With me today, again, I'm Troy Rudd, the CEO of AECOM, and I have Lara Poloni, our President, and Gaurav Kapoor, our Chief Financial and Operating Officer. We have a lot to cover today. I'm sure before you arrived, you had the opportunity to spend a little bit of time with some of the announcements that we put out, and we have a lot of ground that we want to cover with you, and we think some really important ground. We're going to try and move through a little bit of the material at pace, spend some time where we think we need to, to make sure that we have ample time for Q&A.
It's been two years since we were together, our last Investor Day here in New York, and we've been doing a lot of work to try and continue to build an industry leader. We've been driven by a really important paradigm, and that paradigm has been a paradigm of continuous improvement. We've been doing that for six years, and we've been trying to do that constantly for the last two years to drive results for the organization and to make AECOM an Infrastructure leader. That's what's driving our conversation today: the continued, relentless pursuit of continuous improvement. We'll talk a little bit about how we're different than others in our industry.
We've sort of gone down a different path over the last six years and certainly over the last two years, where others in our industry have continued down the path of M&A and growing their organizations through M&A, and we've taken a very different path and a very different approach, and I hope you understand for good reason as we go through the rest of the conversation. I'm also really excited to talk about what we think is a generational opportunity in our industry. Before I do that, I did want to make just a few comments about what you would have seen in our press release this morning, or our press releases this morning. First of all, we're very proud of the fact that we had a very strong fourth quarter and a very strong fiscal 2025.
That was, I think, evidenced by the fact that we raised our guidance 3x during the year, and we beat that. We also delivered more than $500,000,000 in capital to our shareholders through dividends and through stock repurchases, and we built a record backlog to carry us into fiscal 2026. The other thing in our announcement is we announced that we're undertaking a strategic process to evaluate the alternatives for our Construction Management business. Now, we're not exiting the Construction Management business because it isn't a good business. We have just made the decision that we need to make sure that we're allocating the time of our Executive team, our management team, and the capital of the organization to the highest returning opportunities.
The highest returning opportunities we see are in what has been our design and consulting business, and in building an Advisory business, and making sure that we actually execute on our plan around how we transform the business through artificial intelligence. That is where we are going to spend our time and our capital, and we have reached that point in time where we think there is a better place, a better home eventually for our Construction Management team. It is a fantastic business. It is ranked number two or number three in the industries that it plays in here in the United States, and it has done a great job building up a very diverse portfolio of backlog. One of the things that has come through in a few conversations this morning that I will make sure we highlight is people misnomer the Construction Management business as a low-margin business.
We've been saying this for years is that all of our businesses have margins that are all around the same level of margin. Construction Management is a margin that has margins consistent with our Americas business. Again, we think it's a fantastic business, and we'll go through this process, and over the next 12 months, we'll see what happens. Also, we initiated our guidance for 2026, and you'll see our EBITDA and our EPS, we're expecting for the entire business to grow at 9% or 7% and 9%. Lastly, we've raised our long-term guidance, and in particular, our long-term margin guidance to achieving a margin of over 20%. Within that, there's a really important message. That important message is that we are changing the paradigm of operating leverage in our industry.
I'll give you some more details as we talk through the rest of the presentation. A few key messages that I'd like you to walk away with today. We're going to go through this discussion, but again, I just remind you this is what I'd like you to walk away with. First of all, over the last six years, we've always done what we said we're going to do. We've consistently announced targets, and we think are sometimes aggressive targets for growth and for margins and performance of the business, and we've consistently achieved those over the last six years. We stand here today to talk about what we're going to do, and we're not talking about it in the context of this is what we hope to do at some point in the future.
We're going to talk about this in the context that we're already doing it, and we're now willing to talk about it with you. Secondly, for the last two years, we have been quietly investing in building an AI capability, and we've been doing that quietly through our own margins. Next, as you'll hear, we have a great foundation of technical expertise upon which we've expanded our influence, and what that means is we've built a Program Management business off the capabilities in our Design business, and we started building an Advisory business, and we'll talk more about our expectations as we continue to build that Advisory business. The last point is, again, I said we're going to flip the operating leverage paradigm for industry on its head.
In our business, operating leverage has typically been determined by the fact that you have 15%, approximately 15% fixed costs. Think about that as things like real estate or IT. As you grow your business, that remains the same. As you grow your business, it creates operating leverage or improved margins. That also means that in order to grow your business, you have to add people. We've always said that we have to add professionals to the organization to ability to grow, and the cost that you add to the organization for every dollar of revenue is about $0.75 of actually the cost of people to deliver that work. How we're flipping that paradigm on its head is through the use of AI, we do not have to add headcount to grow.
That means that the operating leverage that we have in our business isn't 15% of our cost structure. It's 80% of our cost structure. We think that's extraordinary. The fact is we'll be able to continue to grow the business without having to add headcount. One of the largest constraints for growing businesses in the past, and this has been the rate at which new engineers or architects or designers or program managers can enter the industry and be trained to be successful. That has always been a limiting factor. We believe that's no longer going to be a limiting factor in the industry and for us. I'm going to go through a few things that I think are important just to, again, continue to lay the foundation of the vision for the company and the strategy in our place in the marketplace.
Again, we are on very solid footing. We have an extraordinary group of engineers and scientists and architects, and frankly, we think about this as a large competitive advantage. There are only a few players in the industry that have the size and the scale and the experience and the depth to compete with us. It is already a narrow playing field where there is a competitive advantage that already exists, and we've continued to build upon that. We've continued to strengthen that organization and move to a place where we're number one or recognized as number one. We moved this year to be number one in engineering and in design, the overall design firm. We still maintained our position as being number one in transportation, water, environments, and facilities or what we call buildings and places. We have a fantastic platform as an industry leader.
That has enabled us to actually win at an extraordinarily high rate, and this has had a profound impact on our margins as well. We work with our clients, our largest clients, and they trust us with their largest and most complex and iconic and important projects and programs. When we bid on those competitively, for the last three years, we have been winning those at an 80% rate. Or said differently, when our customers say there is something incredibly important, we are winning that 4x out of 5x We have an extraordinarily powerful platform upon which we are building. We also have, again, a set of track record of delivering on our performance. I do not think I am going to spend a lot of time on this.
Our history, so to speak, speaks for itself, but you can see the track record of performance, and as we stand here today, rely on that track record of performance as we move forward. We have built an incredibly strong management team that's very broad and very diverse and works together and collaborates globally to drive everything we do across the organization. We have built a culture in the organization where our people also focus on bringing the best of their best experiences across the organization to the individual clients. We have referred to it as our Think and Act Globally strategy, and it has been incredibly powerful. It is what has allowed us to build this track record of performance. This is our vision, and this remains unchanged. This has been our vision for the last four years is we want to extend our influence with our customers.
Again, as I said, we have this extraordinarily great and experienced team globally that does design, does engineering, does science work, does environmental design work. You take all of that together and you have this incredibly powerful platform. We said, with those incredibly powerful platform and experiences, how do we expand our influence in our individual clients? We first started with Program Management. We said, if we look at extending that incredible body of knowledge and experience, adding some people to our team that do Program Management work, coupling that with our team, we can expand or extend our influence within our clients or our customer base. We started that four years ago. We added members to our team based on the extraordinary experience that we have in Infrastructure, and we've grown a business.
We have grown a business from a few hundred million dollars in four years to now being over a $1.3 billion business. Again, with incredibly healthy and consistent margins. The next step in that journey for us was to build an Advisory business. Lara will spend a lot more time talking about it, but the Advisory business is a little bit different than what you think about from other advisors or consultants. When you think about folks like Bain or BCG or McKinsey, they come to the table with a very strong consulting offering, but what they do not come to the table with is an incredibly strong experience in I nfrastructure and in science. Recognizing that difference, we then are going to add more members to our team, and we started to do that over the last year to build an advisory business.
What does that mean when I say extending our influence? No longer just relying on design, but effectively through Advisory, being there on day one to help our customers create their own vision or develop their strategy, staying there throughout the process through Design and Program Management, and actually delivering the outcomes within Infrastructure to execute on their own individual visions and strategy. Think about this a slightly different way. It was, as I say, extending our influence. Think about that as addressing or improving or increasing our addressable market spend. In the past, go back to 2020, when we focused on engineering and design, we were being exposed to about 15% of our customers' addressable spend. Today, by expanding that into Advisory and Program Management within that same client, by extending our influence, we're now exposed to 35% of our clients' addressable spend.
Effectively, what that means for us is we have more bats with the same clients. It is a way for us to actually increase our market presence and drive organic growth in a way that you do not typically think about it. When we talk about our vision, again, to extend ourselves in Advisory Program Management and our underlying Design and Engineering, what we are really trying to say is we are increasing our addressable spend with our existing clients. Again, I will not spend a lot of time on this, but I think this is worthwhile to point out that in the long run, we play in incredibly healthy markets. There is no question that over the next few decades, there needs to be a significant continued investment in Traditional Infrastructure, whether it is Water Infrastructure or Transportation Infrastructure or Social Infrastructure.
