Earnings call transcript: Jacobs Engineering Q4 2025 beats EPS forecast

Jacobs Engineering Group Inc (J) reported strong financial results for Q4 2025, surpassing analyst expectations with an EPS of $1.75, compared to the forecasted $1.67, marking a 4.79% surprise. The company’s revenue also exceeded projections, reaching $3.2 billion against a forecast of $3.15 billion. Following the announcement, the stock saw a pre-market increase of 3.55%, with shares trading at $150.2.

Key Takeaways

• Jacobs Engineering’s Q4 adjusted EPS grew 28% year-over-year.
• The company’s revenue of $3.2 billion exceeded expectations.
• Pre-market trading showed a 3.55% increase in stock price.
• Record quarterly adjusted EBITDA margin of 14.4%.
• Strong focus on expanding AI and digital capabilities.

Company Performance

Jacobs Engineering delivered robust performance in Q4 2025, with significant year-over-year growth and a record EBITDA margin. The company’s strategic focus on AI and digital capabilities, alongside partnerships with tech giants like Nvidia and Palantir, has positioned it well in the market. The consolidated backlog grew by 6% to $23.1 billion, highlighting strong demand across key sectors such as transportation, water, and semiconductors.

Financial Highlights

• Revenue: $3.2 billion, up from expectations of $3.15 billion.
• Earnings per share: $1.75, surpassing the forecast of $1.67.
• EBITDA margin: 14.4%, a record high for the company.
• Free cash flow: $607 million.
• Shareholder returns: $1.1 billion in FY2025.

Earnings vs. Forecast

Jacobs Engineering’s Q4 EPS of $1.75 exceeded the forecast of $1.67 by 4.79%, marking a positive surprise. This performance is consistent with the company’s historical trend of surpassing expectations, driven by strategic initiatives and operational efficiencies.

Market Reaction

Following the earnings announcement, Jacobs Engineering’s stock price increased by 3.55% in pre-market trading, reaching $150.2. This positive movement reflects investor confidence in the company’s ability to deliver strong results and maintain growth momentum. The stock’s performance is notable against its 52-week range, showing resilience despite broader market volatility.

Outlook & Guidance

For FY2026, Jacobs Engineering projects adjusted net revenue growth of 6-10% and an adjusted EBITDA margin of 14.4-14.7%. The company anticipates an adjusted EPS of $6.90 to $7.30, reflecting a 16% year-on-year growth. Strategic expansions in data centers and semiconductor design services are expected to drive future growth.

Executive Commentary

"We delivered strong results for Q4 and are pleased to end FY25, the first year of our five-year strategy," said Bob Pragada, CEO. "Our consolidated backlog grew 6% to $23.1 billion, setting a new record to close out the year." CFO Venk Nathamuni added, "We see continued opportunity to increase our margin profile moving forward."

Risks and Challenges

• Regulatory uncertainty in the environmental sector could impact future growth.
• Global economic conditions may affect demand in key markets.
• Supply chain disruptions could pose challenges to operational efficiency.
• Competitive pressures in the AI and digital sectors.
• Currency fluctuations impacting international operations.

Q&A

During the earnings call, analysts inquired about the impact of potential federal government shutdowns, to which the management confirmed no material effect. Discussions also focused on ongoing negotiations regarding PA Consulting and the expansion of data center services globally.

Full transcript - Jacobs Engineering Group (J) Q4 2025:

Audra, Conference Call Operator: Good morning and welcome everyone to Jacobs fiscal fourth quarter and full year 2025 earnings conference call and webcast. Today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time I would like to turn the conference over to Bert Subin, Senior Vice President, Investor Relations. Please go ahead.

Bert Subin, Senior Vice President, Investor Relations, Jacobs: Thank you Audra and good morning everyone. Our earnings announcement and 10-K were filed this morning and we have posted a slide presentation on our website which we’ll reference during the call.

Venk Nathamuni, CFO, Jacobs: I would like to refer you to.

Bert Subin, Senior Vice President, Investor Relations, Jacobs: Slide 2 of the presentation for information about our forward looking statements, non-GAAP financial measures and operating metrics. Now let’s turn to the agenda on slide three. Speaking on today’s call will be Jacobs’ Chair and CEO Bob Pragada and CFO Venk Nathamuni. Bob will begin by providing comments on the business as well as highlights from our fourth quarter and fiscal year results and a recap of notable awards. Venk will then provide a detailed review of our financial performance including commentary on end market trends, cash flow, balance sheet data and our FY26 outlook. Finally, Bob will provide closing remarks and then we’ll open up the call for questions. With that, I’ll turn it over to our Chair and CEO Bob Pragada.

