Colliers International: Engineering Segment as a High-Conviction Growth Engine

In the ever-evolving landscape of commercial real estate and professional services, Colliers International has emerged as a standout player, leveraging its Engineering segment as a catalyst for strategic diversification and margin expansion. With a 67% revenue surge, a 145% jump in adjusted EBITDA, and margins expanding from 7.2% to 10.6% in Q2 2025, the segment is not just a growth story—it's a masterclass in building long-term value through inorganic and organic strategies. Let's dissect why this segment is a high-conviction investment thesis.

The Power of Inorganic Growth: Acquisitions as a Strategic Lever

Colliers' Engineering segment has become a poster child for disciplined acquisition-driven expansion. In Q2 2025 alone, revenue hit $436.0 million, up 67% year-over-year, with 73% of net revenues ($337.3 million) driven by acquisitions and internal growth. The company's playbook is clear: identify high-potential engineering firms in key markets (Canada, U.S., Australia), integrate them swiftly, and scale capabilities in urban planning, infrastructure, and energy transition.

Recent acquisitions like Ethos Urban (Australia) and Triovest (Canada) have not only expanded Colliers' geographic footprint but also added specialized expertise in sectors poised for long-term tailwinds. These moves are not just about revenue—they're about capturing recurring service revenues, which now account for 72% of the company's earnings. This recurring model, bolstered by engineering contracts tied to infrastructure projects and energy transition mandates, creates a sticky revenue base that's less cyclical than traditional real estate services.

Margin Expansion: A Tale of Two Metrics

While GAAP operating earnings for the Engineering segment in Q2 2025 were $19.2 million (compared to $9.6 million in the prior year), the adjusted EBITDA story is far more compelling: $46.3 million, up 145%. This divergence is a textbook example of how acquisition costs distort GAAP metrics but fail to mask underlying operational strength.

The key adjustments? Acquisition-related expenses ($22.8 million) and amortization of intangible assets ($46.1 million). These one-time and non-cash items are excluded in adjusted EBITDA, which focuses on the segment's core profitability. The margin expansion—from 7.2% to 10.6%—is equally impressive. Half of this improvement came from acquisitions, which brought in higher-margin capabilities, while the other half stemmed from internal productivity gains. This dual-engine approach—scaling through M&A and optimizing existing operations—creates a self-reinforcing cycle of growth and margin enhancement.

Strategic Diversification: A Hedge Against Volatility

Colliers' Engineering segment isn't just growing—it's transforming the company's business model. Historically, Colliers relied heavily on real estate services, which are vulnerable to market cycles. Today, the Engineering segment contributes over 30% of the company's revenue and is projected to grow by 30% in 2025. This diversification reduces reliance on any single sector and positions Colliers to capitalize on global megatrends like urbanization, decarbonization, and infrastructure modernization.

Consider the energy transition tailwinds: engineering firms with expertise in renewable energy projects are in high demand. Colliers' acquisitions in this space position it to capture a disproportionate share of this growth. Similarly, its urban planning capabilities align with the need for smarter cities, a sector expected to expand at a 10% CAGR through 2030.

The Long-Term Investment Case

Critics may point to Colliers' GAAP earnings as a red flag, but this is a myopic view. The company's leadership, under CEO Jay S. Hennick, has shown a disciplined approach to balancing short-term accounting impacts with long-term value creation. The Engineering segment now employs over 9,000 professionals and generates annualized revenues exceeding $1.5 billion. This scale, combined with recurring revenue streams and margin discipline, creates a durable competitive moat.

For investors, the numbers speak volumes: adjusted EBITDA growth of 145% in Q2 2025, a 30% revenue growth projection for the segment in 2025, and a margin expansion trajectory that outpaces industry peers. These metrics suggest Colliers is not just riding a short-term wave but building a platform for sustained outperformance.

Final Thoughts: Buy, Hold, or Wait?

Colliers International's Engineering segment is a rare combination of high-growth potential and operational discipline. While GAAP distortions from acquisition costs may cloud the immediate picture, adjusted metrics and long-term trends tell a compelling story. For investors seeking exposure to infrastructure, energy transition, and urbanization—sectors with multi-decade tailwinds—Colliers offers a diversified, scalable platform.

The key risk? Overpaying for future growth. However, with a P/E ratio of 12x and a forward P/E of 9x (based on 2025 adjusted EBITDA projections), the stock appears attractively valued for its growth trajectory. In a market where earnings visibility is scarce, Colliers' recurring revenue model and strategic acquisitions provide a clear line of sight to long-term value creation.

In conclusion, Colliers International's Engineering segment is not just a growth engine—it's a strategic masterstroke. For investors with a 5–10 year horizon, this is a high-conviction opportunity worth considering.