What Management Said
Read the full Q1 2026 transcript ↗Any references to segment margins or segment-adjusted operating margins will reflect the performance for the Americas and International segments. When discussing revenue and revenue growth, we will refer to Net Service Revenue, or NSR, which is defined as revenue excluding Pass-Through Revenue. NSR growth rates are presented on a constant currency basis, unless otherwise noted. Both our reported results and financial guidance are inclusive of construction management.
Also, as a reminder, our year-over-year growth rates were impacted by fewer workdays compared to the prior year first quarter. On today's call, Troy Rudd, our Chief Executive Officer, will review our key accomplishments, our strategy, and our outlook for the business. Lara Poloni, our President, will discuss key operational successes and priorities, and Gaurav Kapoor, our Chief Financial and Operations Officer, will review our financial performance and outlook in greater detail. We exceeded expectations across every key financial metric, including record first quarter NSR, adjusted EBITDA, margins, and backlog.
Backlog increased 9% to a new all-time high, fueled by a 1.5 book-to-burn ratio, even while managing through an unprecedented 43-day U.S. As a result, our visibility is high, and we are increasing our full-year financial guidance, which I will discuss shortly. We repurchased more than $300 million in the first quarter and expect to continue to deploy our strong free cash flow to deliver greater value to our shareholders over time. Net service revenue increased by 5% when adjusted for fewer billable days in the period.
What went well
- Record first quarter across every key metric, with backlog up 9% to a new all-time high fueled by a 1.5 book-to-burn ratio, achieved even while managing through an unprecedented 43-day U.S. federal government shutdown.
- Net service revenue grew 5% when adjusted for fewer billable days, and the segment-adjusted operating margin expanded 100 basis points to a first quarter record of 16.4%, reflecting operating leverage and high-returning investments.
- Adjusted EBITDA of $287 million and adjusted EPS of $1.29 both exceeded management's expectations, prompting an increase to full-year guidance.
- Americas NSR increased 9% with broad-based growth across transportation, water, and facilities, and the Americas adjusted operating margin rose 120 basis points to 19.9%.
- International delivered a 25% backlog increase and a 2.3x book-to-burn on major wins including Scottish Water, the Dubai Metro design role, and the Sydney Metro, positioning the segment for a second-half inflection.
- Increased the share repurchase authorization to $1 billion, repurchased more than $300 million in the quarter (nearly $350 million total returned to shareholders), and extended book-to-burn above one to 21 consecutive quarters.
What went wrong
- An unprecedented 43-day U.S. federal government shutdown, compounded by fresh noise about another shutdown in February, meant the timely pickup in federal award activity management expected did not come through in the quarter.
- International NSR was essentially flat after adjusting for fewer billable days, with management flagging that International growth will likely remain subdued in the second quarter and citing pockets of weakness in the UK, Australia, transportation, and Hong Kong plus softer Asia bookings.
- Truist's Jamie Cook pushed back that first quarter cash flow was weaker than expected; management attributed it to normal seasonality (Q1 approximates ~10% of the full-year outlook, first half ~30%) driven by first-half compensation, 401(k), bonus, and large vendor software disbursements.
- Year-over-year growth rates were depressed by fewer billable workdays versus the prior-year quarter, and management warned of a further working-days headwind in the fourth quarter that will weigh on International comparisons.
