ABM Industries Sees $1.5 Billion Pipeline in Data Centers and Microgrids Amid Office Pressure

Key Points

• Growth in data centers, semiconductors and microgrids is accelerating: These businesses now make up about 11% of sales, up from 7% last year, and ABM has a roughly $1.5 billion qualified pipeline in data centers and microgrids. Current revenue is concentrated among five to seven major clients, while pipeline opportunities span 25 new clients.
• Commercial real estate services face pricing pressure: ABM is turning down low-margin work, especially in Northern California, and expects its Business & Industry segment could return to positive growth in the second half of fiscal 2027. Meanwhile, aviation margins have risen from about 2% to nearly 6% as the business shifts toward airport contracts.
• Capital and execution priorities remain in focus: ABM aims to reduce leverage toward 2.5 times in fiscal 2027, grow cash flow and continue its annual dividend increases. Skilled technicians remain a constraint in its higher-growth technical businesses, prompting the company to open training centers.

ABM Industries NYSE: ABM is expanding its exposure to semiconductor facilities, data centers and microgrids as the facility services company faces pricing pressure in parts of its commercial real estate business.

Chief Financial Officer David Orr said at Baird’s Global Industrial Conference that the three growth areas account for about 11% of ABM’s sales, up from roughly 7% last year. Collectively, they have grown at a very high double-digit rate this year, helped by both organic growth and the acquisition of semiconductor services provider WGNSTAR, he said.

Orr described ABM as a $9 billion company with services spanning janitorial work, parking, building engineering and technical services across commercial properties, airports, manufacturing facilities and schools.

Growth pipeline and customer concentration

Microgrid and semiconductor services have each grown organically at more than 20%, while data center services have grown at about 10%, Orr said. He added that the data center rate could increase as the company’s pipeline expands.

Vice President of Investor Relations Paul Goldberg said ABM has a qualified pipeline of about $1.5 billion across microgrids and data centers. The company hopes to convert those opportunities into contracts and revenue, he said.

Orr said most current microgrid and data center revenue comes from five to seven major clients, while the pipeline spans 25 new clients. Converting those opportunities could broaden the customer base and reduce concentration risk, he said.

ABM’s data center work includes specialized cleaning and uninterruptible power systems through its Quality Uptime Services business. Its RavenVolt business provides microgrid equipment and services, including battery storage and backup power.

Orr also discussed a joint venture’s first task order under an Army Corps of Engineers program, announced in September. The roughly $20 million project involves battery storage and generator work at a New Mexico base and is expected to generate revenue in fiscal 2027.

Orr said approximately $2 billion could be awarded under the program over 10 years, with ABM’s joint venture competing for future work. He stressed that the company must execute on the initial project and win subsequent bids.

Pressure in office services, improvement in aviation

ABM’s Business & Industry segment, which largely serves commercial real estate, is facing intense price competition on the West Coast, particularly in Northern California, Orr said. The company has been selective about taking lower-priced work and has declined some opportunities offering little or no margin.

The segment is also contending with the revenue effect of exiting a Transport for London contract. Orr said ABM chose not to retain the work at margins it considered unacceptable. He sees a scenario in which Business & Industry returns to positive growth in the second half of fiscal 2027.

In aviation, Orr said operating profit margin has improved from about 2% to nearly 6% over six years. He attributed the improvement partly to attention to underperforming contracts and a shift toward airport customers, whose contracts tend to be longer and more profitable than airline work.

Airports now represent about 60% of the aviation portfolio, compared with airlines accounting for roughly 60% five years ago, he said. Orr added that ABM had not seen a significant recent drop in airline-related volumes.

Cash flow, debt and labor priorities

Orr said he would be disappointed if cash flow did not grow next year, while declining to provide specifics because the company was in a blackout period. He said reducing leverage is a priority, with ABM looking to move toward 2.5 times leverage in fiscal 2027.

He also expects the company to continue its roughly 60-year record of annual dividend increases and offset dilution from share-based compensation. Beyond those priorities, ABM would weigh acquisitions against additional share repurchases, he said.

Labor availability has largely returned to normal in ABM’s core business, according to Orr, but skilled technicians remain a constraint in semiconductor and data center work. Goldberg said the company has opened training centers in Idaho and Austin, Texas, to help address that need.

ABM is also testing floor-scrubbing robots, with a few hundred deployed nationally. Orr called their current impact a “rounding error” but said robotics could become more meaningful over the next several years.

About ABM Industries (NYSE:ABM)

ABM Industries provides facility, infrastructure and building maintenance services to commercial, industrial and institutional customers. Its offerings include janitorial and custodial services, facility engineering and maintenance, parking and transportation services, and electrical and energy solutions. The company serves a range of sectors, including commercial real estate, aviation, education, healthcare, manufacturing and distribution. Its services are delivered primarily across the United States, with operations in select international markets.

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