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    ACM
    Earnings call· Jun 2026(Q3 FY26)

    AECOM Q3 FY26 earnings call ACM

    Aug 11, 2026 Source

    Executive summary

    AECOM Q3 FY26 — Record Backlog Amidst Construction Management Project Charge

    AECOM reported a quarter marked by record backlog and strong design business growth, particularly in the Americas and International segments, driven by large program wins. However, results were overshadowed by a significant $337 million charge and reduced free cash flow guidance due to delays and cost overruns on two legacy construction management projects. Management emphasized tightened risk controls and a shift away from such projects, while maintaining confidence in the long-term growth algorithm and margin expansion.

    Highlights

    5

    • Backlog increased 13% to a new all-time high on record quarterly wins and a 1.6 book-to-burn across the business.

    • Americas Design business grew 6% (adjusted for one less working day), with International returning to 4% growth.

    • Adjusted EBITDA and EPS improved year-over-year by 5% and 11% respectively, excluding the CM project charge.

    • International adjusted operating margin was 14.3%, reflecting better growth in Australia and UK, and initial benefits from AI.

    • Company delivered positive free cash flow of $55 million despite headwinds from construction management projects.

    Concerns

    5

    • A $337 million pretax charge was recorded due to a delay in delivering a large construction management project.

    • Overall NSR growth in the quarter was below expectations due to slower-than-anticipated new project starts in CM and continued Middle East conflict impact.

    • Full-year free cash flow guidance reduced from $400 million to $300 million due to cash burn on CM projects.

    • Americas adjusted operating margin was negative 16.1% (or 18% excluding CM impact), affected by lower CM project ramp-up and 140 basis points from record business development activities.

    • Expect continued cash burn of approximately $0.5 billion on CM projects through the first half of fiscal 2027.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year NSR
    approximately $7.3 billion
    high materiality
    High
    Full-year Adjusted EBITDA
    $950 million
    high materiality
    High
    Full-year Adjusted EPS
    $4.05
    high materiality
    High
    Full-year Adjusted NSR (excluding CM charge)
    $7.65 billion to $7.7 billion
    high materiality
    High
    Full-year Adjusted EBITDA (excluding CM charge)
    $1.29 billion
    high materiality
    High
    Full-year Adjusted EPS (excluding CM charge)
    $6
    high materiality
    High
    Full-year Adjusted EBITDA Margin
    17.4%
    high materiality
    High
    Full-year Free Cash Flow
    $300 million
    high materiality
    High
    FY27 Interest Expense Impact
    $30 million to $35 million
    medium materiality
    Medium
    Long-term Organic Growth Algorithm
    between 5% and 8%
    high materiality
    High
    Construction Management Business Growth
    will come in the second half of next year
    medium materiality
    Medium
    Americas Segment Margin
    normalize in the next quarter
    medium materiality
    High
    International Segment Margin
    20% plus
    high materiality
    High
    Americas Design NSR Growth
    7% plus
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Americas
    NSR declined primarily due to the construction management charge. Adjusted operating margin was impacted by lower CM project ramp-up and record business development activities.
    Design business NSR growth: 6% (adjusted for one less working day)Adjusted operating margin (excluding CM impact): 18%Backlog (design and CM): growing high single digitsDesign pipeline growth: >20% for 3 straight quartersBook-to-burn: 1.8x
    		—-29%—-16.1%
    International
    NSR increased, reflecting better growth in Australia and the U.K. Margin benefited from growth in higher-margin markets, higher utilization, and initial AI benefits.
    Backlog growth: 28% YoYAustralia growth: double digitsU.K. growth: high single digitsMiddle East backlog growth: double digitsAsia backlog growth: double digits
    		—4%—14.3%

    Operational metrics

    9
    Pretax Charge
    $337 million
    Q3 FY26

    Primarily due to a delay in delivering a large construction management project.

    Cash Burn on CM Projects
    $0.5 billion
    H1 FY27

    Expected continued cash burn on the two construction management projects.

