Adds share price in paragraph 2, detail, quotes

By Isla Binnie and Arasu Kannagi Basil

NEW YORK, Jan 29 (Reuters) - Blackstone BX.N, the world's largest alternative asset manager, beat fourth-quarter profit forecasts on Thursday as it cashed in dealmaking and grew its data center business.

However shares in the New York-based firm, which said it now manages assets worth $1.27 trillion, slipped by more than 3%, after initially rising 1% before the market open.

"The deal environment has reached escape velocity on the back of moderating cost of capital," president and chief operating officer Jon Gray said on a conference call, referring to the returns a company must make to justify an investment.

Financial investors and corporations piled back into mergers and acquisitions in 2025, helped by falling interest rates making it cheaper to finance deals and easing concerns about the effects of policies introduced by U.S. President Donald Trump.

Blackstone made $957 million selling assets in the three months to December, 59% more than in the same period of 2024 and raked in $71.5 billion in fresh capital.

The results highlight a growing trend for larger private capital firms to keep raising money while smaller, newer funds struggle in a more competitive environment.

Blackstone's infrastructure funds performed strongly, with valuations up 8.4%. This was driven by data center operator QTS, which Blackstone bought in 2021 and is now benefiting from demand to develop AI.

"The historic pace of investment taking place in the U.S. to facilitate the development of artificial intelligence, including the design and manufacture of semiconductors, data center construction and the expansion of power generation is the key driver of economic growth today," said CEO Stephen Schwarzman.

Blackstone also holds QTS through a real estate investment trust (BREIT) which returned 8.1% in 2025, staging a recovery after a difficult couple of years starting in late 2022 when investors queued up to pull out their money.

The group's distributable earnings, or cash that can be used to pay dividends to shareholders, rose 3% to $2.2 billion in the three months to December.

That translated to $1.75 per share, surpassing the $1.54 analysts expected on average, LSEG data showed. For the full year, the closely watched metric came in at $5.57 per share, versus expectations of $5.35 in the LSEG poll.

'UNLOVED' BY STOCK MARKET

Blackstone spent $42 billion on purchases including Japanese engineering staffing firm TechnoPro in the quarter and committed a further $23 billion to buying large assets, including medical device maker Hologic.

Blackstone shares fell about 11% last year, in line with other large alternative asset managers.

Piper Sandler analysts said the stock had been "unloved" and rated it "neutral" but said it should benefit from a pickup in transaction activity and performance revenues.

With a global real estate portfolio worth $611 billion, the company drew scrutiny this month when Trump threatened to ban large institutional investors from buying single-family homes.

Shares in Blackstone fell by as much as 8% on that day, although analysts shrugged off the risk. Oppenheimer analyst Chris Kotowski put Blackstone's "obviously trivial" exposure at about $6 billion, out of a total of more $1.2 trillion.

Blackstone's stock is currently trading at 23 times its forecast 2026 earnings, although its projected fee growth is only in low double digits, Piper Sandler said.

(Reporting by Isla Binnie in New York and Arasu Kannagi Basil in Bengaluru; Editing by Tasim Zahid and Alexander Smith)

((ArasuKannagi.Basil@thomsonreuters.com;))