AECOM reported its third quarter fiscal 2026 results, with performance significantly impacted by a $337 million pre-tax charge related to the delayed completion of a Construction Management project. The charge drove the company to an adjusted EPS loss of $(0.50) and a GAAP diluted EPS of $(0.67) for the quarter. Despite the earnings hit, AECOM delivered record wins and an all-time high backlog, underscoring the underlying strength of its core design business.

Q3 Fiscal 2026 Financial Performance

The following table summarizes AECOM's key financial metrics for the third quarter, presented on both a GAAP and adjusted (Non-GAAP) basis:

Construction Management Project Impact

The dominant factor in the quarter was a $337 million pre-tax charge stemming from a higher projected cost to complete a Construction Management project. The project was originally awarded in 2019 under terms and conditions that would not be acceptable under AECOM's substantially transformed risk policies today. Lower subcontractor productivity has driven a delayed completion, with the project now expected to achieve substantial completion during the second quarter of fiscal 2027. AECOM is pursuing claims related to its work on the project, with confidence in recovery validated by successes on initial matters ruled upon to date, though full resolution is expected to take several years and litigation.

Excluding this charge, the underlying business metrics were considerably stronger, as shown below:

"We are disappointed by the loss we took this quarter on the Construction Management project," said Troy Rudd, AECOM's chairman and chief executive officer. "The project is nearing completion, but lower subcontractor productivity is driving a delayed completion and a higher estimated cost to complete. Beyond this, the quarter included several key highlights, including record wins and an all-time high backlog, which make us very confident in the health of the business."

Business Segment Performance

Americas

Revenue in the Americas segment was $2.6 billion, a 20% decrease from the prior year. Net service revenue was $808 million, a 29% decrease from the prior year, which included 6% growth in the Americas design business after adjusting for one fewer working day. Operating loss was $139 million, and on an adjusted basis was a loss of $130 million. Excluding the Construction Management charge, the adjusted operating margin on net service revenue decreased by 250 basis points to 18.0%, primarily driven by record business development activity and the timing of Construction Management project starts. Backlog in the Americas segment grew by 8% to a new record high, driven by a 1.8 book-to-burn ratio, with strong wins across transportation, water, environment, and facilities markets.

International

Revenue in the International segment was $953 million, a 6% increase from the prior year. Net service revenue was $800 million, a 4% increase, driven by strong growth in the U.K. and Australian markets. Operating income increased by 21% over the prior year to $109 million, and on an adjusted basis increased 26% to $114 million. The adjusted operating margin on net service revenue was 14.3%, an increase of 240 basis points, reflecting improved growth and benefits from restructuring actions. Backlog in the International segment grew 28% to a new record high, driven by a 1.4 book-to-burn ratio and strong wins in the U.K. and Middle East markets.

Backlog and Wins

Total backlog increased 13% year-over-year to a record $27,816 million, driven by a record $4.2 billion in wins that resulted in a 1.6 book-to-burn ratio. Total design wins of $4.0 billion contributed to a 1.6 book-to-burn ratio in the design business, including a 1.8 book-to-burn ratio in the Americas design business and a 1.4 book-to-burn ratio in the International segment. The design pipeline increased again to a new all-time high, including growth in both early-stage and late-stage pursuits.

"Our momentum continues to build, as we win work at a record pace and gain further share in the marketplace," said Lara Poloni, AECOM's president. "Our backlog increased by 13% and we were successful in capturing two of the largest recompetes in our Company's history that also include significantly expanded scope."

Cash Flow and Balance Sheet

Operating cash flow was $95 million for the quarter, a decrease of 66% year-over-year, while adjusted free cash flow was $55 million, down 79%. Cash flow excluding the impact of the Construction Management project remains strong, and AECOM expects to deliver on its long-term 100%+ free cash flow conversion target once the Construction Management project headwinds subside. The company maintains a strong balance sheet with net leverage of 1.5x. As a result of the Construction Management charge, AECOM now projects full year free cash flow of approximately $300 million.

"We have a strong balance sheet and healthy underlying cash flow," said Gaurav Kapoor, AECOM's chief financial and operations officer. "Our positive free cash flow and expectation for the full year demonstrates the resilience of our business and strength of our markets."

Fiscal 2026 Guidance

AECOM updated its fiscal 2026 earnings guidance to reflect the impacts of the Construction Management charge, as well as lower expected NSR growth attributable to delayed project starts in the Construction Management business and ongoing conflict in the Middle East. The updated fiscal 2026 guidance is summarized below:

In addition, AECOM reaffirmed its long-term financial targets, including its expectation to deliver a 20%+ margin exit rate by fiscal 2028 and to grow adjusted EPS at a 15%+ CAGR from fiscal 2026 to fiscal 2029, excluding the Construction Management charge.

AECOM, a global infrastructure firm listed on the New York Stock Exchange (NYSE: ACM), has lowered its Adjusted earnings per share (EPS) guidance for the fiscal year ending in 2026. The company revised its full-year outlook downward, reducing the expected Adjusted EPS range from $5.90 to $6.10 to a new range of $3.95 to $4.15. This adjustment places the midpoint of the new guidance well below the $5.96 analyst estimate, signaling a significant shift in the company's financial trajectory for the period.

The revision affects the entire span of the projected earnings, indicating broader challenges or conservative adjustments across AECOM’s operations. While the specific operational drivers behind this change were not detailed in the filing, the magnitude of the reduction suggests material impacts on profitability metrics for FY2026.

Guidance Revision Details

The table below outlines the change in AECOM’s FY2026 Adjusted EPS guidance compared to analyst expectations:

What the Numbers Show

The reduction in the Adjusted EPS guidance is substantial, with the lower bound dropping by $1.95 and the upper bound by $1.95. The previous range had a spread of $0.20 ($6.10 - $5.90), while the new range has a slightly wider spread of $0.20 ($4.15 - $3.95). This downward shift, combined with the miss against the $5.96 analyst estimate, implies that management is recalibrating expectations based on recent performance data or forward-looking market conditions that were not fully anticipated in the prior estimate.