Industry Summary Articles

AECOM, the trusted global infrastructure leader, reported second quarter fiscal 2026 results.

Second Quarter Highlights:

• Reflecting as reported GAAP performance from continuing operations, second quarter revenue increased 1% to $3.8 billion, operating income declined 4% to $248 million, net income increased 19% to $184 million and diluted earnings per share increased 22% to $1.42.
• Net service revenue¹ increased 4% on an as reported basis, or 2% on a constant-currency basis, highlighted by 8% constant-currency growth in the Americas design business.
• The segment adjusted² operating margin³ increased by 50 basis points to 16.5% and the adjusted² EBITDA margin⁴ increased by 20 basis points to 16.5%, both of which set new all-time highs for a second quarter.
  • As a result, in the first half of the year, the segment adjusted operating margin and the adjusted EBITDA margin were both 16.5%, increasing by 70 basis points and 50 basis points, respectively, and set new records.
• Adjusted² EBITDA⁵ increased by 8% and adjusted² EPS increased by 27%.
• Total backlog⁶ increased by 8% to a record high, driven by a 1.2 book-to-burn⁷ ratio in the design business.
  • The design pipeline increased by double-digits and reached a record level, driven by strong funding across the Company’s markets and an expanding addressable market opportunity.

“Our strong second quarter and fiscal year-to-date performance highlights the strength and resiliency of our business,” said Troy Rudd, AECOM’s chairman and chief executive officer. “Our competitive advantages of scale, infrastructure domain and technical expertise, and strong client relationships are key to our successes. We are continuing to invest at record levels to enhance our client value proposition and expand our addressable market, which includes our proprietary AI investments and growing our Advisory practice. Taken together, we are well positioned to deliver on both our twice-raised fiscal 2026 guidance and our long-term financial targets.”

“Our teams continue to build momentum and our investments to extend our competitive advantages are contributing to a strengthened client value proposition,” said Lara Poloni, AECOM’s president. “Now more than ever, we are positioned to deliver complex technical expertise at scale.”

“As our second quarter performance and raised full year financial guidance underscore, we have an enduring competitive advantage that allows us to continue to deliver,” said Gaurav Kapoor, AECOM’s chief financial and operations officer. “Our competitive advantages have enabled us to consistently win increasingly valuable projects, and in turn, deliver continued earnings growth year after year.”

Cash Flow and Capital Allocation

• Underlying cash flow in the second quarter was consistent with expectations, but was offset by delayed payment timing in the Middle East business, as well as longer-than-anticipated claim resolution on certain projects.
• Importantly, collections in the Middle East have already recovered in the fiscal third quarter and AECOM reiterated its full year free cash flow guidance, as well as its long-term 100%+ free cash flow conversion target.
• The Company returned $155 million to shareholders through repurchases and dividends in the quarter.
  • Since the initiation of its repurchase program in September 2020, the Company has returned more than $3.5 billion of capital to shareholders.
  • The Company remains committed to executing its returns-focused capital allocation policy, which includes returning substantially all available cash flow to shareholders through repurchases and dividends.
• The Company maintains a strong balance sheet with net leverage⁹ of 1.2x.

Fiscal 2026 and Long-Term Financial Guidance

• The Company increased its fiscal 2026 earnings guidance, supported by its strong year-to-date performance, another quarter of record backlog and double-digit pipeline growth.
• As a result, the Company’s guidance now includes expectations for:
  • Adjusted² EPS of between $5.90 and $6.10, as compared to $5.85 to 6.05 previously, which now represents 14% year-over-year growth at the mid-point of the range.
  • Adjusted² EBITDA⁵ of between $1,275 million and $1,305 million, as compared to $1,270 million and $1,305 million previously, which now represents 7% year-over-year growth at the mid-point of the range.
  • Reiterated organic NSR¹ growth range of between 6% and 8%, which excludes the expected approximately 200 basis point impact of fewer working days in fiscal 2026.
  • A segment adjusted operating margin³ of 16.8% and an adjusted EBITDA margin⁴ of 17.0%.
  • Free cash flow⁸ of approximately $400 million.
  • An average fully diluted share count of 130 million, which does not include any potential future benefits from capital allocation actions not yet taken, including potential repurchases.
  • An adjusted effective tax rate of approximately 20 – 22%.
• In addition, the Company reaffirmed its long-term financial targets, which includes its expectation to deliver a 20%+ margin exit rate by fiscal 2028 and to grow adjusted² EPS at a 15%+ CAGR from fiscal 2026 to fiscal 2029.
• See the Regulation G Information tables at the end of this release for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Business Segments

Americas

• Revenue in the second quarter was $2.9 billion, a 1% increase from the prior year. Net service revenue¹in the second quarter was $1.2 billion, a 5% increase from the prior year, driven by 8% growth in the Americas design business.
• Operating income increased by 5% over the prior year to $228 million and on an adjusted²basis increased by 10% to $239 million. The adjusted operating margin on net service revenue increased by 60 basis points over the prior year to 20.0%, which marked a new all-time high for a second quarter. This performance reflects a continued focus on driving operating efficiencies across the business and the high returns on the investments the Company has made and continues to make in organic growth.
• Backlog in the Americas segment grew by 2% to a new record high, driven by a 1.0 book-to-burn ratio⁷. The Americas design business had a 1.1 book-to-burn ratio led by strong wins in the Transportation, Environment and Water end markets.
• International
• Revenue in the second quarter was $890 million, a 2% increase from the prior year. Net service revenue¹was $754 million, a 3% decrease from the prior year, driven by declines in the Asia and Middle East markets.
• Operating income decreased by 6% over the prior year to $77 million and on an adjusted²basis increased 2% to $84 million. The adjusted operating margin on net service revenue was effectively unchanged over the prior year at 11.1%. This performance includes an impact from lower revenues in certain regions due to the conflict in the Middle East, as well as continued investments in business development and strategic growth initiatives.
• Backlog in the International segment grew 25% over the prior year to a new record high, driven by a 1.2 book-to-burn ratio⁷ andstrong wins in the U.K. and Middle East markets.

Tax Rate

The effective tax rate was 12.1% in the second quarter. On an adjusted² basis, the effective tax rate was 13.9%. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income¹⁰. The adjusted tax expense differs from the GAAP tax expense based on the taxability or deductibility and tax rate applied to each of the adjustments.

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