Key Highlights

  • Core EPS was $0.46 for the third quarter, against $0.50 a year earlier and a screen estimate of $0.48.
  • GAAP EPS was $0.44, down from $0.57, on net income of $319 million.
  • Net asset value per share was $19.31 at September 30, against $19.94 at year-end 2025.
  • The company declared a fourth-quarter dividend of $0.48 per share, payable December 29.
  • Non-accruals were 2.4% of the portfolio at amortized cost, up from 1.8% at year-end.

Ares Capital Earnings: Why Did Core EPS Slip to $0.46 Despite a Steady Dividend?

Ares Capital (NASDAQ:ARCC) reported third-quarter results on Tuesday, October 27, ahead of its midday call. Core EPS was $0.46 versus $0.50 a year earlier and a screen estimate of $0.48 (the 3.3% shortfall is as screened). GAAP EPS was $0.44, down from $0.57, on net income of $319 million versus $404 million.

The board declared a fourth-quarter dividend of $0.48 per share, payable December 29 to holders of record on December 15. The dividend exceeds third-quarter core EPS by $0.02, as calculated. Net investment income was $328 million, or $0.46 per share, against $338 million, or $0.48.

MidCap Financial Deal: What Did Ares Capital Agree to Buy?

On October 26 the company agreed to acquire MidCap Financial Investment (NASDAQ:MFIC) in a cash and stock transaction, announced with the results. The consideration is $10.88 per fully diluted share, about $1.21 in cash from a subsidiary of Ares Management (NYSE:ARES) and about $9.67 in Ares Capital stock. The price is a premium of about 30.1% to MidCap's October 26 close and about 25.8% to its 30-day average price.

Enterprise value is about $2.6 billion, and up to roughly 41 million Ares Capital shares may be issued. Closing is expected in the first half of 2027, subject to MidCap shareholder and regulatory approvals.

The company expects the deal to be modestly accretive to core EPS. It cites greater scale, with pro forma investments above $31 billion across more than 800 portfolio companies, and the addition of MidCap's senior secured portfolio.

Portfolio and Credit: How Did Originations and Non-Accruals Move?

New commitments were about $2.1 billion, of which about $1.6 billion was funded, compared with gross commitments of $3,924 million a year earlier. The chief executive attributed the slower pace to a slower transaction environment and said the backlog is up meaningfully, at about $2.5 billion as of October 22.

The portfolio had a fair value of $29,213 million across 636 companies, with a weighted average yield on debt of 10.8% against 10.3% at year-end. Non-accruals rose to 2.4% at amortized cost, or 1.4% at fair value, from 1.8% and 1.2%.

Balance Sheet and NAV: Is Funding Strength Offsetting Lower Book Value?

Net asset value per share was $19.31, down from $19.94 at year-end, a decline of about 3.2% as calculated.

Debt to equity was 1.11 times, or 1.06 times net of cash, with about $7 billion of liquidity. In the quarter the company issued $750 million of 6.250% unsecured notes due 2033, repaid $1,000 million of 2.150% notes at maturity and refinanced a $709 million securitisation. The chief financial officer said these steps reduced funding costs and left limited near-term maturities.

What to Watch Next After Ares Capital's Third-Quarter Earnings?

The release gives no numerical guidance. Investors will follow whether originations convert the $2.5 billion backlog, whether non-accruals continue to rise from 2.4%, and how core EPS compares with the $0.48 dividend.