AECOM (ACM) delivered a mixed bag of fourth-quarter results Tuesday, but the real story wasn't in the numbers. The engineering and infrastructure giant announced it's reviewing strategic alternatives for its Construction Management business, which is corporate speak for "we're probably selling this thing."

It's a bold move that signals where management thinks the future lies: higher-margin advisory work powered by artificial intelligence, not managing construction sites.

The Numbers Tell Two Stories

Revenue came in at $4.175 billion for the quarter, up 2% year over year but short of the $4.315 billion analysts were expecting. Not great, but not disastrous either.

The more important metric, Net Service Revenue (NSR), climbed 8% to $1.97 billion, driven by 9% growth in the Americas design business. That's the stuff AECOM wants more of.

Adjusted EBITDA jumped 13% to $329 million, with margins expanding 80 basis points to 17.5%. This is what happens when you focus on higher-value work. Operating cash flow hit $196 million, with adjusted free cash flow at $134 million.

On the bottom line, adjusted EPS reached $1.36, up 7% year over year and ahead of the $1.34 consensus. So even with the revenue miss, the company is squeezing more profit from each dollar of sales.

Regional Performance and Backlog Strength

Breaking it down geographically, Americas revenue increased 2% to $3.2 billion, while International revenue slipped 1% to $935 million.

Here's the good news: total backlog grew 4% year over year to $24.8 billion, hitting all-time highs for both total backlog and design backlog. The pipeline is full, and it's growing across both the Americas and International design segments. As of September 30, AECOM had $1.6 billion in cash and equivalents on hand.

Taking Care of Shareholders

During fiscal 2025, AECOM returned nearly $500 million to shareholders through buybacks and dividends. The company still has $645 million of capacity remaining under its existing share repurchase authorization.

The board also approved a hefty 19% increase to the quarterly dividend, bumping it to 31 cents per share. That dividend goes out January 23, 2026, to shareholders of record as of January 7, 2026.

The Strategic Pivot

Now for the headline move: AECOM is formally reviewing strategic alternatives for its Construction Management business, including a potential sale. Starting next quarter, this unit will likely be classified as held for sale and reported in discontinued operations.

Why bail on construction management? Management wants to double down on what it sees as the highest-returning, fastest-growing opportunities. That means pouring resources into AI development and expanding the Advisory business, which commands better margins.

The company disclosed that its proprietary AI solutions are significantly increasing operating leverage. Even more ambitious: AECOM expects to double annual NSR in its Advisory business to $400 million within three years.

What Management Is Saying

President Lara Poloni framed the strategy around secular trends: "The secular megatrends of global investments in infrastructure, in sustainability and resilience, and in meeting growing energy demand have accelerated. Amid this backdrop, our advantages of deep technical expertise, trusted client relationships, and a capacity and willingness to invest to advance our proprietary AECOM AI and Advisory capabilities separate us from the competition – both in our core industry and beyond."

Looking Ahead

For fiscal 2026, AECOM expects adjusted EPS between $5.65 and $5.85, significantly above the consensus of $5.24. That's a bold call. Adjusted EBITDA should land between $1.265 billion and $1.305 billion, with free cash flow around $400 million.

At its Investor Day, management raised long-term targets even higher. The company aims to hit a margin exit rate above 20% by fiscal 2028 and deliver adjusted EPS growth exceeding 15% annually from fiscal 2026 through fiscal 2029.

Organic NSR is projected to grow at a 5% to 8% compound annual rate over that period. AECOM also expects cumulative free cash flow to equal at least 100% of adjusted net income and plans to keep raising its dividend by double-digit percentages annually.

Those are ambitious targets that essentially bet the company's transformation will pay off handsomely.

Price Action: ACM shares were trading down 1.99% to $129.30 at last check Tuesday.