Food and facilities services provider Aramark (NYSE: ARMK) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 14.3% year on year to $5.05 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $19.75 billion at the midpoint. Its GAAP profit of $0.33 per share was 44.7% below analysts’ consensus estimates.

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“Fiscal 2025 represented many consequential milestones for the Company, contributing to the strong growth trajectory ahead,” said John Zillmer, Aramark CEO.

Company Overview

From serving hot dogs at major league stadiums to managing college dining halls that feed thousands daily, Aramark (NYSE: ARMK) provides food services and facilities management to schools, healthcare facilities, businesses, sports venues, and correctional institutions across 16 countries.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $18.51 billion in revenue over the past 12 months, Aramark is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices.

As you can see below, Aramark’s sales grew at a solid 7.6% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Aramark’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, Aramark’s revenue grew by 14.3% year on year to $5.05 billion but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will catalyze better top-line performance.

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Adjusted Operating Margin

Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.

Aramark was profitable over the last five years but held back by its large cost base. Its average adjusted operating margin of 4.8% was weak for a business services business.

On the plus side, Aramark’s adjusted operating margin rose by 2.9 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Aramark generated an adjusted operating margin profit margin of 5.7%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Aramark’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Sadly for Aramark, its EPS declined by 31% annually over the last two years while its revenue was flat. This tells us the company struggled to adjust to choppy demand.

We can take a deeper look into Aramark’s earnings to better understand the drivers of its performance. We mentioned earlier that Aramark’s adjusted operating margin was flat this quarter, but a two-year view shows its margin has declinedwhile its share count has grown 1.3%. This means the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q3, Aramark reported EPS of $0.33, down from $0.46 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Aramark’s full-year EPS of $1.22 to grow 60%.

Key Takeaways from Aramark’s Q3 Results

We were impressed by how significantly Aramark blew past analysts’ full-year EPS guidance expectations this quarter. On the other hand, its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $37.27 immediately following the results.

Aramark may have had a tough quarter, but does that actually create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.