What is the level of confidence in meeting the revised completion timelines for the CM projects, and what sensitivity analysis has been done?

Management has reforecasted both projects, building in slack and basing projections on existing production rates and historical subcontractor productivity. The first project is slightly ahead of the reforecasted schedule, and the second is further along, giving a degree of confidence in delivering within the stated timelines. “we're comfortable that we've included the reasonable scenarios in that time line to complete in the second quarter. ...we forecasted out based on our historical subcontractor productivity rates. So again, on both of those at this point in time, we have a degree of confidence in delivering within those time frames.”

How should we think about Americas margin moving forward, given the Q3 decline (ex-CM charge) due to BD costs? Also, what changes have been made to the CM business to prevent future issues, and can it grow in line with the 5-8% algorithm next year?

Americas margin is expected to normalize in Q4 FY26, potentially better than prior year, as BD costs are temporary. The CM business has revised risk matrices and changed leadership, no longer pursuing P3 design-build projects. CM growth is expected in H2 FY27, contributing to the overall 5-8% long-term growth algorithm for the entire business. “absolutely, Americas margin, you should expect it to normalize and be a little bit better than consistent or a little bit better than last year. ...these type of projects will never even qualify to be approved in our current structure... we don't have any design build P3 in our portfolio in our CM business.”

What is the current status of claims for the CM projects, and how will AECOM approach recovery, especially considering the cash burn?

Claims are expected to remain in the $600M-$650M range, with no material change by project completion. AECOM has funded working capital for significant scope changes, exceeding the claims on books, and is confident in recovering a fraction of the total amounts claimed against third parties. The strategy for recovery will remain confidential. “you shouldn't expect a material change in the current quarter. It will be within that $600 million range. ...we believe we've been very prudent in reviewing all different aspects of the claims... and it is what we have for these two projects is a fraction of the total amounts that we're claiming against third parties.”

ACM

AECOM (ACM) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q3 FY26)· Industrials· Aug 11, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year NSR	approximately $7.3 billion high materiality	FY26	High
Full-year Adjusted EBITDA	$950 million high materiality	FY26	High
Full-year Adjusted EPS	$4.05 high materiality	FY26	High
Full-year Adjusted NSR (excluding CM charge)	$7.65 billion to $7.7 billion high materiality	FY26	High
Full-year Adjusted EBITDA (excluding CM charge)	$1.29 billion high materiality	FY26	High
Full-year Adjusted EPS (excluding CM charge)	$6 high materiality	FY26	High
Full-year Adjusted EBITDA Margin	17.4% high materiality	FY26	High
Full-year Free Cash Flow	$300 million high materiality	FY26	High
FY27 Interest Expense Impact	$30 million to $35 million medium materiality	FY27	Medium
Long-term Organic Growth Algorithm	between 5% and 8% high materiality	Long-term	High
Construction Management Business Growth	will come in the second half of next year medium materiality	H2 FY27	Medium
Americas Segment Margin	normalize in the next quarter medium materiality	Q4 · FY26	High
International Segment Margin	20% plus high materiality	Exit FY28	High
Americas Design NSR Growth	7% plus medium materiality	Q4 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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%

Orderbook & backlog

Total Backlog increased 13% Q3 FY26

new all-time high

Book-to-Burn Ratio (Company-wide) 1.6x Q3 FY26

Book-to-Burn Ratio (Americas) 1.8x Q3 FY26

Book-to-Burn Ratio (Year-to-Date) 1.4x Q3 FY26

Provides extraordinary long-term visibility.

Book-to-Burn Ratio (International) 1.4x Q3 FY26

Book-to-Burn Ratio (CM Business) 1.9x Q3 FY26

International Backlog up 28% Q3 FY26

YoY

Australia Backlog new multiyear high, up more than 40% Q3 FY26

YoY

Middle East Backlog double-digit growth Q3 FY26

Driven by infrastructure demand despite military conflict.

Asia Backlog double digits Q3 FY26

YoY

Driven by large Northern Metropolis Highway win in Hong Kong.

Deals & partnerships

Public and Private Clients Two largest recompetes ever in the environment business

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

Canadian Government 10-year program management role for a highway and bus transit project 10 years

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

Saudi Arabian Government Large rail project in Saudi Arabia

Awarded after the quarter.

Hong Kong Government Northern Metropolis Highway win

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

Risks & headwinds

Construction Management Project Delay and Charge Q3 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 Starts Q3 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 Impact Continuing 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 Projects Through 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 Expense FY27

$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 Impact Q3 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 Market Q3 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

Completion of Delayed CM Project

Q2 FY27

Current Delayed from Q1 FY27 to Q2 FY27

Target Completion 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.

Find out whether ACM delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.