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Engineering & Construction · mkt cap $9.2B · calls: Q2 FY2026 vs Q1 FY2026
55.0 conviction · conf-adj 55
conf 6/10 partial
enthusiasm:27.0 · trend:8 · quantifies:5 · impact:0 · under_radar:14 · credibility:0 · business_impact:4 · disruption:-6 · commitment:0 · confirmation:3
Enthusiasm latest 9 / prev 8 (rising)
AECOM’s AI story is proprietary tools deployed on client delivery (post-September acquisition), not selling AI infrastructure. Management ties AI to win rate on megaprojects, pain-share/fixed-fee commercial models, and margin expansion while quantifying ~66 bps FY26 AI opex ($13M in Q2) and ~$1B of recent AI-weighted wins. Credibility improved Q1→Q2 via dollar disclosure, deployment breadth, and named contract mechanics, though revenue-per-hour compression is explicitly denied in favor of share-of-wallet and margin upside; productivity claims remain directional (force multiplier, employee NSR/EBITDA per head) without a stated AI productivity percentage.
GROUNDED NEXT-FY IMPACT vs CONSENSUS
Grounded on actual base — revenue $16.1B · net income $0.6B · net margin 3.5% · diluted EPS 4.21
These are next-fiscal-year annual uplift estimates, not next-quarter numbers.
Aggregate next-FY est. rev uplift: 0.6% · next-FY EPS uplift: 3.1% · vs analysts: inline · priced in: low (model's call-read: high; verdict above is the hard-data one used for ranking) · confidence: 6/10
| Claim | Figure | Arithmetic | Next-FY Rev % | Next-FY EPS % |
|---|
AI roadmap spend Q1 FY26 ~$5M
cost | ~$5M (Q1) | $5M pretax x (1-0.21) = $3.95M after-tax drag; / adj NI $698.6M = -0.57% EPS (HEADWIND). Ramp quarter; annualizes into the 60-70 bps full-year figure. Netted inside the net-margin claim to avoid double-count. | 0 | -0.57 |
Planned AI spend 60-70 bps FY26 margin headwind
cost | 60-70 bps FY26 | 65 bps midpoint x NSR $7,879M = $51.2M pretax; after-tax @21% = $40.5M; / adj NI $698.6M = -5.8% EPS gross DRAG in the investment year. bps taken on NSR (AECOM quotes margins on net service revenue), not gross revenue. Offset by ~95 bps gross expansion -> nets to the +30 bps net figure. Excluded from aggregate (input to net-margin claim). | 0 | -5.8 |
AI roadmap spend Q2 FY26 $13M = 66 bps
cost | $13M; 66 bps | Confirms the headwind: $13M / 0.0066 = $1,969.7M quarterly base -> ~$7.88B annual NSR (ties to the $7,879M base). Quarterly cost: $13M x0.79 = $10.27M after-tax / adj NI $698.6M = -1.47% EPS. Confirmation, not additive. | 0 | -1.47 |
Segment adj op margin H1 16.5% vs 16.1% (AI embedded)
engagement · soft | +40 bps YoY | Margin expanded WITH AI spend embedded, but no H1 segment revenue $ disclosed and whole-company NSR is the wrong base for a segment-level margin — % with no clean obtainable base. Qualitative corroboration only; not converted or aggregated. | | |
Enterprise margin expansion net +30 bps (90-100 gross less tech)
productivity | ~30 bps net FY26 | +30 bps x NSR $7,879M = $23.6M op income; after-tax @21% = $18.7M; / adj NI $698.6M = +2.67% EPS. Cleanest 'net of technology investment' figure mgmt gives — the headline bottom-line uplift (already nets the 60-70 bps AI spend; do not also subtract it). Caveat: WHOLE margin program net of tech, not isolated AI. | 0 | 2.67 |
AI-linked contract wins ~$1B aggregate (2 wins)
revenue | ~$1B bookings (1 post-quarter, not in backlog) | BOOKINGS not revenue. ~$1.0B TCV ratable over ~10yr / partial-year FY26 ramp -> ~$100M next-FY revenue / gross rev $16,139.6M = 0.62% rev. At company net margin 3.48% (gross contract $): incr NI $3.48M / adj NI $698.6M = 0.50% EPS. Higher-margin services not separately quantified; default net margin used. | 0.62 | 0.5 |
