FHIHIGH SIGNALFINANCIAL10-K

Federated Hermes delivered exceptional profitability growth with net income surging 50% while dramatically shifting capital allocation toward share buybacks over dividends.

The company's strong operational performance, evidenced by 42% operating income growth and rising cash reserves, suggests robust business momentum and effective cost management. However, the 91% increase in share buybacks coupled with a 43% dividend cut signals a significant strategic shift in capital allocation priorities that income-focused investors should carefully evaluate.

Comparing 2026-02-27 vs 2025-02-28View on EDGAR →
FINANCIAL ANALYSIS

Federated Hermes demonstrated strong financial performance with net income jumping 50% to $403.3M and operating income rising 42% to $513.9M, while cash reserves grew 16% to $582.5M. Despite declining operating cash flow (-14%), the company dramatically shifted capital allocation by nearly doubling share buybacks to $262.8M while cutting dividends by 43% to $104.9M. The combination of exceptional profitability growth, strong balance sheet position, and strategic pivot toward share repurchases over dividend payments reflects management's confidence in the business while fundamentally changing the investment proposition for shareholders.

FINANCIAL STATEMENT CHANGES
Share Buybacks
Cash Flow
+90.9%
$137.6M$262.8M

Share repurchases increased 90.9% — management returning capital, signals confidence in intrinsic value.

Net Income
P&L
+50.3%
$268.3M$403.3M

Net income grew 50.3% — bottom-line growth signals improving overall business health.

Dividends Paid
Cash Flow
-43.3%
$184.8M$104.9M

Dividends cut 43.3% — significant signal of cash flow stress or capital reallocation priorities.

Operating Income
P&L
+42.2%
$361.5M$513.9M

Operating leverage kicking in — revenue growth outpacing cost growth, a hallmark of scaling businesses.

Capital Expenditure
Cash Flow
-31.4%
$4.0M$2.8M

Capex reduced 31.4% — investment cycle winding down or capital discipline; may improve near-term free cash flow.

Cash & Equivalents
Balance Sheet
+15.5%
$504.4M$582.5M

Cash grew 15.5% — improving liquidity position supports investment and shareholder returns.

Operating Cash Flow
Cash Flow
-14.2%
$346.6M$297.3M

Operating cash flow softened — monitor whether temporary working capital timing or structural deterioration.

Accounts Receivable
Balance Sheet
-11.1%
$65.3M$58.1M

Receivables declined — improved collection efficiency or conservative revenue recognition.

Current Assets
Balance Sheet
+10.6%
$781.4M$863.8M

Current assets grew 10.6% — improving short-term liquidity or inventory/receivables build.