There is no question that we play in great markets. In addition to that, there is a focus on improving the sustainability and resilience of Infrastructure. Even that definition is expanding. In the past, we had not thought about defense as improving the sustainability and resilience of communities and of Infrastructure. It has become even more important. It is even more important and even clearer now that investment in defense is actually improving the resilience of communities and countries. If you sort of look forward, there is an even larger opportunity for us as that continues to grow, and there will be for decades to come.
There is an insatiable need for energy, in particular electricity, as there is an investment, I mean, an amazing investment that is going to take place in AI and data centers and all the power and the water that you need to power that and to make that a reality. As we look at these markets, we have built an organization that is going to play in markets where, in the long run, our opportunities are going to be to grow greater than the GDP of a typical economy. We add to that, we are increasing our addressable market spend. We add to that that we have created and are going to continue to create a competitive advantage. All three of those things give us confidence that in the long run, we will continue to grow organically at a much faster pace than economies and GDP.
That gives us confidence about the growth in the organization. Now let me talk about something that we spent a lot of time thinking about for the past 18 months. I will say that 18 months ago, we questioned whether AI was an existential risk for our industry. We were genuinely concerned that maybe one of our peers or a new entrant into the market or maybe one of our existing industry software providers, which is the technology that we've used for 25 years to do design, we had a legitimate concern that could AI find a way to effectively put us out of business. We had a very genuine concern. We embarked upon a project. This is what I said 18 months ago. We did this. We've been doing this work, and we've been very, very concerned about it.
Over the course of the last 18 months, and this takes time to do, we've gone out and said, to start this journey, we actually need to find some leaders in the organization who have an understanding of AI and an understanding of our industry so we can start to understand what is possible and find out, is there someone or is there a way there's someone who can actually put us out of business? We started to add people to the organization. We hired people into the organization. We started to build with that team so we could sort of gain that understanding. The next thing we did is we said, across our organization, let's take people within the business and let's effectively retrain them, but let's go out with partners and let's experiment. Let's go out with technology firms.
Let's actually go out and do some real experimentation. Can we actually create artificial intelligence models that we can use in engineering? Think about this simply as today there are large language models, which I'm sure everyone in this room uses, but other math models. That's where we went to experiment in the world of math models and understand how large language models can actually influence the business as well. We started to experiment, and we started to see what was possible. We continued to build that team. We then went out and we found new entrants in the marketplace, and we started to partner with them, say, understand what they were doing, be a partner, and see were they actually building a team and a capability that we should really be concerned about? Were they, in fact, going to put us out of business?
We grew through all of those experiences. We built a team. We started to experiment. We experimented with people outside the organization. At a certain point in time, we actually made an acquisition. We found an organization that had built math models, and they were going to profoundly change the industry. They were going to put us out of business. They were very bold about that. They were unique, and now they're part of AECOM. We spent the last 18 months building a team, hiring, training, and acquiring. Now we have a unique team. The next thing we did is we said we actually have to start to build models. Think about this as building tools, building tools, building models, or even think about this as building new teammates, actually building new teammates.
The way we thought about this is we have our people that do engineering and design. They can have a teammate, and that teammate can be what's referred to as an AI agent. We have now built this out, and we have gone through the process of actually testing this with our clients and delivering projects and also understanding when you make a comparison, the way we have delivered a project and the outcomes we have delivered for our customers, are they different? They are dramatically different. I'll give you some more detail and explain that. We have now gotten to a place where we have been investing for 18 months.
We've been doing this quietly through our margins, and we've built a team that we know that doesn't exist anywhere else in our industry, and it doesn't exist at other new entrants, and certainly doesn't exist at our traditional software vendors that we've relied upon. We view this as a generational opportunity. Through that, again, we can flip the operating leverage paradigm. Let me give you a little more detail. I said that we were worried someone's going to put us out of business. I think foundationally, to answer this question is, should you be concerned and how could this happen? Let's look at what clients ask us to deliver for them. What they hire us to do is they hire us to deliver incredibly complex outcomes, whether that's an incredibly complex design or whether that's an incredibly complex Infrastructure outcome.
That's what they hire us to deliver. That's not changing. The clients are going to expect us to continue to deliver that. To deliver that, you have to have a really experienced team. We're still going to need the team of globally experienced engineers and designers and architects to all be able to come together and give our clients confidence that we can deliver those outcomes for them. They also have to be able to certify those results, and they have to be able to stand in front of regulators and say, "Be comfortable with this outcome." That doesn't change. The next thing is you have to have a trusted client relationship. A client does not trust you with billions of dollars of Infrastructure investment or even a design, excuse me, that takes tens of millions of dollars to deliver.
They don't do that unless you have a trusted relationship. You have to have the team, and you have to have a trusted relationship with your clients. Next is you have to have a balance sheet. You have to be able to stand behind those designs, and you have to be able to do something as simple as procure an insurance program to support that client's project. The last thing is you use technology. The technology that we have used has been the same for the last 25 years. It's been software, and it's been evolving slowly. We see that's the place to insert ourselves is by building a team of AI professionals. We're talking about AI PhDs, machine learning PhDs, data scientists PhDs.
We're talking about a group of people that have this unique ability and skill that we have now tested and, more importantly, got them to work with our engineers to be able to build the tools or the teammates to transform how engineering is delivered. We now step back and say, "You have to have all of those four things to be successful. We're the only one that has that team, and we're the only one that has a tested team, and we're the only one that we're over that can deliver this." You step back and say, "Should you be worried about new entrants? Not really, because they might be able to develop technology, but they don't have the engineering teams where you have the confidence that the result will get delivered.
They don't have the trusted relationships, and they don't have a balance sheet. New entrants, you become unconcerned about. You look at our traditional software companies. Yes, they can provide tools, but they don't have those other conditions as well. Yes, they have a balance sheet, but they don't have a team, and they don't have that trusted relationship with clients. You look at our peers. Our peers have all those conditions, but they're using old tech. Old tech will deliver a very different answer. I actually think we viewed this as an existential risk 18 months ago. Today, we view this as an existential opportunity, and maybe we should be considered the disruptor. I talked about this in terms of a generational opportunity.
Now, let's think about changing the outcomes that we deliver for clients and the outcomes that we change at AECOM and how we deliver. In terms of what we've learned in delivering client outcomes, we have learned through using AI with our teams that we can deliver things at an incredibly fast pace. In the Design process, what might take months, AI can do almost instantaneously. What we would deliver would not be instantaneous because you still have to have your team be part of the process so that you have the ability to certify and give the confidence to your customers that you're going to deliver something that's different. Now you're taking something that would be months, and maybe you're shortening that design timeframe to weeks.
For a customer, what that means is that means it's an asset that can be put in place at a much faster pace. It also means that the really important decisions that you need to make, and those decisions are typically around the cost of the design or the cost of the Infrastructure you're designing, you make those decisions much earlier in the process. Think about it as the opportunity to value engineering to get to your customer's budget much earlier in the process. We can now accelerate that. That's incredibly valuable for customers. The next thing is there's a lot of times there's redesign and there's rework as you go through the process.
Because we're reliant on AI and the pace at which it can work, we can do rework, and we can do redesign, or we can adjust the models at a much faster pace than we could have in the past. Again, more acceleration in the process for your customer, which is incredibly valuable. The last thing it does is it gives us the ability to materially reduce cost. And as we've gone through the design process, we have found that we're able to take 10%-20% of the materials and thus potentially the cost out of a design. That's the client outcome. That's an incredibly different value proposition than using AI deliveries to customers. And then for us, it profoundly changed the ways that our team will work. You think about this. As I said, we've shortened months into a very short time of weeks.
It does two things. One is, obviously, it allows us to deliver that work with far less participants. That changes the operating model, our operating leverage model in the business. Now we can grow without having to add people. The other thing it does for people and makes us more attractive to the place to be is it gives us the ability to accelerate the careers of our professionals. In the past, you'd come up through the organization, and you'd spend years learning how to design and doing the same thing over and over and over. We said in the past, well, it takes a long time, maybe a decade, for someone to design that particular kind of Infrastructure.
Because we're able to take those professionals and give them those profound experiences in a much shorter period of time, we can accelerate their careers and their career growth. We can turn a 10-year seasoned design professional, we can create that in a much shorter period of time. That is profound for us. It gives us the ability to go and attract people to have a profoundly better and different career, spend more time, be more innovative, or come up with ideas for their customers. That's fantastic. The other thing it does is, again, it just changes the operating paradigm. As you can appreciate, I'm going to talk a little bit about how we're thinking about this and why this works.