Scottish Water 9-figure / 10-year program
revenue · soft | 9-figure over 10yr | Subset of the ~$1B aggregate wins above (~$100-150M / 10yr = ~$10-15M/yr). Not added separately to avoid double-count; magnitude is a range (9-figure). No incremental aggregate contribution. | | |
Employee NSR & EBITDA per headcount metric
productivity · soft | no figure | Newly-shared tracking KPI, no quantified delta. Unanchored. | | |
20% margin exit rate by FY28 (company algorithm)
productivity | 20% exit by FY28 | Anchored target (soft=false) but FY2028 exit — beyond the NEXT fiscal year horizon, so null pcts. Implies continued multi-year expansion (segment ~16.5% -> 20%) of which AI/tech is one lever. | | |
Assumptions: NSR base $7,879M derived from $13M=66bps (Q2) and confirmed by consensus revenueAvg ~$7.55B; all mgmt 'bps' are on NSR, not gross revenue. EPS% sized on consensus ADJUSTED NI $698.6M / EPS 5.24 (NOT GAAP $561.8M/4.21) per the EARNINGS-BASIS rule — a GAAP denominator inflates cost EPS% into meaningless artifacts (e.g. -14.8% for the spend). Tax 21%; margin claims flow pretax->after-tax @0.79. Contract wins are BOOKINGS converted ratably (~10yr) at a partial-year FY26 ramp -> ~$100M, flowed at company net margin 3.48% (gross-contract / gross-revenue, apples-to-apples; on NSR the rev % roughly doubles). Aggregate = enterprise net +30 bps (the 'net of tech' figure) + contract-win flow-through; segment +40 bps and the spend rows are netted/excluded to avoid double-counting.
Top line: Thin and bookings-driven. The only quantified AI-linked topline is ~$1B of contracted wins (one post-quarter, NOT yet in backlog). As bookings these don't hit revenue at face value: ratable conversion over ~10yr programs at a partial-year FY26 ramp yields only ~$100M of next-FY revenue, ~0.6% of $16.1B gross revenue. AI is framed as TAM-expanding rather than a near-term revenue line — real but small for the next fiscal year.
Bottom line: This is the load-bearing side, but it's an INVESTMENT year. AECOM is spending ~$52M/yr (~65 bps of NSR, a ~5.8% gross drag on ADJUSTED NI) on AI/technology. Management nets ~90-100 bps of gross enterprise margin expansion down to ~+30 bps after that tech spend -> +$23.6M op, ~+$18.7M after-tax, ~+2.67% adjusted EPS; segment margins corroborate qualitatively at 16.5% vs 16.1% WITH AI embedded. Adding the small contract flow-through (~+0.5%) gives ~+3.1% aggregate adopter EPS. Crucial caveat: the +30 bps is the WHOLE margin program net of tech, not isolated AI — management defers quantified AI BENEFITS to FY27+, so the pure-AI FY26 contribution is closer to neutral. (On a GAAP NI base these EPS% would be far larger, but that base is the wrong denominator vs adjusted consensus.)
Quantified adopter uplift on the consensus ADJUSTED base ($698.6M NI / $5.24 EPS): ~0.6% rev, ~3.1% EPS, dominated by the +30 bps net margin program (+2.67%) plus ~0.5% bookings flow-through. The margin algorithm (toward 20% exit by FY28) is management's stated, well-telegraphed plan that consensus already reflects, so AI/tech is a known lever rather than a surprise -> priced_in high, inline vs expectations. Consensus revenueAvg ~$7.55B reconciles to NSR ($7.88B), confirming the bps-on-NSR basis and removing the apparent gross-revenue mismatch. AI-specific FY26 benefit is near-neutral (spend is hard, offsetting AI productivity deferred to FY27+).
MODEL CONSENSUS (impact)
partial
Adopter case. EPS denominator (adjusted vs GAAP) drove the headline divergence; adopted X's adjusted base per task rule, kept Y's conservatism on segment and Scottish Water rows.
