CBRE Group (CBRE) Earnings Call

Operator

Greetings. Welcome to the CBRE Group Second Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode.

Please note this conference is being recorded. I will now turn the conference over to Chandni Luthra, Global Head of FP&A and IR for CBRE. Thank you.

You may begin.

Chandni Luthra

Good morning, everyone. And welcome to CBRE's Second Quarter 2026 Earnings Conference Call. Earlier today, we posted a presentation deck on our website that you can use to follow along with our prepared remarks and an Excel file that contains additional supplemental materials.

Today's presentation contains forward-looking statements including, without limitation, statements concerning our business outlook, business plans, capital allocation strategy as well as our earnings and free cash flow outlook. These statements involve risks, and uncertainties that may cause actual results and trends to differ materially. For a full discussion of the risks and other factors that may impact these statements, please refer to this morning's earnings release and our other SEC filings.

We have provided reconciliations of our non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures together with explanations of these measures in our presentation deck appendix. Throughout our remarks, when we cite financial performance relative to expectations, we are referring to actual results against the outlook we provided on our first quarter 2026 earnings call in April, unless otherwise noted. All the growth rates we cite are in U.S. dollars unless otherwise noted and reflect an FX tailwind of 1% to 2%.

Also as a reminder, our resilient businesses include facilities management, critical infrastructure services, property management, project management, loan servicing, valuations, other portfolio services and recurring investment management fees. Our transactional businesses are comprised of property sales, leasing, mortgage originations, carried interest and incentive fees in the investment management business and development fees. I am joined on today's call by Robert E. Sulentic, our Chairman and CEO and Emma E. Giamartino, our Chief Financial Officer.

Now please turn to slide 3 as I turn the call over to Bob.

Robert E. Sulentic

Thank you, Chandni, and good morning, everyone. The momentum in CBRE's business continued in the second quarter with core EPS up 30% on a 16% revenue increase. Our strength was balanced across the company.

Each of our segments advisory, building operations and experience, project management, and REI grew SOP by more than 25%. Our strategy is working the way we intended. Resources and investments are being productively directed into areas that drive current growth and position us for long-term growth.

Directly related to this positioning, over the last several months, we have received many questions from investors. About our infrastructure and data center services businesses. Those businesses are performing well and they provide an excellent forward-looking opportunity.

Infrastructure services revenue reached nearly $1.2 billion in the second quarter. Increasing by more than 45%. Within infrastructure services, data center services revenue surpassed $700 million rising nearly 30%.

This revenue is strictly from the provision of services and does not include any data center development land sales. The work we do includes the build-out of data centers as well as ongoing maintenance and operational oversight. During this period of significant AI investment, we expect our data center services revenue to remain elevated at about 25% annually for the next five years and then above 15% as the build cycle matures.

Given the momentum in our entire business, and specifically our infrastructure business, we have increased our core EPS expectations for 2026. We now expect to earn in the range of $7.80 to $7.90 equating to 23% growth at the midpoint. Now, Emma will discuss our outlook and results for the quarter in more detail.

Emma?

Emma E. Giamartino

Thank you, Bob, and good morning, everyone. CBRE's strong second quarter saw revenue increase by 16% as both resilient and transactional businesses delivered double-digit growth. Results exceeded our expectations with core EBITDA up 34% and core EPS up 30%.

This is the fifth consecutive quarter that we achieved at least 18% core EPS growth. In Advisory Services, revenue rose 18% and exceeded our expectations driven by accelerated growth in leasing and continued strength in sales. Global leasing revenue grew 24% with strength across office and industrial in the U.S., leasing also grew 24%, led by office up 29% and industrial up 17%.

We generated our highest U.S. office leasing revenue for any second quarter, driven by large deals in gateway markets. We have seen notable strength across the legal and financial services sectors as tenants are upgrading and expanding their space. U.S. industrial leasing growth was led by Los Angeles, San Francisco, Washington DC and Chicago, reflecting increased demand from 3PL providers and companies engaged in advanced manufacturing.

