AECOM (ACM): $24.6B Backlog, Margin Leverage and Cash-Flow Muscle

Q2 Beat, Guidance Raise and a Record Backlog: The Short, Sharp Lead#

AECOM reported an earnings beat in Q2 FY25 with adjusted EPS of $1.34 (vs. roughly $1.25 consensus) and followed with a guidance raise that targets roughly +10.0% adjusted EBITDA growth and ~+16.0% adjusted EPS growth for FY25, underpinned by a record backlog of $24.59 billion. That combination — an immediate beat, a clear upward guidance revision, and a backlog that management describes as providing multi-year revenue visibility — is the single most consequential development for [ACM] in the past quarter because it ties near-term earnings momentum to a measurable pipeline of work.

What matters for investors is how durable the beat and the margin improvement are, whether backlog composition supports higher-margin revenue conversion, and whether cash flow and capital allocation choices preserve optionality. This report connects the dots between GAAP results, adjusted operating performance cited by management, balance-sheet dynamics, and the strategic wins management is converting into revenue.

Financial performance: revenue, margins and the quality of the beat#

AECOM’s FY2024 consolidated financials show a company expanding top-line and materially improving bottom-line results. Using the company’s fiscal year numbers ending September 30, 2024, revenue increased to $16.11 billion from $14.38 billion in FY2023, a year-over-year increase of +12.03% (calculation: (16.11 - 14.38) / 14.38 = +12.03%). Gross profit rose to $1.08 billion, producing a gross margin of 6.70% (1.08 / 16.11 = 6.70%), while operating income was $827.44 million, an operating margin of 5.14%. Net income improved substantially to $402.27 million, a net margin of 2.50% for FY2024 (402.27 / 16.11 = 2.50%). These GAAP calculations mirror the company’s reported trends and show a meaningful YoY improvement in profitability metrics.AECOM Reports Fourth Quarter and Full Year Fiscal 2024 Results

The near-term EPS beats referenced in company releases and earnings-surprise data are reflected in quarterly adjusted results: Q2 FY25 adjusted EPS of $1.34 beat the street by roughly +7.2% (calculation: (1.34 - 1.25) / 1.25 = +7.20%). Management also reported adjusted EBITDA in the low-$300 million range for the quarter (~$312–313M per company slides), supporting the raise to FY25 adjusted targets and signaling that the EPS beat rested on both top-line and margin execution rather than one-off accounting items.AECOM Reports Second Quarter Fiscal 2025 Results

It is important to distinguish consolidated GAAP margins from the adjusted segment margins management highlights. GAAP operating margin for FY2024 was 5.14%, while management has cited segment adjusted operating margins in the mid-teens for recent quarters (for example, 16.1% in Q2 and higher in later quarterly commentary). The gap reflects the impact of corporate costs, amortization of intangible assets, acquisition-related items, and the difference between consolidated revenue and the higher-margin advisory/program-management mix that management is emphasizing. Investors should treat the adjusted margin trajectory as informative for future profitability but anchored to the GAAP baseline noted above.

Table 1 below summarizes the last four fiscal years of key income-statement items and the margins calculated from those figures.

(All figures above are taken from AECOM’s published fiscal year filings for the years cited and were used to compute margins shown. See company filings for FY2024 and FY2023.)AECOM Reports Fourth Quarter and Full Year Fiscal 2024 Results

Balance sheet, cash flow and capital allocation: where the cash is going#

AECOM’s balance-sheet shape improved in FY2024. At September 30, 2024, cash and cash equivalents stood at $1.58 billion, total assets were $12.06 billion, total liabilities $9.69 billion, and total stockholders’ equity $2.18 billion. Total debt was $3.03 billion, leaving net debt of $1.45 billion after cash (calculation: 3.03 - 1.58 = 1.45). Free cash flow for FY2024 was $707.89 million and net cash provided by operating activities was $827.49 million.AECOM Reports Fourth Quarter and Full Year Fiscal 2024 Results

Two practical leverage ratios derived from these figures are instructive. First, net debt to FY2024 EBITDA using the fiscal-year EBITDA value of $1.08 billion is 1.34x (calculation: 1.45 / 1.08 = 1.3426x). Second, total debt to equity at year-end is 139.0% (calculation: 3.03 / 2.18 = 1.3908 or 139.08%). These simple, transparent calculations differ modestly from some TTM metrics presented elsewhere in the dataset (for example, a reported net-debt-to-EBITDA of 1.04x and a debt-to-equity TTM of 122.4%). The source of the divergence is methodological: the compiled TTM ratios use trailing-four-quarter EBITDA and other rolling-period smoothing that can be different from single-year, fiscal-year snapshots. Where possible, this report prioritizes FY2024 audited figures for balance-sheet calculations while noting the TTM results used by market-data providers for valuation multiples.[See keyMetricsTTM in supplied dataset]

Table 2 summarizes the balance-sheet and cash-flow highlights used in these calculations.