Conflicts reconciled
- est_eps_uplift_pct: X=3.1 vs Y=7.43 -> used 3.1 because consensus uses ADJUSTED NI $698.6M (EARNINGS-BASIS rule); Y's GAAP $561.8M base inflates every EPS%
- bps base: X=NSR $7,879M vs Y=gross rev $16,139.6M -> used NSR because $13M=66bps implies ~$1.97B/qtr -> $7.88B/yr and AECOM quotes margins on NSR
- segment +40bps claim: X soft=false(+3.56% EPS) vs Y soft=true/null -> used soft=true (no clean segment revenue base; conservative)
- Scottish Water: X soft=false(0.09% rev) vs Y soft=true/null -> used null (subset of $1B, range figure, avoids double-count)
- priced_in: X=high vs Y=medium -> used high (margin algorithm is telegraphed/known)
- vs_analyst_expectations: X=inline vs Y=unclear -> used inline (consensus rev reconciles to NSR, resolving Y's mismatch)
| Field | Opus 4.8 | GPT-5.5 |
|---|
| Rev uplift % | 0.6 | – |
| EPS uplift % | 3.1 | – |
| Priced in | high | – |
| vs analysts | inline | – |
| Confidence | 6 | – |
| Top line | Thin and bookings-driven. The only quantified AI-linked topline is ~$1B of contracted wins (one post-quarter, NOT yet in backlog). As bookings these don't hit revenue at face value: ratable conversion over ~6-10yr programs at a partial-year FY26 ramp yields only ~$100M of next-FY revenue, ~0.6% of $16.1B gross revenue (~0.09% from Scottish Water alone). AI here is framed as TAM-expanding (e.g. healthcare design) rather than a near-term revenue line — real but small for the next fiscal year. | – |
| Bottom line | This is the load-bearing side, but it's an INVESTMENT year. AECOM is spending ~$52M/yr (~65 bps of NSR, a ~5.8% gross drag on adjusted NI) on AI/technology. Management nets ~90-100 bps of gross enterprise margin expansion down to ~+30 bps after that tech spend -> +$23.6M op, ~+$18.7M after-tax, ~+2.67% adjusted EPS; segment margins corroborate at 16.5% vs 16.1% (+40 bps) WITH AI embedded. Adding the small contract flow-through (~+0.5%) gives ~+3.1% aggregate adopter EPS. Crucial caveat: the +30 bps is the WHOLE margin program net of tech, not isolated AI — management explicitly defers quantified AI BENEFITS to FY27+, so the pure-AI FY26 contribution is closer to neutral (the spend is hard, the offsetting AI productivity is not yet separately disclosed). | – |
| Reasoning | Consensus already embeds the trajectory this implies: adjusted EPS 4.49 (FY24) -> 5.24 (FY25e) = +16.7% growth and NSR 7.21B->7.55B = +4.7%, with the ~30 bps net margin expansion being explicit FY26 GUIDANCE analysts hold, plus the stated 20% FY28 exit-rate algorithm. The whole +3.1% I compute is essentially the guided margin program (+2.67%) that consensus has already, not an above-consensus surprise. The only genuinely incremental item is the ~$1B contract win that is post-quarter and not in backlog (~0.6% rev / ~0.5% EPS) — too small to move the headline. Math points roughly in-line with, not clearly above, consensus. | – |
Rows highlighted where the two models disagreed.
QUANTIFICATIONS
AI roadmap spend (Q1 FY26): ~$5 million (Q1 FY2026, bottomline)
“in the first quarter, you would recall, we had only ramped up approximately $5 million of spend.”
Planned AI spend as margin headwind: 60 to 70 bps (FY2026 full year, bottomline)
“Our expectation was 60 to 70 bps is what we will spend in FY '26.”
AI roadmap spend (Q2 FY26): $13 million; ~66 bps of margins (Q2 FY2026, bottomline)
“We spent $13 million on our AI road map, equates to about 66 bps.”
Segment adjusted operating margin (H1, with AI investment embedded): 16.5% vs 16.1% prior year (H1 FY2026, bottomline)
“the margin increase that you're seeing where we delivered 16.5% operating margin in the first half of the year versus 16.1% in last year. There is that incremental investment coming through.”
AI-linked large contract wins (aggregate): almost $1 billion (two wins) (FY2026 YTD (one post-quarter, not in backlog), both)
“we've had two wins that I'd report on, and the aggregate value of those wins is almost $1 billion”
Scottish Water program value: 9-figure contract over 10 years (10-year program, topline)
“we were one of the two, including the incumbent that were successful in securing this 9-figure contract over a 10-year period.”
