AJG's Q2 2025: Acquisition Spree Fuels Growth and Poses New Risks

Arthur J. Gallagher & Co. (AJG), a major player in the global insurance brokerage and risk management sector, recently released its financial results for the second quarter of 2025. Today, we're diving into the details of their latest 10-Q filing to understand the story behind the numbers. The report reveals a company aggressively expanding through acquisitions, which is supercharging revenue but also bringing new challenges and costs.

A High-Level Look at Performance

For the three months ended June 30, 2025, AJG reported total revenues of $3.2 billion, a strong 16% increase from the $2.8 billion in the same quarter last year. This top-line growth translated into a healthy bottom line, with net earnings attributable to the company climbing to $365.8 million ($1.40 per share), up from $283.4 million ($1.27 per share) in Q2 2024.

To better understand how AJG generates and spends its money, the following flow diagram visualizes the company's income statement for the first half of 2025.

Brokerage Shines While Risk Management Holds Steady

AJG's business is primarily driven by two segments: Brokerage and Risk Management.

• Brokerage: This segment, which involves advising clients and placing insurance policies, was the standout performer. It posted revenues of $2.8 billion, a 17% jump from the prior year. This growth was fueled by both acquisitions and a solid organic growth rate of 5.3%. Organic growth measures a company's internal growth, excluding boosts from buying other companies, making it a key indicator of underlying business health. The segment’s profitability also saw a significant improvement, with its adjusted EBITDAC margin expanding by over 330 basis points to 36.4%. (EBITDAC, or Earnings Before Interest, Taxes, Depreciation, Amortization, and Change in estimated acquisition earnout payables, is a non-GAAP measure used by AJG to assess operational performance.)

• Risk Management: This division provides contract claim settlement, loss control consulting, and other risk-related services. It saw more modest revenue growth of 9% to $391.9 million (before reimbursements). While its organic growth was a healthy 6.2%, its GAAP net earnings dipped slightly to $42.6 million from $47.8 million a year ago. However, on an adjusted basis, the segment’s EBITDAC margin saw a slight improvement, suggesting core operational profitability remains intact.

An Aggressive Acquisition Spree

A central theme of this report is AJG's voracious appetite for acquisitions. In the first six months of 2025, the company closed 20 acquisitions and spent a staggering $1.66 billion on them, a massive leap from the $518.6 million spent in the same period last year.

The report details these acquisitions, including the notable purchase of Woodruff Sawyer & Co. (WSC) for a total price of $1.27 billion. While these buyouts are a powerful engine for revenue growth, they come with substantial costs. For the quarter, AJG recorded $181.1 million in amortization expenses for intangible assets like customer lists from these deals. The company also explicitly notes potential risks from its acquisition strategy, including the "diversion of management’s attention from ongoing business operations."

Looking Ahead

Arthur J. Gallagher & Co.'s second-quarter results paint a picture of a company in full growth mode. The core Brokerage segment is firing on all cylinders, and the firm's aggressive acquisition strategy is rapidly expanding its market presence.

However, this rapid growth is not without its challenges. Investors and analysts will be closely watching how effectively AJG integrates its newly acquired businesses and manages the associated costs. The company also acknowledges emerging risks, including those tied to the "use of AI in its business operations." The key question moving forward is whether AJG can continue to translate its impressive top-line expansion into sustained and efficient bottom-line profitability.