Harvard’s endowment grew by more than $11 billion to nearly $68 billion in fiscal year 2026 after posting a return on investment of about 27%, its highest since 2021, according to the university’s annual financial report released Thursday.
Harvard also reported an operating surplus of $100 million – a modest 1.5 percent margin on $6.7 billion in revenue – after a large deficit last year. The $2.6 billion endowment distributed now represents nearly 40 percent of the University’s operating revenue.
But Harvard reported a $78.7 million shortfall in unrestricted funds, which support the university’s general operations. Because earmarked funds are intended for specific purposes and cannot be reallocated at will, Chief Financial Officer Ritu Kalra and Treasurer Timothy R. Barakett ’87 wrote that the surplus was “an insufficient measure of Harvard’s financial health.”
Harvard also faced the first accounting impact of an increase in the endowment tax, which is expected to rise from 1.4% to 8% under the One Big Beautiful Bill Act, signed into law by Republicans in July 2025.
Even at the previous rate of 1.4 percent, implemented in fiscal year 2026, Harvard’s investment income taxes for the year more than quadrupled, from $47.3 million to approximately $207 million, reflecting higher realized investment gains. Nearly $181 million was attributable specifically to the endowment’s investment income.
These results follow Harvard’s August disclosure of its $2.2 billion stake in SpaceX, which became public in June in the largest IPO in history. The position was worth more than all of the endowment’s other declared public holdings combined.
Harvard’s tax liability fell from $317 million to $1.9 billion, most of which reflects estimates of future taxes on unrealized investment gains under the new rate. This tax is expected to cost Harvard approximately $300 million each year. Although the higher rate takes effect in fiscal year 2027, the University is required to take effect this year.
The modest surplus follows the university’s reported $113 million operating loss in fiscal year 2025 — its first since the pandemic and its largest deficit since 2011 — amid massive cuts to federal research funding by the Trump administration earlier that year.
Kalra and Barakett attributed the modest 1.5 percent margin to “high legal costs as well as other pressures that show little sign of abating.”
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Harvard reported a 58% increase in legal fees in fiscal year 2025, according to university tax filings, a dramatic increase amid court battles with the Trump administration and multiple federal investigations. Harvard President Alan M. Garber ’76 acknowledged the increase at a Sunday event, calling the costs “staggering.”
But efforts to cut costs have been effective in some areas, the report said. “All other expenses,” a category that includes legal fees, rose just 1 percent, with continued increases in legal fees “partially offset by broader cost-saving initiatives.”
Salaries and wages – the University’s largest expense – fell by $104 million, a nearly 4 percent drop that Kalra and Barakett attributed to “a hiring freeze, attrition and restructuring” that reduced the University’s workforce. The report also notes a salary freeze for non-unionized University employees. Overall spending fell more than 2 percent to $6.64 billion.
The drop, which reflects the fiscal year ending June 30, came just before the Faculty of Arts and Sciences eliminated 165 positions over the summer as part of a massive restructuring. The changes could save FAS about $20 million a year, Hopi Dean E. Hoekstra said earlier this month.
“These two facts – a surplus and a smaller community – do not coexist easily,” Kalra and Barakett wrote. “Yet they cannot be separated.”
Harvard is also increasing its operating cash flow to $3 billion in 2026, up 25% from fiscal 2025, providing a cash cushion amid the crisis. in progress federal financial pressure.
Operating cash flow has increased steadily over the past two years, increasing 50% from FY2024’s $2 billion.
Harvard spent $969 million on capital projects, including undergraduate and graduate house renovations, deferred maintenance, academic spaces and continued developments at Allston, according to the report. The report also highlights the opening of the Enterprise Research Campus in Allston, a development built by a third party on land leased from Harvard. The buildings do not belong to the University.
Letters of credit – financial guarantees issued by banks – jumped to $39.1 million from $3 million in 2025, reflecting “contingent obligations supporting various contractual and regulatory requirements,” according to the report. The letters of credit were not drawn, meaning the University had collateral in place but not used it.
The 27 percent return marks a rare record for Harvard. The endowment returned 33.6 percent five years ago, its highest return since 32.2 percent in 2000.
But Harvard’s return remains lower than that reported by several major peer institutions. Stanford reported a 31.7 percent return, while the University of Pennsylvania reported 27.4 percent. Brown University generated a return of almost 20 percent, while MIT lagged behind with just over 10 percent.
HMC has expanded its presence in the technology sector by opening a satellite office in San Francisco. NP “Narv” Narvekar, CEO of Harvard Management Company, publicly acknowledged the opening for the first time in the report, writing that the decision to open the office a year ago “aligned well with extraordinary advances in artificial intelligence.”
Narvekar wrote that this year’s return was mainly due to venture capital, public stocks and hedge funds, and that the endowment gained an annualized rate of 11.4 percent during his nine-year tenure.
Narvekar also confirmed that he had initiated discussions with the HMC board earlier this year to plan for his possible retirement. He told board members in May that he planned to retire as early as 2027.
Harvard has also continued to move into private equity, which now represents 46% of its portfolio. Venture capital and growth venture investments, which are part of this category, increased from 24 percent to 31 percent of the portfolio.
—Editor Megan L. Blonigen can be reached at (email protected) and on Signal at mblon.50. Follow her on X at @MeganBlonigen.
—Editor Graham W. Lee can be contacted at (email protected). Follow him on X at @grahamwonlee.
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