Shares of Oaktree Specialty Lending Corp (OCSL) plummeted 5.07% in pre-market trading on Thursday following the release of its second fiscal quarter 2025 financial results, which fell short of analyst expectations and revealed ongoing challenges in its investment portfolio.

The specialty finance company reported adjusted earnings per share of $0.45, missing the Zacks Consensus Estimate of $0.51 and representing a significant decline from $0.56 per share in the same quarter last year. Total investment income for the quarter ended March 31 came in at $77.6 million, down from $94 million a year earlier and below the analyst consensus of $84.8 million.

The disappointing results were primarily attributed to a smaller average investment portfolio, the impact of certain investments being placed on non-accrual status, and decreases in reference rates. Notably, non-accrual investments at fair value increased to $125.6 million, representing 4.6% of the debt portfolio, up from 3.9% in the previous quarter. The company's net asset value (NAV) per share also declined to $16.75 as of March 31, 2025, compared to $17.63 as of December 31, 2024, primarily reflecting losses on certain debt and equity investments.

Armen Panossian, Chief Executive Officer and Co-Chief Investment Officer, addressed 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 management emphasized their focus on diversifying the portfolio and capitalizing on opportunities arising from market volatility caused by factors such as tariffs, inflation, and high interest rates.