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    Earnings call· Mar 2026(Q2 FY26)

    JACOBS SOLUTIONS Q2 FY26 earnings call J

    May 5, 2026 Source

    Executive summary

    Jacobs Solutions Q2 FY26 — Strong Operational Performance Drives Increased Outlook

    Jacobs Solutions delivered a strong Q2 FY26, driven by robust operational performance and significant growth in key sectors like data centers and critical infrastructure. The full acquisition of PA Consulting is expected to unlock substantial sales and cost synergies, further bolstering the company's strategic positioning. Management raised its full-year outlook for the second consecutive quarter, reflecting confidence in its growth momentum and margin trajectory, while actively managing leverage and capital returns.

    Highlights

    5

    • Adjusted EPS grew 22% to $1.75, marking the fifth straight quarter of double-digit growth.

    • Organic net revenue grew 9%, outpacing Q1's 8% growth.

    • Adjusted EBITDA margin expanded 70 basis points year-over-year to 14.1%.

    • Backlog grew 22% to a record $27 billion, with a trailing 12-month book-to-bill of 1.4x on gross revenue and 1.2x on net revenue.

    • The acquisition of PA Consulting was completed, enhancing digital capabilities and market reach.

    Concerns

    3

    • Adjusted free cash outflow of $272 million in Q2, partly due to a Q1 cash timing item reversal and PA transaction accounting.

    • Net leverage stood at 2.1x at quarter-end, above the target range, though a plan is in place to reduce it.

    • Net revenue growth in the Water & Environmental end market was 2%, with softness in the environmental sector offsetting strength in water.

    Guidance & targets

    16
    CategoryTargetConfidence
    FY26 Organic Net Revenue Growth
    8% to 10.5%
    high materiality
    High
    FY26 Adjusted EBITDA Margin Rate
    14.6% to 14.9%
    high materiality
    High
    FY26 Adjusted EPS
    $7.10 to $7.35
    high materiality
    High
    FY26 Adjusted Free Cash Flow Margin
    7% to 8.5%
    medium materiality
    High
    Q3 Adjusted EBITDA Margin
    approximately 15%
    medium materiality
    High
    Q3 Year-over-year Net Revenue Growth
    approximately 7.5%
    medium materiality
    High
    Q4 Adjusted EBITDA Margin
    above 16%
    medium materiality
    High
    Q3 and Q4 Adjusted Effective Tax Rate
    27% to 28%
    low materiality
    High
    FY29 Organic Net Revenue CAGR
    6% to 8%
    high materiality
    High
    FY29 Adjusted EBITDA Margin
    17% plus
    high materiality
    High
    FY29 Free Cash Flow Margin
    11% plus
    high materiality
    High
    FY29 Annual Free Cash Generation
    $1.2 billion to $1.3 billion
    high materiality
    High
    PA Consulting Revenue Growth
    high single digits
    medium materiality
    Medium
    PA Consulting Annual Cost Synergies
    at least $20 million
    medium materiality
    High
    Net Leverage Ratio
    below 2x
    high materiality
    High
    Net Leverage Ratio
    towards 1.5x
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Infrastructure & Advanced Facilities (I&AF)
    Strong operational performance in this segment contributed significantly to the overall outlook raise.
    Operating profit growth (constant currency): 8%
    		———Operating profit increased 11% year-over-year
    PA Consulting
    PA Consulting saw strong demand tailwinds from national security and public investments in the U.K., and is positioned to advise on European defense strategy and implement digital solutions. Expected to grow revenue high single digits on a constant currency basis in H2.
    Operating margin: 22%Operating profit growth (constant currency): 12%
    		Revenue grew 17%17%—Operating profit increased 19%
    Life Sciences & Advanced Manufacturing
    Net revenue grew 12% in Q2, the highest growth rate since end-market reporting began in late 2024. Expect revenue growth to likely exceed Q2's level in the second half of the year.
    		—12%——
    Critical Infrastructure
    Net revenue increased 9% over Q2 2025, led by strong growth in the transportation sector (rail, aviation, ports grew double digits) and the energy and power sector (transmission and distribution services).
    		—9%——
    Water & Environmental
    Net revenue growth of 2%, with strength in water (growing in line with target) offset by softness in the environmental sector. Environmental business is on track to show meaningful year-over-year improvement by Q4.
    		—2%——

    Operational metrics

    20
    Adjusted EPS
    $1.75up 22% YoY
    Q2 FY26

    Fifth straight quarter of double-digit growth.

    Organic Net Revenue Growth
    9%outpacing 8% in Q1
    Q2 FY26

    Represents the highest consolidated growth rate for the company since the separation of government services business in 2024.

    Gross Revenue Growth
    27%YoY
    Q2 FY26

    Represents the highest consolidated growth rate for the company since the separation of government services business in 2024.