    Interest Expense Impact
    $30 million to $35 millionyear-on-year impact
    FY27

    Expected higher interest expense due to cash burn on CM projects and higher average debt balances.

    Americas Margin Impact from Business Development
    140
    Q3 FY26

    Impacted Americas margin due to record business development activities and large pursuits.

    Undrawn Borrowing Capacity
    $2 billion
    Q3 FY26

    Total undrawn borrowing capacity at the end of the third quarter.

    Restructuring Costs Booked
    $54 million
    YTD FY26

    Restructuring costs booked year-to-date, against a full-year guidance of $150M-$200M.

    Win Rate on Large Projects
    80%
    Q3 FY26

    Win rates for substantial projects, including ECP, remain high.

    CM Business NSR Share
    6%-7%
    Annual

    Construction management business represents a small portion of the total net service revenue in a given year.

    CM Projects Completion Status
    >80%-85%
    Q3 FY26

    Both problematic construction management projects are largely complete.

    Industry KPIs

    4
    MetricValueDetails
    Total backlogincreased 13%%
    Book to bill ratio1.6xx
    End market pipelineexpanded by 30%%
    Same store organic revenue growth5%%

    Orderbook & backlog

    10
    Total Backlogincreased 13%Q3 FY26

    new all-time high

    Book-to-Burn Ratio (Company-wide)1.6xQ3 FY26
    Book-to-Burn Ratio (Americas)1.8xQ3 FY26
    Book-to-Burn Ratio (Year-to-Date)1.4xQ3 FY26

    Provides extraordinary long-term visibility.

    Book-to-Burn Ratio (International)1.4xQ3 FY26
    Book-to-Burn Ratio (CM Business)1.9xQ3 FY26
    International Backlogup 28%Q3 FY26

    YoY

    Australia Backlognew multiyear high, up more than 40%Q3 FY26

    YoY

    Middle East Backlogdouble-digit growthQ3 FY26

    Driven by infrastructure demand despite military conflict.

    Asia Backlogdouble digitsQ3 FY26

    YoY

    Driven by large Northern Metropolis Highway win in Hong Kong.

    Deals & partnerships

    4
    Public and Private ClientsTwo largest recompetes ever in the environment business

    One public, one private client. Won against usual competitor set without joint ventures.

    Canadian Government10-year program management role for a highway and bus transit project10 years

    One of AECOM's largest wins in Canada to date, secured after the quarter.

    Saudi Arabian GovernmentLarge rail project in Saudi Arabia

    Awarded after the quarter.

    Hong Kong GovernmentNorthern Metropolis Highway win

    First major transportation project tied to the Northern Metropolis initiative, a top priority development.

    Risks & headwinds

    7
    Construction Management Project Delay and ChargeQ3 FY26 (charge), Q2 FY27 (completion)

    $337 million pretax charge; project delayed from Q1 FY27 to Q2 FY27

    Mitigation: Tightened risk controls, no longer pursuing design-build P3 projects, pursuing sizable claims for recovery.

    Slower-than-Anticipated New Project StartsQ3 FY26, continuing into Q4 FY26

    Impacted overall NSR growth below expectations

    Mitigation: Strong backlogs in design and CM businesses are expected to return to growth in FY27, particularly H2 FY27 for CM.

    Middle East Conflict ImpactContinuing through Q4 FY26

    Continued uncertainty, specifically in tourism and hospitality end markets

    Mitigation: Wins remain strong driven by infrastructure demand; awarded large rail project in Saudi Arabia; potential for long-term growth in U.S. military infrastructure repair.

    Cash Burn on CM ProjectsThrough H1 FY27

    Approximately $0.5 billion cash burn

    Mitigation: Management is focused on completing these projects and expects leverage ratios to return to low numbers after H1 FY27.

    Higher Interest ExpenseFY27

    $30 million to $35 million year-on-year impact

    Mitigation: Result of expected cash burn on CM projects and higher average debt balances.

    Resource Utilization ImpactQ3 FY26, continuing until CM projects complete

    Tying up resources that would normally be used on other projects

    Mitigation: Resources will be redeployed onto other projects as the problematic CM projects complete in H1 FY27.

