Earnings Recap — Q3 FY2026
CY Q3 2026 · Reported August 10, 2026 · Beat 6 of last 7 quarters
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AECOM's record backlog and strong win rates, particularly in data centers and defense infrastructure, underscore sustained demand for AI-related physical infrastructure. The company's expansion of hyperscaler relationships and fast-growing data center business position it as a key design and program management partner in the AI buildout. However, the construction management charge highlights execution risks in large infrastructure projects, which could temper near-term growth in that segment.
AECOM reported a $337 million pretax charge on a delayed construction management project, which drove a net loss for the quarter and a 29% decline in Americas NSR. Excluding the charge, adjusted EBITDA and EPS grew 5% and 11% year-over-year, respectively, with International margins expanding to 14.3% on strong Australia and U.K. growth. Backlog rose 13% to a record on 1.6x book-to-burn, including two of the largest recompetes ever in the environment business. The company generated positive free cash flow of $55 million despite project headwinds, and management noted the two legacy P3 design-build projects are the only ones of their kind in the portfolio.
Management raised full-year adjusted EBITDA margin guidance to 17.4% (from 17%) and reaffirmed adjusted EBITDA of $1.29 billion and adjusted EPS of $6.00 at the midpoint, excluding the $337 million construction management charge. Including the charge, they now expect NSR of approximately $7.3 billion, adjusted EBITDA of $950 million, and adjusted EPS of $4.05. They lowered free cash flow guidance to $300 million for FY26 due to project cash burn, and expect ~$500 million of cash outflow on the two legacy P3 design-build projects through the first half of FY27, with higher interest expense of $30-35 million in 2027. Management reiterated the long-term growth algorithm of 5-8% organic NSR growth and the 20% margin exit rate by FY28, noting construction management growth will ramp in the second half of FY27 as projects complete and resources redeploy. They also highlighted continued strong demand across defense, data centers, water, and transportation, with the Department of War pipeline up ~30% and a 30% increase in the U.S. water pipeline.
“This project was bid in 2019. Since that time, we have changed leadership and tightened our risk controls. We decided many years ago to no longer pursue design-build work for P3 clients in the construction management business due to the inherent challenges this structure can present. As a result, this project would not clear our risk hurdles today.”
on Construction management risk controls
“Our teams are winning work at a record rate. Our backlog increased 13% to a new all-time high on record quarterly wins and a 1.6 book-to-burn across the business, including 1.8x in the Americas.”
on Record backlog and wins
“The return to growth in international, delivering on our continuing improvement promise and early benefits from AI across our cost base are apparent. While performance was masked this quarter by the construction management project, underlying profitability demonstrates the opportunity ahead as we advance towards our 20% margin exit target for FY '28.”
on Margin trajectory and AI benefits
Can you detail the timeline to complete the two legacy projects and the cash impact through late this year and into next year?
Troy Rudd explained that the first project (where the charge was taken) is now expected to complete in Q2 FY27, with the second project on schedule for Q1 FY27. He noted the first project is ahead of schedule based on recent production rates, and the cash impact will be about $500 million in the first two quarters of FY27, with full-year free cash flow guidance lowered to $300 million.
How should we think about Americas margin moving forward, given the Q3 decline ex-CM charge and the raised overall margin guidance?
Gaurav Kapoor said the Americas margin was impacted by elevated business development costs (140 bps) and slower CM project starts, but expects margins to normalize in Q4 and be consistent or better than last year. He attributed the margin strength to International growth, particularly in Australia and the U.K., and reiterated confidence in exiting FY28 at 20%+ margins.
Where do claims stand, and how should we think about the total claim size and recovery approach?
Gaurav Kapoor said claims remain in the $600-650 million range, with no material change expected through project completion. He noted the working capital funded is far in excess of the claims booked, and the company is being tactical and confidential in its recovery approach, with confidence in recovering the amounts.