What Exponent (EXPO) Said on Its Q3 Earnings Call

Key Points

• Exponent delivered strong Q3 results: Total revenue rose 18% year over year to $173.7 million, net revenue increased 12% to $153.1 million, and diluted EPS climbed 16% to $0.64. Higher utilization and broad demand helped expand EBITDA margins to 29.4%.
• AI-related consulting is becoming a growing opportunity: Management estimates AI directly contributes 15% to 20% of 2026 business, spanning data-center infrastructure, autonomous vehicles, AI testing, and investigations into AI-generated decisions.
• Exponent raised its full-year 2026 outlook: The company now expects 10% to 11% net-revenue growth, a 28% to 28.3% EBITDA margin, and utilization of 73.5% to 74%, while continuing dividends, evaluating acquisitions, and potentially repurchasing shares during pullbacks.

Exponent NASDAQ: EXPO reported third-quarter 2026 revenue and earnings growth as demand remained strong for its engineering and scientific consulting services, particularly in user research, product safety, failure analysis and dispute-related work.

Total revenue increased 18% year over year to $173.7 million, while net revenue, which excludes reimbursable expenses, rose 12% to $153.1 million. Net income increased 10% to $30.9 million, and diluted earnings per share rose 16% to $0.64 from $0.55 a year earlier.

Chief Executive Officer Catherine Corrigan said the quarter reflected demand for the company’s specialized expertise as technology becomes more integrated with physical products, infrastructure and human behavior. She cited growth in user research as well as disputes, failure analysis and product-safety work involving chemicals, consumer products and transportation.

Utilization and operating results

Exponent generated third-quarter EBITDA of $45 million, up 16% from the prior-year period. EBITDA margin expanded to 29.4% of net revenue from 28.3% a year earlier.

Billable hours increased 8% to approximately 405,000, while the company’s average technical full-time-equivalent workforce grew 4% to 1,016 employees. Utilization rose to 76.7% from 74.1%, and the realized billing-rate increase was approximately 4%.

During the call, Chief Financial Officer Eric Anderson said the higher utilization was driven by broad-based demand rather than calendar-related factors. He pointed to dispute-related activity across consumer products, chemicals and transportation, along with stronger-than-expected proactive study work.

A project that represented 4% of revenue in the second quarter declined to 2.5% in the third quarter. Anderson said the company expects that project to represent less than 1% of revenue in the fourth quarter.

Compensation expense, adjusted for deferred-compensation gains and losses, rose 11%. Stock-based compensation increased to $6.7 million from $5.3 million. Other operating expenses rose 9% to $13.8 million, reflecting investments in corporate infrastructure, while general and administrative expense declined 4% to $7.3 million, primarily because the company held a smaller firmwide principals meeting than the prior year’s managers meeting.

Over the past 12 months, Exponent used $171 million for common-stock repurchases, reducing average diluted shares outstanding by 5% to 48.4 million. The company did not repurchase shares during the third quarter. It also distributed $14.7 million through dividends during the quarter.

Segment performance and AI-related demand

The engineering and other scientific segment, which accounted for 85% of net revenue, posted 13% net-revenue growth. The company attributed the increase to user research involving health applications, dynamic real-world environments and sensory perception, as well as disputes concerning chemical facilities, consumer products and advanced transportation technologies.

The environmental and health segment, representing 15% of net revenue, grew 3%. Anderson said growth in that business was supported by projects assessing the effects of chemicals on human health and the environment.

President John Pye said Exponent estimates that artificial intelligence is a direct component of roughly 15% to 20% of its business this year. The company’s AI-related work spans infrastructure supporting AI systems, including data-center components and cooling systems, as well as applications involving data used to train systems and testing of AI performance in real-world conditions.

Pye said clients are increasingly asking Exponent to assess AI-generated recommendations, including recommendations related to materials and formulations, and to investigate why AI systems made certain decisions in vehicles, devices or equipment. He said such projects remain early but are growing.

In response to analyst questions, executives said AI-related reactive work already includes matters involving advanced driver-assistance systems and autonomous vehicles. Executive Vice President Rich Schlenker also cited work on data-center fires, liquid-cooling corrosion, router failures and construction disputes related to AI systems.

Corrigan said medical devices could represent another developing area for AI-related reactive work, particularly as wearable technologies make health-related assessments and decisions.

Hiring priorities and outlook

Management said it is increasing recruiting efforts in response to demand, including university recruiting, lateral hiring from competitors and industry, and hiring from regulatory organizations. Corrigan identified human factors, biomechanics, thermal science, polymers, metallurgy, energy storage, health and environmental expertise as areas of focus.

For the fourth quarter, Exponent expects net revenue growth of 8% to 10% year over year and EBITDA margin of 26.3% to 26.8% of net revenue. Anderson said the outlook assumes utilization of 69% to 70%, which is seasonally lower than the third quarter because of holidays and vacations but consistent with continued robust activity. He noted that the company faces a strong prior-year comparison, when fourth-quarter utilization was 69.2%.

For full-year 2026, Exponent raised its outlook and now expects:

• Net revenue growth of 10% to 11%.
• EBITDA margin of 28% to 28.3%, compared with 27.6% in 2025.
• Average technical employee growth of 4.7% to 5%.
• Full-year utilization of 73.5% to 74%, compared with 72.5% in 2025.
• Realized rate growth of 3.7% to 4%.
• Capital expenditures of $10 million to $12 million.

Management said it plans to continue paying dividends and may repurchase shares during stock-price pullbacks. Anderson said the company also will evaluate potential small acquisitions and other business investments while maintaining its existing capital-allocation approach.

About Exponent (NASDAQ:EXPO)

Exponent, Inc is a science and engineering consulting company that helps clients investigate complex technical issues, manage risks, and develop solutions. Its consultants work across disciplines including engineering, materials science, biomechanics, human factors, environmental science, health, data sciences, and economics.

The company provides failure analysis, product safety and testing, accident reconstruction, environmental and health assessments, regulatory support, and expert testimony.

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