Blue Owl Technology Finance NYSE: OTF reported first-quarter 2026 adjusted net investment income of $0.29 per share and net asset value of $16.49 per share, as management said market volatility around software and technology assets weighed on valuations even as underlying credit performance remained strong.
On the company’s earnings call, CEO Craig Packer said software remains a major focus for investors and for OTF as a lender, but he emphasized that recent pressure was largely market-driven rather than a sign of portfolio credit deterioration. He said more than 80% of the quarter’s write-down was attributable to mark-to-market movements tied to wider technology credit spreads.
“Credit performance remains very strong,” Packer said, noting that non-accruals were “among the lowest in the space.” He added that OTF had no new non-accruals during the quarter and a non-accrual rate of 10 basis points of the total portfolio at fair value.
Software Exposure Remains Central as AI Debate Evolves
Packer said the market discussion around software has become more balanced over the past quarter. Earlier concerns centered on whether software companies would remain relevant in an AI-enabled world, he said, while the current debate is increasingly focused on distinguishing companies with durable competitive advantages from those more exposed to disruption.
President Erik Bissonnette said approximately 70% of OTF’s portfolio is invested in software, with the remainder in areas such as life sciences, hardware and other technology-enabled services. He said the portfolio is concentrated in what OTF views as durable software segments, including mission-critical products, embedded workflows and trusted data.
Bissonnette said OTF’s software borrowers continue to show solid weighted average revenue and EBITDA growth, and that the company has seen “minimal signs of material disruption attributable to AI” across the broader portfolio. He also said portfolio company revolver utilization remained consistent with historical levels at just under 10%, while three-to-five-rated names were steady at 8.5% of fair value.
Management acknowledged that the company is becoming more selective in software lending. Packer said in response to an analyst question that many lenders with significant software exposure may look to reduce that exposure, including OTF “within reasonable bounds.” He said OTF still expects to be a significant software lender, but with a higher bar for new investments and refinancing activity.
Repayments Offset New Commitments
OTF reported $1.7 billion of new commitments in the quarter and funded $1.3 billion, while repayments totaled $1.1 billion. Bissonnette said much of the origination activity reflected deals that had been worked on in the fourth quarter before the latest widening in spreads.
The company highlighted several repayments during the quarter. Intelerad, a medical imaging software business, was acquired by GE HealthCare for $2.3 billion, resulting in a full repayment at par of OTF’s $163 million position. Mindbody, a software and payments provider to gyms, salons and spas, was fully repaid across credit facilities and preferred equity in connection with a merger involving an AI-enabled fitness technology company. Relativity, an e-discovery document review software provider, was fully repaid through a broadly syndicated loan refinancing ahead of its announced plan to go public.
Bissonnette also pointed to the partial sale of OTF’s SpaceX equity position in early March. The company sold 50% of the position, generating approximately $133 million in proceeds and a realized gain of $117 million, which management said represented roughly a 10-times return on the original investment.
Dividend Maintained, but Coverage Timeline Lengthens
CFO Jonathan Lamm said first-quarter earnings were affected by several headwinds, including the full impact of three rate cuts between September and December, spread compression from 2025 originations at tighter spreads and lighter non-recurring income. He said non-recurring income was approximately $0.01 below historical averages.
OTF’s board declared a regular quarterly dividend of $0.35 per share, consistent with the prior quarter, payable on or before July 15, 2026, to shareholders of record as of June 30, 2026. The company also continues to pay a $0.05 per share quarterly special dividend through September 2026, supported by spillover income generated before its listing, bringing total quarterly distributions to $0.40 per share.
Lamm said the company remains confident in the long-term support for the base dividend, but added that it “may take somewhat longer for earnings to cover the base dividend” than previously expected. He cited $0.50 per share of spillover income and gains from the equity book as support while the portfolio continues to ramp.
Balance Sheet and Liquidity
NAV per share fell to $16.49 from $17.33 in the prior quarter, primarily due to mark-to-market adjustments, partially offset by realized gains and $0.05 per share of accretion from share repurchases. OTF repurchased approximately $50 million of stock during the quarter, bringing total repurchases over the past two quarters to $115 million.
The board authorized a new $300 million share repurchase program in February, replacing a prior $200 million authorization. Lamm said approximately $250 million remained available following first-quarter activity.
Net leverage ended the quarter at 0.85 times, below OTF’s target range of 0.9 times to 1.25 times. Lamm said the company had more than $2.3 billion of total cash and available capacity across its credit facilities at quarter-end. In January, OTF issued a $400 million unsecured bond, which it subsequently swapped to a floating-rate coupon.
Looking Beyond Software
Management said OTF may increase exposure to adjacent technology areas, including digital infrastructure and life sciences, while software remains the largest part of the portfolio. Packer said life sciences opportunities include drug royalties and loans to companies with predictable revenue streams, supported by Blue Owl’s dedicated life sciences credit and royalties platform.
Bissonnette said digital infrastructure opportunities include GPU financing and data center-related investments tied to AI demand. He said OTF has participated in GPU financing structures with investment-grade counterparty credit risk, amortizing terms and tight documentation.
In closing remarks, Packer said OTF has room to grow earnings as it ramps toward its target leverage range, while remaining cautious and selective. He also said the company has generated a net realized gain of 29 basis points annually since inception in 2018, which he described as evidence of underwriting performance across cycles.
About Blue Owl Technology Finance NYSE: OTF
Blue Owl Technology Finance NYSE: OTF is a publicly traded business development company (BDC) sponsored by alternative asset manager Blue Owl. The firm focuses on providing customized debt and structured capital solutions to technology and technology-enabled companies, with an emphasis on growth-stage and middle-market borrowers. As a BDC, its primary activities include originating, structuring and managing private credit investments tailored to the financing needs of fast-growing businesses.
Its investment approach typically centers on direct lending and credit-oriented products, including senior secured loans, unitranche and subordinated debt, as well as selective equity-linked instruments and structured financings.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Blue Owl Technology Finance, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Blue Owl Technology Finance wasn't on the list.
While Blue Owl Technology Finance currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
MarketBeat's analysts have just released their top five short plays for May 2026. Learn which stocks have the most short interest and how to trade them. Click the link to see which companies made the list.
Get This Free Report
