Aramark 2025 Q4 Earnings Misses Estimates as Net Income Falls 28.6%

Aramark’s fiscal 2025 Q4 earnings fell short of market expectations, with adjusted EPS of $0.57 and revenue of $5.05 billion both underperforming forecasts. The company guided to 7–9% organic revenue growth and 20–25% adjusted EPS growth for fiscal 2026, aligning with but not exceeding analyst projections.

Revenue

Aramark’s total revenue surged 14.3% year-over-year to $5.05 billion in Q4 2025, driven by robust performance across its segments. The FSS United States segment led with $3.61 billion in revenue, fueled by high retention rates and new business wins. The FSS International segment added $1.44 billion, reflecting strong demand in markets like the U.S., U.K., and Latin America. The Corporate segment reported $0 in revenue, consistent with historical trends.

Earnings/Net Income

Earnings declined sharply, with EPS dropping 28.3% to $0.33 and net income falling 28.6% to $87.24 million. The EPS shortfall was attributed to $25 million in incentive-based compensation tied to record new business growth. Despite a 14.3% revenue increase, margin compression from operational costs and incentive expenses offset top-line gains, marking a challenging quarter for profitability.

Post-Earnings Price Action Review

The strategy of buying Aramark shares on the date of its revenue raise announcement and holding for 30 days showed favorable performance over the past three years, yielding a compound annual growth rate (CAGR) of 14.68%, outperforming the NASDAQ Composite Index’s 9.17%. With a Sharpe Ratio of 1.53, the strategy demonstrated strong risk-adjusted returns, though it faced a maximum drawdown of -15.46% during a market correction. This approach underscores the potential of leveraging company-specific events with defined holding periods to enhance investment outcomes.

CEO Commentary

CEO John Zillmer highlighted 14% organic revenue growth, driven by $1.6 billion in annualized gross new wins and 96.3% client retention. He acknowledged Q4 challenges, including delayed account openings, but emphasized strategic priorities such as AI-driven supply chain optimization and expansion in Collegiate Hospitality. Zillmer expressed confidence in achieving 4–5% net new growth and retention above 95% in 2026.

Guidance

Aramark projected fiscal 2026 organic revenue of $19.45B–$19.85B (7–9% growth), adjusted EPS of $2.18–$2.28 (20–25% growth), and AOI of $1.1B–$1.15B (12–17% growth). Management emphasized margin expansion through supply chain efficiencies and disciplined cost management, with leverage expected to remain below 3x.

Additional News

1. Leverage Reduction: Aramark reduced its leverage ratio to 3.25x, the lowest in nearly 20 years, and repurchased over 4 million shares in fiscal 2025.

2. Dividend Increase: The company raised its quarterly dividend by 14% to $0.12 per share, payable December 17, 2025.

3. Share Buybacks: Post-fiscal year, Aramark continued repurchasing shares under a 10b5-1 plan, signaling confidence in its valuation and capital structure.