Enterprise margin expansion net of technology investment: ~30 bps net (90–100 bps gross before tech investment) (FY2026, bottomline)
“gross margin expansion of somewhere around 90 to 100 bps at the enterprise level. Once you net the investments we're making on technology in the current year, expect 30 bps of margin expansion.”
Productivity / leverage tracking metric: employee NSR and employee EBITDA profitability by headcount (ongoing (metric newly shared Q1), both)
“a key metric that we have now started sharing is employee NSR and employee EBITDA profitability by headcount.”
Long-term margin target (company algorithm, cited alongside AI investment narrative): 20% margin exit rate by fiscal 2028 (FY2028 exit, bottomline)
“achieving a 20% margin exit rate by fiscal '28”
PAST (realized)
- Q1: Completed September AI acquisition integration; doubled technology team; technology live on projects with initial performance matching expectations.
- Q1: Scottish Water win tied to technology road map and demonstrated AI/technology value; described as early proof point and blueprint.
- Q1: Americas margin uplift partly attributed to deploying technology for efficiencies.
- Q2: Beginning to realize benefits from proprietary AI alongside advisory investments within margin expansion.
- Q2: Q1 ramped ~$5M AI roadmap spend; Q2 spent $13M (66 bps) at full planned FY26 run-rate.
- Q2: Internally developed/deployed tools already supporting Americas margin growth and holding International margins as a workforce force multiplier.
CURRENT (now)
- Q1: Engineers collaborating to extend capabilities; uncovering fresh use cases; deploying resources to tackle new problems.
- Q2: Delivering on all key internal AI milestones; investments expanded as expected.
- Q2: Deployment of proprietary AI onto projects and client deliverables growing rapidly; use cases identified by teams growing.
- Q2: Majority of professionals have access to AI models/tools; building model pipeline in earnest.
- Q2: Two large AI-linked wins (~$1B aggregate) with commercial mechanisms to share efficiency upside; improving win rates on large programs.
- Q2: Client conversations embrace innovation; active discussions on contracting that captures shared value (e.g., pain-share KPIs).
FORWARD (guidance)
- Q1: Expect tangible AI/technology value over time from investments; growing trend of technology-led solutions.
- Q1: Tech inflection expected to raise industry TAM and profitability; track employee NSR and employee EBITDA per headcount.
- Q1: FY26 net ~30 bps enterprise margin expansion after ~90–100 bps gross less technology investments.
- Q2: Expect continued margin benefits from tools; confidence in FY27+ margin progression and conversion.
- Q2: AI investment dollar/team base relatively static; expect growing profitability and margin uplift over next year and beyond.
- Q2: Increased confidence in 3-year margin improvement path and next-year margin delivery.
- Q2: Proprietary AI expands addressable market (e.g., healthcare design).
TRACK RECORD — PROMISE vs DELIVERY
—/100 (no quantified promises) no-quantified-promises 6 calls reviewed
Over six calls AECOM discusses AI investment, a tech acquisition, proprietary AI on projects, and AI-driven end-market demand (especially data centers), but management does not set quantified AI delivery targets with both a number and a deadline; track record is qualitative milestones and wins, while numeric goals are margin, advisory NSR, or market-size stats not tied to AI outcomes.
PRICED-IN (REFINED)
LOW (room left)Est. revisions falling · Fwd P/E 79.9 · EV/Sales 0.7x
AI claim maps to Americas Segment, International Segment
Analyst price targets have been cut materially (lastYearAvg 126.43 → lastQuarterAvg 103 → lastMonthAvg 100.4), outweighing modest grade migration (buys 8→9, holds 3→2). Forward consensus bakes in only moderate growth (FY25 EPS ~5.24 vs ~4.49), not an AI step-change. On hard multiples the stock is not stretched—EV/Sales 0.7x and TTM P/E ~18x are typical for E&C, and the 79.9x fwd P/E is a data artifact (denominator matches stale ~$0.89 EPS, not current ~$5+ consensus). AI-driven design/productivity gains would flow through Americas and International services margins, segments the market is not yet paying up for—falling revisions plus non-rich operating valuation imply AI upside is largely not priced in.
COVERAGE — ENTHUSIASM TRAJECTORY + CATALYSTS
3Q4 FY20245Q1 FY20253Q2 FY20255Q3 FY20258Q1 FY20268Q2 FY2026
AI enthusiasm across 6 calls — trend ↗ rising
Moved from AI-adjacent data-center demand and vague digital investment to proprietary AI live on projects, contract wins, and value-capture mechanisms.
