Why did reported EPS decline even though revenue grew 24%?

Reported diluted EPS fell to $1.25 from $1.40 mainly because of higher amortization of acquired intangibles (about $0.84 per share in Brokerage alone), acquisition integration costs (about $0.33 per share), and acquisition-related adjustments. Revenue growth was driven substantially by acquisitions such as AssuredPartners, which carry these non-cash and one-time costs. Adjusted EPS, which excludes these items, rose to $2.84 from $2.30.

How much of the year-over-year improvement is distorted by the prior-year interest income?

Second quarter 2025 included about $144 million of interest income (roughly $0.42 per share after tax) earned on cash raised for the AssuredPartners acquisition. That income is embedded in both reported and adjusted prior-year results, so the comparison to 2026, which had no equivalent item, understates underlying growth in some measures, particularly Brokerage margin and adjusted net earnings growth in the segment.

Is the company's organic growth healthy?

Organic growth appears solid. Brokerage total organic commissions, fees, supplemental and contingent revenues grew 5%, with base commissions and fees up 4%, supplemental revenues up 20%, and contingent revenues down 8%. Risk Management organic fee growth was 12%. Management also stated that client retention and new business generation remained strong, though the filing does not provide a breakdown of pricing versus volume.

What are the main risks or pressure points highlighted in the results?

Key pressure points include the higher compensation and operating expense ratios (reported compensation ratio of 57.6% in Brokerage versus 54.8% a year earlier), higher technology and integration costs, and a lower Brokerage EBITDAC margin. Additional items include $33 million of Corporate adjustments tied to legal, tax and benefit plan matters, including the termination of the U.S. defined pension plan. The forward-looking statements also cite risks from acquisition integration, AI adoption, cybersecurity, and competition for talent.

What should investors look for in the CFO Commentary and Supplemental Data?

The Item 7.01 materials, which are furnished rather than filed, include management's estimates for 2026 and other future results. Investors should review them for updated full-year guidance on organic growth, adjusted EBITDAC margin, interest expense, tax rate, and expected integration and amortization costs. This 8-K does not contain those forward-looking estimates, so they are not verified by this filing.

AJG 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed July 30, 2026. Cited figures are marked; the original filing is the authoritative source.

Arthur J.

Gallagher & Co. reported second quarter 2026 results that were strong on the top line but mixed on reported profitability. Revenues before reimbursements rose 24% to $3.96 billion^a (from $3.18 billion), and management cited 6% organic growth across the Brokerage and Risk Management segments. Reported diluted EPS fell to $1.25 from $1.40, and reported net earnings declined to $324 million from $368 million.

The gap reflects $505 million^b of pretax Brokerage adjustments, mainly $218 million of after-tax amortization of intangibles and $84 million of after-tax acquisition integration costs, largely tied to AssuredPartners. On an adjusted basis, the picture is considerably better. Adjusted diluted EPS rose to $2.84 from $2.30, a roughly 23% increase, and adjusted EBITDAC grew 19% to $1.20 billion.

However, the prior-year comparison is flattered by about $144 million^c of one-time-like interest income from the AssuredPartners financing proceeds, which depressed the year-over-year change in adjusted EBITDAC margin. Brokerage adjusted EBITDAC margin fell to 33.3% from 36.1%, and reported compensation and operating expense ratios rose, reflecting integration and technology spend as well as lower interest income. Investors should focus on organic growth and underlying margin trends excluding the financing effect.

Balance sheet and capital allocation remained active. Total assets rose to $81.8 billion^d from $70.7 billion, driven largely by fiduciary assets and goodwill and intangibles from acquisitions. Corporate borrowings were about $13.5 billion, with current borrowings rising to $1.5 billion.

The company repurchased about 0.9 million shares for roughly $170 million and declared a quarterly dividend of $0.70 per share, up from $0.65. The CFO Commentary and Supplemental Quarterly Data, referenced in Item 7.01, include 2026 estimates that were not part of this filing and should be reviewed separately.

02—Key points

Key Highlights

Revenues before reimbursements rose 24% year over year to $3.955 billion, with management citing 6% organic growth across the combined Brokerage and Risk Management segments (Brokerage organic growth 5%, Risk Management organic fee growth 12%).
Reported diluted EPS declined to $1.25 from $1.40, and reported net earnings fell to $324 million from $368 million, largely due to elevated amortization of intangibles ($301 million total in Q2) and acquisition integration costs.
Adjusted diluted EPS increased to $2.84 from $2.30 (about 23%), and adjusted EBITDAC grew 19% to $1.199 billion, though the prior-year base includes roughly $144 million of AssuredPartners-related interest income.
Brokerage adjusted EBITDAC margin declined to 33.3% from 36.1%, reflecting lower interest income, higher integration and technology costs, and the roll-in of seasonally lower-margin acquisitions.
Acquisition activity was active, with 6 Brokerage acquisitions closed in Q2 2026 representing about $58 million of estimated annualized revenue, and 14 closed year to date.
Shareholder returns continued: the company repurchased about 0.9 million shares for roughly $170 million in Q2 and declared a $0.70 quarterly dividend per share, up from $0.65 a year earlier.
Corporate borrowings totaled about $13.5 billion at June 30, 2026, with current borrowings increasing to $1.5 billion from $640 million at year-end 2025, and the company's total assets increased to $81.8 billion, largely from fiduciary assets and acquisition-related goodwill.

03—Questions

Frequently Asked Questions

Why did reported EPS decline even though revenue grew 24%?
Reported diluted EPS fell to $1.25 from $1.40 mainly because of higher amortization of acquired intangibles (about $0.84 per share in Brokerage alone), acquisition integration costs (about $0.33 per share), and acquisition-related adjustments. Revenue growth was driven substantially by acquisitions such as AssuredPartners, which carry these non-cash and one-time costs. Adjusted EPS, which excludes these items, rose to $2.84 from $2.30.
How much of the year-over-year improvement is distorted by the prior-year interest income?
Second quarter 2025 included about $144 million of interest income (roughly $0.42 per share after tax) earned on cash raised for the AssuredPartners acquisition. That income is embedded in both reported and adjusted prior-year results, so the comparison to 2026, which had no equivalent item, understates underlying growth in some measures, particularly Brokerage margin and adjusted net earnings growth in the segment.
Is the company's organic growth healthy?
Organic growth appears solid. Brokerage total organic commissions, fees, supplemental and contingent revenues grew 5%, with base commissions and fees up 4%, supplemental revenues up 20%, and contingent revenues down 8%. Risk Management organic fee growth was 12%. Management also stated that client retention and new business generation remained strong, though the filing does not provide a breakdown of pricing versus volume.
What are the main risks or pressure points highlighted in the results?
Key pressure points include the higher compensation and operating expense ratios (reported compensation ratio of 57.6% in Brokerage versus 54.8% a year earlier), higher technology and integration costs, and a lower Brokerage EBITDAC margin. Additional items include $33 million of Corporate adjustments tied to legal, tax and benefit plan matters, including the termination of the U.S. defined pension plan. The forward-looking statements also cite risks from acquisition integration, AI adoption, cybersecurity, and competition for talent.
What should investors look for in the CFO Commentary and Supplemental Data?
The Item 7.01 materials, which are furnished rather than filed, include management's estimates for 2026 and other future results. Investors should review them for updated full-year guidance on organic growth, adjusted EBITDAC margin, interest expense, tax rate, and expected integration and amortization costs. This 8-K does not contain those forward-looking estimates, so they are not verified by this filing.

04—Continue

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