- Middle East results reflected the reprioritization of funding that clients are still navigating, and near-term International trends remain varied amid lingering geopolitical and funding uncertainties.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Adjusted EPS | FY2026 | $5.95 (midpoint), raised on Q1 outperformance, capital deployment, a lower tax rate, and record backlog visibility |
| Adjusted EBITDA | FY2026 | Midpoint of the range increased |
| Organic NSR growth (constant currency) | FY2026 | 6%-8% |
| Enterprise gross margin expansion | FY2026 | ~90-100 bps gross; ~30 bps net of technology investments |
| Q2 NSR and adjusted EBITDA (% of FY) | Q2 2026 | ~24% of full-year guidance |
| Effective tax rate | Q2 2026 | ~12%-13% |
| Share repurchase authorization | Ongoing | Increased to $1 billion |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total NSR | +5% (adjusted for fewer billable days) | Broad-based demand and scaling of competitive advantages across both segments; presented on a constant-currency basis. |
| Americas NSR | +9% | Broad-based design growth stronger in the eastern states and Canada, where budgets and visibility are best; design business up 9%. |
| International NSR | ~Flat (adjusted for fewer billable days) | Slower activity in the UK, Australia, transportation, and Hong Kong, consistent with expectations, offset by successful repositioning that lifted backlog. |
| Adjusted EBITDA | $287M (exceeded expectations) | Strong NSR growth plus margin expansion from mix shift to higher-margin services and technology-driven efficiencies. |
| Segment-adjusted operating margin | 16.4% (+100 bps) | New first quarter record from operating leverage and high-returning investments in advisory, technology, and business development. |
| Americas adjusted operating margin | 19.9% (+120 bps) | Operating leverage from strong growth, mix shift to higher-margin services, and technology-driven delivery efficiencies. |
| Backlog | +9% to all-time high | Strong win rate on large pursuits and a 1.5 book-to-burn ratio; International backlog up 25% and Americas backlog up 3%. |
| Book-to-burn | 1.5x (International 2.3x) | 21st consecutive quarter above one, reflecting the value AECOM delivers to clients across strong end markets. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| U.S. end markets and federal funding | Uncertainty from the 43-day shutdown delayed federal awards | Passage of all key FY2026 federal funding bills provides certainty; over half of IIJA funding remains unspent, a multi-year Surface Transportation Authorization is progressing, and a new national highways bill is expected in the spring. | — |
| Data center / private-sector demand | Data center practice grew 50% in FY2025 | AECOM benefits directly (electrical engineering, digital ecosystem) and indirectly (water, power studies, advisory/due diligence for all major hyperscalers); One Big Beautiful Deal incentives and reshoring add multi-year visibility. | — |
| Advisory expansion | Advisory in its second-year infancy | Targeting a $50 billion annual addressable spend with a goal to double the business; hiring accelerating, pipeline expanding, and wins like the UK AMP9 advisory role demonstrating the higher-margin offering. | — |
| Program management + construction management | CM business under a strategic-alternatives review including a possible sale | Concluded to keep and operate CM (about 8% of NSR) more closely aligned with program management to create a differentiated offering; long-term goal for advisory plus program management to reach ~50% of the business. | — |
| AI and technology | Announced a September AI acquisition | Integration complete three months in, team doubled, technology live on projects with results matching expectations; focus on the facilities market first, with AI cited as a differentiator in the Scottish Water win. | — |
| Capital returns | Over $3.3 billion returned over the last several years | Buyback authorization increased to $1 billion; more than $300 million repurchased and nearly $350 million total returned in Q1, funded by strong free cash flow and a nimble balance sheet. | — |
| International repositioning | 18 months of election-driven agenda changes across 60+ cycles slowed activity | Repositioning paying off with agendas fixed and funding coming to market; 25% backlog growth, record pipeline, and expected revenue inflection in the second half and into FY2027. | — |
| Defense spending | — | Defense is ~10% of NSR with the U.S. Department of War as largest client; spending set to rise for several years alongside the U.S. Coast Guard, DHS, and a reaffirmed AUKUS pact with Australia and the U.K. | — |
Q&A Summary
Sabahat Khan (RBC Capital Markets) asked about the decision to keep the construction management business and how the U.S. demand environment has evolved versus last year.
Rudd said the review concluded CM is a high-quality industry leader with strong backlog, opportunities, and cash flow, and that closer alignment with the rest of AECOM (e.g., LA28 and Brisbane 2032) unlocks substantial opportunity. Kapoor added Americas strength continues across all end markets with the design business up 9%, pipeline up 20% (early-stage up 34%), and less than 50% of IIJA funds spent.