Bob Pragada, Chair and CEO, Jacobs: Good day everyone and thank you for joining us to discuss our fourth quarter and fiscal year 2025 business performance. We delivered strong results for Q4 and are pleased to end FY25, the first year of our five year strategy. On a positive note, for both the quarter and the fiscal year we drove strong double-digit growth in adjusted EPS supported by solid revenue growth and robust margin expansion. Our consolidated backlog grew 6% to $23.1 billion, setting a new record to close out the year, and PA Consulting capitalized on strong demand, delivering double-digit revenue and operating profit growth in the second half of FY25. Overall, we are very pleased with our results and we see great runway as we enter FY26. Turning to slide 4, we provide a detailed overview of our quarterly and full fiscal year results.

We grew Q4 adjusted EPS by 28% year over year and this was primarily driven by 6% net revenue growth, a record quarterly adjusted EBITDA margin of just over 14.4% and better below the line performance for the full year. We grew adjusted EPS 16% largely as a result of mid single digit net revenue growth and strong margin expansion. We’ve also seen a solid EPS tailwind from share repurchases which we increased significantly during FY25. Reflecting on our expectations last quarter, we guided to an adjusted EPS range of $6-$6.10 for FY25 and we were able to finish the year above the high end of that range at $6.12. Turning to Slide 5, I’d like to highlight a few notable infrastructure and advanced facility project awards from Q4.

These wins highlight the power of our strategy to redefine the asset life cycle as we prioritize expanding our addressable market with core clients. We continue to see a positive outlook in water and environmental, particularly in the water sector which remains one of our most resilient and high growth areas of our portfolio. Our full lifecycle delivery model, enabled by deep domain expertise and leading digital capabilities, helps our clients address aging, infrastructure scarcity issues and regulatory changes around the world, demonstrating the trust our clients place in Jacobs to deliver long term outcomes. We extended our Operational Intelligence agreement with United Utilities, the largest listed water company in the U.K. through 2030.

Using our AI powered Aqua DNA platform, we’re helping modernize utility operations and deliver measurable, sustainable benefits for millions of people in the life sciences and advanced manufacturing end market. Data centers and life sciences continue to be two of the fastest growing sectors in our portfolio. Additionally, our revenue growth in these sectors is now being complemented by new semiconductor investments. As an example, we were awarded the design for a commercial scale semiconductor fabrication facility by a confidential customer. Our scope encompasses the design and engineering of a greenfield semiconductor manufacturing plant along with its related infrastructure and manufacturing support facilities. We’re also seeing strong demand across the critical infrastructure end market with all verticals performing well during Q4. In the U.K., together with PA Consulting, we were named to the Crown Commercial Services Management Consultancy Framework.

This appointment expands our role advising public sector clients on delivering cleaner, smarter infrastructure and maximizing value from public investment across transportation, cities, defense and clean energy. In the US we continue to build on strong momentum in the transportation sector. In New York, we were selected by the MTA, North America’s largest transportation network, to deliver the Interborough Express Light Rail Project, a transformative new 14 mi transit line connecting Brooklyn and Queens. The project will enhance mobility, reduce travel times and promote sustainable transit oriented growth for New York City communities. In summary, these awards reflect our continued momentum and highlight the broad secular tailwinds driving growth across our business.

As I reflect on FY25, we met or exceeded all of our annual targets, continued to drive robust bookings, stayed true to our disciplined capital returns policy, and now enter year two of our strategy cycle on track to achieve our long term outlook. Now I’ll turn the call over to Venk to review our financial results in further detail.

Venk Nathamuni, CFO, Jacobs: Thank you Bob and good day everyone. During fiscal year 2025 we delivered on our commitment to drive profitable growth which consisted of double-digit growth in both EBITDA and adjusted EPS as well as a 7% free cash flow margin. We’re demonstrating our differentiated business model to strong margin expansion and we see continued opportunity to increase our margin profile moving forward. Now please turn to slide number 6 where I will walk through our results for Q4. We finished fiscal year 2025 on a strong note. In the fourth quarter, gross revenue increased 7% year over year and adjusted net revenue, which excludes pass-through revenue, grew by 6%. Q4 adjusted EBITDA was $324 million, growing 12% year over year. Our adjusted EBITDA margin during Q4 came in strong at 14.4% which is an increase of 79 basis points versus the same quarter last year.

