Aramark Sees Data Center Hospitality Fueling Growth, Margin Expansion

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.

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 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.