    Softness in Asia MarketQ3 FY26

    Asia remained soft

    Mitigation: Backlog grew double digits driven by a large Northern Metropolis Highway win, positioning the company well for future opportunities.

    What to watch in Q4 FY26

    5

    Completion of Delayed CM Project

    Q2 FY27
    CurrentDelayed from Q1 FY27 to Q2 FY27
    TargetCompletion by Q2 FY27

    Why it matters

    This project was the primary cause of the $337 million charge and significant cash burn, so its completion is crucial for financial stabilization.

    We had expected this project to be substantially completed in the first quarter of fiscal 2027 and now expect this near the end of the second quarter of fiscal 2027.

    Q&A highlights

    5

    Can you detail the timeline for completing the two problematic CM projects and the expected cash burn to finish them, especially given the $100M reduction in FCF guidance?

    The project that incurred the charge is now expected to complete in Q2 FY27, and the second project in Q1 FY27. The overall cash impact will be approximately $0.5 billion through the first two quarters of fiscal 2027, leading to the reduction in full-year FCF guidance to $300 million.

    “The first project, which we did take the charge on during the quarter, we now expect to be complete in the second quarter of fiscal '27. And the second project... will be in the first quarter of fiscal '27. ...the overall impact will be about $0.5 billion.”

    asked by Sabahat Khan · answered by W. Rudd

    2 min read5 chapters

    Detailed Narrative

    01

    Construction Management Project Charge and Risk Management

    AECOM recorded a $337 million pretax charge in Q3 FY26 primarily due to delays in a large construction management project, now expected to complete in Q2 FY27 instead of Q1 FY27. This project, bid in 2019, would not meet current risk hurdles due to tightened controls and a decision to no longer pursue design-build work for P3 clients. A second P3 project is progressing as planned for Q1 FY27 completion, also with significant claims for recovery. The charge reflects the expected financial impact through project delivery, while cash flow will be burdened by approximately $0.5 billion through H1 FY27 to fund completion.

    02

    Record Backlog and Strong Win Rates

    Despite the CM project challenges, AECOM achieved a record backlog, increasing 13% to an all-time high, driven by record quarterly wins and a 1.6x book-to-burn ratio across the business (1.8x in Americas). Year-to-date book-to-burn stands at 1.4x, providing extraordinary long-term visibility. The company continues to focus on very large awards and programs, where its win rates remain high, exceeding 80% for projects over $50 million, contributing to multi-year growth visibility.

    03

    Segment Performance and Market Trends

    Americas Design business grew 6% (adjusted for working days), while the International segment returned to 4% growth, led by the U.K. and Australia. International adjusted operating margin reached 14.3%, benefiting from growth in higher-margin markets like Australia and initial AI efficiencies. The U.S. market shows robust opportunities in state and local infrastructure, water, and federal defense spending. Canada experienced strong, broad-based activity, and the Middle East, despite near-term uncertainty in tourism, saw strong infrastructure-driven wins and backlog growth.

    04

    Capital Allocation and Balance Sheet

    AECOM maintains a resilient balance sheet with no debt maturities for several years and $2 billion of undrawn borrowing capacity. The company delivered positive free cash flow of $55 million in the quarter, despite the CM project headwinds, demonstrating consistent conversion. While the full-year free cash flow guidance was reduced to $300 million, the company remains committed to returns-based capital allocation, prioritizing organic growth investments and dividend payments, with expectations for leverage ratios to return to low levels post-CM project completion.

    05

    Evolution of Construction Management Business

    Management reiterated that the problematic P3 design-build projects are legacy issues from 2018-2020. Since then, the company has revised risk matrices, changed leadership, and implemented a prohibition on such projects. The current CM portfolio predominantly consists of guaranteed maximum price (GMP) contracts, where risk is flowed down to subcontractors after design completion, limiting AECOM's exposure to its fee. This revised approach ensures a healthier risk profile and high returns on investment for the ongoing CM business.

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