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    ACM
    Earnings call· Mar 2026(Q2 FY26)

    AECOM Q2 FY26 earnings call ACM

    May 12, 2026 Source

    Executive summary

    AECOM Q2 FY26 — Record Backlog and Strong Profitability Driven by AI and Strategic Investments

    AECOM delivered strong Q2 FY26 results, achieving record backlog and new second-quarter highs for NSR margins, adjusted EBITDA, and adjusted EPS, driven by robust Americas design growth and strategic investments in AI. Despite geopolitical headwinds in the Middle East and some cash flow timing issues, the company reaffirmed its full-year free cash flow guidance and raised its profit outlook, demonstrating confidence in its strategic initiatives and market positioning. The firm is leveraging AI to enhance project delivery and expand its addressable market, with significant wins attributed to its proprietary solutions.

    Highlights

    5

    • NSR margins, adjusted EBITDA, and adjusted EPS reached new second quarter highs.

    • Backlog increased 8% to a new record high.

    • Americas design business grew 8%, contributing to overall NSR growth.

    • Segment adjusted operating margin increased 50 bps to 16.5%.

    • Design book-to-burn ratio was 1.2x.

    Concerns

    4

    • Middle East conflict caused an approximate 100 bps headwind to NSR in Q2 FY26.

    • Delayed payment timing in the Middle East business impacted cash flow in Q2 FY26.

    • Longer-than-anticipated claim resolution on certain projects impacted cash flow.

    • Q4 FY26 growth rate will be impacted by fewer workdays than prior year.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year Adjusted EBITDA growth
    7%
    high materiality
    High
    Full-year Adjusted EPS growth
    14%
    high materiality
    High
    Full-year NSR growth
    4% to 6%
    medium materiality
    High
    Full-year NSR growth (excluding workday impact)
    6% to 8%
    medium materiality
    High
    Free Cash Flow
    reaffirmed
    high materiality
    High
    Long-term Free Cash Flow conversion
    100% plus
    high materiality
    High
    Advisory business NSR
    double its NSR
    medium materiality
    High
    Nuclear fusion NSR
    9 figures of NSR
    medium materiality
    Medium
    AI investment spend
    60 to 70 bps
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Americas
    Strong execution and capitalization on favorable market trends in the design business. Adjusted operating margin increased by 60 basis points.
    Operating income growth: 10%
    		—8%—20%
    International
    Growth in U.K. and Australia offset by declines in Middle East and Asia. Adjusted operating margin remained consistent with prior year. Pipeline of opportunities remains near an all-time high, expecting improved growth in coming quarters.
    NSR growth (constant currency): -3%Operating income growth: 2%Backlog growth: 25%
    		—2%—11%

    Operational metrics

    10
    NSR headwind
    100
    Q2 FY26

    Approximate impact due to conflict.

    AI investment spend
    $13ramped up from $5M in Q1
    Q2 FY26

    Full scale ramp-up of AI roadmap spend.

    Pipeline growth
    double digits
    Trailing 3 quarters

    Provides long-term visibility.

    Capital returned to shareholders
    $155
    Q2 FY26

    Part of returns-focused capital allocation policy.

    Claims balance
    —going up sequentially each quarter
    Q2 FY26

    From projects bid in FY19-FY20, with 4 individual claims successfully resolved but slow overall process.

    Federal business pipeline growth
    50
    Q2 FY26

    Reflects growing investment in U.S. National Defense.

    Defense clients revenue share
    10
    Q2 FY26

    Represents aggregate global defense clients.

    Department of War revenue share
    5
    Q2 FY26

    Represents U.S. Department of War.

    Recompete win rate
    90in excess of
    Q2 FY26

    Indicator of technical expertise and client satisfaction.

    Number of contracts delivered annually
    35,000 to 50,000
    Annual

    Provides multiple paths to deliver cash.

    Industry KPIs

    4
    MetricValueDetails
    Total backlogrecord
    Book to bill ratio1.2x
    End market pipeline—
    Same store organic revenue growth8%

    Orderbook & backlog

    4
    Total backlogrecordQ2 FY26

    increased 8%

    further enhances our visibility

    Design book-to-burn1.2xQ2 FY26

    This performance reflects the combination of strong secular growth demand and robust funding in many of our markets as well as continued strong win rates.

    International segment backlogrecordQ2 FY26

    increased by 25%

    consistent with our expectation that international growth will improve in the coming quarters.

    International trailing 12 months book-to-burn1.4xQ2 FY26

    Product announcements

    2
    ProductTypeDetails
    Proprietary AI solutionsupdate
    Nuclear Fusion capabilitiesexpansion

    Deals & partnerships

    6
    Ohio (State)Sizable contract win for Phase 2 of the Brent Spence Bridge project.

    Follows strong performance on Phase 1, example of positive benefit from IIJA funding.

    Key hyperscalerExpanded relationship for high-tech business.

    Especially in the U.S., with several similar opportunities across this market.

    Type 1 Energy and TPAOngoing work in nuclear fusion.

    Part of U.S. nuclear fusion efforts.

    U.K.Selection to deliver design and technical services for the U.K. STEP nuclear fusion program.

