Jacobs Solutions Inc. Q1 FY2026 earnings call

Key Points

• Gross revenue increased 12% year over year, adjusted net revenue (excluding pass-through) grew >8%. Adjusted EBITDA was $303 million, growing >7% with margin ~13.4%.
• Backlog grew 21% to over $26 billion, trailing twelve-month book-to-bill at 1.4 times, with Q1 book-to-bill at 2.0 times.
• Notable awards included leading engineering design for Bolivar Roads Gate System (water/environmental), Hut 8 Riverbend data center (life sciences/advanced manufacturing), UK health security agency trust program, and Cleveland Hopkins International Airport modernization (critical infrastructure).
• Announced acquisition of remaining stake in PA Consulting, seeing PA's digital consulting, innovation, and AI capabilities as a force multiplier.
• Raised quarterly dividend from 32¢ to 36¢ a share, a 12.5% increase. Net leverage ratio just below 0.8 times on LTM adjusted EBITDA, well below target range.

INAF operating profit increased modestly year on year with similar constant currency performance. PA Consulting operating profit increased 27% on 16% revenue growth and a strong operating margin of 24%. On a constant currency basis, operating profit grew 22%. PA continues to benefit from rising demand for digital consulting and advisory services in the public, national security, and energy sectors, with fiscal year 2026 revenue growth tracking in the high single-digit range.

Fiscal Year 2026 Outlook

• Increased net revenue growth range to 6.5% to 10% year over year, adjusted EPS range to $6.95 to $7.30, and free cash flow margin range to 7% to 8.5%. Adjusted EBITDA margin range remains 14.4% to 14.7%.

Q2 Guidance

• Expect adjusted EBITDA margin in range of 13.8% to 14% with year-over-year net revenue growth of approximately 6.5%.

Acquisition Impact

• Acquisition of PA Consulting is expected to be accretive to adjusted EPS in the first twelve months following closing, with $16 million to $20 million projected cost synergies to phase in during FY 2026.

Q: Higher-level outlook, government shutdown impact, and top-line guide range A: Bob Pragada mentioned strong private sector work, especially in life sciences and advanced manufacturing, and international business growth as drivers for top-line range.

Q: Environmental services improvement in H2 A: Bob Pragada discussed government component (DoD), transfer of disaster relief work, and private sector pickup as drivers for environmental services improvement in H2.

Q: Book-to-bill, project size, and pipeline A: Bob Pragada mentioned private sector projects accelerating, pipeline growth >50% in some areas, and two-year pipeline >50% composite rate.

Q: AI impact on projects and productivity A: Bob Pragada discussed AI driving backlog growth through differentiation, predictive analytics, and digital twinning in various sectors.

Q: PA Consulting margin sustainability A: Venkatesh R. Nathamuni stated PA's margins are industry best, targeting ~22% long-term with balance between revenue growth and margins.

Q: Risk management in large projects A: Bob Pragada stated risk profile remains consistent with EPCM delivery model, flowing risks to supply chain as usual.

Q: PA acquisition accounting and valuation A: Venkatesh R. Nathamuni and Bert Subin explained accounting ownership and economic ownership, emphasizing accretive nature and synergies.

Q: Project pipeline by end market and AI value creation A: Bob Pragada broke down pipeline growth by end markets and discussed AI value creation through data insights and consultancy.

Q: Semiconductor investment and water infrastructure longevity A: Bob Pragada noted acceleration in semiconductor investment and long-term tailwinds in water infrastructure due to climate and scarcity.

Q: Critical infrastructure share gains and industry outlook A: Bob Pragada discussed international transportation (aviation, rail) and US aviation/rail as drivers of share gains, with long-term outlook positive due to digital tools and ecosystem participation.