What went well
- Delivered record full-year fiscal 2025 profitability: full-year segment adjusted operating margin rose 70 basis points to a record 16.5% and adjusted EBITDA margin rose 80 basis points to a record 16.8%, exceeding the Company's prior long-term 17%+ margin target five quarters ahead of expectations (with a 17.1% margin in the second half of the year).
- Full-year adjusted EPS set a record at $5.26, up 16%, and full-year adjusted EBITDA reached a record $1,203 million, up 10%; on a GAAP as-reported basis full-year operating income rose 24% to $1,027 million, net income rose 26% to $638 million, and diluted EPS rose 29% to $4.79.
- Net service revenue (NSR) growth accelerated to 8% in the fourth quarter (constant currency), driven by 9% growth in the Americas design business; Americas Q4 NSR rose 13% to $1.2 billion and the Americas full-year adjusted operating margin on NSR expanded 90 basis points to a record 19.8%.
- Exited the year with a record total backlog of $24,830 million, up 4% and a fifth consecutive quarter of sequential backlog growth, with design book-to-burn of 1.1x in Q4 marking the 20th consecutive quarter above 1.0, while the design pipeline grew 13% year-over-year to an all-time high for the sixth straight quarter.
- Returned nearly $500 million to shareholders through repurchases and dividends in fiscal 2025 and announced a 19% increase to the quarterly dividend to $0.31 per share (a 20% dividend CAGR since initiation), bringing total capital returned since the September 2020 repurchase program to more than $3 billion.
- Raised long-term financial targets at its 2025 Investor Day, including a 20%+ margin exit rate by fiscal 2028, a 15%+ adjusted EPS CAGR from fiscal 2026 to 2029, a 5-8% organic NSR CAGR, and at least 100% cumulative conversion of adjusted net income to free cash flow.
What went wrong
- GAAP as-reported results from continuing operations weakened in the fourth quarter: net income fell 22% to $132 million and diluted EPS declined 21% to $0.99, held back by a higher fourth-quarter effective tax rate of 28.1% and restructuring and intangible-amortization items.
- A previously-expected higher fourth-quarter tax rate limited Q4 adjusted EPS growth to 7% (to $1.36); the Company noted adjusted EPS would have increased 18% absent that higher rate.
- International segment softness: fourth-quarter revenue declined 1% to $935 million, NSR was effectively unchanged at $769 million, and the Q4 adjusted operating margin on NSR fell 50 basis points to 12.1%, primarily due to lower revenue in certain end markets.
- Cash generation declined: Q4 operating cash flow fell 34% to $196 million and free cash flow fell 51% to $134 million, while full-year free cash flow slipped 3% to $685 million; fiscal 2026 free cash flow is guided to only about $400 million as the Company funds restructuring and AI investments.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Adjusted EPS (enterprise-wide) | FY2026 | $5.65-$5.85, up ~9% at the mid-point over the prior year (initiated) |
| Adjusted EBITDA (enterprise-wide) | FY2026 | $1,265M-$1,305M, up ~7% at the mid-point (initiated) |
| Free cash flow (enterprise-wide) | FY2026 | Approximately $400M, including investments for the announced AI-driven restructuring (initiated) |
| Adjusted EPS (continuing design & consulting) | FY2026 | $5.15-$5.35, excluding the Construction Management business to be reported in discontinued operations (initiated) |
| Adjusted EBITDA (continuing design & consulting) | FY2026 | $1,180M-$1,220M (initiated) |
| Organic NSR growth (continuing design & consulting) | FY2026 | 6% to 8% (excludes fewer working days in FY2026); NSR of $7.2-$7.4B, ~5% growth at the mid-point (initiated) |
| Segment adjusted operating margin / adjusted EBITDA margin (continuing) | FY2026 | 16.6% segment adjusted operating margin and 16.8% adjusted EBITDA margin (initiated) |
| Adjusted effective tax rate | FY2026 | Approximately 22-23% for the full year (initiated) |
| Average fully diluted share count | FY2026 | 133 million shares, excluding benefits from any capital allocation actions not yet taken (initiated) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue (as reported) | +2% ($4,175M) | Fourth-quarter revenue increased 2% from continuing operations; full-year revenue was effectively unchanged at $16,140M. |
| Net service revenue (NSR) | +8% ($1,967M) | Q4 NSR growth accelerated to 8% on a constant-currency basis, led by 9% growth in the Americas design business; full-year NSR rose 6% to $7,573M. |
| Americas segment (NSR) | +13% ($1.2B) | Strong Americas design demand; Q4 adjusted operating margin on NSR expanded 70 bps to 20.4%, and full-year Americas margin hit a record 19.8% (+90 bps). |
| International segment (NSR) | Flat ($769M) | Q4 revenue declined 1% to $935M and adjusted operating margin on NSR fell 50 bps to 12.1% on lower revenue in certain end markets; full-year NSR up 1% to $3.0B. |
| Adjusted EBITDA | +13% ($329M) | Fourth-quarter adjusted EBITDA rose 13% with margin up 80 bps to 17.5%; full-year adjusted EBITDA grew 10% to a record $1,203M. |
| Segment adjusted operating margin | +40 bps (17.1%) | Continued operating-leverage initiatives lifted the Q4 adjusted segment operating margin to 17.1% and the full-year margin to a record 16.5% (+70 bps). |
| Total backlog | +4% ($24,830M) | Record backlog with a fifth consecutive quarter of sequential growth; design backlog up 3% to a new all-time high across both the Americas and International. |
| Design book-to-burn | 1.1x (Q4) | 20th consecutive quarter above 1.0, reflecting a design pipeline that grew 13% year-over-year to an all-time high. |
| Adjusted EPS | +7% ($1.36) | Q4 adjusted EPS grew 7% (would have been 18% ex a higher tax rate); full-year adjusted EPS set a record at $5.26, up 16%. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Record backlog and pipeline | — | Exited fiscal 2025 with a record backlog ($24,830M) and pipeline (design pipeline +13% YoY, an all-time high for the sixth straight quarter), which CEO Troy Rudd said underpins confidence in fiscal 2026 and beyond; growth is strongest in the earliest pipeline stages as new project formation accelerates. | — |
| Margin expansion and operating leverage | Prior long-term target of a 17%+ segment margin | Delivered a record 16.5% full-year segment adjusted margin and exceeded the 17%+ target five quarters early (17.1% in H2); management now expects a 20%+ margin run-rate by the end of fiscal 2028 as it scales AECOM AI and the higher-margin Advisory business. | — |
| Capital returns | — | Returned nearly $500M via repurchases and dividends in the year (over $3B since September 2020) and raised the quarterly dividend 19% to $0.31 per share, extending a 20% dividend CAGR since initiation and a commitment to double-digit annual per-share dividend growth. | — |
| AECOM AI and Advisory growth | — | CFO Gaurav Kapoor said AI is creating new opportunities to scale human and intellectual capital and expand operating leverage; president Lara Poloni highlighted a rapidly-growing Advisory practice as project size and complexity increase, positioning these as key drivers of the raised long-term targets. | — |
| End-market demand / global infrastructure megatrends | — | Management cited accelerating secular megatrends - global infrastructure investment, sustainability and resilience, and growing energy demand - as demand for critical infrastructure continues to grow across the Company's markets, supported by robust funding across its largest markets. | — |
| Portfolio focus / Construction Management review | — | Subsequent to year-end, the Board approved a review of strategic alternatives for the Construction Management business (including a possible sale), which will be classified as held for sale and reported in discontinued operations beginning in Q1 FY2026; Goldman Sachs and Wachtell, Lipton, Rosen & Katz were retained as advisors. | — |
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