For obvious reasons, we do not want to create a roadmap for what I'll say are our peers or perhaps used to be our peers. We do not want to create that roadmap. I am going to be a little cautious in how I talk about this. As I said, starting with we've created a team that can work with the engineers or the designers or the architects in our business because they understand how to design, and they take the technology and merge it together. You create math models that can support or do the design. We have had success building it out in segments and deploying it on projects and testing it for over a year. Now we have the confidence that we can extend this across our entire portfolio of Engineering Design.
We have a roadmap over the next 18 months where these teams, and we're building those teams again at a fast pace so we can accelerate this process. Over the next 18 months, we're going to actually do this across our entire portfolio of Engineering and Design and transform the way we do work and bring those client outcomes, I mean, those outcomes for our organization across the entire spectrum of what we do. I'll give you a little bit of insight as sort of how do you actually create AI that can produce these results? First of all, again, you have to have the right team of people that can come together to do it.
Two very diverse skill sets that come together, and we know that they've worked together, and they can actually build these, again, I'll call them teammates, or they can build these models that we can deploy. Think about taking a design and delivering a design with 10% or 20% less materials. Why is that? Two fundamental reasons. One is the Engineering and Design process today is fraught with human bias. The way the process goes is the client gives you a specification, and then you start to design it. As you design it, you take a conservative approach. Think about that through that conservative approach. You know it needs to sort of withstand a lot of scrutiny in the process, regulatory scrutiny, client scrutiny. You might design it to be a little better than maybe it needs to be.
You take something that has all of these various designers and with various disciplines coming together, mechanical, civil, electrical, they come together, and they all just make it a little bit better than it needs to be. AI does not do that. AI gives you the answer. It gives you the, "This is exactly the right answer. This is exactly what you need to design to." The other thing in that process is optimization. A lot of times you will do a design, we will price it out, and we will find out it is too expensive. We go through a process called value engineering. Value engineering means that you have the team come together, and you say, "What can we do to make this more effective? How can we take some cost out of this design?" They try and optimize the design.
It is, again, human beings under a lot of time pressure because at that point in time, you have your customer saying, "I need the new design. I cannot wait." You come together, and I will call the optimizations being incremental. Imagine that AI, as I said, can work and do this. The math models can do this instantaneously. If you start upfront in the process and you have trained AI so that it takes the human bias out of the equation, and you have trained it so that it can optimize to the absolute best answer upfront, that is how you end up with your designs having 10%-20% less material and therefore cost. The way that you go about doing that, again, is you take these teams and do that. You also have to have a knowledge of design.
I'll call it you have to have knowledge of first principles that you use for design. Then you have to have an understanding of how do you actually go through the process? What are the steps of, for example, designing a bridge? You have to have that knowledge. The next thing is you have to have some data that you can use, but not too much data. The really important powerful part of this is then you create synthetic data upon which you train a model. It is a combination of those things.
It's a combination of the two teams coming together, having the experience of design with the right AI capability, the ability to build math models, and then you bring that together with a little bit of the data, and you bring it together, and you create synthetic data to train models, and then you get the output. Where we are today is we've been able to work through those things and have confidence that we're now going to be able to build this across the entire spectrum of what we do every day. Again, that will transform the outcomes for our clients, and it'll transform our operating or our leverage model. As I said, this didn't come together overnight. This actually goes back years on our journey. We've been in this constant pursuit of innovation and improvement. We built a team.
We built a culture that does this. As I said, 18 months ago, we started on kind of the digital journey four years ago, and we very quickly realized that the digital journey was old news. As I said, we recognized that there might be an existential risk with AI. We started two years ago, experimented, and then 18 months ago, we really started this as our new journey. This is what has taken us to get here. The reason I bring this up is because this is not something that you can do overnight. You cannot just flip a switch and say, "I'm going to do AI tomorrow." You cannot. If someone wants to do what we do in our industry, they have to follow this journey that has taken us 18 months to get here.
This isn't something that you can catch up quickly. The other big question we've had for, I'll say, maybe the last year, 18 months is, "Boy, you have industry-leading margins, and you set a target of 17%, and you've just achieved them. I guess there's really no margin upside in your business." We've quietly been saying, "No, there is upside in our business. We just haven't been ready to talk about it yet." Now we are. The upside in our business hopefully becomes self-evident in the way we're actually going to change the delivery of what we do. The upside now is we see our margins going beyond the 20%, and they're going to be enabled by this team and by the AI and the way we're deploying it across the business. You've heard a lot from me.
I just thought it might be helpful for you to hear from some of the other leaders in our business to get their opinion and hear from some of our AI leaders just so you get a sense of how we feel about it as an organization. If you're on the video, please.
Innovation in our industry has provided for safer Infrastructure, more sustainable Infrastructure, better construction materials, and even better construction techniques. The reality is we haven't seen a lot of innovation in the way we develop and design, really, since we switched from paper to computers. AI is going to profoundly change that. It's an opportunity for us to drive speed into the process, to reduce the cost of materials and delivery for our clients, to allow for more investment in Infrastructure for our communities.
Our approach to tech has been very intentional, and it has been impact-driven. We have strategically embraced AI and automation, not because they're trending, but because they really enable us to deliver better, faster, and more cost-effective outcomes at scale. We can simulate, we can optimize, we can really iterate in a fraction of the time. I'm absolutely confident we're positioned to lead. We're not just experimenting with AI. We have made a deliberate company-wide commitment to really embed it in how we deliver value. We have already seen how transformation has taken place within the IT sector, and AECOM is now helping to drive a similar shift in an industry that urgently needs both innovation and transformation. We accelerate the engineering process by integrating AI agents directly into the design teams.
This collaborative approach allows human expertise to focus on creativity, decision-making, and strategic directions, while AI handles the detailed analysis and intricate problem-solving. AECOM's transformation is both boldly led and truly transformative. Our ability to take an automation, a great way of delivering something, and take it to another geography, demonstrate it for a client, is one of the key ways in which we differentiate ourselves from many of our competitors. Now we are in a world where things are changing rapidly. We have got to upskill our workforce very quickly, and we can upskill them faster on whatever job we deploy them. We are pushing the boundaries of what is traditionally done in our industry and find that next level of value for our clients and for AECOM.
With the advancement of our AI strategy going forward, we'll be able to take a leap ahead of our peers to deliver a better solution for our clients.
We'll move through the materials, and we'll get to that in a few more minutes. I just want to conclude with this. Transforming our industry and transforming our business obviously has pretty broad and important financial implications. This is the way we think about the business in terms of our enhanced or changed financial performance. We don't see a change in the organic growth opportunity in the business. I've sort of laid out why we think that's the case. What we haven't built into this is we haven't built into what might be a competitive advantage that gives us an even bigger opportunity for organic growth. We also see our margins, again, growing beyond 20%.
That is a fairly compelling and significant outcome. All of that means that we expect an EPS CAGR of over 15%. This is how we are planning on getting there. The other thing I will point out is it does not change the underlying cash flow profile of the business. We expect to convert earnings to cash at 100% in the long run, which means, again, that we will have ample capital to continue our capital allocation opportunity and to enhance that 15% EPS CAGR. All of this comes together in financial terms. This is the summary of what we see in our future. I am going to now turn this over to Lara.
Thank you, Troy. Thank you, Troy. Good morning, everyone. We are one year into the creation of our next billion-dollar platform, our higher margin platform being our Advisory business.
Now more than ever, we see a tremendous opportunity for this to be a key contributor to our competitive advantage, all differentiated by our tremendous technical capability. That is the key differentiator for us and our particular Advisory offering. We've seen over the last few years the management consultants try to encroach upon this Infrastructure space. Everyone's excited about urbanization Infrastructure. There has been a big move by the management consultants and the Big 4 into our space. However, they do not have the technical substance. The reason why we are the number one design firm, number one across all of our key end markets, is because we have the industry's best technical professionals. Our clients now more than ever need this technical expertise as they plan their next strategic plans, which projects to bring to market.
Whilst the management consultants can come with incredible cachet and brand, they do not show up with the technical substance and the in-depth knowledge of our clients' portfolios and their assets like we do. We have the long-standing relationships. We have built that client relationship moat, and our advisory offering will enable us to further consolidate that relationship that we have. We typically see the management consultants show up to many of our similar clients with a different model. It is four management consultants and one technical expert. Often that technical expert comes as a subject matter expert from outside. Sometimes it is from a firm like AECOM if they need real engineering and design know-how. We are flipping that model on its head. We show up. Our Advisory team show up with four technical experts who are well-known over many years to our clients.
