Any reference 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. On today's call, Troy Rudd, our Chief Executive Officer, will review our key accomplishments, our strategy, and outlook for the business.
Gaurav Kapoor, our Chief Financial and Operations Officer, will review our financial performance and outlook in greater detail. Turning to our results, NSR margins, adjusted EBITDA, and adjusted EPS reached new second quarter highs despite a dynamic market environment, and backlog increased 8% to a new record. The increase in NSR was driven by 8% growth in our Americas design business, which is our most profitable. The segment adjusted operating margin increased by fifty basis points to 16.5%, which is reflective of the high value we deliver to our clients, our focus on efficiency, and the benefits of our strategy.
Backlog reached a new high in the quarter, which further enhances our visibility. This performance reflects the combination of strong secular growth demand and robust funding in many of our markets, as well as continued strong win rates. Notably, this contract includes specific mechanisms that allow us to capture value as we deploy AI to deliver greater value to our clients. In the U.S., both of the demand and funding environments are strong.
| Metric | Period | Current guidance |
|---|---|---|
| Adjusted EPS growth (FY2026) | FY2026 | +14% at the midpoint of the raised range (guidance raised for the second time this year) |
| Adjusted EBITDA growth (FY2026) | FY2026 | +7% at the midpoint of the raised range |
| Organic NSR growth (FY2026) | FY2026 | Reaffirmed 4%-6% including the fourth-quarter fewer-work-days impact; 6%-8% excluding that impact |
| Free cash flow / conversion | FY2026 / long-term | Reaffirmed full-year free cash flow guidance and the long-term 100%+ free cash flow conversion target |
| Segment margin expansion | FY2026 | On track with full-year margin expansion goals; running ahead of the earlier 20-30 bps expectation (16.5% first-half segment operating margin vs. 16.1% prior year) |
| Proprietary AI investment | FY2026 | Ramped to full scale at $13M in Q2 (~66 bps); expected ~60-70 bps of margin investment for the full year |
| Metric | YoY | Note |
|---|---|---|
| Total NSR | New second-quarter high | Growth led by 8% Americas design NSR growth, AECOM's most profitable business, partially offset by an ~100 bps Middle East conflict headwind. |
| Americas NSR (design) | +8% | Continued execution of a strong backlog and favorable market trends; adjusted operating margin up 60 bps to 20% and operating income up 10%. |
| International NSR | +2% (-3% constant currency) | U.K. and Australia growth offset by declines in the Middle East and Asia; adjusted operating margin flat at 11% and operating income up 2%. |
| Adjusted EBITDA | New second-quarter high | Strong margin outperformance and efficiency gains across the business more than covered the small Middle East bottom-line miss. |
| Segment adjusted operating margin | +50 bps to 16.5% | High-value delivery, operating efficiencies, and strategy benefits, absorbing ~66 bps of AI investment while still expanding margin. |
| Backlog | +8% to a record (International +25% to a record) | Strong secular demand, robust funding across markets, and consistently high win rates on the largest pursuits. |
| Book-to-burn | 1.2x design (1.4x international trailing 12 months) | Strong win rates and bookings, especially on largest pursuits; supports expected second-half NSR inflection. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Proprietary AI deployment and monetization | ~$5M ramp beginning in Q1; AI tools in early integration | Investment scaled to full run-rate ($13M/~66 bps in Q2); AI now central to marquee wins with value-capture (pain-share/gain-share) mechanisms; deployment onto client deliverables growing rapidly and expanding the addressable market (e.g., healthcare design). | — |
| Advisory practice growth | Targeting to double NSR within three years | On track to double advisory NSR within three years; infrastructure-led expertise consistently beating traditional consulting peers on clients' most critical assignments. | — |
| U.S. federal / defense spending exposure | Growing defense investment flagged last quarter | Department of War pipeline up 50%; defense clients ~10% of portfolio (DoW ~5%+); President's $1.5T budget proposal points to accelerating defense and facilities spending where AECOM leads for the Army and Navy. | — |
| End-market demand (AI infrastructure / power) | Emerging data-center and power opportunities | Clients investing record amounts in AI infrastructure; high-tech among fastest-growing businesses; expanded relationship with a key hyperscaler; nuclear fusion expected to deliver nine figures of NSR (Type One Energy/TVA, U.K. STEP program); power/transmission demand rising across the stack. | — |
| International strength and Middle East uncertainty | Middle East growth expected; U.K. transportation soft | U.K. growth turned positive (AMP8, Great Grid); Australia backlog at a multi-year high ($3B AUKUS wins); Middle East backlog growing significantly despite near-term revenue softness, with ~$40-50B of U.S. military infrastructure spend identified as an opportunity. | — |
| Capital returns | Returns-focused capital allocation policy | Returned $155M to shareholders via repurchases and dividends in Q2; committed to returning substantially all available cash flow through repurchases and dividends. | — |
| IIJA / infrastructure funding runway | IIJA funding ramping | More than half of IIJA funding remains to be spent (even more for several of AECOM's largest clients/sectors); Brent Spence Bridge phase 2 win in Q2 illustrates the follow-on opportunity. | — |