Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

BEN · Q2 2026 Earnings

Franklin Resources

Reported April 28, 2026

30-second summary

Franklin reported Q2 FY2026 revenue of $2.30B (+8.7% YoY, -1.4% QoQ) and non-GAAP EPS of $0.71, with adjusted operating margin stepping up to 27.1% from 25.0% last quarter. The bigger signal is forward: management now explicitly guides to a high-29s adjusted operating margin in Q4 FY2026 and a path to 30%+ "ahead of planning as presented last quarter," paired with new quantitative guidance that investment management fee revenue should grow at least 6% YoY against ~1.5% expense growth. Long-term net inflows of $16.9B, ETF AUM at a record $61.6B (+67% YoY), and Canvas at $22.9B (+27% QoQ) reinforce that the diversified-growth narrative is no longer aspirational.

Headline numbers

EPS

Q2 FY2026

$0.71

Revenue

Q2 FY2026

$2.29B

+8.7% YoY

Operating margin

Q2 FY2026

14.1%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2025	QoQ
Revenue	$2.29B	+8.7%	$2.33B	-1.4%
EPS	$0.71	—	$0.70	+1.4%
Operating margin	14.1%	—	12.1%	+200bps

Guidance

Management raised full-year FY2026 operating margin outlook to 27% with high-29s Q4 guidance and accelerated path to 30%+ margins ahead of prior plan, while reaffirming expense discipline at ~1.5% above FY2025 and introducing new quantitative 6% YoY investment management fee revenue growth expectation.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

Metric	Period	Guide	YoY
Investment management fee revenue	FY2026	Expected to increase at least 6% year over year	—
Effective fee rate	Q3 FY2026	mid to high 37s (basis points)	—
Compensation expense	Q3 FY2026	$830 million (assuming $50M performance fee at 55% payout)	—
Information Systems & Technology expense	Q3 FY2026	$155 million	—
Occupancy expense	Q3 FY2026	$70 million	—
General, administrative and other expense	Q3 FY2026	$210 to $215 million	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Operating margin	FY2026	30% (medium-term target)	27% for full year with high 29s expected in Q4, targeting 30%+ margins ahead of plan	Raised from implicit guidance; now explicitly guiding 27% FY2026 vs. 30% medium-term target, with Q4 in high 29s positioning for 30%+ realization sooner than previously implied	Raised

Reaffirmed unchanged this quarter: Operating expenses (Approximately in line or slightly above FY2025, ~1.5% higher excluding performance fees)

Segment performance

Q2 FY2026

Segment	Q2 FY2026	YoY
Investment management fees	$1.819B	+8.7%
Sales and distribution fees	$0.397B	+8.7%
Shareholder servicing fees	$0.069B	+11.5%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	YoY
United States	$1.188B	+10.9%
Europe, Middle East and Africa	$0.217B	+18.6%
Asia-Pacific	$0.18B	+5.2%
Americas, excl. U.S.	$0.097B	-15.6%
Assets Under Management (AUM)	$1,682.1 billion	—
Long-term net inflows	$16.9 billion	—
Long-term inflows	$118.2 billion	—
Cash management net inflows	$11.4 billion	—
ETFs net inflows	$4.5 billion	—
Canvas net inflows	$5.3 billion	—
Alternative assets net inflows	$14.3 billion	—
Adjusted operating margin	27.1%	—

Management tone

Narrative arc: Western stabilization watch → Ex-Western fixed income inflection (9th straight quarter) → Record AUM, mixed margin → Margin pull-forward and ahead-of-plan posture.

The single biggest shift is on margin timing. A year ago, 30%+ was a medium-term aspiration discussed in five-year-plan terms; last quarter, the 30% level was reaffirmed as a medium-term target with no formal forward path; this quarter, management explicitly guides high-29s for Q4 FY2026 and says: "we are on our way to 30% plus margins later, ahead of planning as presented last quarter." The pull-forward is the news — same destination, materially earlier arrival.

Management's framing of the operating environment shifted from cyclical recovery to structural advantage. Last quarter's commentary anchored to "stabilization" and "trends reshaping the industry"; this quarter Johnson is explicit: "This is not a short-term reaction to market conditions. It reflects a more fundamental change in expectations where scale, breadth of capabilities, and the ability to deliver them in an integrated way are increasingly defining competitive advantage." The implication is that Franklin is now positioning itself as a beneficiary of consolidation rather than a survivor of it.

ETFs moved from "important vehicle" to "transformation platform." Prior coverage flagged ETFs as a growth contributor; this quarter the $61.6B AUM (+67% YoY) with active ETFs at 45% of platform, plus explicit tokenization acceleration commentary, repositions ETFs as a primary growth engine alongside alternatives and Canvas.

Recurring themes management leaned on this quarter:

Structural shift in client demand toward integrated, multi-asset solutions from fewer partnersPrivate markets momentum accelerating beyond guidance with diversified strategy contributionsTax optimization and personalization at scale as secular industry tailwind driving Canvas and SMA growthAI operationalization moving from experimentation to measurable wholesaler efficiency and sales upliftETF platform as major growth vector with active management and tokenization as near-term catalystsMargin expansion pathway to 30%+ via 4x leverage of revenue growth over expense growth

Risks management surfaced:

Regulatory scrutiny on tax-optimization vehicles (Section 351 exchange ETFs and mutual fund unfair tax treatment)Competitive pressure in direct indexing and tax optimization with low penetration creating crowded fieldRedemption pressure on private real estate ($20B noted as out there seeking alternative homes)Platform distribution influence on ETF growth diminishing as RIA independence increasesTiming and execution risk on crypto venture integration and tokenized product adoption

What to watch into next quarter

Adjusted operating margin trajectory toward high-29s — Q2 printed 27.1%; the Q4 FY2026 high-29s guide implies a ~270bps step-up in two quarters. Q3 needs to show clear progression (high 27s to 28s) for the path to remain credible.

Whether private markets FY fundraising actually clears $30B — $22.7B FY-to-date with two quarters remaining. Anything below the prior $25–30B range would be a meaningful walk-back.

Investment management fee revenue growth vs. the new ≥6% YoY commitment — Q2 fees grew 8.7% YoY; sustaining above 6% as comparisons stiffen is the explicit bar management set.

G&A normalization in Q4 — the $210–215M Q3 guide includes ~$32–35M of one-time fundraising and marketing; watching whether the Q4 run-rate steps back down toward $180M will signal whether the margin path is real or expense-deferred.

Canvas growth rate sustainability — $22.9B AUM at 72% CAGR is the standout vehicle; watch whether net inflows hold above $4–5B/quarter as the base scales.

Sources

Franklin Resources Q2 FY2026 Press Release (Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/38777/000003877726000100/exhibit991q2fy26.htm
Franklin Resources Q2 FY2026 Earnings Call Transcript

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