Jacobs Solutions Q2 Earnings Call Highlights

Key Points

• Jacobs Solutions posted strong Q2 fiscal 2026 results, with adjusted EPS up 22% year over year to $1.75, organic adjusted net revenue growth of 9%, and adjusted EBITDA margin expansion of 70 basis points. Management said the performance gave it confidence to raise full-year guidance for the second straight quarter.
• Backlog and AI/data center demand were major growth drivers, with backlog rising 22% to a record $27 billion and the company saying its data center business grew more than 100% year over year. Jacobs also said its AI infrastructure pipeline is up 400% year over year, with visibility extending well into 2027 and 2028.
• The company lifted its fiscal 2026 and 2029 targets, now expecting 8% to 10.5% organic adjusted net revenue growth, adjusted EPS of $7.10 to $7.35, and higher margin guidance. It also raised its fiscal 2029 adjusted EBITDA margin target to above 17% and free cash flow margin target to at least 11%.

Jacobs Solutions NYSE: J reported stronger fiscal second-quarter 2026 results, citing accelerating organic growth, higher margins, record backlog and momentum tied to data centers, advanced manufacturing and infrastructure markets.

Chair and CEO Bob Pragada said adjusted earnings per share rose 22% year over year to $1.75, supported by 9% organic adjusted net revenue growth and 70 basis points of year-over-year margin expansion. He said the company is “exiting Q2 with significant momentum” and that the first-half performance gave management confidence to raise its fiscal 2026 outlook for the second consecutive quarter.

Jacobs also completed its acquisition of PA Consulting during the quarter. Pragada said the company marked the transaction by ringing the closing bell at the New York Stock Exchange in March.

Revenue, Profit and Backlog Rise

EVP and CFO Venk Nathamuni said gross revenue increased 27% year over year, while adjusted net revenue, excluding pass-through revenue, grew 9%. He said both represented the highest consolidated growth rates for the company since the 2024 separation of its government services business.

Adjusted EBITDA totaled $327 million, up more than 14%, with an adjusted EBITDA margin of 14.1%. Nathamuni attributed the 70-basis-point margin expansion to “good operating discipline.”

Backlog increased 22% from a year earlier to a record $27 billion. The trailing 12-month book-to-bill ratio was 1.4 times on gross revenue and 1.2 times on net revenue. Pragada said quarterly gross and net book-to-bill were both 1.2 times.

Nathamuni said net revenue and gross profit in backlog increased 12% and 15%, respectively, on a year-over-year basis during the quarter. He said the bookings position the company well heading into fiscal 2027.

Guidance Raised for Fiscal 2026

Jacobs increased its fiscal 2026 outlook for adjusted net revenue growth, adjusted EBITDA margin and adjusted EPS. The company now expects:

• Organic adjusted net revenue growth of 8% to 10.5% year over year;
• Adjusted EBITDA margin of 14.6% to 14.9%;
• Adjusted EPS of $7.10 to $7.35;
• Adjusted free cash flow margin of 7% to 8.5%, unchanged from prior expectations.

Nathamuni said the updated EPS outlook implies 18% year-over-year growth at the midpoint. For the fiscal third quarter, Jacobs expects adjusted EBITDA margin of approximately 15% and year-over-year net revenue growth of about 7.5%. The outlook implies a fourth-quarter margin above 16% on double-digit top-line growth, including an extra week in that quarter.

During the analyst question-and-answer session, UBS analyst Steven Fisher asked how much of the guidance increase was driven by operations versus the PA Consulting acquisition. Pragada said the raise was “purely based on our operational performance,” citing bookings and run-rate growth. Nathamuni said PA provided “a little bit of a tailwind” from foreign exchange, but that the bulk of the outperformance was driven by the Infrastructure & Advanced Facilities business and operating discipline.

