AECOM (NYSE:ACM) reported record quarterly wins and a 13% increase in backlog during its fiscal third quarter of 2026, but the infrastructure consulting company also recorded a $337 million pre-tax charge tied primarily to delays on a large Construction Management project.
Chief Executive Officer Troy Rudd said the delayed project, bid in 2019, has been affected by several factors, most notably subcontractor productivity during its final phase. AECOM now expects substantial completion near the end of the second quarter of fiscal 2027, rather than in the first quarter.
Construction Management Projects Weigh on Cash Flow
The company said the charge affected net service revenue and EBITDA by $337 million and reduced earnings per share by $1.99. Cash flow included a $185 million use during the quarter related to the Construction Management projects.
AECOM has two design-build P3 projects in its Construction Management portfolio. The second project remains on track for substantial completion in the first quarter of fiscal 2027, management said. Both projects have claims associated with delays that the company said were not caused by AECOM.
Rudd said the company is pursuing “sizable claims” on the first project and cited progress in the dispute-resolution process. Chief Financial and Operations Officer Gaurav Kapoor said claims related to the two projects should remain in a range of roughly $600 million to $650 million through completion, though the amount AECOM is claiming from third parties is higher.
Management expects the projects to continue burdening cash flow through the first half of fiscal 2027. Rudd said the overall cash impact in the first two quarters of fiscal 2027 is expected to be about $500 million. Kapoor added that higher average debt balances are expected to raise interest expense by $30 million to $35 million year over year in 2027.
The company expects free cash flow of $300 million for fiscal 2026, down from its prior expectation of $400 million. Despite the project-related headwinds, AECOM generated $55 million in positive free cash flow during the third quarter.
Backlog Reaches Record High
AECOM said quarterly wins drove a 1.6x book-to-burn ratio across the company and a 1.8x ratio in the Americas. Year-to-date book-to-burn was 1.4x. Backlog reached a new record, rising 13% from a year earlier.
Adjusted for one fewer working day, net service revenue in the design business increased 5%, led by 6% growth in the Americas design business and 4% growth in International. Rudd said total growth fell short of expectations because of slower-than-anticipated project starts in Construction Management and the continuing effect of conflict in the Middle East.
President Lara Poloni highlighted two large environment-business recompetes, one involving a public-sector client and one a private-sector client. She said the scope of work on both projects expanded significantly.
In the United States, Poloni said state and local clients continue to prioritize highways, bridges, transit, rail and water projects. AECOM’s U.S. water pipeline grew 30% during the quarter, while its Department of Defense pipeline also increased by about 30%.
Poloni also cited private-sector demand, particularly from data centers and hyperscale customers. In Canada, activity remained broad-based across markets and contributed to continued double-digit net service revenue growth. After quarter-end, the company won a 10-year program management role on a highway and bus-transit project, one of its largest Canadian wins to date.
International Growth and Margin Improvement
International net service revenue increased 4%, with growth led by the United Kingdom and Australia. The International segment’s backlog rose 28% year over year, while adjusted operating margin was 14.3%.
Kapoor attributed the margin improvement to stronger growth in Australia, which he described as a higher-margin market; better utilization in the United Kingdom; and initial benefits from the company’s proprietary artificial intelligence strategy.
In the U.K., net service revenue growth accelerated to the high single digits, supported by water, environment and energy work, including the Great Grid Upgrade program. Australia posted double-digit growth, and its backlog rose more than 40% year over year. The Middle East remained affected by uncertainty in tourism- and hospitality-related markets, although backlog there grew at a double-digit rate and AECOM won a large Saudi Arabian rail project after the quarter ended.
Updated Fiscal 2026 Outlook
AECOM updated its outlook to reflect the Construction Management charge, lower-than-expected net service revenue growth and margin performance. The company now expects fiscal 2026 net service revenue of approximately $7.3 billion, adjusted EBITDA of $950 million and adjusted EPS of $4.05 at the midpoint of its guidance ranges.
Excluding the impact of the charge for comparability, AECOM said it expects net service revenue of $7.65 billion to $7.7 billion, adjusted EBITDA of $1.29 billion and adjusted EPS of $6 at the midpoints. The company raised its expected adjusted EBITDA margin to 17.4%, from 17% previously.
Kapoor said the Americas adjusted operating margin was negative 16.1% because of the Construction Management impact. Excluding that impact, the margin was 18%, though it was affected by slower Construction Management project starts and elevated business-development spending. He said Americas margins are expected to normalize in the fourth quarter.
Looking toward fiscal 2027, Rudd said AECOM continues to expect its long-term organic growth algorithm of 5% to 8% to apply to the entire business, including Construction Management. He said Construction Management growth is expected to contribute more meaningfully in the second half of fiscal 2027 as newer awards ramp up and employees are redeployed from the two legacy projects.
About AECOM (NYSE:ACM)
AECOM is a multinational infrastructure consulting firm that provides a broad range of professional technical and management services. Its core offerings include architecture and engineering design, program and construction management, environmental remediation and consulting, and operations and maintenance support. The company works across the full project lifecycle from planning and design through construction and long‑term asset management.
AECOM serves public- and private-sector clients in major built-environment markets, including transportation (roads, bridges, rail, airports), water and wastewater systems, buildings and places, energy and power, and environmental services.
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