Aramark Sees Data Center Hospitality Fueling Growth, Margin Expansion

Key Points

• Data-center hospitality is a major growth opportunity: Aramark’s Nexus unit targets workforce communities with food, lodging, wellness and recreational services. The company estimates a $40 billion–$50 billion addressable market and believes Nexus could reach $2 billion–$3 billion in revenue over the next several years.
• Aramark has three data-center-related sites in development, each representing roughly $150 million in annualized revenue, while a Texas contract could add more than $100 million. Nexus contracts are generally higher-margin and asset-light, potentially helping Aramark exceed its historical 5%–8% revenue-growth range and expand margins by 30–40 basis points.
• The company says broad-based U.S. growth, record new-business wins and elevated client retention are sustainable, while international operations have delivered 20 consecutive quarters of double-digit growth. Aramark also plans continued capital investment, disciplined acquisitions, dividend growth and share repurchases as leverage falls below 3 times.

Aramark NYSE: ARMK executives said the company’s growth-focused operating model, higher client retention and expansion into data-center workforce hospitality are supporting an outlook for continued revenue growth and margin improvement.

Speaking at the Goldman Sachs Global Consumer and Retail Conference, Executive Vice President and CFO Jim Tarangelo said the company’s recent performance reflects years of work to shift toward a growth-oriented model. Aramark realigned employee incentives around new business wins and retention, decentralized its organization, added experienced leadership and nearly doubled the size of its growth and retention teams, he said.

“We think that the elevated retention levels, record levels of new business, double-digit underlying growth that we have seen, we do think is very much sustainable,” Tarangelo said.

Broad-Based U.S. Growth

Tarangelo said growth has been broad-based across Aramark’s U.S. portfolio, including retention, new business wins and base business, which the company defines as same-store sales.

Business and industry operations, including refreshments and micro markets, have posted double-digit growth for 21 consecutive quarters, according to Tarangelo and Pat Liebler, CEO of Aramark Nexus. Sports and entertainment also continued to grow strongly, supported by playoff activity, the World Cup and Major League Baseball during the third quarter, Tarangelo said.

Aramark’s healthcare and collegiate hospitality businesses have also accelerated. In healthcare, Tarangelo cited two major client wins: Penn Medicine last year and RWJBarnabas this year. Those contracts are ramping up and contributing to double-digit healthcare growth, he said.

Nexus Targets Data-Center Workforce Communities

Liebler, who has been with Aramark for 20 years and previously led Aramark Refreshments, said Nexus is intended to bring higher-end hospitality services to workforce communities supporting the construction of data centers.

The offering goes beyond food and lodging, he said, encompassing on-trend food concepts, hotel-like amenities, wellness and fitness centers, recreational activities and potentially golf courses. The objective is to create a more attractive environment for skilled workers who are needed to build large data-center facilities on accelerated timelines.

Liebler said competition for skilled labor is expected to increase, citing statistics that the country could face a shortage of approximately 500,000 skilled workers by 2028. He also cited statistics indicating workers satisfied with their work community, housing, food and sleeping environments are 68% more productive.

Tarangelo said Aramark sees an estimated addressable market ranging from $40 billion to $50 billion, though some estimates place it closer to $100 billion. He said the company believes Nexus could become a $2 billion to $3 billion business over the next several years.

• Aramark has three data-center-related sites in various stages of mobilization, including two connected to a hyperscaler and one associated with a co-locator.
• One site is currently serving meals, Tarangelo said.
• Each of the three initial sites represents about $150 million in annualized revenue, supporting the company’s previously cited $400 million to $500 million opportunity through 2027 and 2028.
• A newly announced Texas workforce-community contract is still being developed but could represent more than $100 million in revenue, with a likely ramp in the first half of calendar 2027 or sooner.

Tarangelo said the company has an active annualized development pipeline of roughly $450 million to $550 million, with a portion expected to be recognized in fiscal 2027. The scope of some initial contracts has increased as clients added more beds, residences, services and amenities while accelerating construction schedules, he said.

Higher-Margin, Asset-Light Model

Tarangelo said Nexus contracts are generally structured as fee-based, cost-reimbursable arrangements with margins above Aramark’s company average. He also described the model as capital-light, with favorable working-capital characteristics.

Executives said Aramark’s scale and experience in complex, remote operations differentiate the company in the emerging market. Tarangelo pointed to the company’s operation of 17 Summer Olympic Games, remote mining services in Chile, operations in Canada’s tar sands, offshore work in the North Sea and hospitality operations at destinations including Yosemite National Park.

Liebler said Nexus was established as a separate line of business so it could draw expertise from across Aramark while operating under a single strategy. The company’s current focus is on expanding Nexus in North America, Tarangelo said, while leaving open the possibility of international opportunities over time.

Tarangelo said Nexus is expected to contribute approximately 1 percentage point to growth in the fourth quarter of fiscal 2026. As the business scales, it could help Aramark operate above its historical 5% to 8% revenue-growth range and sustain margin accretion of 30 to 40 basis points, compared with a longer-term steady-state expectation of 20 to 30 basis points.

International Growth and Capital Allocation

Outside the U.S., Tarangelo said Aramark has recorded 20 consecutive quarters of double-digit growth. Recent growth was supported by the United Kingdom, Germany, Canada, Chile and South America. The company has targeted areas where it has differentiated capabilities, including sports and entertainment, festivals, remote mining services and offshore operations.

Tarangelo said Aramark does not need to expand into additional countries to find growth opportunities internationally. Instead, the company plans to gain share and broaden its sector offerings in existing markets, including areas such as healthcare.

On capital allocation, Tarangelo said Aramark expects to be below 3 times net leverage by the end of the year. He noted that Moody’s and S&P recently upgraded the company, with S&P raising its rating to BB+.

The company intends to continue investing about 3.5% of sales in capital expenditures, pursue targeted and disciplined acquisitions, and return excess cash flow to shareholders through low-double-digit dividend growth and increased share repurchases, Tarangelo said. He added that management sees little reason to reduce leverage materially below roughly 2.6 to 2.7 times.

About Aramark (NYSE:ARMK)

Aramark NYSE: ARMK is a global provider of food services and facilities management solutions. The company serves organizations across education, healthcare, business and industry, sports and leisure, corrections, and other institutional markets.

Its food services include dining operations, catering, concessions, hospitality, and culinary programs. Aramark also provides facilities services such as housekeeping, plant operations, maintenance, workplace services, and related support programs designed to help clients manage their physical environments.

Headquartered in Philadelphia, Aramark serves customers in the United States and internationally.

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