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November 10, 2025 • 4 min read
Global investment management giant Franklin Resources, known publicly as Franklin Templeton, recently released its annual 10-K report, offering a detailed look into its financial performance for the fiscal year ending September 30, 2025. For investors and industry watchers, these documents are a treasure trove of information. Let's dive into the numbers to see how the firm navigated the past year. You can find the full report on the SEC's website here.
For an asset manager, Assets Under Management (AUM)—the total market value of the investments they manage on behalf of clients—is the most critical metric. It's the base from which they generate fee revenue.
At first glance, Franklin's AUM appears stable, ending the year at $1.66 trillion, a minor 1% dip from the prior year. However, digging deeper reveals a significant internal shift.
This shift was driven by substantial client outflows. The company saw long-term net outflows of $97.4 billion, a stark increase from $32.6 billion in 2024. The primary culprit was the Fixed Income category, which bled an eye-watering $122.7 billion in net outflows. While other categories like Alternative and Multi-Asset saw modest inflows, they weren't enough to offset the fixed-income exodus.
Despite the flat AUM and significant outflows, Franklin's top line showed resilience. Total operating revenues increased by 3% to $8.77 billion. This was largely because the fees are charged on average AUM throughout the year, which actually rose 3%.
To visualize how Franklin's revenue flows through its business to generate profit, the following diagram breaks down the income statement for the fiscal year 2025.
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On the expense side, total operating costs were up just 1% to $8.17 billion. The largest component, compensation and benefits, was essentially flat at $3.8 billion. Notably, the company reduced its global workforce from around 10,200 to 9,800 employees, signaling a focus on cost discipline.
The company's reported (GAAP) operating income surged 48% to $604 million. However, this figure is skewed by large, non-recurring items, particularly impairment charges on intangible assets, which were much higher in the previous year.
For a clearer picture of core performance, we can look at the company's "adjusted operating income," a non-GAAP measure that excludes acquisition-related costs and other special items. Here, the story is different: adjusted operating income fell 4% to $1.64 billion, and the adjusted operating margin tightened from 26.1% to 24.5%. This suggests that underlying profitability is facing pressure. Similarly, while reported net income was up 13%, adjusted net income declined by 6% to $1.2 billion.
The significant outflows from Franklin's fixed-income products highlight the intense competition within the asset management industry. The company explicitly notes the "transformative pressures" as a key risk, facing challenges from lower-cost passive investment products and other active managers.
Interestingly, the company's investment performance in fixed income remains strong, with 92% of its strategy composite AUM outperforming its benchmark over a 10-year period. However, its equity performance has been weaker, with only 44% of AUM beating its benchmark over the same timeframe. This performance gap may be contributing to the shifting asset flows.
In conclusion, Franklin Resources presents a mixed financial picture. While revenue has held up, the firm is grappling with significant client outflows in its crucial fixed-income business and pressure on its core profitability. The company's efforts to control costs are evident, but its future success will depend on its ability to stabilize asset flows and enhance investment performance in an increasingly challenging market.
Last updated: November 10, 2025