Aramark, the food and facilities services company known for managing cafeterias in schools, hospitals, and sports stadiums, is quietly building a new growth engine in an unexpected place: data centers. According to a recent note from Oppenheimer, these contracts could become a significant revenue driver, potentially adding $3-4 billion in run-rate revenue by 2028.
Oppenheimer's analysis suggests Aramark's core business is performing well, with revenue growth tracking near the top of management's 7% to 9% target range. Client retention remains above 98%, and the company has secured about $1 billion in net-new business year to date. But the real story is the shift in revenue mix toward data centers.
Why Data Centers Are Different
Data centers require round-the-clock, high-reliability support for everything from cleaning and security to maintenance and catering. These contracts tend to be longer-lasting and harder to replace than typical institutional accounts, making them a source of "sticky" revenue. Oppenheimer estimates Aramark is in talks with several hyperscale cloud providers and aims to sign 10 to 12 data center deals by 2027, growing to 30 to 40 by 2028.
This push is part of a broader trend. Other companies, such as Innio, are also benefiting from the data center boom, as highlighted in a recent UBS report on the sector. The demand for data center services is surging alongside the growth of artificial intelligence and cloud computing.
Profitability Gains on the Horizon
Oppenheimer also expects Aramark to continue improving its profit margins, projecting 30 to 40 basis points of margin expansion each year. The company is managing labor and food costs effectively, which should support steady earnings growth. Combined with the data center opportunity, this points to a story of more visible and predictable earnings, rather than just another year of decent sales growth.
What It Means for Investors
For everyday investors, the key takeaway is that Aramark's revenue could become less cyclical and more predictable. Markets often value "stickier" revenue more highly because it's easier to forecast. If Aramark's data center contracts prove to be long-duration and difficult to switch, the company's growth profile could shift, potentially leading to a higher valuation multiple.
Oppenheimer has set a $65 price target on Aramark, which leans heavily on the expected data center revenue. Investors should watch for proof points in upcoming earnings reports, such as data center deal conversions and whether margin gains are materializing. The company's next earnings update will likely shift focus from core growth to the pace of data center expansion.
This development also underscores the broader data center infrastructure boom, which is creating opportunities across various sectors, from real estate to technology. For context, Texas real estate giants Hunt and Crow recently joined Empery Digital in a $230 million data center push, highlighting the scale of investment in this space.
As always, investors should consider how Aramark fits into their overall portfolio and risk tolerance. The company's data center push offers a potential growth catalyst, but it's still early days, and execution will be key.