RECENT AI CATALYSTS & NEWS
BUSINESS IMPACT - QUALITATIVE MATERIALITY
6/10 qualitative impact moderate medium-term · mixed evidence
Where AI matters: project delivery margins and megaproject win rate
Proprietary AI is deployed on live projects with hard FY26 spend (~65 bps, ~$52M/yr) and ~$1B AI-linked wins, but near-term P&L is investment-heavy (AI-specific FY26 benefit ~neutral) and the measurable uplift is mostly the broader margin program (~30 bps net) plus thin bookings flow (~0.6% next-FY rev), not a quantified productivity line.
Caveats: FY27+ margin benefits are asserted, not isolated or quantified as pure-AI productivity; ~$1B wins are bookings with ratable conversion; one award was post-quarter and not in backlog; Commercial pain-share/gain-share can pass efficiency to clients and cap hour-based upside on key contracts; ~65 bps annual AI opex is a real near-term margin/EPS drag if adoption does not convert
AI DISRUPTION / CANNIBALIZATION RISK two-sided · 5/10
GenAI can deflate routine design/documentation labor and client pain-share KPIs capture part of efficiency gains, yet complex regulated infrastructure programs still require accountable engineering judgment, site execution, and program management where AECOM is positioning proprietary AI as differentiation rather than a commoditized SKU.
OPTIONS / MARKET STRUCTURE
option liquidity: fair
proxy inputs — dollar-ADV $116M · beta 1 · px $71.44
source: proxy (no options chain on FMP)
FMP /stable/ exposes no options-chain endpoint on this key, so ATM IV, bid-ask spread and open interest are unavailable. Liquidity below is a PROXY from dollar-ADV, beta and price level (a stand-in for option depth), not measured option-market data.
CONFIRMATION — INSIDERS · 13F · LANGUAGE
Mixed — insiders selling, institutions adding, management language 6/10 measured.
INSIDERS selling 4 open-market sell(s) vs 2 buy(s) — net distribution
INSTITUTIONS (13F) adding as of 2026-03-31: 102 new / 128 closed positions; 332 increased / 200 reduced; institutional ownership -1.37pp; -29 net 13F holders
MGMT LANGUAGE 6/10 measured Troy claims milestones, rapid deployment, and a win; Lara hedges future value. Thin AI section, no firm AI P&L numbers.
commit “We are delivering on all of our key internal milestones and investments expanded in the quarter as expected.”
commit “deployment of AI onto projects and client deliverables is growing rapidly”
commit “our proprietary AI solution was a central element of the project proposal and our competitive edge”
VERBATIM AI QUOTES
“Through these margins, we are investing in and beginning to realize the benefits from our strategic priorities, which include our proprietary AI and growing our advisory practice.”
— W. Rudd, Q2 FY2026
“Turning to our development and deployment of proprietary AI. We are delivering on all of our key internal milestones and investments expanded in the quarter as expected. Importantly, deployment of AI onto projects and client deliverables is growing rapidly as are the number of use cases identified by our teams. The best measure of how AI is benefiting AECOM is our largest wins. We were recently selected for a substantial re-compete for a major energy client where our proprietary AI solution was a central element of the project proposal and our competitive edge. Notably, this contract includes specific mechanisms that allow us to capture value as we deploy AI to deliver greater value to our clients.”
— W. Rudd, Q2 FY2026
“This outcome not only reflects our strong performance on the last contract but also the value we are poised to deliver in the future through our strategic investments, including AI.”
— Lara Maria Poloni, Q2 FY2026
“But what we would expect to see in the commercial model that we've agreed is that revenue will continue to grow on those projects. But as we deliver using AI, we have a mechanism where we effectively will share the benefit from doing that. And so there's a pretty large upside to that project.”
— W. Rudd, Q2 FY2026
“I would think about it this way in terms of revenue. It's not necessarily that we're going to see more revenue from these particular contracts. We will see improved margins on those contracts. But what we are seeing is an improved revenue opportunity as a result of the competitive -- effectively the competitive advantages that we've created.”
— W. Rudd, Q2 FY2026
“Our clients are asking for more because the demand for our services far exceed sometimes the funding that has historically been in place. And specifically on that contract too, KPIs, where the more efficient we are in delivering, it's a pain share gain -- a pain share -- there's actually no gain share, I should say, pain share mechanism on that contract, which will allow us to share with the client that did not exist before that KPI on the gain share.”
