Jones Lang LaSalle Incorporated (JLL) Earnings

Management highlights

- Accelerate 2030 Strategy Execution: The strategy is taking hold across the organization in its early months, with early progress on platform efficiency and general automation already contributing to Q2 2026 results. Data and AI investments are a core focus to improve platform scalability and client value. The 'One JLL' integrated approach deepens client relationships by offering end-to-end services across the full real estate lifecycle, with ongoing work to improve cross-selling across service lines and geographies. - Core Business Strength: Resilient recurring revenue business lines (representing ~80% of total revenue) benefit from long-term secular outsourcing tailwinds, high client retention, and scale-driven operating leverage, with significant remaining growth runway in workplace management. Advisory businesses saw broad-based activity growth led by the US, with continued market share gains driven by JLL's brand, data, and execution capabilities for complex projects. - Capital Allocation & Balance Sheet: JLL maintains a disciplined, through-cycle capital allocation approach with a focus on converting top-line growth into profitability, cash generation, and shareholder returns. Q2 2026 free cash flow was $438 million, up 52% year-over-year, with full-year free cash flow conversion trending above the long-term 80% average. Net leverage improved to 0.7x, with $3.4 billion in corporate liquidity providing flexibility for business investment and shareholder returns. JLL repurchased $110 million in shares in Q2, bringing first-half repurchases to $410 million (reducing share count by ~3% year-over-year), with $2.6 billion remaining on the repurchase authorization. - Technology & Software Business: After integrating the software and technology business into the core P&L, the business achieved profitability in Q1 2026 and is well ahead of internal plans, with expected additional revenue growth in the second half of 2026. - Data Center Growth: JLL currently manages 340 data centers under facility management, with contracted gigabit capacity expected to grow by one-third in the next two quarters from already signed contracts, creating new recurring revenue complemented by transactional revenue for the segment.

Guidance

- Full-year 2026 adjusted EPS guidance is meaningfully raised to a range of $24.60 to $25.90, representing 34% growth at the midpoint. - Real Estate Management Services reaffirms the full-year mid to high single-digit revenue growth target, with second-half growth weighted to the fourth quarter. The strategic contract exit headwind for property management is expected to largely dissipate in coming quarters. - Leasing Advisory full-year revenue growth target is mid to high-teens, as the business laps strong prior-year comparables in the fourth quarter. - Capital Market Services full-year revenue growth target is mid-teens, factoring in strong prior-year comparables in the second half of 2025. - Investment Management reaffirms the full-year low single-digit advisory fee growth target, with near-term headwinds from Asia Pacific dispositions expected to persist. Incentive and transaction fees are anticipated to land toward the lower end of the historical range, weighted to the fourth quarter. - Commission tier headwinds from faster-than-expected growth in higher commission tiers are expected to moderate during the second half of 2026, and will reset cleanly in January 2027.

Segment performance

- Real Estate Management Services: Revenue grew in line with recent quarters, with broad-based growth across all business lines. Workplace management grew from new client wins and mandate expansions; project management grew 3% in the quarter (25% two-year stacked growth), with mid-single digit management fee growth led by double-digit growth in the Americas (driven by data center projects); property management core growth was partially offset by ongoing strategic contract exits. This segment represents approximately 80% of JLL's total revenue. Leasing Advisory: Revenue grew 24% in the quarter (28% two-year stacked growth), driven by stronger momentum across office, industrial, and data centers, with 20% global office leasing growth (outpacing 2% overall market volume growth), led by US resurgent demand from the technology and AI sectors. Adjusted EBITDA and margins expanded despite near-term commission tier headwinds. Capital Market Services: Overall revenue grew strongly, with 44% debt advisory growth, 20% investment sales growth, and 53% equity advisory growth. Two-year stacked growth is 71% for debt advisory and 30% for investment sales. US investment sales grew 53% (nearly doubling broader market growth), with strong performance led by the US, Japan, and Australia, outpacing slower elongated transaction timelines in parts of Europe. Adjusted EBITDA and margin expanded in the quarter. Investment Management: Advisory fee growth from $3.7 billion in raised capital over the past year was almost entirely offset by an anticipated decline from dispositions in Asia Pacific, resulting in flat near-term advisory fee performance.

Risks & headwinds

- Geopolitical conflicts (the Russia-Ukraine war and the ongoing Middle East conflict) have negatively impacted investor confidence in Europe, leading to elongated investment sales transaction timelines, and have also increased caution in major Asian markets such as India. No material direct impacts to JLL's business are currently observed if conflicts do not escalate further. - Slow overall commercial real estate capital raising in the first half of 2024 could potentially pressure future transaction activity, though JLL notes large amounts of pent-up demand and dry powder on the sidelines, with debt advisory activity remaining strong in the interim. - Interest rate volatility could impact transaction activity, though JLL notes that stable rate environments are manageable, and liquid current credit markets mitigate this risk for the remainder of 2026. - Unbundling demand for outsourced real estate services has not been observed, and broad demand for integrated holistic services remains strong, but a shift to unbundling would create pressure on the real estate management segment growth trajectory.

Analyst Q&A

• Q: What is driving JLL's margin expansion beyond broad market transaction growth, and what additional margin levers does the company have? /

  A: While transaction revenue mix contributed to margin expansion, a large portion of the improvement comes from company-specific platform investments delivering operating leverage. JLL has seen meaningful improvement in fixed cost efficiency relative to fee revenue, and still has additional runway to continue delivering incremental margin expansion going forward.

• Q: Will the current slower pace of commercial real estate capital raising reduce future transaction activity in capital markets? /

  A: While capital raising has been slower across the industry in the first half of the year, there is large amounts of pent-up demand and dry powder on the sidelines for portfolio repositioning, so demand is expected to build through the rest of the year. In the interim, JLL's debt advisory business is already performing very strongly, offsetting any slowdown in investment sales transaction activity.

• Q: What is driving JLL's outperformance of the broader market in US investment sales, and is that share gain durable? /

  A: JLL's outperformance is broad-based across most asset classes, with upticks in office, strong growth in industrial and logistics, and ongoing growth in multifamily. The share gains are driven by existing brokers becoming more productive via JLL's data and AI-enabled technology platform, without needing to add additional headcount. Client demand for integrated full-service real estate providers also supports ongoing durable share gains, with data and AI investments already driving improved lead conversion for closed deals.

• Q: What is the company's approach to M&A at this point, and what is holding back transactions? /

  A: JLL's disciplined underwriting approach for M&A has not changed; the company constantly evaluates opportunities, and past acquisitions (Scale and Race) have significantly outperformed internal projections. JLL will only pursue transactions that deliver clear shareholder value, and will not lower its underwriting bar, but expects to complete additional value-accretive acquisitions when appropriate targets are identified.

• Q: What three main factors drove the large upward revision to full-year 2026 adjusted EPS guidance? /

  A: First, stronger-than-expected performance across all business lines in the first half of 2026 gave the management team more confidence. Second, the company sees continued strong momentum and healthy pipelines for high-margin advisory businesses in the second half, supported by positive broader macro indicators including improving business confidence and global GDP growth. Third, platform investments are delivering more operating leverage from projected full-year revenue than initially expected, supporting higher profitability.