Data Centers and AI Infrastructure Drive Growth

Jacobs highlighted several project wins during the quarter, including work for the San Francisco Public Utilities Commission on the Southeast Wastewater Treatment Plant, a consultancy contract with U.K. water regulator Ofwat, and lead design work at Dallas Fort Worth International Airport for the Terminal F expansion.

Pragada also pointed to strong demand in data centers, semiconductors, water, and energy and power. He said Jacobs’ data center business grew more than 100% year over year in the second quarter and that the broader AI infrastructure ecosystem represents 10% to 11% of the company’s overall business, growing at more than 40%.

In response to a question from RBC Capital Markets analyst Sabahat Khan about visibility in data centers, Pragada said the company’s AI infrastructure pipeline, specifically the data center component, had increased 400% year over year. He said Jacobs has visibility “well through 2027, going into 2028,” supported by relationships with hyperscalers, neocloud providers and NVIDIA.

Pragada said Jacobs’ strategic partnership with NVIDIA continues to gain momentum, including work tied to a data center digital twin developed using the NVIDIA Omniverse DSX blueprint. He said the company is working to expedite delivery of AI factories as compute load requirements rise.

Segment Performance and PA Consulting Integration

Nathamuni said the Life Sciences & Advanced Manufacturing end market posted 12% net revenue growth in the quarter, its highest rate since Jacobs began reporting end markets in late 2024. He said the company expects revenue growth in that end market to exceed the second-quarter level in the second half.

Critical Infrastructure net revenue increased 9% from the prior year, driven by double-digit growth in rail, aviation and ports, as well as demand for transmission and distribution services in energy and power. Water & Environmental net revenue grew 2%, with strength in water offset by softness in environmental services. Nathamuni said the environmental business is on track for meaningful year-over-year improvement by the fourth quarter.

PA Consulting operating profit increased 19% as revenue rose 17% and operating margin reached 22%. Nathamuni said PA is seeing 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 across the region.

Asked by Citi analyst Natalia Bak about sales synergies now that PA is fully under Jacobs, Pragada said the potential is “very high,” citing increased ability to pursue joint opportunities. He identified defense infrastructure and national security in Europe, and transportation and energy and utilities in the U.S., as key areas.

Nathamuni said Jacobs has identified cost synergy opportunities from PA in real estate, vendor rationalization and IT system optimization, providing visibility to more than $20 million of synergies in fiscal 2027.

Cash Flow, Buybacks and Long-Term Targets

Jacobs reported an adjusted free cash outflow of $272 million in the second quarter, which Nathamuni said was partly due to a favorable first-quarter timing item reversing in Q2. First-half adjusted free cash flow was $93 million. He also noted accounting impacts related to the PA transaction that affected reported free cash flow.

The company repurchased $472 million of shares in the first half, putting it ahead of its annual target of returning at least 60% of free cash flow to shareholders. Net leverage ended the quarter at 2.1 times following the PA acquisition. Nathamuni said Jacobs plans to return below 2 times by year-end and move toward 1.5 times during fiscal 2027.

Jacobs also updated its fiscal 2029 targets. The company reaffirmed its five-year organic net revenue compound annual growth target of 6% to 8%, while raising its fiscal 2029 adjusted EBITDA margin target by 100 basis points to more than 17%. It also raised its free cash flow margin target to at least 11%, which Nathamuni said implies $1.2 billion to $1.3 billion of annual free cash generation by fiscal 2029.

Pragada closed the call by saying the company is tracking well into the second half, with momentum in growth, margins and bookings supporting its updated outlook.

About Jacobs Solutions NYSE: J

Jacobs Solutions Inc, commonly known as Jacobs, is a global professional services firm that provides technical, engineering, scientific and project delivery expertise across a broad range of industries. Founded in 1947 by Joseph J. Jacobs in Pasadena, California, the company evolved from a regional engineering consultancy into a diversified provider of design, program and construction management, operations and maintenance, and scientific services for complex infrastructure and industrial programs.

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