They know us for that tremendous technical capability and knowledge. We also bring along one management consultant. We did not grow that capability overnight, but we now, one year in, have a team that is that complement, the four technical experts and the management consultant. We are really disrupting the Advisory industry. We think that there is a tremendous white space that we have moved into, which is unique to us because of that technical differentiation. People are really noticing. As I mentioned, one of the key things is because of the long-standing client relationships that we have, we can automatically open the doors at the C-suite of many of our client organizations and give them depth in the advice that we give them in terms of whatever challenges or opportunities they have.
One thing I want to be very clear on, we have not just packaged up a different team amongst our 50,000 professionals globally. This is a different team and with a different commercial aspiration. We have taken the time within AECOM to be very clear that we have a higher margin expectation, higher rates. What we are excited about is this is an entirely different commercial proposition with our clients. It is about value-based pricing. The same applies to the game-changing plan that we have around AI as well. It enables us to have a very different commercial conversation than what our peers have and to co-create that with our clients and to talk about what are the key success factors and how we are going to be incentivized and share in that and really craft that model. We really have moved to another paradigm of advice to our clients.
When we join that up with our Program Management capability that we've been building for the last few years, we extend our involvement across the project lifecycle, and it's positioned AECOM to a very different paradigm compared to our traditional peers. Advisory is a key component of the three pillars of the long-term growth algorithm. I'll just explain how we sort of break that down and make that contribution. Number one, we see tremendous opportunity to really grow our market share and extend our influence. As I said, we're moving to a different group that is occupied by the management consultants, and we have tremendous confidence in those long-term secular trends. Infrastructure, urbanization, they are long-term trends, and we have deep knowledge of those trends, and we are well poised now with our advisory capability to help our clients conceive.
What is the best business case for their projects? How do they rapidly bring projects to market? You all know there is a lot of pent-up demand in the Infrastructure world because of the budgetary challenges, the geopolitical shocks that have happened, particularly over the last 12 months. Who better than AECOM to help our clients execute on that and bring those projects to market in the Infrastructure world? The same applies to the energy transition. The same applies to the world of resilience and sustainability, where we have market-leading credentials through the work that we've undertaken over the last couple of decades, particularly with our Environmental Services Firm and the new Advisory consultants that we've brought in. There are other market share gains that we absolutely believe that we can take. There's market share to be taken at the municipal level.
Many clients, for example, our traditional water clients, have revenue leakage. They have a real need for Advisory services to come and help them plan out what's next with respect to their portfolio of assets. There is a very exciting white space that our advisory team has already made a great impact in. That is the world of private capital and Infrastructure funds and financing. You all know that there are trillions, literally, of dollars out there. Infrastructure is a very attractive place for sovereign wealth funds, for pension funds, for superannuation funds, and investment firms to park their money. They see the long-term value in Infrastructure. We're excited about many of the conversations that our advisory team are having at the moment with many of the new clients in that space who really want rapid, timely advice, and they want ideas about project creation.
It means that we can break free from the traditional transactionary environment that many of our peers are in. We'll still be a participant in that, but this is a very exciting white space for us to move into in terms of project creation, market-led proposals, and unsolicited proposals as well. That is the third element of that long-term growth algorithm that represents a new space for us. Our clients need that support now more than ever. Our influence and the way that we grow this advisory business is going to be at global scale. Obviously, there's a key opportunity here in the U.S., but around the world, we look at the rebound that we're expecting in Infrastructure over the next decade. The U.K., for example, has a 10-year Infrastructure blueprint, $725 billion of water, transportation, energy Infrastructure.
Those clients are going to need our help about how to rationalize and prioritize which projects and what is the technical advice that they need to bring those projects to market. Here in the U.S., we're only 41% spent in terms of IIJA. As I said, we know that there's significant opportunity at all levels of government to help bring these projects to market with those Advisory capabilities. Our Advisory capability, in a nutshell, is really helping our clients to prioritize projects, how to navigate this new and ever-changing funding environment also. As Troy explained, when coupled with our AI capability, it's going to give tremendous confidence to our clients who have many great ideas about projects but want a heightened level of technical understanding and confidence around what it's going to take to deliver in a timely and cost-efficient manner.
Critical to our success so far, and indeed going forward, has been the ability to attract the industry's best talent. You'll recall a year ago, we brought Jill Hudkins to AECOM as the leader of our Advisory business. We started first in water and environment only, but one year in, we saw tremendous opportunity to really broaden that across all of our services, whether it's environment, water, transportation, or facilities. There's been great interest from many of our clients. Most importantly, many of the people that Jill has hired from the world of the Big 4 and the management consultants are truly excited about what we've been creating at AECOM. I've had the pleasure to join Jill on many of those early interviews with some of those consultants, and they said very clearly, "We have the know-how.
We have the playbook in terms of what makes a McKinsey or a BCG successful. We know how to frame that differently to what you guys do. We know how to price that differently to realize value. What we're excited about and why we want to come and join AECOM is because there is no other company that has the technical capability and the breadth of what you have at AECOM. We're really excited about what you're creating with your Advisory business. It has been relatively easy to attract this fantastic talent to AECOM, and we're excited about the many more team members that are going to join. We have great confidence in the ability to double the size of this business over three years. We're well advanced with that for this to be our next billion-dollar platform.
As Troy explained, the longer-term aspiration has been for our Advisory business and for Program Management. When we view those together, for that to comprise 50% of our business in time. Those two businesses together will be growing at a faster rate than the rest of the business. We have taken a very disciplined approach to the talent, the plan that we have, and the aspiration for our Advisory business and the investment of time and capital that we have had. We are well on track in terms of our aspiration for this business. Just a quick update in terms of our talent capabilities and how important that is and what we have been building over the last few years. You frequently get an update from us in terms of talent attraction and retention. This is another great story.
We've put a lot of time and attention into ensuring that we continue to attract the industry's best talent, whether it's in Advisory or whether it's in all of our other key disciplines, and that they stay. The investments that we have made are about the engagement of our people, recognizing that AECOM is the best place for them to build their careers. We invested in leadership development at all levels in sort of industry-leading learning and development programs, and we're going to continue to do that. We recognize that we now have a tremendous and even more diverse base of talented professionals, and we remain very focused on continuing to expand out the AI team and our Advisory team with the niche expertise that we require to successfully grow these businesses.
All of these talent acquisition and retention strategies are critical for ensuring that we continue to win at the rate that we have and have the levels of client satisfaction that we currently enjoy, and most importantly, the record-high levels of staff engagement that we've been able to achieve as well. All of this very important talent agenda, which remains a key priority for our management team, will continue to ensure that we further extend our competitive advantage. It is a key factor for ensuring that we execute on our growth strategies and continue to create value for our shareholders. Thank you very much. Over to Gaur now. Thank you, Gaur.
Thank you, Lara. Morning, afternoon, everybody. First of all, I wanted to say thanks to our 50,000 strong professionals across the globe because of whom we have been able to create sustained value for all of our stakeholders over the last five years, which has been really gratifying for this management team. As we stand here today in front of you, that value creation opportunity of what we have achieved over the last five years is far greater in the near, mid, and long term as we move forward, leveraging what Troy and Lara have shared with you. Now, the reason for my excitement and confidence is not because of the art of possible. It is because we have already achieved what Troy has discussed specific to generative engineering design technology. Please allow me to be a little redundant here.
We're not standing here today discussing what we can do, what the art of possible will be sometimes in the tomorrow. We have already achieved what we're sharing with you today. Now, over the next 12 - 18 months, we will be scaling it across all of our end markets, geographies, and various asset types. This management team takes a lot of pride in delivering, over-delivering, in fact, to any commitments we make to our investor community. This is because when we provide a commitment, we have researched it, we have piloted it, we have tested it, we rinse and repeat that process again and again. That is why we stand here today very confident in the financial commitments and the outcomes we will achieve over the next 36 months. The excitement you see us from today is not solely limited to generative technology we will scale.
It is due to the expansive opportunities it provides our professionals to deliver solutions for their clients, which in turn deliver value for our shareholders. Now, please let me give some time to explain that a little bit more. You heard Troy state earlier an industry age-old problem in engineering and construction. It takes always longer, and it always costs more on projects. It does not matter which geography, what type of project. It will always take longer historically, and it has always cost more than you originally anticipated. That cycle goes on again and again and again. What we have created will allow our professionals to deliver solutions faster than anyone to their clients, make changes for whatever reasons they may be in a matter of days and hours instead of months and weeks.
Now, our professionals will create synthetic inference-based mathematical design models with support of the generative technology that will cut down total constructible cost. I want to repeat that again. It will cut down total constructible cost by anywhere between 10%-20% based on what we have already achieved. I'll ask a question to the audience and all of those who are listening today to our Investor Day. What is the monetization opportunity when you have technology which will deliver an asset earlier for your client's use of revenue generation, maybe to its constituents at a lower cost basis, delivering a higher ROI?