Outside the U.S., leasing grew 27% in EMEA, led by France, Germany and Spain, 19% in APAC with notable strength in Australia and India. Global property sales revenue grew 20% led by the U.S., which grew 24% double-digit increases across most major property types. Outside the U.S., sales grew 8% in EMEA and 6% in APAC.

Mortgage origination revenue grew 8% with strong volumes from private capital sources partly offset by lower agency lending activity. Advisory SOP grew 29% reflecting strong operating leverage. We delivered strong double-digit revenue growth in our Building Operations and Experience segment.

Growth was led by Critical Infrastructure Services, where revenue increased 68%. Data Center Solutions business grew nearly 30% benefiting from both significant hyperscaler demand and the depth and breadth of our capabilities. Contributions from the Pearce Services business we acquired last November enhanced the growth rate.

Our local facilities management business once again delivered strong high-teens revenue growth across all regions particularly in the Americas. Up almost 35% Enterprise Facilities Management revenue growth was led by the technology, media and telecom sectors. BOE SOP grew 25%.

In our Project Management segment, revenue grew 19%. Underpinned by solid infrastructure activity which increased 30% while real estate-related services grew 13%. Infrastructure saw strength across transportation and utility projects in the UK, Europe and the Middle East.

Real estate saw greater than 20% growth in North America, and strong double-digit growth in Asia. Across all regions, hyperscaler and technology clients drove significant activity. SOP grew 28%, notable operating leverage which we expect to moderate in the back half of the year given the timing of costs.

Turning to the Real Estate Investment segment. Development operating profit exceeded the prior year in line with our expectations and without the benefit of any data center land sales. We continue to have embedded gains of approximately $900 million in our development portfolio.

In Investment Management, operating profit was up modestly. We ended the quarter with approximately $155 billion of AUM. We raised $1.6 billion of new capital in the quarter, up from $1.3 billion in the fourth quarter, but below our expectations.

Some investors particularly capital from the Middle East remained cautious given the volatile global backdrop. Now I will turn to free cash flow and capital allocation. Free cash flow totaled nearly $1.7 billion on a trailing 12-month basis.

For the full year, we remain on track to achieve near the high end of our free cash flow conversion range of 75% to 85%. Since the end of the first quarter, we have bought back more than $450 million worth of shares bringing our year-to-date total to nearly $1 billion. This level of buyback activity underscores our conviction that our stock price is meaningfully undervaluing the enduring long-term growth we see ahead for the business.

As Bob indicated, we now expect full year core EPS of $7.80 to $7.90 up from $7.60 to $7.80 previously. The increase is driven by our outperformance in the second quarter and improved expectations for the balance of the year. We now foresee more than 20% core EPS growth in the third quarter with the fourth quarter likely to be comparable to last year when we also realized significant profits from our data center land program.

Assuming no material changes to the macroeconomic or interest rate environment, we remain confident in delivering at least a 15% increase in core EPS in 2027. With that, operator, we will open the line for questions.

Operator

Thank you. We will now be conducting a question-and-answer session. We ask that you please limit yourself to one question and one follow-up.

Our first question is from Anthony Paolone from JPMorgan. Please proceed with your question.

Anthony Paolone

Yes, thanks. Good morning. My first question relates to just capital priorities.

And the second half of the year and what is in guidance, just given the heavy cash flow production later in the year? Kind of what do you have baked in for buybacks or other activities?

Emma E. Giamartino

So our capital allocation priorities remain unchanged from where we have been for the past number of years. Continue to prioritize M&A. And as we have talked about, we have a really strong pipeline across the areas where we know we want to invest. But it is difficult to project which M&A targets we will be able to convert.

And then we will fill in with buybacks if we do not deploy that level of free cash flow that we generate through M&A. In terms of the back half of the year, there is no significant incremental capital allocation included in our guidance.

Anthony Paolone

Okay, got it. And then just on BOE, you maybe update us on your thinking as it relates to margins in that business for the year? Because I think you started the year out pointing to being more frothy, but it seems like it is improved quite a bit here in the second quarter.

Emma E. Giamartino

Yes. So we did make a change to how we classify amortization related to our fleet in that segment. And so without that change, the margin for the year will improve by 20 basis points or so.

But the rest of that margin improvement is related to that reclass.

