Financial snapshot: 2026-06-30. Research reviewed 2026-10-17. The annual earnings comparison is from 2026-10-24. The business and balance-sheet figures below relate to the reporting period shown.
The income-producing business
Interest, dividends and fees for arranging or committing financing feed Ares' investment income. Borrowing costs, the manager's base fee and day-to-day operating expenses reduce what is left, and the manager also receives an income-based fee.
Some income can be recognized before cash is collected, including payment-in-kind interest and dividends. Ares can also pay management fees on accrued income that it never ultimately receives, without being entitled to reimbursement. That makes collections an important check on the quality of the earnings behind the dividend.
ARCC 10-Q for 2026-06-30
The funding behind the assets
Borrowing is a substantial part of how Ares finances its portfolio alongside shareholder capital. At June 30, 2026, debt was 1.15 times equity, or 1.12 times after deducting available cash.
That financing lets a larger pool of investments earn income, but interest costs reduce the earnings left for shareholders and investment losses are absorbed by the equity base. The benefit depends on the extra investment income justifying both the borrowing cost and the added risk, rather than on portfolio size alone.
Ares Capital Q2 2026 results: NII, Core EPS and September common dividend
Three different earnings measures
Q2 NII was $0.50 per share, Core EPS $0.47 and GAAP net income $0.24. The declared third-quarter common dividend is $0.48, payable September 30 to holders of record September 15.
The earnings relate to the second quarter; the payment belongs to the third-quarter declaration. Core EPS is non-GAAP. These figures do not replace the formal four-quarter estimate.
Ares Capital Q2 2026 results: NII, Core EPS and September common dividend
Credit losses and non-accruals
A larger share of Ares' investments was on non-accrual at June 30, 2026 than at the previous year-end, meaning interest recognition had stopped on those loans. The average portfolio grade stayed unchanged, so the broad score did not reflect the increase in non-accrual exposure.
The steady grade is useful context, but it does not cancel the income pressure from troubled borrowers. Because non-accruals can reduce recognized earnings before the eventual recovery is known, stabilization in those exposures would be more reassuring than an unchanged average score alone.
Ares Capital Q2 2026 results: NII, Core EPS and September common dividend
Interest-rate and funding-cost changes
At June 30, 2026, variable-rate investments represented 71% of Ares' portfolio at fair value. Most variable-rate investments outside the SDLP certificates had rate floors, which set a minimum reference rate, while the credit facilities had no such floors on their borrowing rates. Some fixed-rate notes had also been converted to floating costs through swaps.
Falling rates can reduce portfolio income, although floors may limit the decline on affected investments and floating borrowing costs can also fall. What matters for the dividend is how those changes balance. A fixed bond coupon alone therefore does not tell us Ares' financing cost or how much investment income remains for shareholders.
ARCC 10-Q for 2026-06-30
September financing and rate exposure
On September 15, Ares closed $750 million of unsecured notes due September 15, 2033 at a 6.250% coupon. A same-notional swap receives 6.250% fixed and pays three-month SOFR plus 1.85250%.
The company expects net proceeds to repay credit-facility debt. The bond coupon differs from the floating cost after the swap; the financing proceeds are not earnings.
Ares Capital September 15, 2026 financing: $750 million notes and interest-rate swap
Conditional share-issuance authority
Ares' shareholders authorized common-share issuance below NAV, but only with board approval and within specified limits. Those include a cap of 25% of the shares outstanding at the time, and the authority expires on August 13, 2027.
This gives Ares financing flexibility, but it does not show that shares have actually been sold below NAV. Any sale would need to be judged on its terms because raising capital below NAV can reduce the asset backing of each existing share, even when it brings in cash for new investments.
Ares Capital August 2026 shareholder vote: conditional below-NAV issuance authority
Asset quality
At June 30, 2026, non-accrual loans represented 2.4% of investments at amortized cost and 1.4% at fair value, up from 1.8% and 1.2% at year-end. The average portfolio grade remained 3.1.
The stable grade is encouraging, but it does not erase the rise in loans that have stopped earning interest. Stabilizing those exposures would make the income outlook more convincing.
Ares Capital Q2 2026 results: NII, Core EPS and September common dividend
Funding and liquidity
At June 30, 2026, Ares held $383 million of cash and had about $6.7 billion of additional credit-facility capacity, subject to borrowing limits and other conditions.
Those resources support the view that there was no immediate funding shortfall at the reporting date. Facility headroom remains conditional, and drawing on it creates debt rather than earnings.
Ares Capital Q2 2026 results: NII, Core EPS and September common dividend
Capital per share
At June 30, 2026, NAV was $19.35 per share. Investment losses more than offset the first-half excess of NII over distributions, so capital per share declined despite that income coverage.
Income generation alone has not protected capital per share. Stabilizing investment values matters alongside the earnings margin, because further losses could weaken the capital supporting future income.
ARCC 10-Q for 2026-06-30
What would change the earnings picture?
The next report needs to show whether Ares can turn near-full dividend support into a more comfortable earnings margin without further credit slippage. Stable or falling non-accruals would help, while another rise would make the narrow margin less convincing.