— Gaurav Kapoor, Q2 FY2026
“in the first quarter, you would recall, we had only ramped up approximately $5 million of spend. Our expectation was 60 to 70 bps is what we will spend in FY '26. And in fact, in Q2, we ramped up that spend to that full scale. We spent $13 million on our AI road map, equates to about 66 bps.”
— Gaurav Kapoor, Q2 FY2026
“if you take a step back with the 66 bps of AI investment we're making in our margins in Q2, our Americas margins continue to grow over prior year and just a little bit better quarter-over-quarter as well because of some of these tools that we have already developed -- deployed -- internally developed and deployed internally are driving benefits.”
— Gaurav Kapoor, Q2 FY2026
“International business is not having same robust growth we're seeing in the Americas business, but the margins still held because they're being supported by these tools we've developed, which is being a force multiplier for our workforce and being able to deliver more efficiently.”
— Gaurav Kapoor, Q2 FY2026
“The answer is it does. And what this does is it allows us to actually have a way of entering some markets that we hadn't previously participated in a meaningful way in the past. And an example of that would be health care.”
— W. Rudd, Q2 FY2026
“we have the majority of our people having access to certain kinds of AI models and tools that help them in their work. And at the same time, and we mentioned this in our prepared comments, we've been working on actually building out, what I'll call it, the model pipeline.”
— W. Rudd, Q2 FY2026
“what we have experienced is we're experiencing an increase in our confidence in our path to ultimately improve margins over the next 3 years.”
— W. Rudd, Q2 FY2026
“you can think about that as sort of being relatively static over time. But what we are starting to see and we will see this will continue to grow is, obviously, an improvement in the overall profitability of the business and certainly in our margins.”
— W. Rudd, Q2 FY2026
“Our target investments in program management advisory services, AI and technology position us to unlock greater value for our clients and deliver on our multiyear financial targets.”
— W. Rudd, Q1 FY2026
“our rapidly expanding technology road map was key to our selection as we were able to demonstrate a tangible value opportunity from AI and technology over time. Our emphasis on bringing best-in-class technology-led solutions and the overwhelmingly positive client response is a growing trend in our business, and we believe this win serves as a blueprint for the value we expect to deliver from our investments.”
— W. Rudd, Q1 FY2026
“We've completed the integration of our September acquisition. We have already doubled the size of our team and engineers are deeply engaged and collaborating to extend our capabilities. The technology is now live on our projects and the initial performance results achieved have matched our expectations.”
— W. Rudd, Q1 FY2026
“This includes the operating leverage created by strong growth, mix shift to higher-margin services and the benefits from deploying technology to deliver efficiencies.”
— Gaurav Kapoor, Q1 FY2026
“we also demonstrated that we brought something new, which was the ability to use AI to transform the way they think about it and the way they design over the coming years and decades.”
— W. Rudd, Q1 FY2026
“It has created a higher TAM for everybody. Profitability has always gone up when things like that have happened in our industry, let it be when we went from going from paper to CAD designs to BIM modeling and like that happened about a decade ago.”
— Gaurav Kapoor, Q1 FY2026
“Specifically, our focus is on the facilities market.”
— Gaurav Kapoor, Q1 FY2026
“a key metric that we have now started sharing is employee NSR and employee EBITDA profitability by headcount.”
— Gaurav Kapoor, Q1 FY2026
“I wouldn't characterize this as a renegotiation. I would actually characterize this as our clients trying to seek out ways that they can employ us to actually deploy something that is more valuable.”
— W. Rudd, Q1 FY2026
“they're bringing up in the dialogue, how they would like to move to a method of contracting that recognizes that value. So moving away from something like cost plus to something that looks more like a fixed fee because it is in their interest and of course, it is in our interest to do that.”
— W. Rudd, Q1 FY2026
“during that process, the client asked us, they're willing to sign an NDA to understand what we have developed and what we will be developing over the next quarter, the next few years. And clearly, we were one of the two, including the incumbent that were successful in securing this 9-figure contract over a 10-year period.”
— Gaurav Kapoor, Q1 FY2026
“we have signed up for in the current year is gross margin expansion of somewhere around 90 to 100 bps at the enterprise level. Once you net the investments we're making on technology in the current year, expect 30 bps of margin expansion.”
