Blackstone’s Q3 Profits Dip Amid Interest Rate Headwinds

Blackstone’s third-quarter earnings beat expectations, but the private equity giant still experienced a more than 9 percent profit drop, which it blamed in part on its commercial real estate business confronting higher capital costs. 

Distributable earnings at Blackstone fell 9.2 percent year-over-year to $1.72 billion, or $1.32 a share. The firm beat analysts’ expectations of $1.26 per share. 

“The third quarter of 2026 represented a highly complex environment characterized by a historic increase in bond yields globally, including U.S. Treasury yields hitting the highest level in decades,” Stephen Schwarzman, chairman and CEO of Blackstone, said Thursday morning during the quarterly earnings call. “A higher cost of capital has negatively impacted investor settlement and transaction activity and triggered significant volatility in the markets.” 

The company’s distributable earnings with its real estate segment fell 10 percent to $1.68 billion. Its core-plus real estate funds reported positive appreciation of 1.6 percent in the quarter, with opportunistic funds declining 3.2 percent. 

BREIT, the firm’s flagship private real estate investment trust, also raised $1.3 billion in the third quarter. 

Jon Gray, president and chief operating officer at Blackstone, said valuation cap rates increased across its holdings in the third quarter in response to interest rate volatility. That led to depreciation in its opportunistic real estate funds, Gray said. He stressed, though, that Blackstone is still well positioned with its CRE business thanks to sharp demand within its data center and logistics holdings, which represent 54 percent of its global real estate holdings, coupled with shrinking supply in other property sectors. 

“This doesn’t mean there won’t be legacy equity and debt investments in real estate that will face renewed pressure from higher rates, particularly in lower growth sectors,” Gray said. “But, in this cycle as with past cycles, we believe we are in a differentiated position overall, given where we’ve concentrated our capital and the quality of our portfolio.”

Blackstone netted $63.3 million of capital inflows in the third quarter and achieved $167.9 million over the last 12 months. The firm’s assets under management at the end of the quarter were $1.37 trillion, a 10 percent increase from the year-ago period.

Schwarzman stressed that Blackstone is set up for future growth given how proactive the company has been with investing in data centers and with the recent political pushback against the facilities only amplifying demand.  

“Demand for compute is accelerating, and we see no signs of that slowing down as AI use cases ramp up for both businesses and consumers, and the world increasingly engages with the vast potential of this technology,” Schwarzman said. “Seldom in my career have I seen such a supply-constrained market of this scale. Current public attitudes toward data centers will likely only amplify this scarcity.”

Andrew Coen can be reached at acoen@commerciualobserver.com.