What is the customer receptivity to Jacobs' digital and AI-enabled tools, and when might margin opportunities from these become more material?

AI is significantly driving the business, especially in AI infrastructure. The data center business (3-4% of total) is growing 100% YoY, and the broader AI ecosystem (10-11% of total) is growing over 40%. This is accelerating demand and internal efficiency. “AI is absolutely driving our business in what's going on with regard to the AI infrastructure build out. We're seriously at an inflection point and it's accelerating our entire business.”

What is the near to medium-term visibility for projects in the data center and AI infrastructure end market?

The AI infrastructure pipeline for data centers is up 400% YoY, with visibility extending well through FY27 into FY28. Client relationships and the partnership with NVIDIA provide strong long-term visibility. “our AI infrastructure pipeline, the data center component of that, the pipeline has gone up 400% year-on-year. We have visibility well through '27 going to '28...”

Given the current leverage at 2.1x, how will Jacobs manage buybacks and broader capital allocation for the rest of the year?

Jacobs plans to delever below 2x by the end of FY26 and towards 1.5x during FY27. Share repurchases will continue aggressively, modulated by market conditions. Strong H2 FCF of $600M-$700M will support both deleveraging and buybacks. “we have a clear plan to delever pretty quickly, and we said we'll be below 2x by the end of fiscal year '26, which is just 1.5 quarters away.”

Jacobs Solutions (J) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q2 FY26)· Industrials· May 5, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
FY26 Organic Net Revenue Growth	8% to 10.5% high materiality	FY26	High
FY26 Adjusted EBITDA Margin Rate	14.6% to 14.9% high materiality	FY26	High
FY26 Adjusted EPS	$7.10 to $7.35 high materiality	FY26	High
FY26 Adjusted Free Cash Flow Margin	7% to 8.5% medium materiality	FY26	High
Q3 Adjusted EBITDA Margin	approximately 15% medium materiality	Q3 · FY26	High
Q3 Year-over-year Net Revenue Growth	approximately 7.5% medium materiality	Q3 · FY26	High
Q4 Adjusted EBITDA Margin	above 16% medium materiality	Q4 · FY26	High
Q3 and Q4 Adjusted Effective Tax Rate	27% to 28% low materiality	Q3 and Q4 · FY26	High
FY29 Organic Net Revenue CAGR	6% to 8% high materiality	FY29	High
FY29 Adjusted EBITDA Margin	17% plus high materiality	FY29	High
FY29 Free Cash Flow Margin	11% plus high materiality	FY29	High
FY29 Annual Free Cash Generation	$1.2 billion to $1.3 billion high materiality	FY29	High
PA Consulting Revenue Growth	high single digits medium materiality	H2 · FY26	Medium
PA Consulting Annual Cost Synergies	at least $20 million medium materiality	FY27	High
Net Leverage Ratio	below 2x high materiality	year-end · FY26	High
Net Leverage Ratio	towards 1.5x high materiality	during FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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%	—	—

J operating KPIs by quarter

J operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q2 FY26	Jun 2026 Q3 FY26	Change vs prior quarter
Backlog	$27B Second, our backlog grew 22% to $27 billion, setting another new record with a trailing 12-month book-to-bill of 1.4x on gross revenue and 1.2x on net revenue. Source: earnings call transcript	$29B And third, our backlog grew 27% to $29 billion, setting another new record with a trailing 12-month book-to-bill of 1.4x on gross revenue and 1.2x on net revenue. Source: earnings call transcript	+7.4%
Employees	47K And I want to thank our 47,000 colleagues for delivering leading solutions to our clients every single day. Source: earnings call transcript	47K+ In closing, I'd like to express my gratitude for the trust our clients continue to place in Jacobs and to our more than 47,000 talented employees for their continued commitment to delivering excellence. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total Backlog $27 billion Q2 FY26 end

up 22% YoY

Set a new record.

Trailing 12-Month Book-to-Bill (Gross Revenue) 1.4x Q2 FY26 end

Trailing 12-Month Book-to-Bill (Net Revenue) 1.2x Q2 FY26 end

Q2 Book-to-Bill (Gross and Net Revenue) 1.2x Q2 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

Product	Type	Timeline	Details
Data Center Digital Twin	launch	—

Deals & partnerships

PA Consulting Completion 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 Commission Selected 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 customers Multiple 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.

NVIDIA Strategic 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 Airport Selected 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

Adjusted Free Cash Flow Outflow Q2 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 Target Q2 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 Sector Q2 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 Spread Q2 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 Situation Ongoing

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

Net Leverage Ratio

by year-end FY26

Current 2.1x

Target below 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.

Find out whether J delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.