Jacobs Solutions (NYSE:J) reported what executives described as a “very strong” start to fiscal 2026, delivering first-quarter results above internal expectations and prompting the company to raise its full-year outlook for net revenue, adjusted earnings per share, and free cash flow margin.
First-quarter performance and backlog gains
Chair and CEO Bob Pragada said adjusted EPS increased 15% year over year to $1.53, supported by 8% adjusted net revenue growth and “solid underlying margin performance.” CFO Venk Nathamuni added that gross revenue rose 12% and adjusted EBITDA increased more than 7% to $303 million, with an adjusted EBITDA margin of about 13.4%.
Nathamuni noted that book-to-bill strength was helped by several large awards in life sciences and advanced manufacturing, which he said carry higher-than-normal pass-through revenue. However, he pointed to “gross profit in backlog” rising 15% year over year as evidence of underlying sales strength that is not affected by pass-through dynamics.
Notable awards highlighted during the quarter
Management outlined several major wins across its Infrastructure & Advanced Facilities (I&AF) business, emphasizing demand breadth in water, advanced manufacturing, data centers, aviation, and public-sector resilience.
- Water and environmental: Selected to lead engineering design for the Bolivar Roads Gate System along the Texas Gulf Coast, described as expected to be among the largest storm surge barriers in the world.
- Life sciences and advanced manufacturing: Chosen to provide engineering, procurement, and program management services for Hut 8’s River Bend Data Center in Louisiana, described as a flagship AI high-performance computing project.
- Critical infrastructure / cyber resilience: The UK Health Security Agency selected PA Consulting, supported by Jacobs, as a delivery partner for its Trust Program to strengthen resilience and safeguard critical health data and infrastructure.
- Aviation: Selected to lead program and construction management for the $1.6 billion modernization of Cleveland Hopkins International Airport.
End-market trends: growth led by advanced facilities and critical infrastructure
On a portfolio view, Nathamuni said all end markets performed well in the quarter, with particularly strong growth in life sciences and advanced manufacturing, critical infrastructure, and PA Consulting. Life sciences and advanced manufacturing net revenue grew 10%, which management attributed to program ramp-ups and strong award activity in data centers and semiconductors, alongside favorable trends in life sciences.
Critical infrastructure net revenue increased 8% versus the prior year quarter. Nathamuni said transportation, particularly rail and aviation, drove growth. Water and environmental net revenue grew 4% sequentially, led by “high single-digit” growth in water and “a modest easing of headwinds” in environmental.
During the Q&A, Pragada expanded on environmental services, describing an improving outlook driven by three factors: growing U.S. Department of Defense-related activity (including programs tied to the Navy and Army Corps of Engineers), stabilization related to disaster relief work shifting from federal to state/local levels, and a pickup in private-sector environmental work supporting industrial and advanced manufacturing clients. He also said the pipeline in that area is up double digits, supporting management’s view that environmental performance should improve in the second half of the fiscal year.
PA Consulting: planned move to full ownership and segment performance
Jacobs also announced an agreement to acquire the remaining stake in PA Consulting. Pragada characterized PA’s capabilities in digital consulting, innovation, and AI advisory as a “force multiplier” for Jacobs’ strategy. Nathamuni said full ownership would help simplify the structure and support a goal of producing “predictable, high-quality earnings” over time.
In the quarter, PA Consulting operating profit increased 27% on 16% revenue growth, with an operating margin of 24%. Nathamuni said demand has been rising for digital consulting and advisory services in the public, national security, and energy sectors, and he expects PA’s fiscal 2026 revenue growth to track in the high single digits year over year.
On margin sustainability, Nathamuni said the quarter benefited from a “solid top-line beat” and operating leverage, and he described about 22% as the long-term margin framework for PA as the company balances growth and profitability.
Cash flow, capital returns, and updated fiscal 2026 outlook
Jacobs reported first-quarter free cash flow of $365 million. Nathamuni said results were supported by strong working capital performance and a favorable timing item at quarter-end that will reverse in the second quarter. He also said a cash tax payment is expected in Q2, but management still expects the company to be free cash flow positive in the first half of the year.
On capital returns, Jacobs increased share repurchases in the quarter “to take advantage of the dislocation” in the stock during the second half of the quarter. The company also raised its quarterly dividend to $0.36 per share from $0.32, a 12.5% increase, and noted it has more than doubled the quarterly dividend per share since 2019. Nathamuni reiterated an objective to return at least 60% of free cash flow to shareholders.
Balance sheet leverage stood just below 0.8x net leverage on last-twelve-month adjusted EBITDA, below the company’s 1.0x to 1.5x target range. Management said the PA transaction is expected to lift leverage slightly above the high end of that target range upon closing, with a plan to return to the range within a year.
Jacobs raised its fiscal 2026 guidance (excluding the PA transaction) to:
- Adjusted net revenue growth: 6.5% to 10%
- Adjusted EPS: $6.95 to $7.30
- Free cash flow margin: 7% to 8.5%
- Adjusted EBITDA margin: unchanged at 14.4% to 14.7%
Nathamuni said the updated outlook implies more than 16% adjusted EPS growth at the midpoint. For the second quarter, he said Jacobs expects adjusted EBITDA margin of 13.8% to 14% and year-over-year net revenue growth of approximately 6.5%.
Management said it plans to update guidance after the PA deal closes, which it expects could occur in time to address with second-quarter results in May. Based on current assumptions, Nathamuni said the transaction is expected to be accretive to adjusted EPS in the first 12 months following closing, with projected cost synergies of $16 million to $20 million beginning to phase in during fiscal 2026.
About Jacobs Solutions (NYSE:J)
Jacobs Solutions Inc, commonly known as Jacobs, is a global professional services firm that provides technical, engineering, scientific and project delivery expertise across a broad range of industries. Founded in 1947 by Joseph J. Jacobs in Pasadena, California, the company evolved from a regional engineering consultancy into a diversified provider of design, program and construction management, operations and maintenance, and scientific services for complex infrastructure and industrial programs.