(All figures sourced from company filings cited earlier.)AECOM Reports Fourth Quarter and Full Year Fiscal 2024 Results

Capital allocation in FY2024 leaned toward returning cash to shareholders and opportunistic balance-sheet repair. AECOM repurchased $478.5 million of common stock and paid $115.24 million in dividends in FY2024, representing roughly 67.6% of free cash flow used for buybacks alone (calculation: 478.5 / 707.89 = 0.676). Dividends as a percentage of FY2024 net income are approximately 25.04% (calculation: 115.24 / 460.25 = 25.04%), where the numerator is dividends paid and the denominator is net income as reported in the company’s FY2024 cash-flow statement line for net income/cash reconciliation. Management’s published payout ratio in the dataset (circa 20.27%) is likely based on adjusted or TTM earnings measures; the difference is again an artifact of adjusted vs. GAAP baselines.

Backlog, book-to-burn and how revenue visibility translates to earnings#

Management cites a total backlog of $24.59 billion and sustained book-to-burn consistently above 1.0x for many quarters. Backlog composition matters: management notes the mix is increasingly weighted to higher-margin advisory, program-management and digital services, and the geographic profile is skewed toward the Americas where NSR growth is strongest. AECOM reported Americas NSR growth of roughly +6–8% in recent quarters, while International NSR expanded at a lower but steady rate. The company explicitly links margin expansion to this mix shift: advisory and program-management work typically carry higher adjusted operating margins than transactional design work, and converting a larger share of backlog into those work types is a primary lever of margin improvement.AECOM Reports Second Quarter Fiscal 2025 Results

Backlog alone is not a free lunch: execution risk, concentration of funding sources (notably government programs), and the pace of booking vs. burn determine whether backlog translates to predictable revenue. Management’s repeated statements that book-to-burn is above 1.0x — if sustained — mean backlog is being replenished faster than it is consumed, providing a cushion and underpinning the raised guidance. The most important risk to monitor is whether the higher-margin mix can be sustained as backlog converts, and whether program-level execution preserves those margins.

Strategic project wins and secular drivers supporting the backlog#

Concrete awards in water, transportation, aviation, energy transition and digital infrastructure underpin the backlog quality. Notable, verifiable wins include the Changi Water Reclamation Plant Phase 3 joint-venture role, program-management contracts in the Middle East (for example, The Avenues – Riyadh Phase II project-management scope), and multiple IDIQ awards from the U.S. Army Corps of Engineers for work across Europe. These wins are strategically significant because they place AECOM in advisory and program-management roles that extend the revenue opportunity over multiple years and usually attract higher margins than pure design tasks.AEcom Binnies JV to Expand Singapore's Changi Water Plant

Macro tailwinds that directly map to AECOM’s service set include continued deployment of U.S. infrastructure funding (notably the IIJA), multi-year national infrastructure plans in the UK and Canada, and large-scale Gulf-region urbanization programs. In addition, the rapid expansion of data-center and AI infrastructure is a newer, high-margin addressable market for technical design and program management — one that the company has highlighted as growing within the backlog.

Margin dynamics: what changed and is it sustainable?#

AECOM’s FY2024 GAAP operating margin of 5.14% marks improvement over FY2023 (2.25%) and is consistent with a multi-quarter improvement path. Management’s reported segment adjusted operating margins in recent quarters (for example, 16.1% in Q2 FY25; subsequent commentary noted even higher levels in later quarters) indicate that changes in mix and operational execution are lifting profitability in the higher-margin businesses. The critical question for sustainability is whether those adjusted margins can be realized at scale after corporate overhead, amortization, and non-cash items are applied.

Sustainability looks credible if three conditions hold simultaneously: (1) the backlog conversion rate to higher-margin advisory and program-management work remains high, (2) project execution avoids margin-dilutive overruns, and (3) corporate cost structure does not grow faster than revenue. The reported free cash flow conversion (free cash flow of $707.89 million on operating cash flow of $827.49 million) demonstrates strong cash conversion, which offers management the flexibility to invest in digital tools, pursue selective M&A or continue buybacks without stressing the balance sheet.