    Adjusted Net Revenue Growth
    9%YoY
    Q2 FY26

    Represents the highest consolidated growth rate for the company since the separation of government services business in 2024.

    Adjusted EBITDA
    $327 milliongrowing more than 14%
    Q2 FY26

    Driven by good operating discipline.

    Adjusted EBITDA Margin
    14.1%up 70 bps YoY
    Q2 FY26

    Driven by good operating discipline.

    Net Revenue in Backlog Growth
    12%YoY
    Q2 FY26

    Positions the company well for FY27.

    Gross Profit in Backlog Growth
    15%YoY
    Q2 FY26

    Positions the company well for FY27.

    Share Repurchases
    $472 million
    H1 FY26

    Ahead of the annual target of returning at least 60% of free cash flow to shareholders.

    Net Leverage
    2.1x
    Q2 FY26 end

    Roughly 0.5 turn above target range, with a plan to reduce it.

    Weighted Average Interest Rate
    around 5%declined
    Q2 FY26 end

    Following successful refinancing of debt stack and issuance of new bonds for the PA acquisition.

    AI Ecosystem Revenue Share
    10% to 11%growing in excess of 40%
    Q2 FY26

    Includes chips, power, energy requirements, and data centers.

    Data Center Business Revenue Share
    3% to 4%growing 100% YoY
    Q2 FY26

    A key driver of overall growth.

    Global Delivery Model Growth
    well into the double digits
    YoY

    Enables access to talented labor and supports capacity to meet demand.

    Life Sciences Pipeline Growth
    81%
    YoY

    Reflects strong in-flight pursuits and maturing reshoring activities.

    Margin Expansion
    about 200 bps
    FY25 and FY26

    Achieved over the past two fiscal years.

    Annual Margin Improvement
    at least 75 bps
    FY27 through FY29

    Identified from gross margin and G&A initiatives, in addition to prior improvements.

    CapEx as Percentage of Revenue
    about 1%
    Ongoing

    Capital is reallocated to AI-related investments without raising overall CapEx numbers.

    PA Transaction Impact on Q2 Reported FCF
    approximately $233 million
    Q2 FY26

    Due to accounting treatment of compensation expense acceleration for vesting shares, impacting reported FCF.

    PA Transaction Impact on Q3 Reported FCF
    just over $100 million
    Q3 FY26

    Due to employee benefit trust payments, impacting reported FCF.

    Orderbook & backlog

    5
    Total Backlog$27 billionQ2 FY26 end

    up 22% YoY

    Set a new record.

    Trailing 12-Month Book-to-Bill (Gross Revenue)1.4xQ2 FY26 end
    Trailing 12-Month Book-to-Bill (Net Revenue)1.2xQ2 FY26 end
    Q2 Book-to-Bill (Gross and Net Revenue)1.2xQ2 FY26

    Another quarterly book-to-bill above 1.0x.

    AI Infrastructure Pipeline (Data Center Component)up 400%Q2 FY26

    YoY

    Indicates strong forward visibility through FY27 and into FY28.

    Product announcements

    1
    ProductTypeDetails
    Data Center Digital Twinlaunch

    Deals & partnerships

    6
    PA ConsultingCompletion of the acquisition of the remaining stake in PA Consulting.

    The acquisition was completed in March, and the company celebrated by ringing the closing bell at the NYSE.

    San Francisco Public Utilities CommissionSelected to deliver the Southeast Wastewater Treatment Plan.

    A landmark investment to upgrade San Francisco's largest wastewater facility, positioning it to meet new nitrogen limits for the bay. Highlights a significant award in a fast-growing sector.

    Ofwat (U.K. water regulators)Secured a 2-year economics and policy consultancy contract.2-year

    Engagement brings together expertise across water regulation, financial, technical, and strategic consulting to support pricing, performance oversight, and policy development tied to substantial investment across the AMP8 cycle and beyond. Jointly secured with PA Consulting.

    Hyperscalers and other data center customersMultiple wins spanning the full project life cycle.

    Wins include advisory, design, program management, digital solutions, and full EPCM services, driven by the expansion of AI investment.

    NVIDIAStrategic partnership to expedite the delivery of AI factories.

    Partnership continues to gain momentum, including work on the data center digital twin developed using the NVIDIA Omniverse DSX Blueprint, and development of the plan of record for next-generation chips like Vera Rubin.

    Dallas Fort Worth International AirportSelected as lead design for the Terminal S expansion.

    Project involves existing bridge operations to allow for up to 16 additional gates and support growing demand, while maintaining operability of the SkyLink people mover during construction.

    Risks & headwinds

    5
    Adjusted Free Cash Flow OutflowQ2 FY26

    $272 million outflow in Q2

    Mitigation: Partly a function of a favorable Q1 cash timing item reversal and accounting for PA transaction proceeds. Expects more normal differentials between GAAP and adjusted EPS in Q3 and beyond. Strong H2 FCF expected to improve cash generation.