What is the value to our public clients across all layers of government, federal, state, local, with limited funding but significant Infrastructure needs when we, with our support, our professionals, and our tools, generative tools we have created and will scale, will make those dollars go farther? Now, I haven't even gotten into expanding our TAM, our total addressable market. By all accounts, every research report I've ever read, somewhere between 60%-80% of our industry is fragmented. It is served by small firms, local proprietors because of constraint on labor. 60%-80%, that is not being addressed by companies like AECOM. We have the technical prowess. Now, combined with this technology with our professionals, which expands their labor productivity, that defragmented market is ours for the taking. Not by doing expensive, risky, low ROI M&A.
It is, again, by expanding labor productivity that till this point was not possible. That is the paradigm shift we're discussing. Now, one of the things that Troy has mentioned, and as you see on this slide here, is operating leverage. Let me explain this a little bit more. Historically, and AECOM has been part of that historical delivery. For every dollar of revenue we generate, it takes somewhere between $0.80-$0.90 of variable cost to deliver that revenue, resulting in operating leverage of 10%-20%. We have been at the higher end of this operating leverage, clearly as evidenced by the strong margins we have delivered, head and shoulders above our peer average. With the generative technology that we have achieved and will be scaling, it will allow us to expand that operating leverage.
We have already realized some of that in FY2026 and the guidance we're putting forth. It will continue to expand in the near future, in the midterm, to 30%, 60%, 80%. By the way, this is not just for incremental revenue that we drive. It is for the entire revenue base. That's the part that I love the best. Now, we're not naive to think that this will just happen overnight, but it is going to happen quickly because, again, the disruption has already occurred, and it has occurred. We are at the forefront of it. We've already seen the progress we have made, reaction of our people and clients, and the investments that we're making in fiscal 2026 to scale. Those investments are reflected in the margins.
This is excluding our CM business, where we expect to deliver, even with the investments of 60-70 bps that we're going to be making in the business through our margins. That is included in the 16.6. Even with that 60-70 basis points, we will be delivering higher margins than what we achieved for FY2025. It gives you a bridge of what we expect are the building blocks to deliver 20+% margin as we exit velocity for fiscal year 2028. These investments that we're making in fiscal 2026 to scale are not just driving FY2026 benefit, but an extrapolated expansive benefit throughout the organization into the near and midterm.
Advisory business, as Lara pointed out, will continue to also provide tailwinds as we scale up from our base level of $200 million of NSR to $400 million as we exit FY2028 at higher value, higher margins. One thing that you all have become accustomed to and should always hold AECOM responsible for is our focus and management of continuous improvement. We will always look for opportunities to better our margins, make our Infrastructure and our cost more efficient. Let it be from our Global business services, which are our support functions, our EC centers, where we're exiting close to 7% of our direct labor hours running through those capability centers. We know there's still a lot of room for us available to continue to utilize that and driving technology, agentic technology, generative technology in the way that we work. One key element to our success has been focus.
Five and a half years ago, when this team took over, we looked at the best and highest returning opportunities, best ROI opportunities, and made decisions where to focus to create sustainable value, create value for all of our stakeholders. That included exiting almost 65 countries over that time period, exiting from risky businesses that did not drive the right value creation opportunities for our shareholders. As we sit here today, hopefully, it's becoming clear to you the opportunity in our professional services Design Engineering business, augmented by our Advisory services, but the opportunity for generative technology, the ROI opportunity is significant in front of us. It deserves our full focus and attention. Although our CM business, which has been a very good business over the last few years, we will be undertaking strategic reviews, including potential sale.
That means starting in Q1, it will be shifting to distribute operations as required by the accounting rules. One of the things I did want to share on capital allocation, expect no changes from us. We will continue to focus returns because that is what drives sustained value creation for our shareholders. That includes proceeds from our Construction Management business upon a sale will be used consistently with how we have used capital in the past to repurchase our stock. At the same time, I think it is very important for everybody to remember we do not build in buybacks into our guidance. It is impossible to do so based on timing, quantum, pricing, all of those things. Those proceeds we expect based on everything we know, once we have bought back our stock, EPS will not be dilutive for the standalone RemainCo company.
Quickly sharing our results for FY25, it was another very strong year, including driving strong organic growth at the top end of our peer set from those who have reported in fourth quarter. We raised our guidance 3x during the year, and even after raising it 3x , due to the hard work of our professionals, we were able to overdeliver in Q4 compared to consensus again. We've exceeded on EBITDA and EPS and margins. In fact, when you look at EBITDA and EPS, the original guidance that we made for FY25 this point last year, we're at the top end of the range. Margin percentage, be remiss if I didn't go back and remind everybody, we were supposed to achieve the 17% exit velocity next year. We achieved it five quarters early. Second half of the year, we've delivered 17.1% margins.
As importantly, on the right side is our backlog. Any way you slice and dice it, 20 quarters in a row, we have delivered while contributing organic growth above or at the near top every single quarter of our peer group. Our backlog has been 1x or better. In Q4 FY2025, we delivered 1.1x with strong organic growth. This was in our international markets and in America's market. When we look at our pipeline, our pipeline continues to be very robust, including the early phase of our pipeline where we see growth of almost 20% across most geographies and all end markets, which sets us up well going into FY2026. It allows us to make the investments we have been making and will continue to make in FY2026, including the 60-70 bps of margin investments organically in FY2026 to scale the technology we have developed.
For FY26 guidance, we have been providing it two ways. One is an apples and apples comparison for everybody's benefit for Holtco, which includes Construction Management, 7% and 9% respectively on adjusted EBITDA and EPS. As we're going through the discontinued operations calculations right now, we've also provided to you our FY26 guidance excluding Construction Management or what we call Remain Co. That is what we will be reporting on going forward. The growth is very consistent on top line, on EBITDA, and EPS. One thing this management team has been focused on and will always be focused on is ensuring not that just we deliver, but for every opportunity provided to us, we overdeliver on the commitments we make.
For FY26, cash will be impacted only in FY26 based on the investments and the restructuring we will undertake to right-size our platform with the divestment of CM and overall adoption of the technologies that we're creating and scaling. One thing I wanted to share with you guys on our long-term targets and emphasize as I walk through the different pieces, we don't see a change into our long-term growth algorithm for top line. Hopefully, again, it's becoming clear to you. We're expanding the ways on how we will be approaching the market and taking market share away, continue to take market share away based on the technology we have developed.
We're no longer just solely reliant on the funding of our clients because we have a competitive edge in our platform more than we have ever had before, something that we have not seen in the marketplace from anybody, not our peers, not software providers for the clear reasons Troy stated earlier. We're also raising what we think we will be delivering on EPS growth CAGR over the next few years. Again, this does not include our capital allocation impact of repurchases, which our capital allocation strategy continues to be unchanged. The last thing I want to leave you guys with as we take a step back is we think the future is bright for many reasons, as we have shared with you today.
If you have one takeaway, remember this: the most common question when we have spoken to our analyst community, to our investors, prospective investors over the past five years has been, "How can you grow in a labor-constrained market? How can you continue to grow when you're delivering such strong organic growth year after year and the labor market is constrained in our industry?" It is a valid question even today, but not for AECOM. It is a valid question for our peers because we have changed the paradigm of the value creation opportunity. Thank you very much.
Thank you, Gaur, Lara. My mic on? It's good? Great. Again, I think at this point in time, we'll open it up to questions. I think, Steve, you had your hand up first.
Thanks for that great presentation, Steve Fisher, UBS. I just want to clarify how you get to this 50% operating leverage improvement. Is that the combination of having fewer team members on the team and using your internal resources more efficiently, but then at the same time, since your costs are large, you need to change the revenue model? You talked about price for value. Does it become a sort of blanket fixed price for a project and then you just deliver at a lower cost? You could just clarify that, please.
Thanks for starting with a really simple question, Steve. I'll take that in two pieces. First, in terms of the operating leverage, the way we think about this is a traditional team has had a group of, let's just say, a group of engineers with different disciplines that would come together and they would spend their hours to deliver a project. You can think about it this way: you can introduce an AI model or you can introduce elements of AI, and they can act like a teammate. Now the engineer will work together with an AI model or it'll work together with a new teammate. As a result of that, that work gets done differently. Effectively, you're extending the ability of the team of engineers.
The other thing you're doing is you're actually shrinking the time and the effort that it took because of the new teammates to do it. Effectively, that changes the operating leverage paradigm. One of the things that we've been doing is we've been working with this on projects to actually understand what the implications are in terms of a reduction in the traditional labor or the traditional hours that our engineers would deploy in a project. We've seen that we've taken an extraordinary amount of hours to date out of those projects. That, again, will give you a sense of what we're talking about. We're talking about entirely different teammates that are AI models, and we're talking about a significantly less amount of time to deliver the same outcome with those people's time. That creates this operating leverage.
