Aramark Q2 FY2026 earnings call

• Core Company Performance

• Overall second quarter organic revenue grew 12% year-over-year to $4.8 billion, including a 3% benefit from a calendar shift that has no impact on full-year 2026 results.
• Client retention across the entire company exceeds 98%, matching strong levels from last year.
• Fiscal 2026 year-to-date new client wins have reached an unprecedented $1 billion, outpacing last year's full-year total of $1.6 billion at the midpoint of the year.
• GAAP EPS was $0.38, and adjusted EPS grew 40% year-over-year (constant currency) to $0.49.
• Net operating cash flow increased 56% year-over-year to $400 million, while free cash flow grew 116% year-over-year to $305 million, enabling proactive debt repayment and continued share repurchases.

• Strategic New Market Entry: Hyperscale AI Data Centers

• Launched Aramark Nexus, a new service platform delivering integrated hospitality and workforce support for large-scale, remote data center construction projects.
• Secured a multi-year engagement with a top global hyperscaler that will become Aramark's largest single client when fully ramped, with expected annual revenues of several hundred million dollars.
• The business model is capital-light, with margins above the company average and expected attractive returns, drawing on Aramark's existing expertise serving remote/complex sites like extractive operations and national parks.

• Operational & Productivity Initiatives

• Technology initiatives including Culinary Co-pilot (menu optimization) and Labor IQ (labor scheduling) are driving productivity gains in food and labor, with Labor IQ reducing reliance on higher-cost agency labor.
• Global supply chain continues to expand group purchasing organization (GPO) reach, with inflation tracking in line with management expectations across all regions.

1. FSS-US: Organic revenue increased 12% year-over-year to $3.4 billion, with an 8% increase after excluding the 4% calendar shift benefit. Adjusted Operating Income (AOI) grew 27% year-over-year, with the calendar shift contributing approximately 13% of this growth. Key sub-segment performance included double-digit growth in Workplace Experience, 15% larger average new client wins for Refreshments, successful Penn Medicine launch in Healthcare, and strong growth in collegiate hospitality and sports and entertainment. This segment contributes ~71% of total company organic revenue.

2. International: Organic revenue increased 13% year-over-year to $1.4 billion, with a 12% increase after excluding a 1% calendar shift benefit. It achieved 12% constant currency AOI growth, with broad-based growth across all regions: double-digit growth in Europe and Canada, and high single-digit growth in emerging markets. This segment contributes ~29% of total company organic revenue.

• Management updated fiscal 2026 organic revenue growth guidance to the high end of the prior 7% to 9% range, maintaining the AOI growth guidance of 12% to 17% and adjusted EPS growth guidance of 20% to 25%.
• Accelerated AOI margin expansion remains on track to hit the 30 to 40 basis points improvement expected for the full year, with startup costs for record new business openings temporarily pressuring margins in the near term before scaling in 2027.
• The 2026 guidance does not include any revenue or profit from the newly awarded hyperscaler AI data center engagement, as the contract ramp-up timeline is still being finalized.
• Management remains committed to reaching a leverage ratio below 3x by the end of fiscal 2026.

• Actual results may differ materially from forward-looking statements due to general macroeconomic uncertainty, geopolitical volatility, and energy market fluctuations.
• Uncertainty around inflation trajectories could impact cost structures if prices rise faster than expected, though Aramark notes it has multiple operational and pricing levers to mitigate this risk.
• Permitting, construction, and ramp-up timing uncertainty for new hyperscale data center projects could lead to slower revenue growth than anticipated in this new market.
• Adverse weather events can create temporary negative impacts to revenue and profitability in education and other outdoor/onsite segments, with Q2 2026 seeing a $15-$20 million revenue impact from winter storms in the U.S. Northeast and South.
• Competitive pressure remains robust across all service lines, requiring continued investment to maintain market share.

Q: The $1 billion year-to-date new signings is very strong, and there was no change to AOI/EPS guidance despite the organic growth upgrade. Is this due to longer ramp timelines for large contracts or margin pressure from startup costs? / A: Aramark is well ahead of last year's signing pace, with many large accounts opening in the second half of 2026. Startup costs for this record level of new openings lead to modest near-term margin pressure, but margins will scale as the contracts mature, driving tailwinds in 2027. The hyperscaler contract ramp-up is not included in 2026 guidance, and management chose to take a prudent, conservative approach to guidance while expecting margin acceleration through the second half. (357 characters)

Q: Can you share more details on the economics, capital requirements, and competitive position for the new Aramark Nexus data center business? / A: Under the client NDA, specific terms cannot be disclosed, but this is a capital-light business: Aramark does not invest in construction or own real estate, and only provides support services for the construction workforce. The contract will deliver margins above the company average and strong returns, leveraging Aramark's existing expertise in integrated remote site services. Aramark's one-stop solution reduces client complexity, which is highly attractive to hyperscalers that focus their capital on data center infrastructure. (401 characters)

Q: What is driving the 98% client retention rate, and have you seen changes to new contract structure or duration? / A: Higher retention is driven entirely by improved client satisfaction from consistent delivery of promised value, which aligns with Aramark's increased focus on client relationship management. There has been no material change to average contract duration or deal structure for new contracts or renewals, with contracts following the same historical cadence of renewals. (256 characters)

Q: This first hyperscaler contract will be Aramark's largest ever, so why is it not included in 2026 guidance? What is the typical contract duration and long-term revenue opportunity? / A: The contract will scale to several hundred million dollars in annual revenue when fully ramped, but there are multiple locations with staggered start dates, and the exact ramp timeline is still being finalized. Construction phases for these projects typically last 3-5 years, with most revenue generated during construction. Aramark expects to rotate to new projects as construction completes, with hundreds of data center projects planned across the U.S. representing a large long-term growth opportunity. (343 characters)

Q: Have you seen any pullback in consumer discretionary spending that is impacting your consumer-facing segments like sports and entertainment? / A: Aramark has not seen any meaningful pullback in demand to date. Attendance and per capita spending remain strong in sports and entertainment, and reservation levels at national parks are also very strong. Aramark's core business mostly serves people where they work, study, and receive medical care, segments that are inherently resilient even during economic downturns, so management expects continued stability. (262 characters)