Andrew Kaplowitz (Citigroup) asked whether an AI-shaped value model shrinks AECOM revenue and whether the EBITDA-per-employee improvement now steps up substantially.
Rudd said clients always expect more value and are willing to pay for it, so AI is simply an extension of prior technology investments; the winning attributes (trusted relationships, technical leadership, domain expertise) are unchanged, and creating more value is rewarded with higher fees and additional work, as demonstrated at Scottish Water.
Andrew Kaplowitz (Citigroup) followed up on AECOM's positioning in private-sector U.S. work, particularly data centers.
Poloni said AECOM has one of the larger global data center practices, grew that business 50% in FY2025, and benefits directly through digital-ecosystem and electrical/infrastructure work plus indirectly through advisory, due diligence, and water and power studies for all the major hyperscalers.
Adam Bubes (Goldman Sachs) asked for an update on integrating the acquired AI technology and which workflows and end markets are being targeted in 2026, plus what drove the strong International bookings.
Kapoor said integration is complete three months in and ahead of expectations, with the facilities market the initial focus and employee NSR/EBITDA by headcount as new metrics. On bookings, Rudd and Poloni pointed to the repositioning paying off, with the Sydney Metro win signaling the next wave of infrastructure investment and balanced wins across regions and segments (Scottish Water, Dubai Metro).
Jamie Cook (Truist Securities) asked whether customers are renegotiating projects around AI value and flagged that Q1 cash flow looked weaker than expected.
Rudd characterized it not as renegotiation but as clients seeking to deploy more valuable work, sometimes shifting from cost-plus toward fixed-fee contracting to recognize that value. Kapoor said cash was consistent with expectations, noting the first quarter has historically been ~10% of the outlook and the first half ~30% due to compensation, 401(k), bonus, and large software payments.
Sangita Jain (KeyBanc Capital Markets) asked whether AECOM will run the retained CM business differently and what it is seeing at the state and local level.
Rudd said yes, aligning CM more closely with program management to create a more valuable combined offering. Kapoor said the shutdown pushed federal awards out but a pickup is expected in Q2/Q3, a new federal highways bill is likely in the spring, and state and municipal budgets are healthy with better-than-expected tax collections in California, Florida, and Texas.
Michael Dudas (Vertical Research Partners) asked about the mix shift among design, program management, and advisory, and any change in fixed-fee versus cost-plus contract booking.
Rudd said no material change in pricing yet given the size of the programs, but AECOM is intentionally shifting mix, with program management growing slightly faster than design and advisory growing faster still, targeting advisory plus program management at about 50% of the business over time.
Judah Aronovich (UBS) asked whether International book-to-bill will stay above one with a margin step-up, and how much acceleration potential Americas top-line growth has.
Kapoor said the International pipeline is up double digits (including early stage), pointing to an inflection in Australia and the Middle East in the second half, tempered by a Q4 working-days headwind; he guided to ~90-100 bps of enterprise gross margin expansion (~30 bps net of technology investment) and reiterated 6%-8% constant-currency organic growth for the year.
Nandita Nayar (Bank of America) asked for color on the 1.5x book-to-burn (2.3x in International) and how much was market versus AI-enabled wins, plus the latest on the authorization bill and CR risk.
Kapoor said backlog growth was broad-based across UK&I, Australia/New Zealand, and the Middle East as clients gained stability after 60+ election cycles, with technical expertise and technology roadmap driving wins like the nine-figure, decade-long Scottish Water contract won against the incumbent. Rudd said federal funding is largely in place through year-end, key long-term authorizations are progressing positively, and the tone in Washington is positive.
More on Aecom
Reported 2026-02-10 · figures from the Aecom Q1 2026 earnings call.
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