Arthur J. Gallagher & Co. (AJG -1.34%), the multinational insurance brokerage and risk management company, reported its Q2 2025 earnings on July 31, 2025. The release showed adjusted earnings per share (EPS) of $2.33 and revenue (non-GAAP) of $3.17 billion for Q2 2025, both slightly below analyst expectations of $2.36 and $3.20 billion, respectively (non-GAAP). Although the quarter featured robust margin expansion and steady acquisition pace, Organic revenue growth in the core Brokerage segment decelerated to 5.3% in Q2 2025 from 9.5% in Q1 2025. Overall, the period demonstrated strong profitability and continued M&A activity, but the organic growth slowdown and non-recurring margin tailwinds stood out as key developments.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $2.33 | $2.36 | $2.29 | 1.7 % |
| Revenue (Non-GAAP) | $3.17 billion | N/A | $2.76 billion | 14.8 % |
| Adjusted EBITDAC | $1.01 billion | $821.7 million | 23.3 % | |
| Adjusted EBITDAC Margin | 36.4 % | 33.1 % | 3.3 pp | |
| Organic Revenue Growth (Non-GAAP) | 5.3 % | — | — |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Core Focus
Arthur J. Gallagher & Co. operates as one of the world’s largest insurance brokers and risk managers. Its main businesses are arranging insurance coverage for clients, providing consulting services, and delivering risk management solutions. The company helps businesses, public entities, and other organizations identify, transfer, and manage various risks. Gallagher Bassett, its risk management arm, offers claims handling and claims advisory services.
The firm's business model relies on two main segments: Brokerage, which generates most of its revenue by helping clients buy insurance, and Risk Management, which provides ongoing service contracts for managing clients’ claims and risk exposures. The company’s recent strategic focus includes diversifying its business by expanding both domestically and internationally, boosting its mix of fee-based revenue, and pursuing growth through mergers and acquisitions. Successfully integrating acquisitions, maintaining a global presence, and navigating regulatory landscapes are core to the company’s continued success.
Key Developments During the Quarter
The quarter featured strong total adjusted revenue growth of 15.4% versus the prior year for the six months ended Q2 2025 (non-GAAP), but Organic revenue growth in the core Brokerage segment was 5.3% (non-GAAP). This result was a step down from prior periods. U.S. retail operations saw about 5% organic growth in Q1 2025, and international operations delivered roughly 4% organic growth in Q1 2025, with management noting the softer trend particularly outside the U.S. Growth in contingent and supplemental revenues—payments tied to carrier relationships and business volume—was healthy at 16.5% and 10.5%, respectively, on an organic basis. The specialty and binding authority lines (which bundle underwriting and placement services for complex markets) achieved growth in the mid-teens in Q1 2025.
Adjusted EBITDAC climbed to $1.01 billion, and the adjusted EBITDAC margin rose to 36.4%, up from 33.1% in Q2 2024. A significant $144 million benefit from interest income on cash reserves earmarked for the pending AssuredPartners acquisition contributed to this margin growth on an adjusted (non-GAAP) basis. Management describes this as a transitory boost that will not recur after the acquisition closes. The net earnings margin (as reported, GAAP) also increased 430 basis points to 18.3%, further signaling the impact of temporary interest income windfalls.
The company completed 9 acquisitions, generating an estimated annualized revenue of $290 million. This compares to 12 deals in Q2 2024, but with far greater revenue impact per transaction this time. The pending AssuredPartners transaction—valued at approximately $13.45 billion—remains the headline event. Management reiterated confidence that the deal will close in the third quarter. The firm’s M&A banking and interest costs (GAAP) jumped to $159.5 million, reflecting the increased use of debt ahead of the deal close.
In the Gallagher Bassett business, which manages claim operations for clients, adjusted revenue climbed to $391.8 million, with organic growth of 6.2%, up versus the prior quarter. The segment reported continued strong client retention, supported by consistent new business production. However, Reported (GAAP) compensation expense ratio increased by 1.1 points, influenced by incentive pay and integration costs linked to new hires and acquired staff.
Segment performance shows the company’s recurring revenue streams from fee-based risk management—less sensitive to shifts in insurance premium pricing—help buffer results when insurance market conditions soften. Meanwhile, ongoing investment in technology and analytics, such as in data-driven claims management services, was a point of management emphasis in the quarter. The workforce totaled 59,291 employees at quarter-end, up 10% as of June 30, 2025 compared to June 30, 2024.
Looking Ahead
Underlying margin expansion is expected to continue in 2025, though not at the current rate, since a large portion of the recent margin increase came from one-time interest income that will disappear post-acquisition. Leadership commented that insurance market dynamics remain “cautious,” with property insurance renewal premiums fell 7% in Q2 2025, while casualty lines rose 8% in Q1 2025.
The quarterly dividend was raised to $0.65 per share, up from $0.60 in Q2 2024. Investors should watch the pace of organic growth, as further deceleration could impact long-term profitability trends. The integration of AssuredPartners is set to reshape the company’s scale and operations. Execution risk will be in focus following the deal close, as will any effect from rising leverage and regulatory requirements in global markets.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
