J — Jacobs Solutions Inc.

Jacobs Solutions Inc. Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted EPS: Increased by 22% to $1.75.
• Organic Net Revenue Growth: 9%, surpassing the 8% growth rate from Q1.
• Gross Revenue: Rose 27% year-over-year.
• Adjusted EBITDA: $327 million, up 14%, with a margin of 14.1%, reflecting a 70 basis point year-over-year improvement.
• Backlog: Reached a record $27 billion, a 22% increase year-over-year, with a trailing 12-month book-to-bill ratio of 1.4x on gross revenue and 1.2x on net revenue.

2. Strategic Updates and Business Highlights

• Acquisition of PA Consulting: Completed in March 2026, contributing to the company's growth and operational capabilities.
• Rankings: Jacobs was recognized as the number one design firm by Engineering News-Record for the seventh time in eight years.
• Project Awards: Significant contracts in Water and Environmental sectors, including a major wastewater treatment project in San Francisco and a consultancy contract with Ofwat in the UK.
• Growth in Data Centers: The data center business grew over 100% year-over-year, driven by AI infrastructure investments.
• Critical Infrastructure: Selected as the lead designer for the Terminal F expansion at Dallas Fort Worth International Airport, indicating strong demand in aviation and transportation sectors.

3. Forward Guidance and Outlook

• FY 2026 Outlook: Increased guidance for adjusted net revenue growth to 8% - 10.5%, adjusted EBITDA margin to 14.6% - 14.9%, and adjusted EPS to $7.10 - $7.35, implying an 18% year-over-year growth at the midpoint.
• Q3 Expectations: Anticipated adjusted EBITDA margin of approximately 15% and net revenue growth of around 7.5%.
• Long-term Targets: Reaffirmed a 6% - 8% organic growth rate for FY 2029, with an increased adjusted EBITDA margin target of 17%+.

4. Bad News, Challenges, or Points of Concern

• Free Cash Flow: Adjusted free cash outflow of $272 million in Q2, attributed to timing issues related to the PA acquisition, with expectations of continued cash flow challenges in Q3.
• Net Leverage: Ended Q2 at 2.1x, slightly above the target range, though plans to reduce this below 2.0x by year-end are in place.
• Environmental Sector Weakness: The Water and Environmental segment saw only 2% net revenue growth due to softness in the environmental sector, though improvements are expected by Q4.

5. Notable Q&A Insights

• Operational Performance vs. PA Impact: Management emphasized that the raised guidance was primarily driven by operational performance rather than the PA acquisition.
• AI and Digital Tools: Strong demand for AI infrastructure is driving growth, with the data center sector expected to continue expanding significantly.
• Visibility on Projects: The AI infrastructure pipeline has increased by 400% year-over-year, with visibility extending into 2027 and beyond.
• Capacity for Growth: Management confirmed they have the resources to support double-digit organic growth, leveraging their global delivery model.
• Sales Synergies from PA: With full ownership of PA, there is a strong potential for accelerated sales synergies, particularly in defense and national security sectors.

Overall, Jacobs Solutions Inc. demonstrated robust financial performance in Q2 2026, with strategic growth initiatives and a positive outlook, despite facing challenges related to cash flow and sector-specific weaknesses.