As a result, adjusted EPS rose to $1.75, a 28% increase year over year. Our disciplined cost management contributed to a new record adjusted EBITDA margin both during the quarter and for the full fiscal year and we’re well positioned to build on this momentum. In fiscal year 2026, consolidated backlog was up 6% year over year to a record $23.1 billion, putting our trailing 12 month book-to-bill at 1.1 times. Notably, gross profit and backlog increased over 13% year over year during Q4, highlighting our strong sales performance. Moving on to slide 7, I’ll recap fiscal year 2025 results. Fiscal year 2025 total gross revenue increased about 5% year over year with adjusted net revenue rising more than 5%. Revenue growth and higher margins resulted in adjusted EBITDA and adjusted EPS increasing by 14% and 16% respectively.

We’re pleased to end fiscal year 2025 in a strong position with mid single digit organic revenue growth, mid teens adjusted EPS growth and a backlog that sets us up well for the future regarding our performance by end markets and infrastructure and advanced facilities. Let’s now turn to slide number 8. At a high level, net revenue growth across our three end markets was fairly consistent in fiscal year 2025 with water and environmental and life sciences and advanced manufacturing growing just over 4% and critical infrastructure at about 6%. Focusing on Q4, net revenue increased more than 9% year on year in critical infrastructure. Our strong growth was a function of several key programs ramping up in the transportation sector and continued momentum in energy and power, with favorable trends in both the US and internationally.

As we look ahead, we believe continued tailwinds in the transportation and energy and power sectors will be underpinned by improvement in cities and places. In our life sciences and advanced manufacturing end market, net revenue grew a little more than 5% in Q4, a modest improvement from Q3. During the quarter, we saw strong net revenue growth in the life sciences and data center sectors, but at tougher comps in the industrial portion of the portfolio. Positively, we’re on track to fully lap these tougher comps and are seeing semiconductor programs ramp up which we believe will benefit our setup in fiscal year 2026. Net revenue for our water and environmental end market was roughly flat year on year in Q4.

Demand across this end market was mixed with continued strength in the water sector offset by softer revenue performance in environmental, particularly in the US where both public and private clients moderated spending more than anticipated. Looking ahead to fiscal year 2026, we expect water to remain a key growth driver and on the environmental side, opportunities are reemerging as we position for a return to growth. In summary, we’re seeing favorable trends in each of our end markets and believe we’re entering the new fiscal year with solid momentum. Moving on to slide 9, I will provide a brief overview of our Segment Financials. In Q4, Infrastructure and Advanced Facilities operating profit increased 16% year on year with a modest tailwind from FX. In fiscal year 2025, operating profit increased 13% year over year and on a constant currency basis.

Infrastructure and advanced facilities results were aided by both revenue growth and margin expansion. Now moving to PA Consulting’s performance, revenue increased 10% year on year in Q4. This contributed to a 17% increase in operating profit or 13% in constant currency on a strong operating margin of 23%. PA continued to benefit from rising demand for services in the public and national security sectors, driving double digit growth in their backlog. For fiscal year 2025, operating growth for PA was in line with Q4 performance. As we look ahead to fiscal year 2026, we anticipate PA’s revenue growth will be similar to our consolidated growth rate. Turning now to slide 10, we provide an overview of cash generation and our balance sheet for fiscal year 2025. Free cash flow generation came in at $607 million.

As a reminder, this does not add back the impact of restructuring or other charges. Good free cash flow generation and our high quality balance sheet enabled us to repurchase $754 million of our shares and pay out $153 million in cash dividends. As a result, we returned approximately 150% of our free cash flow during the fiscal year. Adding in our dividend of momentum shares distributed in May, we returned $1.1 billion to shareholders in fiscal year 2025, a company record. We also paid down debt, ending the year with $1 billion in net debt, yielding a net leverage ratio of 0.8 times on LTM adjusted EBITDA, which is below our 1.0-1.5 times target range. Our balance sheet strength supports continued investment in the business along with continued returns to shareholders via share repurchases as well as long term dividend growth.

Our commitment to return capital to shareholders is evidenced by a recently approved $0.32 per share dividend representing 10% year over year growth and our material increase in share repurchase activity this year. Finally, please turn to slide number 11 for our fiscal year 2026 outlook. We expect adjusted net revenue to increase 6%-10% year over year, adjusted EBITDA margin to range from 14.4%-14.7%, adjusted EPS to range from $6.90-$7.30 and free cash flow margin, which is free cash flow divided by adjusted net revenue, to be in the range of 7%-8%. Notably, our outlook for fiscal year 2026 implies 16% year on year growth in adjusted EPS. At the midpoint, we provide relevant assumptions on the right side of the page to help with your modeling.

