Aramark (ARMK -8.00%), released its Q3 FY2025 earnings on August 5, 2025. The most notable news from the release is that while earnings per share met analyst forecasts at $0.40 (Non-GAAP), GAAP total revenue of $4,626 million was below the estimated $4,655 million. Despite the slight revenue miss, the company posted a 29% year-over-year increase in adjusted EPS and saw its adjusted operating income jump 19%. Overall, the period was marked by record profitability, continuing operational efficiency gains, and strong business retention, driving management to reaffirm its robust full-year outlook.
| Metric | Q3 2025 | Q3 2025 Estimate | Q3 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.40 | $0.40 | $0.31 | 29.1% |
| Revenue | $4,626 million | $4,655 million | $4,376 million | 5.7% |
| Adjusted Operating Income | $230 million | $193 million | 19.2% | |
| Operating Margin | 3.9% | 3.7% | 0.2 pp | |
| Free Cash Flow | $(34) million | $62 million | (154.8%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.
What Aramark Does, and Why It Matters
It is recognized as a top two provider in North America and holds a top-three position in food and facilities services internationally in most countries where it has significant operations.
Recent business focus areas include driving operational efficiency, expanding technology in the supply chain, and strengthening client retention. Key factors for success are retaining large long-term contracts, keeping costs low in a competitive, low-margin sector, and continuing to win new business through innovation and value-added service. The wide variety of clients and contract lengths help to stabilize revenue and support future growth.
Third Quarter Highlights: Growth, Margins, and Segment Drivers
Aramark matched profit expectations with Non-GAAP EPS of $0.40. However, reported revenue (GAAP) came in slightly below forecast. Organic revenue, which excludes currency effects, increased 5% as international business continued to outpace U.S. growth. The international segment posted a 10% organic revenue gain in Q2 FY2025, while the U.S. saw only 3% organic growth. Within the U.S, exits from certain portfolios and fewer major arena events affected results but are now largely behind the company, with management stating that future periods should see less impact from these factors.
Adjusted operating income (AOI) rose sharply, increasing 19% year-over-year. The company’s focus on operational discipline and supply chain improvements, including the use of artificial intelligence (AI) for supply chain decisions, contributed to margin expansion. The total AOI margin (non-GAAP) reached 5.0%, while operating income margin (GAAP) advanced by 0.2 percentage points year over year. In the U.S, operating income improved 14% as the company benefited from new business, stronger participation rates in business & industry (B&I) services, and student demand in its education portfolio. International Adjusted Operating Income improved 13% in constant currency, even as reported operating income declined 6% because of country mix and higher labor costs.
Aramark continued heavy investment in technology and process improvements. Management highlighted the impact of AI-driven tools that optimize purchasing compliance and contract productivity in Q2 FY2025, with management describing average margins in that segment as “north of 55%–60%,” as stated on the Q2 FY2025 earnings call. Integration of recent acquisitions, such as the Quantum deal to expand international purchasing capabilities, is expected to deliver further procurement synergies and growth.
Free cash flow (non-GAAP) was negative $34 million. This result is in line with typical seasonal working capital outflows, especially as capital expenditures are weighted toward new business ramp-ups in sports and education. Management expects a strong rebound in free cash flow (non-GAAP) in Q4 FY2025 as the company enters its busiest business period. Aramark took steps to strengthen its balance sheet, repaying approximately $62 million in term loan debt and repurchasing $31 million worth of shares. Cash and cash equivalents at quarter’s end stood at $501.5 million, and capital return remains a priority.
Understanding Aramark’s Services and Growth Drivers
Aramark’s services fall into food service and facilities management. Within food service, it provides meal plans for universities, on-site catering for hospitals and businesses, and operation of concessions at sports and entertainment venues. Facilities management covers asset upkeep, cleaning, and building operations for clients.
Business & Industry services benefited from higher in-person attendance and new vending and micro-market offerings. The education segment saw growth from increased meal plan enrollment and more operating days due to academic calendar shifts. Sports, leisure, and corrections revenue rose as new contracts were signed with Major League Baseball stadiums and as per-capita spending rose.
Internationally, revenue gains were broad-based, led by the United Kingdom, Chile, Canada, and Spain. The company secured several large new contracts, including high-profile sporting venues and industrial accounts, contributing to its record retention rate above 97% in both U.S. and international markets. A key focus remains on first-time outsourcing wins, as uncertainty prompts more organizations to consider professional service providers over internal options.
Inflation was relatively benign, with rates around 2% to 3%, and was described as manageable. During Q2 FY2025, overall inflation was in the 2% to 3% range. Management stated pricing was adjusted to keep pace with these input cost increases. Tariffs and supply chain shocks were described as manageable, with contingency plans and alternative sourcing in place to offset potential disruptions.
Progress toward environmental, social, and governance (ESG) goals continues, though no major ESG updates were highlighted in this release.
Looking Ahead: Guidance and What to Watch
Management maintained its full-year guidance, targeting organic revenue growth between 7.5% and 9.5%, adjusted operating income growth of 15%–18%, and adjusted EPS growth of 23%–28% (all in constant currency). These targets include a planned 53rd week, which adds about a 2% benefit to both organic revenue and adjusted operating income projections. The company also projects a year-end leverage ratio near 3.0x, reflecting continued debt repayment and strong cash generation.
Looking into the next quarter and beyond, investors should monitor the pace of U.S. business growth and net new client wins, especially as the company aims for the high end of its 4%–5% net new business growth goal. Seasonality will play a key role, with free cash flow expected to rebound as collegiate hospitality and sports & entertainment activity ramps up. Other watchpoints include managing inflation risk, sustaining client retention, and further integration of new technology and process improvements.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
