Strong EPS and Margin Expansion
Adjusted EPS grew 22% year-over-year to $1.75 in Q2, supported by 70 basis points of year-over-year margin expansion. Adjusted EBITDA was $327 million, up more than 14%, with an adjusted EBITDA margin of 14.1%.
Jacobs Solutions
· J
May 5th, 2026
Summary
- Earnings Call Date:
- 2026-05-05
- Change Since:
- -10.34%
- Next Earnings Date:
- 2026-08-11
Earnings Call Sentiment
PositiveThe call conveyed a substantially positive operational and commercial momentum: strong top-line growth (gross revenue +27%, adjusted net revenue +9%), record backlog (+22% to $27B), double-digit EPS growth (+22%), rapid expansion in AI/data center demand (data center +100% YoY; AI ecosystem >40% growth), and an increased FY2026 outlook. Key strategic moves—completion of the PA Consulting acquisition, identified synergies (~$20M+) and an upgraded multi-year margin and free-cash-flow target—support upside. Near-term caveats include Q2 adjusted free cash outflow driven by transaction cash accounting, elevated net leverage (2.1x) until deleveraging occurs, a wider GAAP-to-adjusted EPS spread in Q2, and soft performance in parts of the environmental business. Overall, positive operating execution and bookings materially outweigh the near-term cash and integration headwinds.
Company Guidance
Jacobs raised its FY‑2026 outlook (inclusive of PA) to organic net revenue growth of 8.0–10.5%, an adjusted EBITDA margin of 14.6–14.9%, adjusted EPS of $7.10–$7.35 (implying ~18% YoY EPS growth at the midpoint), and an adjusted free cash flow margin of 7.0–8.5%; near‑term, management expects Q3 adjusted EBITDA margin ≈15% with ~7.5% YoY net revenue growth and an adjusted effective tax rate of 27–28% (Q3–Q4), and Q4 margin above 16% on double‑digit top‑line growth (including an extra week). They reaffirmed FY‑2029 targets of 6–8% organic CAGR (central view ≥7%), adjusted EBITDA margin 17%+, an 11%+ free cash flow margin (implying $1.2–$1.3B annual FCF by FY‑2029), at least $20M of annual cost synergies from PA, identified 75 bps of annual margin improvement for 2027–2029 (after ~200 bps in FY25–26), and a balance‑sheet path from ~2.1x net leverage now to <2.0x by year‑end and ~1.5x in FY2027.
Robust Revenue and Backlog Growth
Gross revenue increased 27% year-over-year and adjusted net revenue (ex-pass-through) grew 9% (organic). Consolidated backlog grew 22% year-over-year to a record $27 billion, with a trailing 12-month book-to-bill of 1.4x on gross revenue (1.2x on net). Net revenue and gross profit in backlog increased 12% and 15% year-over-year, respectively.
Data Center and AI Acceleration
Data center revenue grew more than 100% year-over-year in Q2. The broader AI ecosystem (chips to power to data centers) represents ~10%–11% of revenue and is growing in excess of 40%. The AI infrastructure pipeline for data centers rose ~400% year-over-year with visibility into 2027–2028.
PA Consulting Acquisition and Performance
Completed the acquisition of PA Consulting. PA revenue grew 17% in Q2 with operating profit up 19% and an operating margin of 22%. Management expects PA to grow revenue high single digits (constant currency) in H2 and identified at least $20 million of annual cost synergies as integration scales.
Upgraded FY2026 Guidance
Raised FY2026 guidance: organic net revenue growth to 8.0%–10.5%, adjusted EBITDA margin to 14.6%–14.9%, and adjusted EPS to $7.10–$7.35 (implying ~18% year-over-year adjusted EPS growth at the midpoint). Q3 margin guide ~15% and Q4 >16% (extra week included).
Industry Recognition and Key Contracts
Named #1 design firm by Engineering News-Record (2026 Top 500). Secured notable awards including San Francisco Southeast Wastewater Treatment Plant, Ofwat consultancy engagement, DFW Terminal F lead designer, and multiple hyperscaler data center wins (including a digital twin built with NVIDIA).
End Market Diversification and Strong Segments
Life Sciences & Advanced Manufacturing net revenue grew 12% (highest since end-market reporting) and Critical Infrastructure net revenue grew 9%, led by transportation and energy & power. Life sciences pipeline up 81% year-over-year.
Active Capital Returns and Improved Financing
Share repurchases totaled $472 million in H1, ahead of the annual target of returning at least 60% of free cash flow. Net leverage ended the quarter at 2.1x (weighted average interest rate ~5%), with a plan to return below 2.0x by year-end and toward ~1.5x in FY2027.
Operator
Greetings, and welcome to Jacobs Solutions Inc.'s fiscal second quarter 2026 earnings conference call and webcast. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Bert Subin, Senior Vice President, Investor Relations. Thank you.
You may begin.
Bert Subin
[inaudible]
Robert V. Pragada
Solid year-over-year margin expansion and continued robust sales activity. I will quickly highlight a few key takeaways. First, adjusted EPS grew 22% to $1.75 supported by 9% organic net revenue growth, outpacing the 8% growth rate in Q1, and 70 basis points of year-over-year margin expansion. 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. And third, we completed the acquisition of PA Consulting, which we celebrated together by ringing the closing bell at the New York Stock Exchange in March. In summary, we are exiting Q2 with significant momentum, and the strong first half of the year gives us confidence to increase our FY 2026 outlook for the second time in two quarters, which Venk will walk through shortly. Turning to slide four, we provide a detailed overview of the quarter. We are very pleased with Q2 results as strong operating performance, paired with our lower share count, drove the fifth straight quarter...
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