One item to be mindful of is the fact that fiscal year 2026 will include an extra week during Q4, adding just over a point and a half to our net revenue growth rate. Additionally, as it pertains to Q1, we’re forecasting 5.5%-7.5% net revenue growth and a low to mid 13% margin. Note that Q1 is typically our seasonally slowest quarter due to holiday timing. In summary, fiscal year 2025 was a great first year in our strategy cycle. We executed to our 13.9% EBITDA margin target, which puts us well on our way to reaching 16% by fiscal year 2029. We grew the top line mid single digits, demonstrating resilience in a dynamic macro environment. In addition, we returned record amounts of capital back to our shareholders.

As we enter fiscal year 2026, we believe we are very well positioned to build on our fiscal year 2025 performance. With that, I’ll turn the call back over to Bob.

Bob Pragada, Chair and CEO, Jacobs: Thank you, Venk. In closing, we’re proud of our continued strong execution in FY25. With a record backlog, expanding margins, and healthy demand across the sectors we serve, we’re entering FY26 with significant momentum. Operator, we will now open the call for questions.

Audra, Conference Call Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one. Again, we ask that you please limit yourself to one question and one follow up to allow everyone an opportunity to ask a question. We’ll take our first question from Sangita Jain at KeyBanc.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Thank you for taking my questions. Can I start with the federal government shutdown and if you think that had any impact on your fiscal 2026 bookings to date?

Bob Pragada, Chair and CEO, Jacobs: Fiscal 26 or 25?

Various Analysts, Analyst, KeyBanc, Citi, Truist: The fiscal 2025 ended and the shutdown started. I’m trying to see if you had any impact in the early part of this year from the shutdown.

Bob Pragada, Chair and CEO, Jacobs: No, we did not. The bookings trend was those awards in the federal government happened before the shutdown. The short answer is no. Sangeeta.

Various Analysts, Analyst, KeyBanc, Citi, Truist: All right, great. Can you give us an update on PA and how that process is unfolding?

Bob Pragada, Chair and CEO, Jacobs: Sure, sure. Our negotiations continue, and I would say they’re progressing. We’ve said from the beginning that we would be making a decision on that honor before March of 2026, and we’re on track to do so. Great.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Thank you. Appreciate it.

Bob Pragada, Chair and CEO, Jacobs: Thank you. Thank you, Sagiv.

Audra, Conference Call Operator: We’ll move next to Andrew Wittmann at Baird.

Venk Nathamuni, CFO, Jacobs: Yeah, great.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Thanks for hearing my questions. I guess my first question is just on the water and environment portion of your business. Obviously, we saw some deceleration here. Bob, you mentioned the environmental business has been a little weaker. I was hoping maybe you could just drill into that. It seems like the water side is strong, but what was it about the environmental side that caused a little bit of softness? Would you tie that to anything? Maybe the administration change or something else? What are the indications that you have today? You made some comments that you see that improving going forward, and I just wondering kind of what that’s based on. I thought you could drill in.

Bert Subin, Senior Vice President, Investor Relations, Jacobs: A little bit more there.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Thank you.

Bob Pragada, Chair and CEO, Jacobs: Yeah, absolutely. Andy, maybe just. I’ll start with the positive. The water sector continues to be strong. The pipeline is up double digits as well as our booking trend. We still see high single digit growth in the water sector moving forward into FY2026 and beyond. That is global. All major geographies are participating in that. In the environmental sector, kind of two dynamics that played out during the year. Actually during Q4, accentuated in Q4, one was we did have a one time event, a positive on last year’s comp. That was one. From kind of the core of the business, the regulatory volatility right now within the environmental world has put a bit of a pause for our private sector clients.

Until those kind of settle down, our private sector clients are tending to pull back a bit of the spend that we saw traditionally. These are some of the larger industrials as well as chemical folks. On the public sector, it really was about disaster relief. The traditional, the kind of the switch of FEMA funding and application down to the state level. There was a bit of a pause on how the states were going to, especially after the OABBA was passed, how states were going to reorganize their budgets. We saw some delays in awards as well as a pullback in FEMA.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Got it. Was the FEMA the one time item for the prior year or you’re saying that affected this quarter?

Bob Pragada, Chair and CEO, Jacobs: No, the prior year, the Q4 of FY24 one-time event was a federal agency outside of the US that we had a one-time event.