Now, you asked a question about revenue. Think about it this way: in our industry, there's a market price for what we do. When we compete, we all have worked with our customers. A lot of times, those prices are actually public in public procurements. There is a market price for what we do. Put aside how it's actually structured, whether it's a fee, a fixed fee, a cost plus, a unit price, there is a value that the industry pays for getting a design outcome or getting a Program Management outcome. We look at it this way: we sort of have the opportunity to price to market. If the margins are better in pricing to market, we decide what we want to do with it. Our objective is to keep it, but we make some different decisions.
You sort of think about, okay, there are different means of how our customers price. When we go through and we do this work, we're going to have an experience where we will decide this is what the market price would be, and we would deliver it for that quantum of work. We can now deliver it for an entirely different quantum of work. With that experience, we'll then have the opportunity to go and have a discussion with our customers about maybe we want to change the market price. I don't think we need to. I actually think it's the opposite. I think because we're going to be delivering designs or delivering our work that's such a profoundly improved outcome for our customers, I don't think we need to change market price to actually capture more market share.
Great. Thanks. My follow-up is in terms of customer receptivity. I know it's still pretty early, but based on what you've been kind of working on and the customers you've been working with already, is there any early indication as to kind of where the adoption is going to be most prevalent and quick, basically? Private sector, public sector, large projects, smaller projects, and markets, geographies? How do you see that?
I can't give you a data point on everything because, again, we've only sort of taken this out in sort of certain segments of our client base or our market. What we did is we did a couple of things in the process. One is I can tell you from the work we're doing now, the client acceptance is easy. Because, again, as I said, they still require the same things. They still require the confidence of that team. They still require you to certify the results. That's not changing. The result that they're getting is different and more valuable. They still have that trusted client relationship, so they trust you to deliver that. When you come in and you sort of explain the different kind of outcome you can get for them, they're incredibly receptive to that.
Especially when you sort of go through the, I'll call it the private customer and the public customer, they all face the same challenges. The same challenge is there's a limited amount of funding, and there's an unlimited amount of Infrastructure ambition. They are widely accepting this. We haven't found a client yet that says, "Hang on a sec. I'm not willing to do that." We actually found the opposite. The other thing we did as part of this process, we went out and we actually talked to customers. We actually went out with an outside firm that wasn't us to just test this on our customer base. We found across our customer, public and private, an almost unbridled willingness to accept this innovation.
Thank you.
Sorry. Hi, good morning. Adam Bubes with Goldman Sachs. It looks like you're investing through margins to invest in AI development. Do you have strong visibility on duration and magnitude of those investments, or should we think about this as a moving target as you continue to iterate on your tools?
Yeah, that's a good question, Adam. The easiest way to think about it is we're going to continue to invest. However, all of those investments are built into the targets we have set. There is the initial investment year. That is why you see the 60-70 bps in FY2026 coming into play. As the targets we put forth for FY2027, exiting FY2028, 18+%, that is net of the investments it is going to take us to continue to scale, continue to develop, and always be ahead of the curve as we are right now.
A follow-up on Program Management looks like your ambitions are to continue to grow the mix of that business. Can you just provide an update on what the trajectory there looks like today? Curious, are customers using you for the total package today? Will you be engaged for Program Management, Advisory, Engineering, and Design? Is there a way to frame the opportunity to sort of internalize all that within AECOM?
I would think about Program Management now growing at a pace that slightly outpaces our Engineering and Design business. I think Lara mentioned this in her points. We expect it to grow at a faster rate. We grew that business very quickly to get to the size and the scale and the confidence that it is today. We still see there are tremendous opportunities in Program Management around the world, but we see it growing at not that rate. We were growing at double-digit rates in the past. We see it outpacing the overall growth of our business. To answer your second question, the answer is yes, we do. We actually see where we're delivering kind of the whole spectrum: Advisory and Design and Program Management, taking them through the process. It's different for every client.
We find that there is more willingness or more acceptance within private clients. They are more accustomed to doing that. Within the public sector, it depends on the client. Some actually have some pretty strict rules about what roles you can play. If you are an advisor, you cannot be a designer, and you cannot be a program manager. You can even put that aside in some places because sometimes what you provide is so compelling that they are willing to make exceptions. I will not discuss client projects, but we have actually found places where what we have provided is so compelling that they are willing to sort of go through a process to set that aside for you. Again, it is very mixed at this point.
Saba.
Yep.
Thanks. Saba Khan, RBC. I guess just continuing the discussion you had with Steve around the pricing models, I guess. You indicated about 60%-80% of the industry is still fragmented. Many of those folks probably can't invest in this stuff. At times, it's been said pricing may be not a factor in some of the bids or many of the bids. How do those other 60%-80% sort of compete? How do you expect the bidding processes to involve? Are some going to show up with AI, some are not? Just trying to think through how the competitive dynamic involves as maybe some folks are able to invest in this stuff and some not, and how do you price for it?
Are you familiar with Blockbuster? That's a way to think about it. Adam, being serious, I mean, so I'll give you an example. If we go to do environmental work and I talked about different teammates, imagine they show up with a group of five teammates, five people that work on this project. Imagine if we show up with one teammate and four AI teammates, and we can deliver something that seems like or feels like it's almost instantaneous. I mean, that's the outcome. I can't speak to what's going to happen to them, but I would suspect that they're really, really capable people, and they're going to have to figure out how to use AI. We've had this discussion internally with our people for a long period of time. We say AI is nothing to be afraid of.
AI is not going to replace people, but people with AI are going to replace people. To your point, Saba, if because of the nature of the smaller businesses, they're fragmented, they don't have the scale and ability to invest, then something's going to happen over a period of time. They're going to be able to eventually compete and have a successful career because they're going to find a path to being able to use AI. Maybe that's with us. I think there's a pretty profound shift coming in the industry.
Thanks. One of the concepts we've heard is to hold or keep some of the benefits of AI companies or firms like yourself from trying to get more fixed bid contracts so you get to sort of keep more of that. Is that something you're trying to do? What's been the customer reception to shifting more to a fixed bid model within this new construct?
At this point, we haven't had those discussions. We haven't needed to have those discussions because where we can deploy, we can deploy it on unit cost or fixed price. As I said, we can test it, and we can understand what that difference is going to look like. That will then enable us with that information to actually go have a client conversation.
At the end of the day, if you can provide something that's much more compelling in terms of value, and you have a discussion about maybe doing it for a little bit below what they consider to be the market price or even more value and maybe a little above the market price, you will have an ability in that conversation to shift the pricing model and shift from cost plus to a fixed price where you gain more certainty around that outcome. There are more creative ways to have that conversation. We view it as it will eventually happen. It's like all industries. It happens over time. It's when water runs downhill, you can only stop it for so long.
Good morning, Mike Dudas, Vertical Research. Troy, the 18-month "head start" or the head start that you've had relative to the industry, as we look today, do you think that's going to be exponential in the leadership and how you're going to move forward while others are going to try to catch up? Within the disciplines of V&D, Advisory, Project Management, where is the we're seeing the first benefits from the AI investment helping revenue and profit growth in each of those divisions? Is it bringing more advisory work that you wouldn't have had otherwise because you can develop this? How does that play through the rest of those divisions?
Do you want to take the advice?
Yeah, I think the two of Mike to answer the question. We're seeing great complementarity between two of them. I'll give you an example. One of the Advisory types of work that we do is due diligence. Say for data centers, work for the hyperscalers where they want to rapidly move through assessment of candidate sites to rapidly build out these new data centers at scale. The tools that we're creating at the moment, I mean, some of those are in the due diligence space, and they can rapidly assess a whole range of attributes of a site: the physical, the legal, the environmental, the social. You put those two together, and there's a lot of interest already from many of the private and public sector clients who want to buy Advisory Services. I would say enhanced now with our AI tools.
Maybe as a follow-up on the markets, maybe you could share a little bit maybe from domestic Americas to international. How did 2025 look? How does the next 12 - 24 months from a customer demand standpoint? Is that 5%-8% type of target lean one way or the other? Are there certain markets that we should focus on that might be more helpful to achieve mid to upper range of those targets than others?
Sure. I will not spend a lot of time on 2025, but I think 2025, you can see from our results, is that North American markets were healthier markets than the International markets. International markets were challenged. There were some that were good. For example, the U.K. marketplace was surprisingly a healthy market in 2025. If you looked across Australia and Asia and even in the Middle East, those markets were certainly not as healthy. You saw that in our results. The growth internationally was much more challenging, and it was much better in North America. As we look forward, there has been a lot of work that has been done in sort of repositioning those businesses and building up the opportunities over the course of this last year.