Anthony Paolone

Okay. Got it. Thank you.

Operator

Our next question is from Stephen Sheldon at William Blair. Please proceed with your question.

Stephen Sheldon

Hey, good morning. Thanks. On the leasing side, another very strong quarter there in that has now been true for the last two-plus years.

So do you think activity leasing activity there has effectively normalized now after the pandemic where leasing growth would be more in line with an average seen throughout the macro cycle? Or is there still room for above cycle growth just as pent-up demand on the leasing side continues to come through? I guess, just how are you thinking about it on over the next couple of years?

Robert E. Sulentic

Stephen, I think there has been a return to the norm. I think COVID is so far in the rearview mirror now that people. You see it in office buildings, you see it in restaurants, you see it in everything.

There is a real return to the norm. Secondly, people really are focused on what office space can do for their businesses, for the productivity of their businesses, exciting their employees about being part of the company, getting their young people educated and brought into the business. that is a very real thing. it is a real thing for us. We have a lot of space around the world and we think about that a lot.

We know our big occupier clients are thinking about that a lot and they are competing with each other. To try to have the kind of space that allows them to get those things done. So I think it is going to be somewhere between a return to the norm and maybe more than that.

I will give you one anecdote with all the talk about the various parts of our economy that might get disintermediated by AI. one of the areas is the legal profession, law firms. We are having tremendous leasing. success with law firms now, kind of unlike we ever had before. And it is because they recognize the importance of office space to their business.

And it is also because using AI for certain things and then doing other things with their talent that is causing their headcount not to go down the way some people think it might.

Stephen Sheldon

Got it.

Stephen Sheldon

That is helpful. It makes sense. And then just as a follow-up, Bob, a really encouraging commentary on the data center revenue growth outlook.

As you think about CBRE's opportunity continuing to support the data center build-out. Where do you see the biggest opportunities by business line? I guess, to drive the 25% annual revenue growth that you are expecting over the next five years?

I mean, is there certain business lines where, you know, there is a huge opportunity where you are not doing much yet? There is a big opportunity for activity to pick up and yeah, maybe where you are seeing those opportunities.

Robert E. Sulentic

Well, first of all, it has become big for us. So infrastructure was $1.2 billion of revenue in the quarter, $700 million of that was data centers. We think by the year 2030, we could have a $10 billion business with over $1 billion of EBITDA related to infrastructure, the disproportionate share that would be in data center, certainly not exclusively in data centers.

Where we are really seeing it, the opportunity and the current activity is in two places. It is in our project management and program management business with Turner & Townsend. By the way, they have been growing their data center-related business at over 30% for a decade now.

And then the second place we are seeing is building operations and experience. We are helping create data centers in support of the boom that AI is generating, but over half of our data center revenue is from downstream work, managing them refitting them, doing project work in data centers. So we expect to see a lot of growth in both those areas of our business in the BOE area and in the projects business.

Stephen Sheldon

Good to hear. Thank you.

Operator

Our next question is from Julien Blouin at Goldman Sachs. Please proceed with your question.

Julien Blouin

Yes. Thank you. Thank you for the question, and congratulations on the strong quarter.

I wanted to maybe dig into project management a little bit more, very impressive quarter. Both top-line and bottom-line. It sounds like maybe that will flow with expenses a little bit in the back half.

But I guess, could you talk about how we should think about the sort of the projects that go into that? Sounds like it is a lot of projects. I think of those as sort of longer-dated Turner & Townsend projects.

And so is it right to think that much of this strength could carry into sort of the future quarters?

Robert E. Sulentic

We are, Julien, we are very excited about the future for Turner & Townsend. The project management and program management business that they participate in. First of all, one thing to realize about them is they were really dominant.

Europe, Middle East, significant in Asia, in Australia, By combining with us they have been able to significantly escalate their activity in Japan and India and especially in the U.S. So just the geographic positioning of that business has improved dramatically and I have commented on this over and over We have been able to leadership team of Turner & Townsend is in the in the tools and capabilities they bring to the table just has not existed in our before. But where do we think the real opportunity will be with them? It will be in big infrastructure projects, big energy projects.

