Jacobs Solutions Inc. (J) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary highlights strong financial performance with 8% growth in critical infrastructure and a 27% increase in PA Consulting's operating profit. The Q&A reveals positive sentiment with strong demand drivers and a growing project pipeline. The company's strategy includes substantial shareholder returns and AI integration, which are favorable for future growth. Despite some management vagueness, the overall outlook is optimistic, especially with the projected revenue growth and positive sector trends.
Key Financial Performance
Adjusted EPS Grew 15% to $1.53 year-over-year, supported by robust 8% net revenue growth and solid underlying margin performance.
Backlog Grew 21% to over $26 billion year-over-year, setting a new record with trailing 12-month book-to-bill rising to 1.4x. Growth driven by strong award activity in life sciences, advanced manufacturing, and critical infrastructure.
Gross Revenue Increased 12% year-over-year in Q1.
Adjusted Net Revenue Grew by more than 8% year-over-year in Q1, excluding pass-through revenue.
Adjusted EBITDA $303 million, growing more than 7% year-over-year, with a margin of about 13.4%. Margin was impacted by the absence of a prior year margin tailwind from less PTO absorption.
Consolidated Backlog Up 21% year-over-year to a record $26.3 billion, with trailing 12-month book-to-bill rising to 1.4x. Gross profit in backlog increased 15% year-over-year.
Net Revenue (Life Sciences and Advanced Manufacturing) Grew 10% year-over-year in Q1, driven by strong award activity in data center and semiconductor sectors, as well as favorable trends in life sciences.
Net Revenue (Critical Infrastructure) Increased 8% year-over-year in Q1, with robust growth in transportation (rail and aviation) and high single-digit growth in water.
Net Revenue (Water and Environmental) Increased sequentially to 4% year-over-year in Q1, driven by high single-digit growth in water and easing headwinds in environmental.
PA Consulting Operating Profit Increased 27% year-over-year on 16% revenue growth and a strong operating margin of 24%. On a constant currency basis, operating profit grew 22%.
Free Cash Flow $365 million in Q1, supported by solid working capital performance and a favorable cash timing item at the end of the quarter. Excluding the timing item, underlying free cash flow performance was still strong.
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Operating Highlights
PA Consulting Acquisition: Jacobs announced an agreement to acquire the remaining stake in PA Consulting, enhancing capabilities in digital consulting, innovation, and AI advisory.
AI and High-Performance Computing Project: Jacobs was selected to provide engineering, procurement, and program management services for Hut 8's River Bend data center in Louisiana, a flagship AI and high-performance computing project.
Backlog Growth: Backlog grew 21% year-over-year to over $26 billion, with a trailing 12-month book-to-bill ratio of 1.4x.
Critical Infrastructure Projects: Jacobs secured high-value projects, including the $1.6 billion modernization of Cleveland Hopkins International Airport and a storm surge barrier project in Texas.
Financial Performance: Adjusted EPS grew 15% to $1.53, supported by 8% net revenue growth and solid margin performance. Adjusted EBITDA was $303 million, with a margin of 13.4%.
Free Cash Flow: Free cash flow for Q1 was $365 million, enabling increased share repurchases and a 12.5% dividend increase.
Focus on Digital and AI: Jacobs is leveraging PA Consulting's expertise to redefine the asset lifecycle and strengthen its position in digital and AI-driven solutions.
End Market Trends: Strong growth in life sciences, advanced manufacturing, and critical infrastructure markets, with a focus on data centers, semiconductors, and transportation.
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Risk or Challenges
Market Conditions: The company faces potential challenges in maintaining its growth trajectory amidst broader economic uncertainties and market volatility, which could impact demand for its services.
Regulatory Hurdles: The acquisition of the remaining stake in PA Consulting may face regulatory scrutiny, which could delay or complicate the integration process.
Supply Chain Disruptions: While not explicitly mentioned, the company's reliance on large-scale infrastructure and advanced manufacturing projects could expose it to risks from supply chain disruptions, particularly in critical sectors like semiconductors and data centers.
Strategic Execution Risks: The integration of PA Consulting and realization of projected cost and revenue synergies pose execution risks, especially given the scale and complexity of the acquisition.
Economic Uncertainties: The company's performance is tied to sectors like aviation, water infrastructure, and advanced manufacturing, which are sensitive to economic cycles and funding availability.
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Guidance & Outlook
FY '26 Net Revenue Growth: Increased forecast to 6.5% to 10% year-over-year.
Adjusted EPS Growth: Increased forecast to $6.95 to $7.30, implying over 16% year-on-year growth at the midpoint.
Free Cash Flow Margin: Increased forecast to 7% to 8.5%.
Adjusted EBITDA Margin: Expectation remains unchanged at 14.4% to 14.7%.
PA Consulting Acquisition Impact: Expected to be accretive to adjusted EPS in the first 12 months following closing. Projected cost synergies of $16 million to $20 million to phase in during fiscal year '26, with revenue synergies providing incremental upside.
Q2 Adjusted EBITDA Margin: Expected to be in the range of 13.8% to 14%.
Q2 Year-over-Year Net Revenue Growth: Expected to be approximately 6.5%.
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Shareholder Return Plan
Dividend Increase: The company announced a 12.5% increase in its quarterly dividend, raising it from $0.32 to $0.36 per share. This marks a doubling of the quarterly dividend per share since 2019.
Share Repurchase: The company increased its share repurchase activity during Q1 to take advantage of share price dislocation. It is on track to return at least 60% of its free cash flow to shareholders through share repurchases and dividends.
