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

Aramark (ARMK) reported fiscal 2025 Q4 results that fell short of estimates, with revenue up 14.3% to $5.05 billion but EPS declining 28.3% to $0.33. The company provided 2026 guidance below consensus, citing margin pressures from incentive costs and delayed contract onboarding.

Revenue

Aramark’s total revenue surged 14.3% to $5.05 billion in Q4 2025, driven by robust performance across its segments. The Food and Support Services (FSS) division led the growth, with the U.S. segment contributing $3.61 billion and the international segment adding $1.44 billion. The Corporate segment reported $0 in revenue, consistent with its non-operational role. This performance reflects strong new business wins and high client retention, though temporary delays in contract ramp-ups slightly offset momentum.

Earnings/Net Income

Aramark’s EPS fell 28.3% to $0.33 in Q4 2025, compared to $0.46 in the prior-year period, while net income declined 28.6% to $87.24 million from $122.25 million. The earnings shortfall was attributed to $25 million in incentive-based compensation tied to record new business wins and higher operational costs. The results highlight the trade-off between growth investments and near-term profitability.

Post-Earnings Price Action Review

Aramark’s shares faced immediate pressure following the earnings report, with the stock dropping 6.37% month-to-date and 4.15% in the most recent week. The decline reflected disappointment over the Q4 miss and 2026 guidance that fell below analyst expectations. Pre-market trading saw a steeper 8% drop as investors digested the impact of incentive costs and delayed revenue recognition. However, management emphasized confidence in long-term growth, citing $1.6 billion in annualized new business and a 96.3% retention rate. The stock’s pullback may present an opportunity for investors focused on the company’s strategic priorities, including AI-driven efficiency and high-retention sectors like healthcare.

CEO Commentary

John Zillmer, CEO & Director, highlighted Aramark’s 2025 achievements, including $1.6 billion in annualized gross new wins and a 96.3% client retention rate. He acknowledged short-term revenue impacts from delayed contract launches but expressed optimism about future growth. Strategic investments in AI and technology, such as AI-driven menus and robotic applications, are expected to enhance operational efficiency. Zillmer emphasized the company’s focus on high-retention sectors and performance-linked incentives to drive 4–5% net new growth in 2026.

Guidance

Aramark outlined fiscal 2026 guidance, projecting organic revenue of $19.45B–$19.85B (7–9% growth), AOI of $1.1B–$1.15B (12–17% increase), and adjusted EPS of $2.18–$2.28 (20–25% growth). The company aims to maintain a leverage ratio below 3x, supported by free cash flow and disciplined cost management. CFO Jim Tarangelo noted that margin expansion will stem from supply chain efficiencies and AI adoption, while normalized costs and delayed 2025 contract ramp-ups are factored into the outlook.

Additional News

Aramark announced a 14% increase in its quarterly dividend to $0.12 per share, payable on December 17, 2025. The company also repurchased over 4 million shares in 2025 and plans to continue buybacks via a 10b5-1 program. The leverage ratio improved to 3.25x, the lowest in nearly 20 years, reflecting strong free cash flow generation. Additionally, Aramark secured a landmark contract with a top-tier medical system, signaling confidence in its healthcare sector growth. These actions underscore the company’s commitment to shareholder returns and financial discipline while positioning for long-term expansion.