Free cash flow margins have contracted to 24.1% in 2026Q1, exacerbated by a $239.0 million negative working capital change that complicates dividend sustainability.
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 | Dec'22 | Dec'21 | Dec'20 | Dec'19 | Dec'18 | Dec'17 | Dec'16 | Dec'15 | Dec'14 | Dec'13 | Dec'12 | Dec'11 | Dec'10 | Dec'09 | Dec'08 | Dec'07 | Dec'06 | Dec'05 | Dec'04 |
|---|
| Cash from Operations | 1.14B | 1.14B | 1.28B | 1B | 746M | 935M | 734M | 681M | 666M | -1.87B | 707M | 360.38M | -658.55M | -1.3B | -250.93M | -396.91M | -656.49M | 12.26M | -309.01M | -514.16T | -518.26M | -349.97M | -187.75M |
| Operating CF Margin % | - | 36.31% | 54.16% | 46.17% | 62.37% | 45.61% | 85.55% | 61.08% | 59.52% | -191.58% | 95.93% | 53.15% | -76.04% | -182.04% | -36.01% | -54.29% | -124.15% | 6.13% | -160.58% | -99999900% | -518.67% | -741.02% | -4377.35% |
| Operating CF Growth % | -19.6% | -10.92% | 28.2% | 34.05% | -20.21% | 27.38% | 7.78% | 2.25% | 135.69% | -363.93% | 96.18% | 154.72% | 49.25% | -417.11% | 36.78% | 39.54% | -5456.05% | 103.97% | 100% | -99207611.24% | -48.09% | -86.4% | - |
| Net Income | 1.15B | 1.42B | 1.52B | 1.52B | 600M | 1.57B | 484M | 793M | 858M | 667M | 474M | 379M | 591M | 488.52M | 508.18M | 319.45M | 691.83M | 202.69M | -139.46M | 0 | 69.7M | 41.85M | 3.19M |
| Depreciation & Amortization | 10M | 34M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1M | 1M | 734K | 805K | 802K | 829K | 876K | 923K | 672K | 503K | 410.33K | 258.56K | 0 | 0 |
| Stock-Based Compensation | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Deferred Taxes | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other Non-Cash Items | -130M | -225M | -430M | -553M | 293M | -840M | 172M | -73M | -208M | -2.54B | 234M | 11.51M | -1.25B | -1.8B | -818.14M | -748.51M | -563.57M | -221.64M | -194.31M | -514.16T | -592.98M | -390.23M | -191.31M |
| Working Capital Changes | -192M | -82M | 190M | 31M | -147M | 208M | 78M | -39M | 16M | 3M | -2M | -30.86M | -590K | 10.3M | 58.2M | 31.26M | -93.84M | 0 | 0 | 0 | 0 | 0 | 0 |
| Change in Receivables | -11M | -2M | 89M | -65M | -114M | 56M | 37M | -26M | 2M | 28M | 26M | 23.01M | -37M | -14.98M | -9.92M | -28.56M | -4.08M | 0 | 0 | 0 | 0 | 0 | 0 |
| Change in Inventory | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Change in Payables | 67M | -68M | 58M | 91M | -91M | 129M | 38M | -6M | -23M | -76M | -9M | -76.72M | 34.58M | 13.77M | 44.86M | 57.38M | -107.58M | 0 | 0 | 0 | 0 | 0 | 0 |
| Cash from Investing | -2.31B | -2.86B | -3.41B | -489M | -2.1B | -3.39B | -1.29B | -1.89B | -362M | -182M | 236M | -123.78B | -1.13T | -1.77T | -665.96B | -747.54B | -771.65B | -113.24M | -428.66M | -586.12T | -574.77M | 0 | 0 |
| Capital Expenditures | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| CapEx % of Revenue | 0% | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| Acquisitions | 0 | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| Investments | 0 | 29.48B | 26.72B | 22.89B | 21.78B | 20.01B | 15.52B | 14.43B | 12.42B | 11.84B | 8.82B | 9.06B | 9.03B | 7.63B | 5.92B | 5.09B | 4.32B | 2.17B | 1.97B | 3.55B | 1.24B | 585.97M | 182.56M |
| Other Investing | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -574.77M | 0 | 0 |
| Cash from Financing | 1.15B | 1.78B | 2.42B | -284M | 1.21B | 2.62B | 707M | 1.09B | -324M | 2.14B | -741M | -298M | 704M | 1.18B | 399.19M | 416.94M | 658.02M | -2.41M | 377.25M | 443.76M | 593.19M | 339.78M | 214.56M |
| Debt Issued (Net) | 0 | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| Equity Issued (Net) | 544M | 928M | 1.36B | 1.16B | 1B | 819M | -96M | 64M | 0 | 1.84B | -5M | -2M | 258M | 833.48M | 679.98M | 0 | 1.33B | 109.09M | 259.8M | 344.17M | 211.75M | 397.4M | 159.84M |
| Dividends Paid | -1.02B | -268M | -1.14B | -1.03B | -912M | -694M | -679M | -694M | -656M | -642M | -477M | -487M | -464M | -411.45M | -357.33M | -277.15M | -229.76M | -189.57M | -109.21M | -99.88M | -74.52M | -17.3M | 0 |
| Share Repurchases | 0 | 0 | 0 | 0 | 0 | 0 | -100M | 0 | 0 | 0 | -5M | -2M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other Financing | -311M | -996M | -59M | -20M | -16M | -64M | -60M | -59M | -19M | -37M | -10M | -6M | -13M | -21.01M | -44.38M | -25.34M | 0 | -7.19M | -3.14M | -874.83K | -8.05M | -2.82M | 0 |
| Net Change in Cash | -87M | 64M | 296M | 227M | -149M | 160M | 150M | -120M | -20M | 93M | -34M | 62M | 45.37M | 149.63M | 148.26M | 20.03M | 1.52M | 9.84M | 68.24M | -70.4M | 74.93M | -10.19M | 26.8M |
