Jacobs (J) Q3 FY26 earnings call: guidance and Q&A

Given accelerating backlog growth and a strong Q4 exit rate, is it possible for FY27 net revenue growth to be faster than FY26, or at least have higher visibility than usual for mid- to high single-digit growth?

Management will defer specifics on the FY27 growth algorithm to the next call but indicated that the current backlog position suggests growth will be at least in line with the long-term average.

“I think we will defer specifics on the growth algorithm for fiscal '27 on the next call. But suffice it to say that looking at our current backlog position, we feel pretty good about growth at least in line with the long-term average that we put on that.”

asked by Andrew Kaplowitz · answered by Venkatesh Nathamuni

With the data center business increasing as a percentage of net service revenue, can this business continue to grow double digits for the foreseeable future, considering share gains and market trends?

Management confirmed that the data center business can absolutely sustain double-digit growth, citing its deep and broad nature, increasing share, and long client pipelines across the entire AI ecosystem.

“Yes, Andy, we absolutely can. It's a growth engine right now, but is deep and broad for us with the entirety to that ecosystem. And if we look all the way from kind of what we're doing in the high-bandwidth memory chips, the water and power requirements that are feeding the data center and then the complexity that's going into the data center, our share is increasing, and the clients that we're working for have got long pipelines ahead. So the answer is an absolute yes.”

asked by Andrew Kaplowitz · answered by Robert Pragada

Following recent wins in Water and Environmental, what is the expected scope and burn period for these bookings, and how should investors think about the segment's growth going forward?

The recent wins will start to contribute in Q4, leading to sequential growth. The segment is well-positioned for mid- to high single-digit growth in FY27, with the water sector specifically showing high single-digit growth and a bright outlook.

“So Sangita, the wins that we had in the quarter will start to burn in Q4. So kind of that inflection point that we've always been telegraphing that would come at the end of the year, it's right in front of us. You'll see sequential growth in the quarter. And then going into FY '27, we're positioned extremely well to be on those growth rates that we highlighted during the Investor Day of that mid- to high single-digit growth for water and environmental and the water sector continues to be high single-digit growth for us and the pipeline as well as the forward outlook is very bright.”

asked by Sangita Jain · answered by Robert Pragada

With the recent uptick in book-to-bill, how sustainable is a 1.5x or better ratio as growth accelerates, and how lumpy will it be?

Gross revenue book-to-bill will be lumpy due to large program delivery jobs, potentially reaching 1.5x or 1.6x. However, the net revenue book-to-bill is expected to be more consistent, in the 1.1x to 1.3x range.

“Yes, Steve, I think if you look at the gross revenue book-to-bill versus the net revenue book-to-bill, let me kind of segregate those, the lumpiness in the gross revenue book-to-bill, where we would have a 1.5 or 1.6, you probably remember last year, we had a 1.7 for a quarter. That's going to come up and down as some of these larger full program delivery jobs are booked. But the 1.1 to 1.3-ish net revenue growth, pretty consistent.”

asked by Steven Fisher · answered by Robert Pragada

Considering accelerating organic growth and margin expansion, will the margin uplift in FY27 be more balanced between I&AF and PA Consulting, or skewed to one?

Margin expansion is expected to be balanced, coming from both I&AF and PA Consulting, as the company is in the middle of cost synergies with PA Consulting, which already has the highest margins in its space.

“And Jamie, I think on the question that you had with regards to '27 and where we could see that continued margin expansion, I'd say it's pretty balanced that we would continue to get it from both I&F as well as PA Consulting because we're right in the middle of the cost synergies that we're working on with consulting. Just as a reminder, PA Consulting does have the highest margins in that space. So we're continuing to grow on a base that's really high.”

asked by Jamie Cook · answered by Robert Pragada

What should the investment community expect regarding income statement adjustments between GAAP and non-GAAP, especially with PA integration, and when can these converge?

The gap between GAAP and non-GAAP EPS is primarily driven by tax items related to the PA acquisition. Management expects a significant convergence, with the gap substantially reducing beyond Q4, as M&A-related variances are being taken off the table.

“I would say, obviously, you've seen with this Q3 print, the gap between GAAP and non-GAAP EPS was primarily driven by just a tax item. But overall, you've seen a pretty significant convergence between our non-GAAP numbers, except for the PA acquisition. So from that standpoint, we feel pretty good about the quality of the earnings, and we will continue to make additional progress in Q4 and beyond. You'll see it from both the P&L side as well as on the free cash flow side. And we've already taken M&A off the table. So you don't have to expect a lot of these variances between GAAP and non-GAAP going forward.”

asked by Andrew Wittmann · answered by Venkatesh Nathamuni

Are customers indicating a shift to 800-volt architecture in data centers, and how does this change design intensity for Jacobs?

Yes, there is a shift, and it increases Jacobs' scope due to complexities in utility requirements for next-generation chips and overall scale. This plays into Jacobs' sweet spot, and they are working with both hyperscalers and neo-cloud providers on this journey.

“Yes. There's complexities that are going on, Chad, that I'd say is increasing our scope. So that 800-volt DC solid-state transformer is a big deal has been well publicized. But I'd say -- I wouldn't point to that as the single source of that inflection point. the complexity in all of the utility requirements to feed the next generation of chips is increasing the complexity as well as the scale. And so that's where kind of it's in the sweet spot of Jacobs.”

asked by Charles Dillard · answered by Robert Pragada

Are customers still indicating accelerating US semiconductor construction activity, and what are the early thoughts for FY27?

Yes, customers are pushing for accelerated designs. Jacobs is working with the largest high-bandwidth memory chip manufacturer in the U.S., and the pipeline continues to grow. With recent announcements from Intel, for whom Jacobs has been the engineer of record for decades, the pipeline is expected to grow into FY27.

“Short answer, Andrew, is absolutely yes. Our customers are pushing us to accelerate those designs. And we're working for the largest high-bandwidth memory chip manufacturer in the U.S. today. So that pipeline continues to grow. And now with some of the announcements that you've heard from Intel moving forward, as we have publicly stated, we've been the engineered record for Intel for a couple of decades. And that relationship, we stayed with them during this kind of slower time. And we're starting to see that pipeline grow going into '27.”

asked by Andrew Rosen · answered by Robert Pragada