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Key Q&A
Q:What factors are reflected in the company's guidance and what would drive it to the higher end of the top-line guide?
A:The guidance reflects the burn profile of the backlog, strong wins in life sciences and advanced manufacturing (e.g., data centers and chip manufacturing), and international business growth (over 9% this year). The velocity of private sector work would drive the company to the higher range.
Q:What are the demand drivers for the environmental services business?
A:The demand drivers include larger programs from the U.S. Department of Defense (e.g., Navy and Army Corps of Engineers), the transfer of disaster relief work from federal to state and local governments, and private sector growth in industrial, life sciences, and advanced manufacturing. The pipeline is up double digits.
Q:What is the outlook for the company's project pipeline and backlog growth?
A:The project pipeline is growing significantly, with private sector growth greater than 50% in the 12-18 month range. The backlog growth is driven by larger, more complex projects in water, transportation, and energy, with private sector acceleration in data centers, chip manufacturing, and life sciences.
Q:What is the company's approach to capital allocation and free cash flow?
A:The company is committed to returning 60%+ of free cash flow to shareholders through share repurchases and dividends. It also aims to deleverage to a 1x to 1.5x range within the first 4 quarters after PA financing. Strong cash flow is driven by working capital performance and customer payments.
Q:What is the company's position on AI and its impact on business?
A:The company sees AI as a strong enabler for growth and efficiency, using it for data insights, predictive analytics, and digital twinning. AI is helping address resource constraints and driving backlog growth. The company is also expanding its AI consultancy offerings, especially with the acquisition of PA Consulting.
Q:What is the company's strategy for managing risk in large EPCM projects?
A:The company maintains the same risk profile it has used for 20 years, focusing on EPCM delivery models and flowing risks to the supply chain. It has not changed its risk profile despite the larger and more complex projects.
Q:What is the company's view on the sustainability of PA Consulting's margins?
A:PA Consulting's margins are expected to stabilize at around 22% long-term, balancing high single-digit revenue growth with industry-leading margins. The strong Q1 performance (24% margin) was driven by top-line growth and operating leverage.
Q:What is the company's perspective on the water infrastructure market?
A:The water market is experiencing high single-digit growth, driven by international demand (e.g., AMP8 cycle in the U.K., Middle East, and Australia) and U.S. municipal spending. The market benefits from water scarcity, aged assets, and climate effects, with a long-term growth outlook.
Q:What is the company's approach to AI in client projects?
A:The company uses AI to provide data insights, automate tasks, and deliver outcomes faster. It co-creates AI platforms with clients and offers AI advisory services to help clients improve their operations. Digital tools like Acuity and Replica are used for predictive analytics and digital twinning.
Q:What is the company's outlook for the semiconductor and advanced manufacturing sectors?
A:The semiconductor sector is in acceleration mode, with high-bandwidth memory advancements driving demand. The company is involved in major projects in Idaho and New York. Advanced manufacturing and life sciences are also experiencing strong growth, with pipelines up 50%+.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the Sizewell C contract size and potential scope increase, only stating that there is an opportunity for continued scope growth. Additionally, they did not provide a clear breakdown of the profit increase in backlog sequentially, only mentioning high single-digit growth.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI advisory
Gulf
IAF
PA Consulting
Venk
acquisition stake
afternoon
award
backlog
book bill
capital
center
delivery
demand consulting
digit
dividend share
expectation
facility
flow margin
life science
market water
month
outlook cash
power
program infrastructure
project
science manufacturing
stake PA
start
strength
summary
synergy
J Transcript
Jacobs Solutions Inc. (J) Q1 2026 Earnings Call Transcript
Positive2-3
The earnings call summary highlights strong financial performance with 8% growth in critical infrastructure and a 27% increase in PA Consulting's operating profit. The Q&A reveals positive sentiment with strong demand drivers and a growing project pipeline. The company's strategy includes substantial shareholder returns and AI integration, which are favorable for future growth. Despite some management vagueness, the overall outlook is optimistic, especially with the projected revenue growth and positive sector trends.
Jacobs Solutions Inc. (J) Presents at UBS Global Industrials and Transportation Conference Transcript
Neutral12-2
Jacobs Solutions Inc. (J) Q4 2025 Earnings Call Transcript
Positive11-20
The earnings call highlights strong financial performance with raised EPS guidance, revenue growth, and margin expansion. Despite some challenges in the environmental sector, overall growth is robust across regions and sectors, supported by strategic AI partnerships and a strong pipeline, especially in Data Centers. The company's commitment to shareholder returns and positive Q&A insights further reinforce a positive sentiment. However, lack of specific guidance on some aspects and a one-time tax event slightly temper the outlook.
Jacobs Solutions Inc. (J) Q3 2025 Earnings Call Transcript
Positive8-5
The earnings call summary and Q&A section indicate strong backlog growth, strategic partnerships, and positive guidance for fiscal 2025. Key sectors such as Life Sciences, Data Centers, and Water are expected to drive growth, while margin improvements and organic investments further bolster confidence. Despite some uncertainties, such as the impact of Medicaid cuts, overall sentiment is positive due to robust financial metrics and optimistic outlooks, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
J Slides
Jacobs Engineering Q1 2026 slides: double-digit revenue growth, raises full-year outlook2026-02-03
Jacobs Engineering Q4 2025 slides: adjusted EPS jumps 28%, FY 2026 outlook strong2025-11-20
Jacobs Engineering Q3 2025 slides: EPS jumps 25%, guidance raised on strong performance2025-08-05
Jacobs Q2 2025 slides: Adjusted earnings jump 22% despite legal reserve impact2025-05-06
J Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