Venk Nathamuni, CFO, Jacobs: Got it.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Okay. And then just for my follow up, maybe for Venk, we saw the guidance here on free cash flow. Just the bridge. You’re now doing it as a percentage of revenue, but if you convert it back to the old way of doing it, it’s under the 100% targets. I was wondering what the items in the 2026 outlook are at Bridgeview, because obviously the business fundamentally is equipped to deliver at 100% or greater. That means something is kind of unusual or included in this number that we should know about. I thought maybe you could expand on that a little bit more.

Venk Nathamuni, CFO, Jacobs: Yeah, thanks Andy, for the question. I’d say. You know, first of all, I point out that as we stated at Investor Day, free cash flow margin of 10% target, we’re well on track for that. We delivered 7% this year and we’re guiding to between 7% and 8%. What we have imputed in that guidance is that there is a kind of a one time tax event unrelated to our continuing operations that we’re expecting sometime in fiscal 2026. We just want to give transparency to that. On top of it, as Bob alluded to in response to Sangeetha’s question, we are expecting resolution on our combination with PA and we’re just assuming some cash expenses associated with that. Those are the things that we want to factor in.

We feel really good about our free cash flow margin expansion and we think that’ll be a true indicator of the efficiency of the business. You’re absolutely right. Our efficiency has been improving and we see continued growth in that in fiscal 2026 and beyond.

Bob Pragada, Chair and CEO, Jacobs: Okay, thank you.

Venk Nathamuni, CFO, Jacobs: You’re welcome.

Audra, Conference Call Operator: We’ll move next to Jamie Cook at Truist.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Hi, good morning and congrats on a nice quarter. I guess my first question, you know, with regards to the margin performance in infrastructure and advanced facilities, we saw a nice improvement there. Anything unusual in the margins and how to think about the cadence of margins in that segment as in 2026. My second question, Bob, to you sort of more strategically, you know, your peer, one of your public peers came out this week talking about their competitive advantage on AI and what that means for margins for them over the longer term. You have similar business models. Just wondering how you’re leveraging AI and is there a margin opportunity outside of what you’ve already announced? You know, given your peers came out with much more bullish margin targets longer term. Thank you.

Bob Pragada, Chair and CEO, Jacobs: Great. Thanks, Jamie. On the first part with regards to margins in INAF, I’ll let Venk take that and then I’ll address the AI question following, so Venk, please.

Venk Nathamuni, CFO, Jacobs: Hey Jamie, thanks for that comment. I’d say in terms of our margin performance, it continues to go up and to the right, really solid performance across the entirety of our business. Also a good job of improving our cash collections and so forth. I’d say as we guided to in the prepared remarks, when it comes to Q1, there will be a sequential slowdown and a seasonal slowdown driven by a couple of factors. One is, you know, fringe as it relates to things like medical insurance costs and health benefits that typically have an impact in Q1, but you get the recovery in subsequent quarters. We’ll see a linear progression in margins throughout the rest of fiscal year 2026. We wanted to make sure that we were transparent in terms of how to model it for fiscal Q1. That’s number one.

As it relates to the overall free cash flow margin target of 7-8%, imputed in that, as I mentioned earlier, is the fact that, you know, we’re continuing to see operational improvements in the margin performance combined with some of the one-time items that we expect to happen in fiscal 2026. All of that is imputed in our margin guidance.

Bob Pragada, Chair and CEO, Jacobs: Yep. And then on the AI question, Jamie, you know, we’ve been very vocal about this since dating all the way back to 2021. In fact, if you remember, in our 19 and 22 strategy we, and it was the origins of the partnership with PA Consulting as well. This is a journey we’ve been on for over five years, how it’s transpired. You know, we see it as an accelerant, a differentiator, a space that we continue to use to primarily provide greater solutions externally for our clients. That has realized itself. These are things that we’ve highlighted in the past. You know, all the way back to 2021, being able to deliver a transformational effort for Intel as they were expanding their business model into a foundry model back in 2021. That was done through machine learning and digital replication.

That then led to our partnership with Palantir and all of the water platforms that we have developed since 2022 in reference one in Aqua DNA as well as intelligent O and M. That’s really creating a differentiated position to gain efficiencies for our clients. Most recently, we announced a partnership with Nvidia where we’re utilizing AI enablement platforms as well as digital twinning technology to simulate gigawatt plus technology type data centers and creating a reference design for Nvidia clients. Even going all the way up to today where StreetLight Data is providing unbelievable transportation analytics for major metropolitan areas around the country. In fact, over 26 state DOTs are utilizing the StreetLight platform.