| Free Cash Flow | 1.14B | 1.14B | 1.28B | 1B | 746M | 935M | 734M | 681M | 666M | -1.87B | 0 | 0 | 0 | -1.3B | -250.93M | -396.91M | -656.49M | 12.26M | -309.01M | -514.16M | -518.26M | -349.97M | -187.75M |
| FCF Margin % | 43.46% | 36.31% | 54.16% | 46.17% | 62.37% | 45.61% | 85.55% | 61.08% | 59.52% | -191.58% | - | - | - | -182.04% | -36.01% | -54.29% | -124.15% | 6.13% | -160.58% | -263.11% | -518.67% | -741.02% | -4377.35% |
| FCF Growth % | -7.96% | -10.92% | 28.2% | 34.05% | -20.21% | 27.38% | 7.78% | 2.25% | 135.69% | - | - | - | 100% | -417.11% | 36.78% | 39.54% | -5456.05% | 103.97% | 39.9% | 0.79% | -48.09% | -86.4% | - |
| FCF per Share | 1.59 | 1.63 | 2.05 | 1.74 | 1.44 | 2.10 | 1.73 | 1.59 | 1.56 | -4.39 | - | - | - | -4.86 | -1.09 | -1.94 | -3.71 | 0.12 | -3.45 | -7.60 | -11.78 | -14.90 | -16.97 |
| FCF Conversion (FCF/Net Income) | 0.99x | 0.88x | 0.84x | 0.66x | 1.24x | 0.60x | 1.52x | 0.86x | 0.78x | -2.80x | 1.49x | 0.95x | -1.11x | -2.66x | -0.49x | -1.24x | -1.33x | 0.06x | 2.22x | -999999.00x | -5.87x | -8.07x | -56.42x |
| Interest Paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 87.42M | 53.12M | 19.96M | 34.42M | 31.75M | 0 | 0 | 0 |
| Taxes Paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 9.11M | 1.32M | 818K | 1.6M | 1.27M | 0 | 0 | 0 |
Portfolio Credit Quality Deterioration
According to recent financial disclosures, ARCC's operating cash flow to net income ratio reached 2.00 in 2026Q1, signaling a significant disconnect between accounting profits and actual cash generation that warrants close scrutiny by investors evaluating the sustainability of the firm's current dividend distribution policy.
The wide variance between net income and operating cash flow suggests that non-cash valuation adjustments are heavily influencing reported earnings. This divergence implies that the firm's bottom-line performance may be less indicative of its actual liquidity-generating capacity than historical averages would suggest.
As reported in quarterly filings, ARCC's free cash flow margin experienced a sharp contraction to 24.1% in 2026Q1, a notable decline from the 72.3% peak observed in 2024Q4, which highlights the increasing difficulty in maintaining cash efficiency amidst a challenging credit environment.
The downward trend in free cash flow margins suggests that the firm's ability to convert revenue into distributable cash is under pressure. Investors should monitor whether this trajectory reflects structural shifts in the portfolio's yield profile or temporary volatility in interest income recognition.
Based on the provided cash flow statements, ARCC recorded a substantial negative working capital change of $239.0 million in 2026Q1, which significantly hampered the firm's ability to translate its core investment activities into immediate cash inflows during the most recent reporting period.
The erratic nature of these working capital swings suggests that the timing of interest receipts and portfolio adjustments is creating lumpy cash flow patterns. This volatility may complicate the firm's ability to forecast cash availability for ongoing dividend commitments and new investment originations.
Data from recent financial statements indicates that ARCC's dividend payments of $64.0 million in 2026Q1, while lower than previous quarters, continue to consume a significant portion of available cash, raising questions about the long-term viability of current payout levels given the recent earnings decline.
The firm's capital allocation strategy appears increasingly constrained by the need to balance shareholder distributions with the preservation of liquidity. If the current trend of lower cash generation persists, the firm may face difficult trade-offs between maintaining its dividend and funding new portfolio growth.
Quick answers to the most common questions about buying ARCC stock.
Ares Capital Corporation (ARCC) generated $1.14B in net cash from operating activities in 2025. This reflects the cash generated directly from core business operations.
Ares Capital Corporation (ARCC) generated $1.14B in free cash flow in 2025. Free cash flow is the cash left over after capital expenditures, which can be used to pay dividends, repurchase shares, or pay down debt.
Ares Capital Corporation (ARCC) spent $0.0M on capital expenditures in 2025. CapEx represents the cash invested in physical assets like property, plant, and equipment to maintain or grow the business.
In 2025, Ares Capital Corporation (ARCC) returned $268.0M to shareholders via cash dividends. This shows the company's commitment to returning capital to its equity investors.