Private markets investment firm StepStone Group (NASDAQ: STEP) missed Wall Street’s revenue expectations in Q2 CY2026, but sales rose 26.6% year on year to $300.6 million. Its non-GAAP profit of $0.48 per share was 4.8% below analysts’ consensus estimates.

Is now the time to buy STEP? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

StepStone Group’s second quarter results were met with a negative market reaction, as both revenue and adjusted earnings per share came in below Wall Street expectations. Management attributed the quarter’s performance to continued strength in fee-related earnings, driven by robust fundraising across both commingled and managed accounts, as well as the rapid growth of its Private Wealth platform. CEO Scott Hart described the company’s client retention as “enviable” and highlighted expansion in Private Wealth subscriptions, which surpassed $2.8 billion for the quarter. Management also acknowledged that changes in fee structures and the timing of fund activations had a noticeable impact on margins and revenue growth this quarter.

Looking ahead, leadership is focused on capturing additional economics from its fastest-growing businesses, particularly through the planned buy-in of the Private Wealth profits interest. Management believes this move will materially increase adjusted net income and provide significant earnings per share accretion over time. CFO David Park indicated that continued investment in technology and expansion into new markets, such as defined contribution retirement solutions, are expected to support future growth. Management remains attentive to the pacing of fundraising, platform diversification, and the impact of product launches, while also planning for the orderly management of equity lockup expirations related to strategic acquisitions and M&A activity.

Key Insights from Management’s Remarks

Management cited strong fundraising, expansion of the Private Wealth platform, and selective M&A as key factors driving the quarter’s performance, while fee structure adjustments and fund activation timing contributed to deviations from expectations.

• Private Wealth platform growth: The Private Wealth segment saw record quarterly subscriptions, with assets surpassing $21 billion and net asset value more than doubling over the past year. Management emphasized that persistently low redemptions contributed to these gains, positioning Private Wealth as a primary growth engine.

• Fundraising momentum: The company achieved $10 billion in gross inflows for the quarter, split between managed accounts and commingled funds. Notably, the SPRING venture and growth equity fund attracted $1.7 billion in inflows, tapping into investor interest in sectors such as artificial intelligence, cybersecurity, and space exploration.

• Fee structure changes and impact: Adjustments to the fee structure in flagship private equity secondaries funds led to modest fee rate growth, as management indicated that these changes will keep the average fee rate relatively flat in the near term. The company expects fee rates to resume rising once the fundraising cycle for these funds matures and Private Wealth assets continue expanding.

• Strategic M&A and buy-in plans: StepStone continues to pursue selective acquisitions, focusing on buying out noncontrolling interests in high-growth asset classes at favorable terms. The upcoming buy-in of the Private Wealth profits interest is expected to materially boost adjusted net income and enhance the company’s earnings profile.

• Dividend increase and capital return: Reflecting confidence in its earnings trajectory, the company raised its quarterly dividend by 18% and continued share repurchases, executing $21 million in buybacks since the prior quarter. Management reiterated that capital management will remain disciplined, especially as it prepares for the cash requirements of planned buy-ins.

Drivers of Future Performance

Management’s outlook centers on expanding Private Wealth, executing strategic buy-ins, and investing in technology and new markets to drive sustainable growth.

• Buy-in of Private Wealth profits interest: Management expects that completing the planned buy-in will allow StepStone to capture the full economics of one of its fastest-growing businesses, resulting in meaningful adjusted net income and earnings per share accretion over time. The structure is designed to manage equity lockups and minimize market disruption.

• Technology and market expansion: Investment in data analytics, benchmarking partnerships, and digital infrastructure is expected to facilitate entry into new channels, such as defined contribution retirement plans. Management believes these initiatives will help the company address a larger total addressable market and support long-term fee growth.

• Fundraising and product pipeline: Sustained fundraising momentum in both managed accounts and commingled funds, alongside the launch of new products in Private Wealth and institutional channels, remains a core growth driver. Management is focused on maintaining high platform adoption rates and diversifying across geographies and asset classes, while monitoring for potential margin pressures from distribution fees and macroeconomic factors.

Catalysts in Upcoming Quarters

In the coming quarters, focus will be on (1) progress toward the buy-in of the Private Wealth profits interest and its financial impact, (2) sustained fundraising momentum and net inflows across the Private Wealth and institutional channels, and (3) the pace of adoption and monetization for new data analytics and benchmarking partnerships. Additional attention will be paid to product launches and international expansion efforts.

StepStone Group currently trades at $49.13, down from $50.33 just before the earnings. Is there an opportunity in the stock? The answer lies in our full research report (it’s free).

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