Aramark (NYSE: ARMK) shares surged nearly 10% on Tuesday, hitting an all-time high after the food and facilities management company delivered better-than-expected fiscal third-quarter results and raised its full-year organic revenue growth guidance. The upbeat outlook is being driven by early contributions from AI data center contracts, a promising new growth avenue.
The company now expects fiscal 2026 organic revenue growth in the range of 9% to 10%, up from its previous forecast of the high end of 7% to 9%. This upward revision reflects the positive impact of new business wins, particularly in the rapidly expanding AI infrastructure sector.
In the fiscal third quarter, Aramark reported revenue of $5.058 billion, surpassing consensus estimates of $4.94 billion by 2.36%. Adjusted earnings per share came in at $0.52, beating expectations by 7.22%. On a GAAP basis, EPS was $0.36, up from $0.27 in the same period last year. Operating income climbed to $216 million, while adjusted operating income reached $261 million.
One notable factor in the quarter was a calendar shift that reduced reported revenue growth by approximately two percentage points. Excluding this timing effect, management indicated that organic revenue growth was closer to 11%, compared to the reported 9%. This acceleration was even more pronounced at the profit and earnings level, with adjusted operating income growth estimated at around 21% (versus 13% reported) and adjusted EPS growth at roughly 43% (versus 29% reported).
Chief Executive Officer John Zillmer highlighted the company's strong performance and the momentum in new client acquisitions. New client wins have surpassed $1.6 billion so far this fiscal year, a 51% increase from the same period last year. Client retention remained near an all-time high of 98%, which management says is crucial for accelerating net growth.
The international segment delivered the strongest adjusted profit growth, with a 24% increase in adjusted operating income. In the United States, revenue benefited from higher sports attendance, increased fan spending, and new business contracts, including contributions from the FIFA World Cup and NBA/NHL playoffs.
A key highlight was the company's entry into the AI data center market through its Nexus platform, which provides food, accommodation, and workforce support for AI facilities. Aramark has begun operations at its first Texas location for a major global hyperscaler and is setting up a second site. Management anticipates further contract wins in this space, although they did not disclose specific revenue figures for the contracts.
Cash flow also improved significantly. Quarterly free cash flow turned positive at $8.7 million, compared to a negative $33.6 million in the prior-year period. Net debt decreased to $5.630 billion, and the leverage ratio improved to 3.5x from 4.0x. The company remains committed to its target of keeping leverage below 3.0x by the end of the fiscal year.
Despite the strong performance, management maintained its adjusted operating income growth guidance of 12%-17% and adjusted EPS growth of 20%-25% for fiscal 2026. They project faster margin expansion in the fourth quarter as the Nexus business begins to contribute more meaningfully to earnings.
Analysts have largely responded positively, with most price targets set before Tuesday's report. Goldman Sachs raised its target to $66 on Monday, while Citi and Truist Financial have targets of $70.50 and $70.00, respectively. The stock traded at $61.21, just 3.27% below the consensus target of $63.21.
Risks remain, including potential delays in launching new contracts, higher-than-expected mobilization costs, and margin pressure from client attrition or rising input costs. However, management expressed confidence in sustaining strong growth. The upcoming fourth-quarter results will be critical to validate the raised guidance and prompt further analyst adjustments.