A&E Firms Are Busy, Growing — But Many Are Flying Blind on Profitability

Architecture and engineering firms are entering the second half of 2026 with healthy workloads, loyal clients and growing optimism about artificial intelligence. But beneath those positive signals is a significant operational challenge: many firms still lack visibility into the financial performance of their projects.

That is one of the central findings of Factor A/E’s 2026 Architecture & Engineering Industry Benchmark Report, which surveyed architecture and engineering firms across the United States and Canada.

The findings point to an increasingly important issue for A&E leaders: being busy is not the same as being profitable — and growth without better operational visibility can magnify problems rather than solve them.

The Profitability Blind Spot

Perhaps the report’s most striking finding is how many firms struggle to answer basic questions about their financial performance.

According to the survey:

• 42% cannot report their own net profit margin
• 60% either do not know or do not track realization rate
• 40% do not track project profitability in real time
• 73% identify scope creep as their biggest threat to project budgets
• 56% report budget overruns on more than 10% of their projects

Taken together, the numbers suggest that many firms are managing projects with incomplete financial information. Problems may be visible operationally but not fully understood financially until the opportunity to correct them has passed.

That becomes especially important as firms grow. More projects, people and clients create more opportunities for revenue — but also more opportunities for margin leakage.

Utilization Looks Healthy — Until You Look Deeper

The industry’s utilization numbers appear relatively strong. Fifty-eight percent of firms report utilization rates of 71% or higher.

But 42% are either below that level or aren’t tracking utilization at all.

Project management itself is also consuming significant capacity. Forty-four percent of respondents identified project management tasks as the biggest factor pulling employees away from design work, followed closely by client communication and approvals.

Resource planning remains surprisingly manual as well. Seven in 10 firms manage staffing across projects through meetings, spreadsheets or no formal process, while half assign employees to projects primarily based on experience and gut feel.

That may work when a firm is small. It becomes increasingly difficult to scale.

Cash Flow Remains Another Pressure Point

Winning profitable work is only part of the equation. Firms also have to collect the money.

The report found that 70% of firms wait at least 31 days to receive payment after invoicing, while 22% wait more than 60 days.

For smaller firms in particular, those delays can create significant working-capital pressure because payroll and project expenses continue regardless of when clients pay.

Better project financial management therefore isn’t simply about margin. It is also about forecasting, billing discipline and cash conversion.

Strong Relationships, Limited Feedback

Client loyalty remains one of the industry’s strengths.

Three out of four firms report that at least half of their clients are repeat customers — a powerful indicator of the relationship-driven nature of the A&E business.

Yet 60% of firms have no formal process for measuring client satisfaction.

That creates another blind spot. Firms may know that clients continue hiring them without fully understanding why — or recognizing emerging problems before those clients begin looking elsewhere.

In a competitive market, repeat business is valuable. Understanding the drivers behind repeat business is even more valuable.

AI Is Coming — But Data Readiness Comes First

The report becomes particularly interesting when viewed through the industry’s accelerating adoption of artificial intelligence.

Seventy-eight percent of respondents believe AI and automation will have the greatest impact on the A&E industry in the years ahead, making it the most frequently identified future trend.

The opportunity is significant. AI can potentially improve forecasting, resource allocation, project controls, knowledge management, scheduling and decision-making.

But there is a catch.

AI works best when organizations have reliable data, connected systems and disciplined processes underneath it.

A firm that cannot consistently measure utilization, realization, project profitability or resource capacity will have difficulty extracting maximum value from AI. Technology can accelerate decision-making, but it cannot magically repair fragmented data and inconsistent processes.

In that sense, the industry’s AI challenge may be less about selecting the next AI platform and more about building the operational foundation that allows AI to work.

Growth Is Still on the Agenda

Despite economic uncertainty and persistent talent challenges, firms remain optimistic.

Economic uncertainty was identified by 48% of respondents as their biggest challenge over the next five years, followed by talent shortages at 28%.

Yet 54% of firms plan to expand their services or enter new markets within the next 12 to 24 months.

That combination — growth ambitions, labor constraints and rapidly advancing technology — makes operational discipline increasingly important.

Firms will need to produce more with limited resources while protecting margins and maintaining client service.

What It Means for Carolinas A&E and Construction Firms

For firms across North and South Carolina, the findings carry broader implications.

The Carolinas continue to attract investment across manufacturing, data centers, healthcare, higher education, infrastructure and advanced industrial development. That growth creates substantial opportunity for architecture, engineering and construction firms.

But a strong market can sometimes hide weak operating practices.

When backlog is healthy and new opportunities keep arriving, utilization and revenue can mask margin erosion, inefficient staffing, slow collections and scope creep. Those weaknesses become much more visible when market conditions tighten.

The firms positioned to outperform will increasingly connect project delivery, financial performance, resource planning and client intelligence into a common operating picture.

AI can become another layer on top of that foundation — helping leaders identify risk earlier, forecast staffing needs, detect deteriorating project economics and make faster decisions.

But the sequence matters.

First build visibility. Then build intelligence. Then automate.

The Factor A/E report ultimately highlights a larger lesson for the A&E industry: the next competitive advantage may not simply come from winning more work.

It may come from understanding, in real time, which work creates the most value — and having the discipline and technology to act on that information.