Infrastructure consulting service company AECOM (NYSE: ACM) missed Wall Street’s revenue expectations in Q2 CY2025, with sales flat year on year at $4.18 billion. Its non-GAAP profit of $1.34 per share was 6.2% above analysts’ consensus estimates.

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StockStory’s Take

AECOM’s second quarter was met with a positive market reaction as investors responded to improving operating margins and robust backlog growth, despite revenue coming in below Wall Street’s expectations. Management attributed performance to the company’s continued focus on high-return organic investments, expansion of its advisory and program management businesses, and a favorable mix shift in key geographic markets. CEO Troy Rudd highlighted that the company’s “record level of business development investment” and “high win rates—especially in large pursuits” supported both backlog growth and margin expansion. The quarter also benefited from a steady pipeline of infrastructure projects, particularly in the Americas, which remains the company’s most profitable region.

Looking ahead, AECOM’s updated guidance is underpinned by management’s view that multi-year infrastructure spending and increased demand for technical advisory services will drive further growth. The company plans to capitalize on government initiatives and regulatory changes in markets like the U.S. and U.K., while scaling its data center and sustainability solutions for evolving client needs. President Lara Poloni cited the acceleration of U.S. data center investments and regulatory streamlining as tailwinds, stating, “We can address this demand holistically like no other firm in our industry through our advisory, program management and design capabilities.” Management expects AI-driven productivity and a growing advisory platform to contribute to both top-line momentum and margin gains.

Key Insights from Management’s Remarks

Management credited the quarter’s margin expansion and backlog growth to targeted investments in high-return areas, effective operational execution, and strong client demand in core markets.

• Advisory business momentum: The advisory segment delivered double-digit growth, with management targeting its expansion as the next $1 billion platform, supported by earlier client engagement and increased wallet share from existing accounts.
• Americas segment strength: The Americas region led margin improvement and backlog gains, benefiting from increased infrastructure spending and a focused approach to high-margin program management and design work.
• High win rates in large pursuits: The company maintained an over 80% success rate on its largest project bids, reflecting a strategic emphasis on complex, higher-value opportunities that enhance both revenue quality and margins.
• AI and technical capability investments: Management highlighted ongoing investment in artificial intelligence and advanced technical solutions, which are already contributing to operational efficiency and are expected to materially impact margins over the next several years.
• Global market dynamics: While the U.S. and Middle East drove backlog growth, management noted that budget constraints in Australia and project pipeline shifts in Asia led to more modest revenue trends in those regions this quarter.

Drivers of Future Performance

AECOM’s outlook focuses on leveraging secular infrastructure demand and expanding its advisory and technology-driven offerings to sustain margin and revenue growth.

• Sustained infrastructure spending: Management expects ongoing U.S. federal and state investments, plus new international government commitments, to sustain demand for core engineering and consulting services over multiple years.
• Advisory and program management scaling: The company is prioritizing the growth of its advisory and program management businesses, targeting a higher proportion of revenue from these higher-margin offerings and aiming to double advisory revenue within three years.
• AI-driven productivity gains: AECOM anticipates that continued deployment of artificial intelligence in project delivery and back-office operations will drive further margin expansion, with management emphasizing visible benefits already emerging from these initiatives.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will be monitoring (1) the pace of advisory and program management revenue growth, (2) further expansion of operating margins as AI and technical solutions are scaled, and (3) backlog conversion into realized revenue, especially in the Americas and Middle East. We will also track management’s ability to navigate regional market fluctuations and deliver on its growth targets for new business lines.

AECOM currently trades at $120.88, up from $112.08 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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