Aramark F2Q26: Organic Growth Beats by 160bps, Record New Business Pipeline — Raising PT to $50 but Holding at Equal-Weight

Core Conclusion

Aramark delivered F2Q26 organic revenue growth of 12.3%, beating consensus by 170bps and Morgan Stanley estimates by 160bps, driven by strength in both FSS US (+12.2%) and International (+12.7%). Year-to-date gross new wins reached $1.0B (vs. FY25 full-year $1.6B), positioning FY26 for another record year of new business with net new contribution at 4.5%. Management raised FY26 organic revenue guidance to the upper end of the 7–9% range, but left AOI and adjusted EPS guidance unchanged due to start-up costs and potential Q4 incentive compensation. The hyperscaler data center contract (Aramark Nexus) introduces a new, high-margin addressable market. At ~13x FY26e standardized EBITDA, valuation is fair relative to peers. We maintain Equal-weight and raise DCF-based target price to $50 from $45.

What the Market May Underestimate

• Data center contract margin persistence: The hyperscaler contract carries an annualized run rate “well over” $100M per location, with lifetime value of several hundred million dollars across multiple sites. Aramark does not invest capex (reimbursed by client), and contract economics are above company-average margin. Unlike one-off construction projects, management expects to roll from site to site and continue servicing completed facilities, extending the profit tail.
• New business momentum durability: YTD net new business contributes 4.5% to organic growth, while retention exceeds 98%. The $1.0B gross wins after just half a fiscal year (vs. $1.6B in full FY25) implies a step-change in win rate. This fuels sustainable above-algorithm revenue growth even if base business slows.

Evidence Chain

1. F2Q26 organic growth of 12.3% was a clear beat, led by broad-based segment strength.

• FSS US organic +12.2% (vs. MSe 11.2%), driven by B&I (+23%, 1,000bps above consensus) and Sports/Leisure (+13.6%, >300bps beat). Education grew +13.0% in-line, while Facilities declined -0.2%.
• FSS International organic +12.7% (vs. MSe 9.5%, consensus 11.1%), supported by Europe and Canada (double-digit) and emerging markets (HSD).
• 2Q26 organic growth excluding calendar shift was 9.0%: 5% from new business, 4% from base business (3% pricing, 1% volume).

2. New business momentum is tracking at a record pace.

• YTD gross new wins = $1.0B vs. FY25 full-year $1.6B. Client retention >98%.
• Net new business contribution YTD = 4.5%. B&I average new win size increased 15%; Leisure won Stone Mountain in Georgia.

3. Hyperscaler contract provides structural growth optionality.

• Aramark Nexus now the largest contract in portfolio: >$100M annual run rate per location, several hundred million lifetime value from multiple sites.
• Margins above company average; no capital expenditure (reimbursed). Construction phase (3–5 years) generates elevated economics, but management expects to roll from site to site and maintain service at completed facilities.
• Aramark has proven similar integrated service models in offshore energy, mining, and national parks; US alone has ~1,000 planned data center projects.

4. FY26 guidance raised on revenue but not on AOI/EPS — near-term margin headwinds.

• Management now expects FY26 organic growth at the upper end of 7–9% (prior: midpoint).
• AOI and adjusted EPS guidance unchanged due to start-up costs on new wins and potential repeat of $25M Q4 incentive compensation (similar to FY25). FY26 AOI margin expected ~5.5%.

5. Valuation: fair but not compelling.

• EV/EBITDA (standardized) ~13x FY26e, vs. Compass ~12x and Sodexo ~7x. DCF target $50 based on 7.3% WACC, 2% terminal growth, ~$48 implied 12-month value; current price $48.41 offers ~3.3% upside.

Key Divergences & Risks

• Margins capped near-term: Start-up costs and incentive compensation may keep AOI margin below 6% in FY26, despite revenue acceleration. Consensus may be too optimistic on FY26 EPS.
• Hyperscaler revenue concentration: Elevated margins during construction phase may decline once sites become operational. Renewal risk after 3–5 years.
• Competition and in-sourcing: Clients may bring services in-house, particularly in education (University of Kentucky contract lost). Competitive intensity in B&I is elevated.
• Macro slowdown: Lower discretionary spending could pressure per-cap spend at sports/leisure and business dining volumes.

Valuation / Trade Implication

Maintain Equal-weight. DCF target raised to $50 (from $45) reflecting higher revenue trajectory. The ~3% implied return is inadequate for a position at current levels. We recommend waiting for a clearer margin inflection (post Q4 FY26) or a pullback to ~$44–45 (10.5x EV/EBITDA) before adding.

Appendix (High-Value Summary)

F2Q26 Segment Organic Growth & AOI Margin