10-Q: Jacobs Solutions Reports Q3 2026 Results, Revenue Up 34.5%

Jacobs Solutions Inc. announced its third quarter fiscal year 2026 results, with revenues increasing by 34.5% year-over-year, driven by strong performance in its Infrastructure & Advanced Facilities segment.

Summary

• Jacobs Solutions Inc. reported third quarter fiscal year 2026 revenues of $4.08 billion, a 34.5% increase from the prior year period.
• For the nine months ended June 26, 2026, revenues reached $11.06 billion, up 24.7% year-over-year.
• Net earnings attributable to Jacobs from continuing operations for the third quarter were $137.4 million ($1.16 per diluted share), a decrease from $181.2 million ($1.56 per diluted share) in the prior year.
• For the nine months ended June 26, 2026, net earnings from continuing operations were $219.3 million ($1.96 per diluted share), an increase from $175.3 million ($1.53 per diluted share) in the prior year.
• The company's backlog stood at $28.89 billion as of June 26, 2026, an increase from $22.69 billion in the prior year.
• The PA Consulting acquisition, completed in March 2026, contributed to increased expenses and a higher effective tax rate.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as moderately positive, reflecting revenue growth and strong backlog, but tempered by increased expenses and a higher effective tax rate impacting net earnings.

Positives

• Revenue for the third quarter increased by 34.5% to $4.08 billion, driven by the Infrastructure & Advanced Facilities (I&AF) segment.
• Nine-month revenue grew by 24.7% to $11.06 billion.
• Gross profit increased by 6.9% to $810.7 million for the quarter and by 6.9% to $2,370.8 million for the nine months.
• Backlog increased to $28.89 billion as of June 26, 2026, up from $22.69 billion in the prior year, primarily due to growth in the Advanced Manufacturing market within I&AF.
• The PA Consulting segment showed a 10% revenue increase for the nine-month period, reaching $1.04 billion.

Negatives

• Net earnings attributable to Jacobs from continuing operations decreased by $43.9 million to $137.4 million in the third quarter.
• Selling, general, and administrative (SG&A) expenses increased by 23.4% to $1.93 billion for the nine months, largely due to expenses related to the PA Consulting Transaction.
• The effective tax rate for the three months ended June 26, 2026, was 43.4%, significantly higher than 21.9% in the prior year, due to non-deductible expenses from the PA Consulting Transaction.
• Net interest expense increased by 61.2% for the three-month period and 26.2% for the nine-month period due to higher average debt levels.
• Miscellaneous income decreased by $38.0 million in the quarter, primarily due to the absence of prior year mark-to-market gains on Amentum stock.

Risks

• General economic conditions, including inflation, interest rate changes, and potential recession, could impact results.
• Competition from existing and future competitors may reduce demand for services.
• The ability to fully execute corporate strategy, including integrating acquisitions like PA Consulting, is subject to risks.
• Geopolitical uncertainty and conflicts could adversely affect financial position or results.
• The company is exposed to interest rate risk on its variable rate borrowings.
• Foreign currency exchange rate fluctuations can impact results.

Future Outlook

The company expects to recognize approximately 45% of its remaining performance obligations ($22.2 billion) within the next twelve months, with the remainder over the subsequent four years. The company believes it has adequate liquidity and capital resources to fund projected cash requirements for acquisitions, debt servicing, share buybacks, and dividends for the next twelve months.

Management Comments

• Favorable period over period underlying operating performance was seen in the third fiscal quarter of 2026, resulting from higher gross profit.
• Reported net earnings for the third fiscal quarter of 2026 were also favorably impacted by a decrease in restructuring and other charges associated with the Separation Transaction compared to the fiscal 2025 period.
• The nine months ended June 26, 2026 were favorably impacted by higher gross profit compared to the corresponding period last year.
• The company's backlog increased in I&AF from June 27, 2025, predominantly driven by growth across the Advanced Manufacturing market.
• The increase in backlog in PA Consulting from June 27, 2025, was primarily driven by organic year-over-year growth of the business.

Industry Context

StockSavvy.ai notes that Jacobs Solutions' performance, particularly the revenue growth in its Infrastructure & Advanced Facilities segment and the strategic acquisition of PA Consulting, aligns with broader industry trends of increased demand for consulting and engineering services in areas like advanced manufacturing, digital transformation, and sustainability. The company's focus on science-based consulting and digitally enabled solutions positions it to capitalize on these trends.

Comparison to Industry Standards

• The revenue growth of 34.5% in the quarter is strong, especially within the professional services and engineering consulting sector, which has seen varied performance across different sub-sectors.
• The increase in backlog to $28.89 billion indicates robust demand for services, a positive sign compared to industry peers who may be experiencing slower order intake.
• The higher effective tax rate (43.4% in Q3 2026) due to acquisition-related expenses is a notable factor that impacted net earnings, a situation that can arise in companies undergoing significant M&A activity.
• The company's strategic shift towards science-based consulting and digital solutions mirrors a trend seen in leading engineering and consulting firms aiming to enhance value-added services.

Legal Proceedings

• The company is involved in litigation or arbitration, including personal injury claims, professional liability claims, and breach of contract claims.
• The company is subject to audits, investigations, and claims by the U.S. federal government regarding contract performance, pricing, cost allocations, procurement practices, labor practices, and socioeconomic obligations.
• Income, franchise, and similar tax returns are subject to audit and investigation by tax authorities globally.

Stakeholder Impact

• Shareholders may be impacted by the decrease in quarterly net earnings and EPS, despite revenue growth.
• Employees of PA Consulting received distributions from the PA Consulting EBT, impacting compensation and SG&A expenses.
• Creditors are impacted by the increase in long-term debt to $3.58 billion, primarily due to financing for the PA Consulting acquisition.

Next Steps

• The company anticipates substantially completing the restructuring program for the Separation Transaction at the end of fiscal year 2026.
• Integration initiatives related to the PA Consulting Transaction are anticipated to continue through fiscal year 2028.
• The remaining distribution of PA Consulting EBT restricted cash is expected in the second quarter of fiscal year 2027.
• Future dividend declarations are subject to review and approval by the Board of Directors.

Key Dates

Recommendation

While revenue growth and a strong backlog are positive indicators, the decrease in quarterly net earnings, increased expenses, and higher effective tax rate warrant a cautious approach. The integration of PA Consulting and the impact of macroeconomic factors present ongoing uncertainties. Therefore, a 'hold' recommendation is appropriate pending clearer signs of earnings recovery and successful integration.

Keywords

Jacobs Solutions, PA Consulting, Infrastructure, Advanced Facilities, Consulting, Acquisition, Revenue Growth, Earnings