Oaktree Specialty Lending Corporation (NASDAQ: OCSL) saw its stock price plummet 5.07% in pre-market trading on Thursday after reporting disappointing second-quarter fiscal 2025 financial results that fell short of analyst expectations. The specialty finance company faced headwinds from a challenging investment environment and deteriorating portfolio quality.

For the quarter ended March 31, 2025, Oaktree Specialty Lending reported adjusted earnings per share of $0.45, missing the consensus estimate of $0.49. This represents a significant decline from $0.56 per share in the same quarter last year. Total investment income also fell short, coming in at $77.57 million compared to analysts' expectations of $86.42 million and down 17.51% year-over-year.

The company's results were negatively impacted by a smaller average investment portfolio, an increase in non-accrual investments, and lower reference rates. Notably, non-accrual investments as a percentage of debt investments at fair value rose to 4.6%, up from 3.9% in the previous quarter. CEO Armen Panossian acknowledged the challenges, stating, "Certain challenged portfolio company investments weighed on our results in the second quarter. We are focused on resolving these issues while also positioning our portfolio to deliver more consistent performance going forward." The company's net asset value (NAV) per share also declined to $16.75 as of March 31, 2025, compared to $17.63 at the end of the previous quarter, primarily reflecting losses on certain debt and equity investments.