We sort of look at the U.K. as being a healthy market, but questionably healthy. The reason is, again, they have a large announced infrastructure ambition. The question is, how does that work when it is becoming clear that they either have a large budget deficit and they are either going to have to borrow or they are going to have to raise taxes? Those create more challenging environments. We are optimistic about the U.K., but I would sort of wait and see. We go to the Middle East, and our Middle East business is positioned, repositioned very quickly. We have had a great backlog that we have won. We actually see that business being, I think, a good growth market over the course of this next year. Australia and Asia are still going to be a little bit challenging.
There has been some work that has been won, and it is in water and defense and less so in transportation because they have been coming off a large transportation investment cycle. That will be a tougher market as we look into the future. You come back to North America. North America we see being a healthy market. Of course, there are speed bumps, and we cannot predict all of those speed bumps. We could not have predicted that there was going to be a government shutdown for 40 days. The positive is that really did not have material impact on our business. It had a little bit of an impact on collections, and it had an impact on awards for the future. We expect that those awards will come over the next couple of quarters.
We do not know whether there is going to be another shutdown on February 1st. It is entirely possible. We still see the conditions for investment and the need for investment in Infrastructure and the funding to be good in our North American markets, especially in the United States over the course of this next year. It could be a little bit, it could be a little bit bumpy.
Very good. Thank you.
Thank you. Mike Feniger, Bank of America. Troy, just back to discussion with Blockbuster, you were giving an example of someone coming to a site with five engineers, AECOM rolling up with one and four AI chatbots or helpful agents. I guess the question is, when you go to that customer, there seems like there's an advantage. But are you able to charge and bill for five? Or do you have to say, well, they're charging for five. We can do the same productivity, but we can only charge you for 1.5 or two. And I know this is a theoretical example. It's just, I think.
It's a good example.
The question, Troy, is basically, how much of this is a competitive edge, or how much can you guys actually give back to the customer, and how much flows down to AECOM?
In that example, I think we can get stuck in very specific examples today. I think you've given a really good example. There is a market price for what we do. Let's just use environment work. There is a market price for that. The customer reaction is they don't care how you deliver it to them. There's a market price, and there's an expectation for what your deliverable is going to be. If you can deliver that outcome and they're comfortable because they trust you as their Advisor, they don't care how you delivered it. If you can deliver it faster, and then think about it this way. There's a unique problem in the world of consulting. It's been the challenge for consulting. There's been billions of dollars invested in this. It's knowledge sharing.
The whole world is, how do we create a knowledge sharing system so that you can bring all the knowledge of our organization to that particular customer problem? Imagine what we've accomplished. We have access to all information publicly. We're building access to all of the information that AECOM has internally, current and from our past colleagues, that can be brought to that AI agent or agents to that individual and to that customer. You're solving the most significant problem in the consulting business that's existed for decades. That's value that you bring to customers. So putting aside, we have it priced. This is the market price for what you do. This is what my expectations are going to deliver to me. I'm willing to pay that.
If you deliver something that's more valuable and you deliver in a shorter period of time, you're going to be able to keep the benefit from doing that. That's the approach that we're taking.
That's helpful. And just on CM, maybe you could talk about the timeline. What drove this decision? I think people feel like you guys are continuing to simplify the portfolio. But anything in the backlog or the underlying marketing conditions that might have played a part? And I think you said EPS neutral once all said is done. Is there a timeline that we should be considering around that?
Yeah. Mike, we're going to be starting the process within the next week. Expect, given similar type transactions we've undertaken, it could be 6-9 months by the time it occurs. Now, in regards to rationale, it didn't have anything to do with the political outcomes that have happened in New York. This was a conversation we've had with the board many months ago, once we understood what we had on our hands from a technology standpoint specific to our Design and Engineering business. Looking back and saying, 93% of your business, you can apply this great technology where you are far ahead of anybody else in the curve. It represents 93% of our profit as well. That 7% takes an inordinate amount of time because it is a business that is a very good business, great cash flow generation business.
You have to be focused to make sure teams are within the risk swim lanes. Those of you that have been part of the AECOM journey for longer than this management team has been responsible for it will recall when you get out of those swim lanes, what happens to those results. That is why the decision has been, let's focus on the highest and best ROI opportunity that we have created for almost 93% of our business because the returns are truly, truly going to be special once we fully scaled it.
Appreciate it. I'll just try to squeeze one more in. Lara, just there were some comments in the presentation about private markets, private funding. I'm just curious because, I mean, I feel like in the U.S., at least, we really haven't seen that private-public partnership. I think that is something that gets talked about a little bit more in the international markets. You guys made a couple of comments on the Advisory side with private markets. Just curious, what are you seeing there? What has kind of changed, if anything, that's offered this inflection point where this is maybe part of the discussion and where AECOM fits in on this maybe paradigm shift with private-public?
Sure. It's a great question. Thanks for that. We're seeing a few things. I mean, we obviously operate around the world. There are a couple of mature markets with respect to private investment in infrastructure and the sort of frameworks to make that happen. The most mature of those are Canada, Australia, and to a lesser degree, the U.K., although they've been constrained with funds. They have been on the receiving end, particularly in the last decade, of some very significant private financing for particularly road transportation and rail projects. That's quite mature. I think what a lot of those private investment funds are saying to us at the moment is now seems like a great time in the U.S., with particularly a deregulated environment and an openness, once again, for private sector participation. Yes, there were some P3 examples.
They weren't necessarily the best examples across various sectors. But they're really saying that now might be the opportune time. And so we're having some great shared conversations around particular states or environments where we think there is most interest and appetite to progress some of those proposals, shall we say. So there's some great conversations, and they're really interested in our advisory capability backed by the tremendous technical expertise that we have and our very in-depth knowledge of many of those assets, whether you're talking about a road network, whether you're talking about a port asset or a rail network, or even a lot of interest, no surprise to all of you, in the world of data centers. So we're really excited about that particular sort of group of clients and the opportunity to create a different sort of market for ourselves in co-creation with those funds.
Hi. This is Jose Sulca from Citi. You guys have talked about the 20% margin exit rate by FY2028. Maybe can you talk about how we should think about the contributions from the Americas and internationals for that? Obviously, we understand there's been a structural reason for that gap, historically speaking. Should we continue to expect that moving forward, or should there be some change with the AI benefits flowing through? Thank you.
Yeah. You should expect a consistent uplift on margins between both our Americas and International. You should also, at the same time, continue to expect that differentiation. The differentiation is for the same rationale we have shared with you before: multiple countries, multiple regulations, statutory requirements, and alike versus one geography, one support center for the entirety of it.
Thank you.
Hi. Just a quick follow-up, I guess. When you talk about, I think you indicated in the AI build-up, it's been a bit differentiated versus your peers. As you think about investing it in the next few years, how should we think about maybe the, I know you talked about a bit of a drag on margin that's being netted out, but is it going to be more SG&A? Is it going to be CapEx? Is it more than does 200 people go to 400? More software? If you can just maybe detail out, to the extent you can, the build-out plan.
Yeah. The build-out you should think about, Saba, is there's the 60-70 bps of investment we're making. Like I said, in the 20+% exit velocity for FY2028, we have built in the required investments to get to it. It is net of it. From an OpEx versus CapEx, clearly anything that's built into our margins is OpEx. Simply being put, that is more R&D. It is piloting and testing. CapEx starts once you have a minimum viable product, a model for a specific asset type. At that point, you're allowed to capitalize it. We don't expect our CapEx to shift materially based on what we're doing because a lot of that upfront cost is going through OpEx.
Just one last follow-up. You said you've been testing this out for the last little while. Has there been any notable difference between public or private customer receptivity? How would a government customer think about a bit more of an automated approach versus private sector? Are there end markets that have been more receptive? Thank you.
I think there are a difference between the two customers. I don't think it really relates to the adoption of AI. The fact of the matter is that private customers move faster. Their decision-making processes are used a little bit faster than public organizations. I mean, we see within certain governments and certain organizations of the government, we actually see a paradigm shift as well, where those decisions will be made a lot faster than they had been in the past.
Gaur, maybe you could share on the financial profile how you think about the balance sheet or your position today. You've done a lot of good things with it the last 12-18 months. On the capital allocation, you did make little acquisitions over the last several years. How does that look the next three to four years? Is it something opportunistic in this AI realm or something that would be outside the realm of the 67 bps that you're looking at going forward? Finally, on amortization of CM, if that's possible, how does that impact on your allocation if it's scale, quantum, accelerated, or not? How do we think about that? Thank you.
Mike, I'll answer all those different pieces, but always pivot back. There is no change in our capital allocation strategy. We want to be very redundant and consistent to that point. We're returns-based.
