Gladstone Investment Corporation (NASDAQ: GAIN) reported its third fiscal quarter results for the period ended December 31, 2025, presenting a complex financial picture that left analysts and investors balancing a significant earnings miss against record-breaking growth in asset value. While “paper losses” triggered by high success fees weighed on the bottom line, a surge in portfolio appreciation sent the company’s Net Asset Value (NAV) to its highest level in years.
The Q3 2025 Scorecard (Ended Dec 31, 2025)
The results highlight a “good problem to have”: because the company’s underlying investments grew so much in value, the resulting accruals for manager bonuses actually pushed the company into a technical net loss.
| Metric | Q3 2025 Value | Q2 2025 (Prior Q) | % Change |
| Net Asset Value (NAV) | $14.95 | $13.53 | +10.5% |
| Total Assets | $1.22 Billion | $1.13 Billion | +8.1% |
| Adjusted NII per Share | $0.21 | $0.24 | -12.5% |
| GAAP EPS | -$0.16 | $0.11 | NM |
| Weighted Average Yield | 12.9% | 13.4% | -3.7% |
| Monthly Dividend | $0.08 | $0.08 | Steady |
The “Success” Paradox: Why EPS Missed
The headline net loss of $6.5 million was almost entirely driven by a $14.7 million accrual for capital gains-based incentive fees.
The Math: Under BDC accounting rules, if portfolio companies increase in value (unrealized appreciation), the company must set aside “success fees” for the investment adviser.
The Result: GAIN saw a massive $70.2 million in unrealized appreciation this quarter. While this is great for shareholders’ equity, the resulting fee accrual wiped out the quarter’s interest income on paper.
Portfolio & Transaction Highlights
Gladstone remained aggressive in the M&A market, expanding its footprint in the lower middle market:
New Buyout: The company invested $33.1 million in Rowan Energy Inc., a strategic move into the energy services sector via a mix of first-lien debt and preferred equity.
Debt Refinancing: In a savvy balance sheet move, GAIN voluntarily redeemed its 8.00% Notes and replaced them with 6.875% Notes, significantly lowering its cost of capital heading into 2026.
Asset Quality: Management noted that while three companies remain on non-accrual, they are generating positive EBITDA, and exits or restructurings are expected in the coming months.
Dividends: The “Income Machine” Remains Intact
Despite the GAAP loss, Gladstone’s board maintained its commitment to shareholder returns. The company confirmed it will stay the course with its $0.08 monthly distribution ($0.96 annualized).
Additionally, the company highlighted its “Spillover Income” of $22.9 million ($0.58 per share), which provides a massive cushion to maintain or even increase supplemental dividends throughout the 2026 calendar year.
Executive Takeaway: A High-Value Pivot
CEO David Gladstone struck an optimistic tone during the earnings call, focusing on the fundamental health of the buyout model.
“Our strategy of being the majority economic owner in our portfolio companies continues to pay off. The 10% jump in NAV is a direct reflection of the EBITDA growth we are seeing at the portfolio level. While the incentive fee accruals create some noise in the quarterly EPS, the underlying value of the company has never been stronger.”
Market Reaction & Outlook
GAIN shares rose 2.7% in the wake of the report, as investors prioritized the 10.5% NAV growth over the accounting-driven earnings miss. With a healthy pipeline of new deals and a lower cost of debt, Gladstone enters the final stretch of its fiscal year with significant momentum.