It will be in doing more of that in particular here in the U.S. And, you know, Emma tells the M&A story every quarter. We have, we have specific areas of our business we want to grow with M&A. We have got some ideas around Turner & Townsend that we want to make happen there if we could find the right deals. So we think that you should expect lots of growth in the U.S. and in infrastructure and in energy etcetera, from Turner & Townsend.

But they also do a tremendous amount of corporate work And with Turner & Townsend as part of our business now, we are doing big complicated projects for corporates that we were not able to do before. So that will be another area of growth.

Julien Blouin

Thank you.

Julien Blouin

No. That is very helpful. And then on the land sales, Emma, it sounds like you have a number of these earmarked to be sold in the third quarter.

Just wondering beyond the ones that are sort of earmarked here, how many will you have left in your land bank for potential future monetization?

Emma E. Giamartino

We still have about 30 sites across the U.S. in our land bank. They are varying sizes, and it is very difficult to time when they will potentially monetize, but we still have 30 sites.

Julien Blouin

Okay. Great. Thank you.

Operator

Our next question is from Jade Rahmani at KBW. Please proceed with your question.

Jade Rahmani

Thank you very much. In terms of the 2027 commentary for EPS growth of at least 15%, is it reasonable to expect double-digit revenue growth? And are there any key areas of operating leverage you would like to highlight?

Emma E. Giamartino

So if we go through our segments, just simply, it is we are looking at low double-digit SOP growth across both BOE and project management, and that does include some operating leverage, but revenue growth is going to be in line with that low double-digit growth. And then advisory, as you would expect, will moderate somewhat from this year. But it is not going to be anywhere near mid-cycle growth levels.

And then what we are expecting for REI is that it will be roughly flat to what we are expecting for this year's SOP, which we are expecting to be very strong. So some operating leverage across our segments, but not a tremendous amount.

Jade Rahmani

Thank you very much.

Jade Rahmani

Turning to the AI theme. Wondering if you could comment on whether you see any risk of unbundling of services within property and facilities management also, could you parse out your views on the smaller size deals in the market and if you see that as an area of potential risk. You say, Jade, unbundling, give us a little more on what you are what you are commenting on there.

Well, the thesis around outsourcing has been institutionalization. Of CBRE being a one-stop shop. And so within that, there is you know, basic facilities and property management, but there is many other services that are provided to occupiers a full suite of services.

And so does AI give them potentially you know, the capacity to shrink the scope of certain outsourcing projects.

Robert E. Sulentic

So the outsourcing work that we do for occupiers centers around three big things. Facilities management, project management, and transactions or leasing. All of those areas of our business and I am going to I am going to start with transactions.

The three big products that we are introducing or the three big areas that we are introducing AI into our product mix or with transactions leasing in particular now we are using agentic AI to collect and assimilate data in a way that we can help For instance, our occupier clients predict and benchmark their predict will their portfolio should go and benchmark them against others in the market. We have a whole protocol that we are putting in place in our project management business to span the life cycle of projects related to budget schedule and risk that is going to give our clients much greater insight. Into how projects go. it is going to give them much greater confidence in when to kick off big projects and how to correct course on big projects when they get off course on any of those three areas.

And then in facilities management, we are using it for some very basic things. The kind of the back-office work can make it more efficient But we are also using it for predictive maintenance on the buildings that we manage. We are also using it to help move our mobile engineers around and schedule those engineers except So we think it is going to help all of the products that we offer to our occupier clients in the traditional outsourcing sense it is actually the areas where we are going to use it most.

And we do not think that any of those things that we do are positioned to be, I guess, when you say disintermediated or separated pulled away from us because our clients would do it instead of having us do it. There is significant labor involved in all of that work and we think we have we will have tools and an overall platform that the clients themselves will not have.

Jade Rahmani

Thank you very much.

Operator

Our next question is from Steve Sakwa at Evercore ISI. Please proceed with your question.

Steve Sakwa

Bob, I know that the rate environment has not been as cooperative as everybody had hoped for at the beginning of the year. But you still put up pretty good growth in the transaction business. I am just curious what kind of you are seeing, what the pipeline looks like and is there any sort of concern about just funding in debt markets and how that business kind of moves forward?