— Gaurav Kapoor, Q1 FY2026
ANALYST QUESTIONS ON AI
Q (Q2 FY2026, Andrew Kaplowitz (Citigroup)): Double-click on marquee wins where AI contributed and how the mechanics work — if successful in delivering for the client, does that mean man-hours/revenue are lower vs. a similar project without AI, and what is the potential profitability vs. a similar project without AI?
A: Troy: two wins aggregate almost $1B (one post-quarter, not in backlog); commercial model shares benefit as they deliver with AI with large upside; revenue on those contracts can grow but improved margins on them; broader improved revenue opportunity from competitive advantage. Gaurav: multiyear contracts; Scottish Water example went from practically no exposure to largest water contract let; second win multiple of current NSR; efficiency technology means clients ask for more scope; Scottish Water has pain-share KPI on efficiency that did not exist before.
Q (Q2 FY2026, Jamie Cook (Truist Securities)): How much are you investing in AI and how is that impacting margins this year; when does EBITDA/operating leverage accelerate; does AI change the addressable market as clients differ in willingness to adopt?
A: Gaurav: H1 margins above plan; Q1 ~$5M AI spend ramp, FY26 plan 60–70 bps, Q2 $13M (66 bps); Americas margins still up YoY despite investment; International margins held via tools as force multiplier; confident on FY27+ margin progression/conversion. Troy: clients want speed, cost reduction, certainty on complex outcomes and embrace innovation; AI expands addressable market (e.g., healthcare design globally via tools reducing time, uncertainty, cost).
Q (Q2 FY2026, Adam Bubes (Goldman Sachs)): Six+ months into scaling AI tools and the AI acquisition — has visibility improved on hitting margin expansion targets; updated thoughts on cadence of margin expansion in FY27 and FY28?
A: Troy: ~6 months in earnest — first ~3 months integration/ramp, majority of people now have access to AI models/tools, building model pipeline; benefits deploying and ramping; increased confidence in path to improve margins over next 3 years and for next year’s margin expectations.
Q (Q2 FY2026, Lauren Sullivan (UBS)): How do you see AI investments evolving over the next few years — will anything change about the type or magnitude of investments?
A: Troy: team/build-out relatively static financially; growing improvement in overall profitability and margins; margin uplift over the next year and beyond as the return signal.
Q (Q1 FY2026, Andrew Kaplowitz (Citigroup)): Does a new value model shaped by AI lead to shrinking revenue for AECOM; does the rate of EBITDA-per-employee improvement shift up substantially (e.g., 15%+ productivity in a year from AI)?
A: Troy: clients always want more value and pay for it; AI is an extension of prior technology investments; winning attributes (relationships, technical leadership, domain expertise) unchanged; AI adds opportunity; clients reward more value (fees and additional work because you extend their funding); Scottish Water example showed AI to transform how they think about and design over years/decades.
Q (Q1 FY2026, Adam Bubes (Goldman Sachs)): Update on integration of acquired AI technology across workflows; which workflows/end markets to scale via AI in 2026; what milestones to track?
A: Gaurav: 3 months into roadmap, integration complete, spend ramps through year; momentum high; facilities market initial focus where commercial structures advantageous; solutions impact all business lines to some extent; track workflows and employee NSR/employee EBITDA per headcount; historical tech inflections (CAD, BIM) raised TAM and profitability.
Q (Q1 FY2026, Jamie Cook (Truist Securities)): Are customers coming back to renegotiate existing projects or is it mainly upcoming work; could that be an incremental long-term positive as both sides learn to extract value?
A: Troy: discussions are about increasing customer value on projects, not renegotiation — clients seek more work because AECOM brings clear value; some clients want contracting that recognizes value (away from cost-plus toward fixed fee) because it aligns both sides.
Q (Q1 FY2026, Nandita Nayar (Bank of America)): On strong book-to-bill (especially international), how much was overall market vs. secured by leveraging AI capabilities?
A: Gaurav: backlog growth driven by many factors (geopolitical stability post-elections, demand vs. funding gap, technical expertise); clients ask how technology roadmap improves CapEx return, deadlines, delivery risk; Scottish Water proof point — client NDA to review developed/planned tech, 9-figure decade program win vs. incumbent and all competitors.