Capital allocation: buybacks, dividends and leverage discipline#

In FY2024 AECOM repurchased $478.5 million of stock and paid $115.24 million in dividends while reducing net debt modestly. Repurchases consumed a large share of free cash flow in the year, leaving the company with net debt of $1.45 billion. This mix of return-of-capital and debt reduction is consistent with a company confident in its cash-generation capacity and in the durability of its backlog. That said, aggressive buybacks can limit flexibility if macro conditions deteriorate or if backlog conversion slows, so the balance between returns and reinvestment will be an important governance dynamic to watch.AECOM Reports Fourth Quarter and Full Year Fiscal 2024 Results

Data points to watch and material risks#

AECOM’s exposure to government-funded projects — management has cited roughly ~46% government-related revenue in prior disclosures — is a two-edged sword. It provides predictability tied to multi-year programs but creates sensitivity to budget timing and political cycles. Project execution risk (scope changes, weather, supply-chain effects) and geopolitical exposure in regions such as the Middle East and Asia are ongoing risks. Additionally, the dataset contains a few methodological inconsistencies — for example, TTM ratios presented in market-data summaries (net-debt-to-EBITDA of 1.04x; debt-to-equity of 122.4%) differ from simple FY2024 snapshot calculations (net-debt-to-EBITDA = 1.34x on FY2024 EBITDA, debt-to-equity = 139.0%). Those differences arise from rolling-TTM vs. fiscal-year bases and adjusted vs. GAAP measures; practitioners should be explicit about which basis they use when comparing leverage or valuation metrics.

Another item worth watching is change-in-working-capital: FY2024 cash-flow reporting shows a change-in-working-capital line of 0 in the supplied dataset, which is unusual and likely reflects rounding or classification differences in the public dataset — FY2023 and earlier show material working-capital moves. Any meaningful swing in working capital can affect quarterly cash conversion and should be monitored in upcoming filings.

What this means for investors#

Bold outperformance in recent quarters accompanied by a guidance raise and a $24.59B backlog argues that AECOM is entering a period where revenue visibility and margin mix improvements can drive continued earnings expansion. The operating story is one of converting a larger share of wins into advisory and program-management work, which is higher-margin and more recurring than purely transactional design services. If management sustains book-to-burn above 1.0x and controls execution risk, adjusted margins can remain elevated relative to historical GAAP margins.

At the same time, the balance-sheet picture is mixed: net leverage measured on a fiscal-year snapshot is conservative (net-debt-to-EBITDA approximately 1.34x), but buybacks consumed a large share of free cash flow in FY2024. That allocation choice supports shareholder returns but narrows the company’s buffer against an execution shock. Investors should therefore track quarterly cash flow, backlog conversion rates into advisory work, and any shift in the mix between government and private-sector clients.

Key takeaways#

Record backlog and visible revenue: The $24.59B backlog and sustained book-to-burn above 1.0x provide conversion visibility that underpins the current guidance raise and recent EPS beats. Backlog quality — the share that is advisory/program-management — will determine the magnitude of margin uplift.

Improving profitability with clear cash conversion: GAAP operating margin expanded to 5.14% in FY2024 from 2.25% the prior year, and free cash flow conversion remains strong ($707.89M FCF, $827.49M cash from ops) which funds buybacks and dividends while keeping net leverage moderate.

Capital allocation is shareholder-friendly but reduces flexibility: Buybacks of $478.5M in FY2024 consumed ~67.6% of free cash flow, signalling confidence but also reducing room for large, unexpected investments without tapping the credit profile.

Watch the details, not just the headlines: Adjusted segment margins reported in recent quarters are substantially higher than GAAP consolidated margins; the critical investor questions are whether those adjusted margins are sustainable as backlog converts and whether working-capital dynamics or project overruns reassert themselves.

Conclusion — synthesis and near-term monitor list#

AECOM’s recent beat, guidance raise and record backlog combine to tell a coherent story: demand for infrastructure and advisory services is robust, and AECOM is increasingly winning higher-margin roles that can lift adjusted profitability. The company’s cash-flow generation gives it latitude to return capital while maintaining a conservative net-debt position in absolute terms. That said, investors should remain attentive to several near-term monitors: backlog composition (advisory vs. transactional), book-to-burn trends, quarterly free-cash-flow conversion, and any widening between adjusted segment margins and consolidated GAAP margins. Methodological discrepancies between TTM market-data metrics and fiscal-year snapshots require explicit reconciliation when using leverage or valuation multiples in comparative analysis.

For primary source materials referenced in this analysis see the company releases and investor slides cited throughout: AECOM Q2 FY25 results and prior full-year and quarterly reports provide the underlying numbers and management commentary that anchor the narrative offered here.AECOM Reports Second Quarter Fiscal 2025 Results