You look at that portfolio and it’s creating a differentiated position for growth in the market and it is contributing to our margin expansion as we continue to go up the value chain.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Thank you. Congrats on a nice quarter.

Bob Pragada, Chair and CEO, Jacobs: Thank you.

Audra, Conference Call Operator: We’ll move next to Andrew, excuse me, Kaplowitz with Citi.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Hi, good morning, this is Natalia on behalf of Andy Kaplowitz from Citi.

Venk Nathamuni, CFO, Jacobs: Andrew.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Congrats on the quarter. Maybe first question I’ll start off with. You cited that transportation was a contributor to growth, but I’m just curious how the funding visibility under IIJ is progressing. Are you seeing any delays or accelerations as new money flows through the states?

Bob Pragada, Chair and CEO, Jacobs: We’re not. That continues to be a catalyst. I would say, you know, that transportation number we’re seeing globally, it’s not just in the US but nice growth that we experienced in Europe, Middle East as well as in Australia and New Zealand. It’s something where, and again, it kind of goes to the previous question too. Differentiated position, utilizing strong transportation analytics in driving mobility concerns. I’d say IHA is a component. Budget clarity in the UK is another component. Growth in the Middle East as well as Australia continues to be a really strong market for us in the transportation space.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Got it. That’s super helpful. Maybe just continuing on the strength that you see globally in transportation, maybe more so just curious about the regional performance across your end markets. Which regions outperformed expectations and which ones are you expecting maybe to be a little softer into 2026?

Bob Pragada, Chair and CEO, Jacobs: Yeah, we’re seeing growth across the board, Andrea. It’s, you know, our business domestically in the US has got some strong tailwinds behind it, but we’re not seeing, let me say it in the positive. Our business outside the US and internationally is in growth mode. We’ve got double-digit growth going on in the Middle East. Europe is going through a nice recovery and Southeast Asia and Australia and New Zealand are really being buoyed by strong transportation and water growth. It is pretty uniform for us across the globe.

Venk Nathamuni, CFO, Jacobs: If I could add to just what Bob said, I mean that’s true of the PA business as well. We’re seeing some good solid momentum in the PA business, especially in the U.K. and continental Europe.

Various Analysts, Analyst, KeyBanc, Citi, Truist: Got it. Thank you. Helpful. Congrats on the quarter.

Bob Pragada, Chair and CEO, Jacobs: Thanks. Thank you.

Audra, Conference Call Operator: We’ll go next to Stephen Fisher at UBS.

Venk Nathamuni, CFO, Jacobs: Thanks.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Good morning.

Stephen Fisher, Analyst, UBS: What if I could just follow up on Jamie’s question on the margin in terms of bridging the expansion in margins between fiscal 2025 and fiscal 2026. If you can kind of be a little more specific on some of the major puts and takes, be it cost savings, operating leverage, any specific investments that you’re making to support AI and digital. Anything that you can help us sort of bridge within that.

Bob Pragada, Chair and CEO, Jacobs: Thank you.

Venk Nathamuni, CFO, Jacobs: Yeah, thank you, Steve. You know, as we mentioned in the prepared remarks, fiscal 2025 solid performance in terms of 110 basis point margin expansion and we’re guiding for between 50 and 80 basis points for fiscal 2026. A lot of what happened in fiscal 2025 was driven by some of the operating leverage and cost actions as well as some early improvements in margin. As it relates to gross margins, we see a much bigger contribution especially on the gross margin line going forward, driven by three things that we outlined at investor day. Global delivery being a big component of it. As we look at the mix of business across the globe, we see that there’s tremendous adoption of global delivery across our various end markets. That should be a meaningful driver of margin expansion for us this year.

You know, we talk about commercial models and how with the adoption of AI that’s increasing across the multitude of end markets that Bob talked about, that also makes a meaningful contribution to margin expansion. I would say multiple levers on the gross margin front and you know, we are committing to maintaining our operating leverage, meaning we want to grow our OpEx at a slower pace than our revenue growth. That is driven by both efficiencies as well as what we do internally as well as externally for our clients. A multitude of factors. We feel really good about our margin expansion story and you know, we’re guiding for 65 basis points at the midpoint after 110 basis point expansion in fiscal 2025.

Stephen Fisher, Analyst, UBS: Very helpful. Bob, maybe on the data center side, since I think you guys have a pretty interesting perspective and role in the industry being on the front end of things, I’m curious if you could talk about the changes in the assignments that you’re getting this year versus a year ago. What are your customers asking you that’s different this year? How the project? Is there anything more international or more domestic? Any changes there? Just curious your perspective on how things are different. Entering 2026 versus 2025.

