AMG's Alternative Pivot Accelerates: Record Q2 Earnings, $29B Flows, and a Deeper Buyback Moat

The Quarter in Numbers

AMG reported another landmark quarter. AUM hit a record $942B, up 7% QoQ, while adjusted EBITDA of $316M grew 44% YoY and economic EPS of $8.29 grew 54% YoY. “Adjusted EBITDA of approximately $316 million and economic earnings per share of $8.29 grew 44% and 54% year-over-year” — Jay Horgen, Chief Financial Officer · 2026-07-30 The strength came from an increasingly alternative-heavy mix: alternatives now account for more than 60% of earnings, up from 50% 18 months ago. “Alternatives account for more than 60% of our earnings, and this contribution is expected to grow meaningfully over the next 12 months.” — Jay Horgen, Chief Financial Officer · 2026-07-30

The driver is flows. Net inflows were $13B in Q2, but alternative strategies alone brought in a record $29B. Over the last 12 months, alternatives attracted ~$100B. This is not a one-quarter blip. “we see that 60% going to 70% in a relatively short order.” — Jay Horgen, Chief Financial Officer · 2026-07-30 The mix shift is being amplified by new partnerships. In the last year, AMG added BBH Credit Partners, HighBrook, and doubled down on Garda. The deal pipeline is active – with a "notable increase in new investment opportunities" in Q2.

The Four Growth Engines

Jay Horgen structured the earnings call around four secular themes: secondary solutions, infrastructure, absolute return, and tax-aware investing. The last one, catalyzed by AQR, has become the most scrutinized. Management is careful to stress it's just one engine. “at the AMG level, these tax-aware strategies, they represent just over 10% of our earnings today.” — Jay Horgen, Chief Financial Officer · 2026-07-30 That's a far cry from the 60%+ contribution of alternatives overall, and it's a reminder that the bull thesis isn't a single product. AQR's broader liquid-alts franchise – absolute return, beta-sensitive, tax-aware – is the growth story, and capacity appears ample (the strategies are long-short equity on deep indices).

This is a marked evolution from prior quarters. On the May call, Jay emphasized the same four drivers but with more caution about concentration. “the answer is our flows were broad-based, and they were along the lines of the 4 trends” — Jay Horgen, Chief Executive Officer · 2026-05-01 Now the language is bolder: the business is heading to 70% alternatives, and management is pointing to a "structural" shift in investor behavior. It's the same narrative, but with more confidence and more data behind it.

Fundamentals: The Numbers Confirm the Story

The financials support the narrative. Revenue for Q2 2026 came in at $545M, up 10% YoY. More importantly, net income of $146M was up 48% YoY, and free cash flow (ex-SBC) hit $296M, up 61% YoY. The cash flow conversion is remarkable: FCF margin (ex-SBC) rose to 54.2%, up 17pp YoY. This is the machine that funds both the buyback and the deal pipeline. AMG repurchased $185M of stock in Q2, bringing YTD to $375M, and expects ~$600M for the year. The balance sheet remains comfortable: leverage is still low, and the company recently extended its revolver to 2031.

Valuation is another angle. The stock trades at ~7.8x trailing net income and ~7.9x FCF, despite the record earnings. Management is explicit that this disconnect is why the buyback makes sense.

given our forward growth prospects and the strength of our capital position, we have been a buyer of AMG shares in size, repurchasing more than 10% of the company's shares outstanding in the last 12 months

One theme that's quietly changed: the role of AQR. A year ago, AQR was mentioned as a "double-digit contributor" to EBITDA. Today, Jay is framing AQR as "one of the top 3 liquid alts businesses in the world," and the tax-aware component is just 10% of AMG's earnings. The company is clearly trying to diversify the narrative away from single-affiliate risk, and the numbers back that: alternatives now span 40+ affiliates, with secondaries and infrastructure leading private markets.

What's New, What's Not

The tax-aware story has been present for four quarters now, but the second-quarter call contained a notable nuance: capacity is no longer a worry. In February, management was still fielding questions about how big the tax-aware business could get; now they're saying the addressable market is "deep" and the strategies are index-based. This is a clear de-risking of the thesis. On the M&A side, the pipeline is more active than it's been in years – management specifically cited "high-quality independent firms managing alternative strategies." “we are focused on areas of secular growth. And in both private markets and liquid alternatives, we do have firms that we're speaking to in both of those areas” — Jay Horgen, Chief Financial Officer · 2026-07-30

From a global keyword perspective, AMG's language is noticeably more specific than the market's. While the global trajectory is dominated by tariff and geopolitical noise, AMG's own secular trend language and capital allocation decisions are company-specific and consistent with the flow story. The prior quarter's Q&A also confirmed the trajectory. As we noted on the February call, “We have continued to see flows into these products into the first quarter.” — Dava Elaine Ritchea, CFO · 2026-02-12 The momentum has only intensified since then, making the Q2 report feel less like a surprise and more like a confirmation of a durable strategic pivot.