Ares Capital Shares Face Mounting Pressure as Key Metrics Disappoint

The world's largest publicly-traded BDC is confronting significant challenges. Recent quarterly results have exposed concerning weaknesses in its operations, even as the company's chief executive demonstrates confidence through personal investment. With a multibillion-dollar credit portfolio under scrutiny, questions emerge about whether the downward trajectory can be halted.

Ares Capital maintained an aggressive investment posture throughout the third quarter of 2025, committing $3.9 billion to new investments with $3.0 billion actually funded. The organization's portfolio expanded to $28.7 billion spread across 587 companies, with first-lien secured loans accounting for 95% of new deployments.

Despite this growth momentum, anxiety surrounding potential credit losses in the private credit market continues to weigh heavily on share performance. Management emphasizes no direct exposure to recently failed private enterprises, and non-accruals have improved to 1.8% at cost and 1.0% at fair value. Nevertheless, broader market nervousness maintains downward pressure on the stock.

Quarterly Performance Undermines Investor Confidence

The most recent quarterly report delivered substantial disappointment to Ares Capital stakeholders. While the company achieved earnings per share of $0.50, aligning with analyst projections, revenue figures fell considerably short of expectations. Instead of the anticipated $766.48 million, Ares recorded only $658 million in revenue.

More troubling was the decline in net investment income, which dropped to $0.48 per share—a significant decrease from the $0.57 per share reported during the same period last year. This erosion of core profitability has damaged market confidence in the financial powerhouse.

Should investors sell immediately? Or is it worth buying Ares Capital?

Dividend Sustainability Questions Intensify

The current dividend payout of $0.48 per share appears increasingly vulnerable. Shrinking net investment income and tightening dividend coverage have analysts speculating about potential reductions by spring 2026. For income-focused investors who rely on the stock's substantial 9.5% yield, such a cut would represent a serious setback.

Contrasting this cautious outlook, some major investors have demonstrated confidence. Nomura Asset Management boosted its position by 25.4% during the second quarter, while CEO Michael Arougheti personally acquired over $265,000 worth of shares in October, increasing his direct holdings by 86.67%.

Analyst Sentiment Shows Cracks in Bullish Consensus

Market experts maintain cautiously optimistic positioning toward Ares Capital, though recent adjustments suggest growing concerns. Among covering analysts, eight recommend buying the shares while two advise maintaining current positions. The average price target of $22.25 implies approximately 13% upside potential from current levels.

However, recent downward revisions from JP Morgan and Keefe Bruyette indicate that confidence in the company's near-term prospects may be weakening. These adjustments reflect broader apprehensions about the business development company's ability to navigate current market challenges while preserving shareholder returns.