10-Q · May 4, 2026
Oaktree Specialty Lending Corporation (OCSL) reported a decrease in total investment income to $70.4 million for Q2 FY2026, down 9.3% from $77.6 million in Q2 FY2025, primarily due to lower interest income stemming from…
Earnings analysis · 10-Q
OCSL earnings analysis
Filed August 4, 2026 · Our reading of the company's report
The latest report
OCSL's Q3 FY2026 total investment income declined 7.8% year over year to $69.4 million as lower reference rates reduced portfolio interest income, though a 12.3% decline in net expenses limited the impact on net…
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OCSL's Q3 FY2026 total investment income declined 7.8% year over year to $69.4 million as lower reference rates reduced portfolio interest income, though a 12.3% decline in net expenses limited the impact on net investment income. Credit indicators improved in non-accruals, but this was overshadowed by $49.5 million of quarterly realized losses and a $106.0 million decline in portfolio fair value since September 2025. Liquidity is adequate with $659.0 million of undrawn facility capacity, but the highly floating-rate portfolio remains vulnerable to further benchmark-rate reductions.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
What stood out
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Investment income declined 7.8% year over year
Total investment income was $69.4 million in Q3 FY2026, down $5.8 million, or 7.8%, from $75.3 million a year earlier, principally because reference-rate declines reduced interest income by $7.6 million.
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Lower funding costs mitigated income pressure
Expense discipline partly offset the income decline: net expenses fell $5.1 million, or 12.3%, to $36.6 million, driven primarily by $6.9 million lower interest expense from lower reference rates and lower average borrowings.
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Non-accrual exposure improved
Credit quality improved on a non-accrual count basis. Six investments were on non-accrual at June 30, 2026, representing 1.8% of debt investments at fair value, versus 10 investments and 3.0% at September 30, 2025.
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Liquidity and leverage remain within targets
Liquidity remains meaningful, including $39.9 million of cash and cash equivalents and $659.0 million of undrawn credit-facility capacity at June 30, 2026; net debt-to-equity was 1.02x, within the 0.90x to 1.25x target range.
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Portfolio rotation generated more proceeds than funding
The company deployed capital actively, funding $747.9 million of investments over the first nine months while receiving $775.4 million from prepayments, exits, paydowns and sales; it exited 26 portfolio companies.
What to watch
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Realized losses rose materially
Realized investment losses accelerated sharply to $49.5 million in Q3 FY2026 from $13.4 million in Q3 FY2025, largely related to exits and restructurings. The quarter's $48.2 million of unrealized appreciation largely offset this, but included $52.5 million tied to exited investments and was partly offset by $5.2 million of equity depreciation.
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Portfolio value declined amid credit marks
Portfolio fair value fell to $2.742 billion at June 30, 2026 from $2.848 billion at September 30, 2025, primarily due to realized and unrealized losses. For the nine-month period, debt investments recorded $59.9 million of net unrealized depreciation and equity investments recorded $36.5 million.
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Lower rates pressure net investment income
Earnings remain exposed to falling benchmark rates: 91.4% of debt investments at fair value were floating rate at June 30, 2026, and management estimates a 100-basis-point rate decrease would reduce annualized net assets from operations by $9.5 million, excluding incentive fees.
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Leverage and immediate funding commitments remain sizable
Cash declined by $39.7 million in the first nine months to $39.9 million, while immediately drawable unfunded commitments were $235.4 million. Total debt outstanding was $1.451 billion at June 30, 2026.
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No formal risk-factor updates
There were no material risk-factor changes during the three months ended June 30, 2026 versus the fiscal 2025 Form 10-K. Nevertheless, management specifically cited inflation, elevated rates, tariffs, trade disputes and geopolitical conflict as macro uncertainties.
Management's outlook
No quantitative earnings or revenue outlook was provided in the 10-Q. Management said it believes liquidity is sufficient for market opportunities, with $659.0 million of undrawn credit-facility capacity as of June 30, 2026. The Board declared a future quarterly distribution of $0.30 per share plus a $0.03 supplemental distribution, payable September 30, 2026.
Earlier filings 4
10-Q · February 4, 2026
OCSL reported total investment income of $75,096,000 in Q1 (Dec 31, 2025) versus $86,647,000 in the year-ago quarter, and GAAP earnings per share of $0.06 (vs $0.09 prior year). Net investment income declined to…
10-Q · February 4, 2025
Oaktree Specialty Lending reported total investment income of $86,647,000 for the three months ended December 31, 2024, down from $97,985,000 in the year-ago quarter (a decline of $11,338,000, -11.6%). Net investment…
10-Q · August 1, 2024
Oaktree Specialty Lending reported total investment income of $94,966,000 for Q3 (three months ended June 30, 2024), down from $101,900,000 a year earlier. Net investment income was $44,575,000 ($0.54 per share) but…
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