    Net Leverage Above TargetQ2 FY26

    2.1x at Q2 end

    Mitigation: Company plans to return net leverage below 2x by year-end FY26 and towards 1.5x during FY27, supported by increased EBITDA from PA and strong cash generation outlook.

    Softness in Environmental SectorQ2 FY26

    Offset water strength, leading to 2% net revenue growth for Water & Environmental

    Mitigation: Performance for the environmental business is on track to show meaningful year-over-year improvement as the company reaches Q4.

    Wider GAAP vs. Adjusted EPS SpreadQ2 FY26

    Wider than normal spread

    Mitigation: Expected to be mostly a Q2 phenomenon due to the PA transaction, with more normal differentials anticipated in Q3 and beyond.

    Middle East Geopolitical SituationOngoing

    Minimal disruption to time-based mission-critical programs

    Mitigation: Acutely focused on safety of people, with crisis management teams and daily check-ins. Global delivery model provides resilience, enabling services from around the world. Recently returned to a work-from-home scenario.

    What to watch in Q3 FY26

    5

    Net Leverage Ratio

    by year-end FY26
    Current2.1x
    Targetbelow 2x

    Why it matters

    Deleveraging is a key capital allocation priority, impacting financial flexibility and future investment capacity.

    Our balance sheet is in good shape following the acquisition of PA Consulting with a net leverage at 2.1x ending the quarter, and we plan to return to below 2x by year-end.

    Q&A highlights

    7

    How much of the increased FY26 outlook is due to operational performance versus the full consolidation of PA Consulting?

    The increase is primarily driven by operational performance, particularly strong bookings and run rate in the I&AF segment, coupled with operating discipline. The PA Consulting consolidation had only a minor impact.

    “it is purely based on our operational performance. The drive we're seeing in our bookings, how that's translating into our run rate, that drove the top line.”

    asked by Steven Fisher · answered by Robert Pragada

    2 min read6 chapters

    Detailed Narrative

    01

    AI Infrastructure and Data Center Growth

    Jacobs is experiencing significant acceleration from the AI infrastructure build-out. The data center component, representing 3% to 4% of the overall business, grew 100% year-on-year in Q2. The broader AI ecosystem, including chips, power, and energy requirements, constitutes 10% to 11% of the business and is growing in excess of 40%. The AI infrastructure pipeline for data centers has increased 400% year-on-year, with strong visibility through FY27 and into FY28, supported by relationships with top hyperscalers and NVIDIA.

    02

    PA Consulting Integration and Synergies

    The full consolidation of PA Consulting, completed in March, is expected to drive substantial sales and cost synergies. The removal of prior regulatory constraints has significantly increased visibility into joint sales pipelines. Key areas for combined growth include defense infrastructure and national security in Europe, as well as U.S. transportation, energy, and utility sectors, particularly those feeding AI infrastructure. Identified cost synergies of at least $20 million by FY27 will come from real estate consolidation, vendor rationalization, and IT system optimization.

    03

    Critical Infrastructure Momentum

    Critical infrastructure demonstrated strong growth, with net revenue increasing 9% over Q2 FY25. This was primarily driven by global transportation, where rail, aviation, and ports businesses saw double-digit growth, and the energy and power sector, fueled by high demand for transmission and distribution services. Management anticipates continued solid opportunities in this sector, with long-tail programs from the IIJA still in early stages of outlay, providing resilience against potential political changes.

    04

    Life Sciences and Advanced Manufacturing Performance

    The Life Sciences and Advanced Manufacturing segment achieved 12% net revenue growth in Q2, its highest rate since late 2024. The in-flight pipeline for this business is up 81% year-on-year, with many pursuits moving from early stages to field execution in the coming quarters⏳. This growth is supported by ongoing reshoring activities in the U.S. and emerging build-out in Europe, indicating sustained demand for specialized facilities.

    05

    Global Delivery Model and Talent Capacity

    Jacobs' global delivery model is proving highly effective in meeting increased demand and driving margin expansion. The growth in global delivery is well into double digits, enabling the company to access talented labor efficiently. This model ensures the capacity to execute on the record backlog and new projects, contributing to operational discipline and margin improvements without requiring significant incremental capital investments, as CapEx remains around 1% of revenues.

    06

    Middle East Operations and Resilience

    Operations in the Middle East, primarily Saudi Arabia and the Emirates, have experienced minimal disruption despite geopolitical tensions. Jacobs has maintained an acute focus on the safety of its personnel, with crisis management teams conducting daily check-ins. Time-based, mission-critical programs in transportation and water have continued, with the global delivery model enabling services to be delivered by teams both in-country and remotely, highlighting the resilience of the operational structure.

    AI-generated summary of the company’s earnings call. Not investment advice.