Robert E. Sulentic

You know, there is concern that interest rates will go up and what is going on in the Middle East causes that. But a few things as it relates to our business and the market in general. Steve.

Number one, and we have said this over the last couple of years quite a bit. that is a big important business for us, but double-digit growth trajectory of our business does not depend on strong capital markets and large lease or large sales volumes and large origination volumes. it is really important and things will go even better if that happens. But the growth trajectory of our business and the strategy that underpins our business is not tied to that. Secondly, what we saw in the quarter was lots of uncertainty around debt.

And the cost of debt and some things happen. So a big part of our profit stream in the origination business comes from the agencies. We did not have a strong quarter at all with the but yet we had still a very strong quarter overall.

In capital markets and in debt origination. What we saw in the market was bid-ask spread had come down and was closer than it had been in years. And there are people out there.

Arlin, we have talked about this quarter after quarter. there are people out there with assets that they want to sell and there are people out there with lots of money to invest in assets. So the choppiness in the debt markets did not keep them on the sidelines. We do not know how that will unfold going forward, but we think we will continue to see pretty strong sales for the rest of the year and we think we will see pretty strong debt origination for the rest of the year, but it may come down if interest rates go up or if the volatility gets to be too great.

Steve Sakwa

Okay, thanks.

Steve Sakwa

And maybe, Emma, just as a follow-up to Anthony's earlier question on kind of capital deployment. If I am looking at the cash flow statement right, between buybacks and acquisitions, I think you have invested close to $1.3 billion in the first half of the year. And given that you sort of generate that $1.7 billion of free cash flow, is it fair to then assume that kind of buyback activity would likely taper off quite significantly?

Or if the stock remains at sort of these levels you would lean in and even, I guess, invest more than the free cash flow of $1.7 billion?

Emma E. Giamartino

Our goal is not to deploy more than we generate in free cash flow in buybacks. So yes, it is safe to assume that the buybacks will taper off.

Steve Sakwa

Great. Thank you.

Operator

Our next question is from Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Ronald Kamdem

Great. Just thinking back to the presentation that you guys had in June, I think you talked about 30% of revenues from Fortune 100 companies. I guess, just when you sort of take a step back and you guys think about sort of your penetration rate and your opportunity set not just across these Fortune 100 companies, but just broadly, just where do you think you are in that cycle, in that inning?

How much more sort of white space is there? For CBRE? Thanks.

Robert E. Sulentic

Yeah. We do a lot for the world's biggest companies. And it is just very clear in our results and what we are seeing day-to-day that there is a skewing of that opportunity toward anything related to data centers and infrastructure.

There is all kinds of emphasis. There is all kinds of work going on with various military-related companies. And so on and so forth.

So those are very large companies. Obviously, the hyperscalers are the biggest companies in the world. And all of that all of those types of companies are offering up bigger and bigger opportunity than we have ever seen from them before.

And all of those companies like to interface with companies that have substantial scale. Our scale helps us with those companies. Our ability to invest helps us with those companies.

Our global footprint I do not think I ever remember us being involved in any area of our business where the revenue synergies were as great as they are in the data center business. If you do data center work for a company in one area, the odds of getting work from them in other areas, other types of services or other geographies are as high as I have ever seen in terms of revenue synergies. So our future is going to be skewed toward big companies in that opportunity for us is substantial.

Ronald Kamdem

Great. And just my follow-up, I mean, I think some of the numbers suggest we are in sweet spot of the real estate cycle and you have sort of talked about 2027 growth core EPS growth. And my question is really just on visibility.

Right? Like what are you guys looking at, whether it is contracts or pipelines? Like, of what gives you sort of confidence in that visibility call it, 12 to 18 months out to have that target out there?

Thanks.

Emma E. Giamartino

So across our BOE and project management business, we have strong visibility. That low double-digit growth on SOPs that I talked about across both of those segments is in line with, if not slightly below, what those businesses have delivered consistently over the past number of years on an organic basis. And so we have high confidence that will continue.

And then within advisory, we do believe that there is more room. Bob was talking about it earlier, but on the leasing side, we are still not back to 2019 levels. We see there is more room to go this year, and that will extend into next year.