What will drive the best outcome of sustained value creation for our shareholders, we will continue to undertake it. As we sit here today, including the CM monetization and the sale proceeds, we expect to use that for repurchases. Why I said based on everything we know right now, it is net neutral from an EPS standpoint after that sale and utilization of those proceeds for repurchases. As we look forward, including what we have done in FY2025, I think it is important for us to share. We have worked with every Big 3, Big 4 consulting hyperscalers specific in terms of generative technology, talked to them, spoken with them, tested with them. We have worked with various startups, hundreds of them. We created a partnership a little over two years ago with a venture.
We brought them now in Q4 onto our platform to support our deployment, scaling, and development on the generative standpoint. We are always on the lookout for anything that will continue to expand our competitive advantage, but no change in capital allocation.
Again, I'll make a point in addition to that is the thing that we see as the highest return opportunities are just obviously investments in organic growth and margins are in the business. Those are the highest return opportunities. They do go through our margin. Even when we think about expanding, I'll call it the AI enabling team, we're also looking at we've created unique ways so that we're building a talent pipeline so that, again, we'll be actually working to develop the pipeline of talent, say, AI PhDs, in a way that we're actually working with them to build the novel research that will benefit our business. We're thinking about you can sort of think about that's organic. You might think about, well, you could make an acquisition to acquire that.
We're not going to stop looking at all of those avenues to continue to build this ability and this capacity to match up with the tremendous ability of, again, the engineer and the sort of scientific community of AECOM.
Hi. This is Steven Fark from Truist Securities. Obviously, we're early on in the process here. You spoke about these AI models that there's a training process involved. As you scale that business or scale the AI across your business, how should we think about some of the challenges you're facing? Going back on the previous question or your previous answer to the question, how do we think about your ability or the competitive nature to gain the talent of people that's involved in your AI process?
Yeah. I'll answer the reverse order. At this point, I don't think we feel like we're concerned about our ability to go and find and attract AI talent. In terms of, again, what are you concerned about? The most significant concern we have is how we allocate management time. The shortage that we have in the business, and I think everybody has this, is how do you find really capable leaders in management that have the time to devote all of their time to make this a success? That gets back to we're constantly evaluating where we spend management time and where we deploy capital in the business to those highest returning opportunities. We're constantly trying to, again, find the right executives to add to the organization, like adding Jill Hudkins. When she joined us, guess what she had? 100% of her time available.
It's the biggest challenge that we have in order to build an Advisory business. We're finding people and adding that capacity to build the business. It's the same thing when we look across everything we do. We have to, again, go back to the process around Construction Management. It gets to how do we create bandwidth for our management team to make this happen? That also means not being distracted by things. That's one of the reasons that we haven't focused on, there's a whole bunch of reasons, but we haven't focused on M&A. If we did a large acquisition, we would have no bandwidth for the next three years or four years to devote to this. That would be our biggest problem. That's always been our largest concern, making sure that you have the leadership to actually make this happen.
All right. Thank you.
Adam Bubes with Goldman Sachs again. You talked about the need for power to power data centers. You used the example of due diligence on data center projects. Just as you think about the end market mix evolution over the next five years, anything to call out where you're seeing backlog head today? You spoke about from a regional perspective, but wondering if we should expect end market mix to shift around over the next couple of years.
I mean, in terms of the trends, they're quite consistent across the end markets. We continue to see our pipeline. It is up approximately 20% across all end markets. To your point, Adam, there are some, based on what Troy spoke earlier, on certain international markets versus the U.S. markets, which are very robust, continue to be, but very healthy at a global point.
One thing I will add to that is when we look at the opportunity into the mid and long term, so let's say 5- 10 years out, and how we will be able to leverage this technology, proprietary technology that we have created, how we will be able to extract value for our clients and deliver sustained value for our shareholders, one thing clearly stood out for us: our Construction Management business. We do not see that same level of opportunity that we see here again. That is why, to Troy's point, focusing on highest and best use, greatest return on 90%+ of our business.
Can I just add something to that? Think about it this way: we have a really diverse portfolio of skills. We're kind of number one in transportation, number one in water, number one in environmental engineering, number one in buildings. It really means that we're exposed as the trends change. There's no question that there's going to be a massive investment over the next 15 years in generating power or electricity. Are we exposed to that? Yes. The trends are going to vary across the world over the next decade. The beauty of our organization is we're not exposed to one of those markets. We're exposed to the right markets geographically, and we're exposed to all these various end markets.
What typically happens is those skills are a little bit transferable as you go across those end markets. If there is a growth in transportation, people on our buildings and places or our facilities business will start to participate. When you have lots of rail work, there are lots of stations. We really have a platform that sort of exposes us to participate in all of those trends. We do not see any particular trend in the future that we do not have a meaningful way to participate in, nor do we say, "Boy, if this does not work over the next five years for us, we have a problem." We are not exposed. Like data centers, that is what is going to mean it. That is meaningful for us.
Sure, it's meaningful for us, but because of our portfolio effect, all of this investment infrastructure is meaningful, and we have the ability to adjust.
Thanks. Just wanted to ask about the guidance for fiscal 2026 in terms of the organic growth rate, that 6%-8%. Just curious how you approached it in terms of it's obviously a 2% window. I think previous years you've had 3%. Maybe that's not that big a difference. How much of this is an increased level of specification because you don't have Construction Management in there? Is that generally been a bigger uncertainty to factor in, or is there something about this year that makes you a little more confident to have a narrower range?
No, good question, Steve. I'll answer the last part first, which is CM is not a contributor to that more concise range of 6%-8% versus 5%-8%, what we have said on an organic level. What gives us the confidence is 20 quarters in a row of book to burn of 1x or better, four quarters in a row, including entirety of FY2025, of 1.1 book to burn while delivering at the peer lead level from an organic NSR growth standpoint. When we look at our capture rates, they continue to be elevated. When we look at our pipeline collectively at the enterprise level for our Design, Engineering, Advisory, and Program Management business, they continue to be very healthy. Last but not least, if you look at our performance, we have delivered at that 6%.
When we looked at all of those measures, it gave us the confidence supported by especially tail end, second half of 2026, where we will be rolling out a lot of these. I mean, the technology is available. It is a matter of now just introducing it to all the other different asset types in the different end markets and geographies that we operate in. It is going to become more and more expansive. It is going to provide a greater competitive edge to our teams across the globe where they can now take their legacy technical prowess, as Troy said, number one across all our end markets globally, and now be augmented by this great competitive differentiator. Combined, all those things give us a lot of confidence as we step in FY2026.
Thank you.
Thank you. Just on 2026, Troy, you made a comment. I just want to hopefully clear the deck. I think you said with the government shutdowns, should we be expecting a little volatility in the first quarter to honor awards? Is that more a timing issue? Just wanted to kind of get a sense of that. Obviously, the reauthorization is coming up next year. Just how do you see your clients start to manage this as we kind of see it seems like it's a little bit bumpy before we get maybe some of that visibility? Is that showing up in the conversations?
Yeah. No, it's fair. So don't read too much. We don't have any insight into what's going to happen. What we did notice is that we noticed at the end of the fourth quarter, sort of in anticipation of a shutdown, that we didn't see the level of awards that we typically—again, I'm talking U.S. federal government awards, nothing else. We didn't see the level of awards that we would typically see in the fourth quarter. Yeah, it had a muted impact. We expect that those awards would come over the next couple of quarters because that work is still part of the agenda that needs to be done for the U.S. federal government. If there is another shutdown in February of this year, yeah, that might have an impact. Again, we can't predict it.
That is why ultimately, remember this, that is why we give a range, because there are things that we can anticipate to the positive and to negative during the course of the year. When we build up our plan for the year, we sort of look at it and start with from the bottoms up, starting with the work that we are seeing, the pipe that we have, our confidence around when we kind of build up to come up with a confidence around that particular range. That is why we give a range, because there will be speed bumps throughout the year.
Hi. Name's Natalia. I'm associate on Andy Kaplowitz's team at Citi. Just curious about your advisory and AI business. I know we talked a lot about it, but could you see it evolving more into, let's say, SaaS-like characteristics or offerings for your clients or digital twins or anything of that nature?
No. We're not getting into the SaaS business. Yeah. We went through a period of experimentation years ago, and we did try it. What we found is that in our industry, we're just not equipped to be successful. We might be able to build tools, and we even built some tools that were powered by AI that we tried to take to our clients. We just uncovered that we don't have the sales force. We don't have the ability to kind of follow up and support it with our clients or our customers. It is not something that works in the industry. We discovered that it didn't work for us.
We have turned our attention to making sure that we build an organization that can deliver the same outcomes, what our clients are asking us to do for them, but we just do it a different way. Great. It seems like we have no more questions. Again, I say thank you to everybody for spending your morning with us. We do appreciate the conversation and the questions. I would imagine that we have given you a lot to digest, and we will continue to have this conversation over the coming months as we continue to see the benefit of what we are doing across our business. Thank you all for coming.