LANGUAGE CHANGES
NEW — 2026-02-27
PRIOR — 2025-02-28
ADDED
The obligation to make purchase price payments in connection with acquisitions is subject to certain adjustments and conditions, and the obligation to make contingent payments is based on net revenue levels or other financial thresholds, and will be affected by the achievement of such levels and thresholds.
Federated Hermes also provides stewardship services to customers seeking a range of solutions for engagement, as well as real estate development and renewable energy project development services.
In addition, Federated Hermes markets and provides stewardship, real estate development and renewable energy project development services to various domestic and international customers.
The Federated Hermes Funds are domiciled in the U.S., as well as Ireland, the United Kingdom (U.K.), Luxembourg, Guernsey, Jersey, Australia and the Cayman Islands.
In general, new advisory agreements for new U.S.-domiciled registered funds and material amendments to such advisory agreements must be approved by a fund s shareholders.
Of the 176 Federated Hermes Funds, Federated Hermes investment advisory subsidiaries managed as of December 31, 2025, 22 money market funds with $508.4 billion in AUM, 46 equity funds with $55.0 billion in AUM, 52 fixed-income funds with $46.0 billion in AUM, 51 alternative/private markets funds with $12.1 billion in AUM and five multi-asset funds with $2.9 billion in AUM.
As of December 31, 2025, Federated Hermes provided investment strategies to $278.3 billion in Separate Account assets.
Each distribution plan and agreement is 5 initially approved by the directors or trustees of the respective fund (and, as required by law, a fund s shareholders) and is reviewed for approval by such directors or trustees annually as required under applicable law.
2024 dollars in millions 2025 2024 Equity $ 97,898 $ 79,423 23 % Fixed-Income 100,127 98,059 2 Alternative / Private Markets 19,101 18,864 1 Multi-Asset 2,854 2,883 (1) Total Long-Term Assets 219,980 199,229 10 Money Market 682,604 630,349 8 Total Managed Assets $ 902,584 $ 829,578 9 % Average managed assets represent the average balance of AUM during a period of time.
2023 dollars in millions 2025 2024 2023 Equity $ 88,627 $ 79,893 $ 81,348 11 % (2) % Fixed-Income 99,446 96,773 89,079 3 9 Alternative / Private Markets 19,474 20,250 21,096 (4) (4) Multi-Asset 2,853 2,902 2,887 (2) 1 Total Long-Term Assets 210,400 199,818 194,410 5 3 Money Market 643,025 588,653 511,568 9 15 Total Average Managed Assets $ 853,425 $ 788,471 $ 705,978 8 % 12 % Changes in Federated Hermes average asset mix year-over-year across both asset classes and offering types have a direct impact on Federated Hermes operating income.
REMOVED
The obligation to make purchase price payments in connection with acquisitions is subject to certain adjustments and conditions, and the obligation to make contingent payments is based on net revenue levels and will be affected by the achievement of such levels.
Federated Hermes also provides stewardship services to customers seeking a range of solutions for engagement, as well as real estate development services.
In addition, Federated Hermes markets and provides stewardship and real estate development services to various domestic and international customers.
The Federated Hermes Funds are domiciled in the U.S., as well as Ireland, the United Kingdom (UK), Luxembourg, Guernsey, Jersey and the Cayman Islands.
In general, material amendments to such advisory agreements must be approved by a fund s shareholders.
Of the 176 Federated Hermes Funds, Federated Hermes investment advisory subsidiaries managed as of December 31, 2024, 22 money market funds with $461.7 billion in AUM, 45 equity funds with $43.8 billion in AUM, 54 fixed-income funds with $45.6 billion in AUM, 50 alternative/private markets funds with $11.5 billion in AUM and five multi-asset funds with $2.8 billion in AUM.
As of December 31, 2024, Federated Hermes provided investment strategies to $264.3 billion in Separate Account assets.
Each distribution plan and agreement is initially approved by the directors or trustees of the respective fund and is reviewed for approval by such directors or trustees annually as required under applicable law.
2023 dollars in millions 2024 2023 Equity $ 79,423 $ 79,291 0 % Fixed-Income 98,059 94,920 3 Alternative / Private Markets 18,864 20,551 (8) Multi-Asset 2,883 2,867 1 Total Long-Term Assets 199,229 197,629 1 Money Market 630,349 559,993 13 Total Managed Assets $ 829,578 $ 757,622 9 % Average managed assets represent the average balance of AUM during a period of time.
2022 dollars in millions 2024 2023 2022 Equity $ 79,893 $ 81,348 $ 84,793 (2) % (4) % Fixed-Income 96,773 89,079 89,776 9 (1) Alternative / Private Markets 20,250 21,096 21,799 (4) (3) Multi-Asset 2,902 2,887 3,273 1 (12) Total Long-Term Assets 199,818 194,410 199,641 3 (3) Money Market 588,653 511,568 432,992 15 18 Total Average Managed Assets $ 788,471 $ 705,978 $ 632,633 12 % 12 % Changes in Federated Hermes average asset mix year-over-year across both asset classes and offering types have a direct impact on Federated Hermes operating income.
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