And on the sales side, we are still pretty early. We have seen strong growth, but not near the levels of growth that we have seen coming out of other recoveries. So we have a high level of confidence that we will be able to deliver 15% growth next year.

Ronald Kamdem

Thank you.

Operator

Our next question is from Brendan Lynch with Barclays. Please proceed with your question.

Brendan Lynch

Great. Thanks for taking my questions. Emma, I anticipate any impacts on your data center business from the growing NIMBYism that we are seeing in the market?

And is there anything that CBRE can do either in conjunction or on behalf of your clients to mitigate concerns among local governments and local residents.

Robert E. Sulentic

There are all kinds of things that are challenging the growth of the data center business relative to the demand for that growth. So there is the NIMBYism, there are water issues, which are tied to the NIMBYism, there are power issues, which are tied to the NIMBYism. there are challenges all over with regard to the supply chain for the kind of work we do. there are challenges, hard to hire the people you need to hire to do the work we do. Obviously, all the equipment that goes into data centers etcetera.

So there are challenges everywhere. With regard to growing the base of data centers in the world. There is enormous demand and there will be even in light of those challenges, there will be considerable growth in the number of data centers and the size of the data centers out there.

We are convinced of that. They will have to move to areas that allow them to get that done. The supply chains will have to adjust etcetera.

So yes, there are all kinds of pressures. When anything becomes that big and rapidly changing and uses up resources the way data centers use up resources, there is going to be challenges. But we expect a very, very substantial sustained opportunity in the creation of data centers and an even bigger long-term opportunity in the downstream work we do in data centers.

Brendan Lynch

Great. Thanks, Bob.

Brendan Lynch

And for my follow-up, on the local facilities management growth, I think it was in the high-teens, it seems to outpace enterprise growth. Can you just discuss what was behind those dynamics this quarter?

Emma E. Giamartino

So, mobile, that business has consistently outpaced enterprise and we expect that to continue. A major driver is the expansion of our local business into new markets. So for example, we really just started entering the U.S. five years ago or so or maybe a little bit before that and within the U.S., we have been growing that business at 20% to 30% very consistently, and we expect that to continue.

Even in the more mature markets where our local business is within the UK, that is growing at a low-teens rate. So there is a lot of growth in that business.

Brendan Lynch

Great. Thank you very much.

Operator

There are no further questions at this time. I would like to turn the floor back over to Robert Sulentic for closing comments.

Robert E. Sulentic

Thanks everyone for being with us and we will talk to you again when we report our third quarter results.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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CBRE Group Earnings Calls | CBRE

Earnings Calls

Date

CBRE Group Earnings Call Transcript - Q2 FY 2026

Operator

Chandni Luthra

Robert E. Sulentic

Emma E. Giamartino

Operator

Anthony Paolone

Emma E. Giamartino

Anthony Paolone

Emma E. Giamartino

Anthony Paolone

Operator

Stephen Sheldon

Robert E. Sulentic

Stephen Sheldon

Stephen Sheldon

Robert E. Sulentic

Stephen Sheldon

Operator

Julien Blouin

Robert E. Sulentic

Julien Blouin

Julien Blouin

Emma E. Giamartino

Julien Blouin

Operator

Jade Rahmani

Emma E. Giamartino

Jade Rahmani

Jade Rahmani

Robert E. Sulentic

Jade Rahmani

Operator

Steve Sakwa

Robert E. Sulentic

Steve Sakwa

Steve Sakwa

Emma E. Giamartino

Steve Sakwa

Operator

Ronald Kamdem

Robert E. Sulentic

Ronald Kamdem

Emma E. Giamartino

Ronald Kamdem

Operator

Brendan Lynch

Robert E. Sulentic

Brendan Lynch

Brendan Lynch

Emma E. Giamartino

Brendan Lynch

Operator

Robert E. Sulentic

Operator

Operator

Chandni Luthra

Robert E. Sulentic

Emma E. Giamartino

Anthony Paolone

Stephen Sheldon

Julien Blouin

Jade Rahmani

Steve Sakwa

Ronald Kamdem

Brendan Lynch