    One of the most advanced fusion programs in the world, leveraging AECOM's decade-long leadership in the energy sector.

    Major energy clientSubstantial recompete win where proprietary AI solution was a central element of the project proposal and competitive edge.almost $1B

    One of two large AI-enabled wins during the year, with the aggregate value of both being almost $1B. One win came after the end of the quarter.

    Scottish WaterLargest water contract ever let out by the client in Europe, AECOM had virtually no prior exposure.almost $1Bmultiyear

    Part of two large AI-enabled wins during the year, with the aggregate value of both being almost $1B. Demonstrates AI's impact on market entry and value capture.

    Risks & headwinds

    4
    Middle East conflictNear-term, ongoing

    approximate 100 basis point headwind to NSR in Q2 FY26

    Mitigation: Strong earnings growth in other segments; significant NCI in the region reduces profit impact; strong backlog growth in Middle East provides future visibility.

    Delayed payments in Middle EastQ2 FY26, but recovered in Q3 FY26

    Impacted Q2 FY26 underlying cash flow

    Mitigation: Collections recovered in Q3, including advanced payments.

    Slow claim resolutionOngoing, claims from FY19-FY20 projects

    Impacted Q2 FY26 underlying cash flow

    Mitigation: Clear right to claims; successful resolution on 4 individual claims; strong history of recovering balance sheet position.

    Fewer workdays in Q4 FY26Q4 FY26

    Will impact Q4 FY26 growth rate

    Mitigation: Accounted for in reaffirmed full-year NSR guidance (4-6% including impact, 6-8% excluding).

    What to watch in Q3 FY26

    5

    Middle East growth inflection

    H2 FY26
    CurrentNSR declined in H1 FY26
    TargetGrowth to inflect in H2 FY26

    Why it matters

    Recovery in the Middle East is crucial for achieving full-year NSR guidance and leveraging significant backlog growth in the region.

    Specific to the growth in the Middle East, which has contracted in the first half of the year, we're expecting the second half of the year, we're going to start seeing the growth to support the guidance we have of 4% to 6%, excluding the workday impact; and including the workday impact, 6% to 8% growth.

    Q&A highlights

    6

    What needs to happen for organic revenue growth to pick up in H2 FY26 to meet guidance, specifically regarding Middle East recovery and Americas ramp-up?

    Management expects growth to inflect in H2 FY26 due to strong backlog and book-to-burn, especially in Americas design (already 7% growth in H1). Federal client recovery post-shutdown will provide tailwind. Middle East backlog growth is significant, and recent wins provide visibility, though pace is uncertain.

    “So in the Americas design, just to note, has grown in spite of the government shutdown in Q1 and it also impacted Q2, but we saw a recovery of wins and bookings in our federal clients, which were impacted by the shutdown in the second quarter.”

    asked by Andrew Kaplowitz · answered by Gaurav Kapoor

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Investments in AI and Advisory

    AECOM is actively deploying proprietary AI solutions on projects, with use cases growing rapidly. These AI capabilities are proving to be a central competitive edge in securing large contracts, including a recent recompete for a major energy client where AI was a key proposal element. The company's advisory business is also on track to double its NSR within three years, leveraging infrastructure-led expertise to differentiate itself from traditional consulting firms.

    02

    Record Backlog and Pipeline Growth

    The company achieved a new record backlog, increasing 8% year-over-year, driven by a strong design book-to-burn of 1.2x. The pipeline of opportunities has also increased by double digits for three consecutive quarters, providing significant long-term visibility and underpinning expectations for strong NSR growth in the second half of the year and beyond.

    03

    Robust End-Market Demand

    AECOM benefits from strong demand and funding environments, particularly in the U.S. where over half of the IIJA funding remains unspent. Investment in U.S. National Defense is growing, with the pipeline from the Department of War increasing by 50%. The company also sees significant opportunities in high-tech (hyperscalers) and power generation (including nuclear fusion), with expectations of 9 figures of NSR from fusion in coming years.

    04

    Middle East Dynamics and Cash Flow Management

    The Middle East conflict presented an approximate 100 basis point headwind to NSR in Q2 FY26, though the profit impact was smaller due to the significant non-controlling interest (NCI) in the region. Delayed payments and longer-than-anticipated claim resolutions also impacted Q2 cash flow. However, collections in the Middle East have recovered in Q3, and the company remains confident in its full-year free cash flow guidance, citing a strong track record of managing diverse cash drivers.

    05

    Construction Management Business Outlook

    The Construction Management (CM) business is currently performing agency work on new large projects, following the completion of others. A ramp-up in NSR burn is expected to begin in Q2 FY27, driven by these projects transitioning from T&M agency basis to GMP contracts, with good NSR book-to-burn anticipated in Q3 and Q4 FY26 as projects mature.

    06

    Global Market Performance

    The Americas design business grew 8% with a 20% adjusted operating margin, reflecting strong execution and efficiency. International NSR increased 2% (declined 3% constant currency), with growth in the U.K. (driven by AMP8 and grid projects) and Australia (AUKUS partnership) offsetting declines in the Middle East and Asia. International backlog increased 25% to a new record, signaling improved growth in coming quarters.

    AI-generated summary of the company’s earnings call. Not investment advice.