billion a year earlier, and the annualized organic growth rate was 6.3% against 7.9% a year earlier and 8.5% in the prior quarter 8-K. QQQ flows count in net long-term flows only from December 20, 2025, so the year-on-year flow comparison is not like for like 8-K. Net market losses reduced AUM by $26.4 billion, yet ending AUM was $2,537.8 billion, up 19.4% from a year earlier 8-K.
Debt-funded preferred buyback follows a quarter of deleveraging
Net debt fell to $315.8 million from $708.6 million at June 30, as the credit facility balance dropped to $393.0 million from $736.0 million 8-K. On October 26, 2026 Invesco repurchased $1.5 billion of Series A Preferred Stock held by MassMutual, funded by a $1.5 billion five-year floating-rate bank term loan, leaving $1 billion of the preferred outstanding 8-K.
Management says the buyback reduces leverage, adds balance sheet flexibility and raises earnings available to common shareholders 8-K. The loan is larger than the $1,281.3 million of debt held at September 30, so the quarter's net debt figure will not carry forward 8-K. Preferred dividends paid in the quarter were $37.0 million 8-K.
What to watch next
Whether the $1.5 billion floating-rate term loan's interest cost is outweighed by the lower preferred dividend burden, as management expects earnings available to common shareholders to rise 8-K.
Whether operating cash flow conversion, 134% of net income against 170% a year earlier, recovers in coming quarters.
Whether long-term organic growth, 6.3% annualized against 8.5% in the prior quarter, holds up as net market losses weigh on AUM 8-K.
The report does not give drivers of the operating cash flow decline.
Sources
Produced by Clarifo Research with the Clarifo financial research engine from the company's public filings. AI was used in parts of the analysis and drafting. Figures are checked automatically against the filings they come from. This is not investment advice.