Bob Pragada, Chair and CEO, Jacobs: Sure. Let me start with the geography and then go to how our scope is expanding in that area. We’re seeing interest now in data center starts in the Middle East and in Europe in addition to the U.S. The U.S. continues to be the strongest of the three, but it is expanding into Europe, into the Middle East as well. From a scope standpoint, you know, our scope has traditionally been within the white space. The white and the gray space are now merging. This, especially the work that we’re doing now for Nvidia, is translating into more innovation happening within the server rack in that white space area and then broadly solutions around the power requirements behind the meter as well as reclaimed water that we’re expanding our scope on that front too.

All of that put together has really been a net benefit. Just another data point, Steve. In the last quarter our pipeline in the data center space has gone up 5x and so we’re actually being selective on how we deploy that talent and growing that talent not just in the U.S. but in the Philippines and in India as well.

Stephen Fisher, Analyst, UBS: Very helpful, thanks a lot.

Audra, Conference Call Operator: We’ll go next to Michael Dudas at Vertical Research.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Morning gentlemen.

Venk Nathamuni, CFO, Jacobs: Morning, Mike.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Bob, maybe you know, tailing off your.

Bob Pragada, Chair and CEO, Jacobs: Last comment on pipeline, which is important, maybe you could share you’ve put out, I guess, your investor day two year.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Pipeline outlooks and you of the segments.

Bob Pragada, Chair and CEO, Jacobs: Maybe you can refresh on that, how?

Various Analysts, Analyst, Baird, Wells Fargo, UBS: That looks today versus a year ago.

Bob Pragada, Chair and CEO, Jacobs: What areas should we be looking at as we monitor on bookings?

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Progress as the year goes through.

Bob Pragada, Chair and CEO, Jacobs: Is there a certain couple areas? I mean you just touched on some of them, but roll for the pipeline.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Whether the conversions are gonna happen sooner rather than later, that might drive the 10% range of 2026 numbers.

Bob Pragada, Chair and CEO, Jacobs: Sure, maybe Mike. I’ll kind of segregate it into two categories, one by sector and then second by geography. By sector I’d say the fastest growing pipelines and I can quote some numbers here in the data center world just mentioned, pipeline is up 5x in the semiconductor world. We’re seeing more growth there after some flatness over the course of the last year. It’s really centered around high bandwidth memory for the American client. In the U.S. semiconductor pipeline is up 20%. Life sciences continues to be strong and in all those areas that we mentioned before, that’s really been driven in the U.S. that pipeline is up 50%. The water sector continues to be a strong sector for us globally and that’s up 50%. Overall the pipeline is looking really, really strong as we go into FY2026.

The reason why I mentioned those four sectors is because that’s where we’ll see the fastest conversion of that pipeline in 2026 and in early 2027. From a geography standpoint, it’s the Middle East. You know, we just announced the award for New Maraba, specifically the Mukaab component of that. That’s a huge, really good job for us. We’re now on the Expo and we’ve got a few opportunities at Abu Dhabi and Etihad Rail that could convert here shortly. Across the Middle East region we’re seeing good growth leading up to not just the Expo but also the World Cup coming up too. Certainly the visit in Washington this week from the Saudis certainly can add to that visibility.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: I would assume.

Venk Nathamuni, CFO, Jacobs: It did.

Bob Pragada, Chair and CEO, Jacobs: It did, yeah.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Of course the second question, just as.

Bob Pragada, Chair and CEO, Jacobs: We think about cadence through 2026 on.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Free cash and share repurchase, just, you know, 2025 had a lot of opportunistic.

Bob Pragada, Chair and CEO, Jacobs: One time issues, but how do we.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Think about as you allocate that cash relative to share repurchase and whatever, maybe.

Bob Pragada, Chair and CEO, Jacobs: Target on debt relief or what have.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: You, as we look through 26.

Venk Nathamuni, CFO, Jacobs: Yeah, Mike, thanks for the question. I’ll answer the margin question first, which is and as we guided to expecting a linear progression in margins, Q1 being probably the slowest in terms of margins and then a steady increase right through the rest of the year such that we feel good about the 50-80 basis points for the full year as it relates to our use of cash. As we pointed out, our net leverage ratio is right now at 0.8x. We do want to maintain the optionality for additional deployment of cash for a potential increase in our stake in PA as we’ve been stating all along. Outside of that we want to be regular buyers of our stock.

We truly believe in the value of being predictable in terms of buying back shares and we’ll do it at a regular quantum and it won’t be at the same level as it was last year, 150%. We made the commitment at investor day to return at least 60% of our free cash flow in the form of share repurchases and dividends. We’re committed to that. Excellent.

Bob Pragada, Chair and CEO, Jacobs: Thanks, Jonna. Thank you.

Audra, Conference Call Operator: We will take our final question from Jerry Revitch at Wells Fargo.

Various Analysts, Analyst, Baird, Wells Fargo, UBS: Yes.

Venk Nathamuni, CFO, Jacobs: Hi.

Bob Pragada, Chair and CEO, Jacobs: Good morning everyone. Hi Jerry. Thank you.

Jerry Revitch, Analyst, Wells Fargo: Hi. Given the top line outlook yet for the year and Venk, what you shared for the first quarter, you know you.

Bob Pragada, Chair and CEO, Jacobs: Could be exciting if you hit the.

Jerry Revitch, Analyst, Wells Fargo: High end of the range with, call it, 13% type pipeline growth in the fourth quarter. Can you just talk about if you do hit the high end of the range, given the color you provided earlier, Bob, which end markets do we need to see that pipeline turn into bookings? If we’re talking about the high end of the outlook being feasible and exiting at that teens growth rate in the fourth quarter if that plays out.

Venk Nathamuni, CFO, Jacobs: Yeah. J.D., I’ll take the first part of the question and then Bob can add a lot more color. I would say in terms of the sequential nature of the growth profile as well as the margin profile, you expect, we expect to see continued momentum right through the year. As we stated, Q4 is the one which will have the extra week. That will have an extra oomph, if you will, in terms of both revenue contribution as well as margin contribution. In terms of the end markets, you know, it’s pretty broad based and maybe Bob can add more color on how we expect that to play out.

Bob Pragada, Chair and CEO, Jacobs: Yeah, the ones that would drive the high end of the range, Jerry, would be life sciences and data centers clearly. That’s a matter of those sectors moving at pace, that wouldn’t have to be accelerated, just need to move at pace and that would be a big contributor. We’re seeing semiconductor fabrication facilities start to move and if that were to accelerate, that would definitely be a tailwind momentum. I think on Citi’s question with regards to transportation, that international transportation market would provide some momentum as well. Major prospects, you know, we’re seeing major prospects in cities and places in Middle East, but also we’re now starting at the LA Olympics as well as FAA and a few other kind of larger initiatives that would drive the higher end.

Venk Nathamuni, CFO, Jacobs: Bob, on data center specifically.

Jerry Revitch, Analyst, Wells Fargo: You mentioned a fivefold increase in that pipeline for you. Obviously that market is very hot, but I do not think it is up 5x. Are you folks expanding the scope of what you are doing within data centers or is it people are looking farther out to lock in services? Can you just expand on that fivefold comment and if you are willing to share off of what base from Jacobs standpoint, that would be helpful.

Bob Pragada, Chair and CEO, Jacobs: Just to put in perspective, it’s about a $200 million business for us today and you know, over time, I won’t be specific on time but you know that business could be as big as our life sciences business today, you know, in a few years. That’s kind of where it’s headed. I’d say it’s across the board, it’s hyperscalers, it’s what we call kind of the NEO cloud providers as well as multi tenant players as well. It’s in just sheer numbers of people that are coming into the market. Our scope has expanded from a, from a content standpoint, going within the battery limits of the data center, into the water requirements as well as power needs. That’s a nice kind of adjacency with our energy and power group and then you know, alternative delivery.

Similar to what we do in the life sciences sector where we, as well as in the water sector where we do not just design but program management for the delivery of the facility, we are now in that mode in the life, I am sorry, in the data center space as well.

Jerry Revitch, Analyst, Wells Fargo: Super, thank you. Anything you could do to improve traffic in the New York area, a lot of us on the call would be grateful. Thanks, everyone.

Bob Pragada, Chair and CEO, Jacobs: Okay, we’re working on it.

Various Analysts, Analyst, KeyBanc, Citi, Truist: J.

Audra, Conference Call Operator: That concludes our Q and A session. I will now turn the conference back over to Bob Pragada for closing remarks.

Bob Pragada, Chair and CEO, Jacobs: Thank you. Thank you, everyone, for joining our earnings call. We look forward to engaging with many of you over the coming days and weeks as we go on the road and hope all that are celebrating the US Thanksgiving have a happy holiday.

Audra, Conference Call Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.