Jacobs {Q2} {2026} Earnings Call - AI Infrastructure Drives 22% Backlog Growth and Raised Outlook

Operator: Greetings, and welcome to Jacobs Fiscal Second Quarter 2026 earnings conference call and webcast. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Bert Subin, Senior Vice President, Investor Relations. Thank you. You may begin.

Bob Pragada, Chief Executive Officer, Jacobs: Solid year-over-year margin expansion and continued robust sales activity. I’ll quickly highlight a few key takeaways. First, adjusted EPS grew 22% to $1.75, supported by 9% organic net revenue growth, outpacing the 8% growth rate in Q1 and 70 basis points of year-over-year margin expansion. Second, our backlog grew 22% to $27 billion, setting another new record with a trailing 12-month book-to-bill of 1.4 times on gross revenue and 1.2 times on net revenue. Third, we completed the acquisition of PA Consulting, which we celebrated together by ringing the closing bell at the New York Stock Exchange in March.

In summary, we are exiting Q2 with significant momentum, and the strong first half of the year gives us confidence to increase our FY 2026 outlook for the 2nd time in 2 quarters, which Venk will walk through shortly. Turning to slide 4, we provide a detailed overview of the quarter. We are very pleased with Q2 results as strong operating performance paired with our lower share count drove the 5th straight quarter of double-digit growth in adjusted EPS. During Q2, we also delivered another quarterly book-to-bill above 1.0 times, with both gross and net coming in at 1.2 times. The addition of the net revenue book-to-bill metric will provide a useful context for our investors and analysts and reinforces the strength in our bookings over the last 12 months. Turning to slide 5.

I’d like to highlight a few notable project awards from the second quarter. Before I do that, I want to recognize a major achievement. Jacobs has been ranked the number one design firm by Engineering News-Record in their newly released 2026 Top 500 report, marking the seventh time in the last eight years we’ve held this ranking. Our strong organic growth profile helped us earn this honor, and I want to thank our 47,000 colleagues for delivering leading solutions to our clients every single day. Now, moving on to Q2 awards. In Water and Environmental, Jacobs was selected by the San Francisco Public Utilities Commission to deliver the Southeast Wastewater Treatment Plant, a landmark investment in environmental protection for the San Francisco Bay.

The project will upgrade San Francisco’s largest wastewater facility, positioning the plant as the first major discharger to proactively meet new nitrogen limits for the bay. This win highlights another significant award in one of our fastest-growing sectors and positions Jacobs for similar regulatory-driven investments emerging across Northern California, the Pacific Northwest, and the Great Lakes. Also within Water and Environmental, Jacobs and PA have secured a two-year economics and policy consultancy contract with Ofwat, the U.K. water regulator. The engagement brings together industry-leading expertise across water regulation as well as financial, technical, and strategic consulting. Our solution will be delivered to support pricing, performance oversight, and policy development tied to substantial investment across the AMP8 cycle and beyond.

In Life Sciences and Advanced Manufacturing, we had multiple wins with hyperscalers and other data center customers spanning the full project life cycle, from advisory, design, program management, and digital solutions to full EPCM. This includes our recently released data center digital twin, developed using the NVIDIA Omniverse DSX Blueprint. Our strategic partnership with NVIDIA continues to gain momentum as we work to expedite the delivery of AI factories with compute load requirements rising substantially. Last year at our Investor Day, we laid out a roadmap for how we believed our data center business would evolve, and the combination of our deep domain expertise, our full asset lifecycle model, and the expansion of AI investment has accelerated that journey.

We grew our data center business by more than 100% year-on-year in Q2. We see very strong runway to build on that success in the second half of the year. It’s more than the data center sector. We are seeing rising demand in semiconductors, water, and energy and power as the technology and infrastructure go hand in hand. This is bolstering total revenue growth with our backlog and pipeline, indicating the investment cycle is still in the early stages. Moving on to critical infrastructure, Jacobs has selected a lead design at Dallas Fort Worth International Airport as part of the Terminal F expansion. The project involves existing bridge span alterations essential to allow for up to 16 additional gates and support the airport’s growing demand.

Combining bridge design expertise with the unique challenge of maintaining operability of the SkyLink people mover during all phases of construction, we are modernizing infrastructure while keeping passengers moving. Jacobs is ranked as Engineering News-Record’s number one firm in aviation, a sector where we continue to see significant growth in demand for terminal upgrades and new builds. In summary, we continue to build on our industry leadership in sectors like wastewater, aviation, and data centers, securing key awards that position us for growth in the second half of the year and into FY 2027. Now I turn the call over to Venk to review our financials in further detail.

Andrew Wittmann, Analyst, Baird2: Thank you, Bob, and good afternoon, everyone. Please turn to slide 6, where I’ll walk through our results for Q2. Gross revenue increased 27% year-over-year, and adjusted net revenue, which excludes pass-through revenue, grew by 9%. These both represent the highest consolidated growth rates for the company since the separation of our government services business in 2024. Q2 adjusted EBITDA was $327 million, growing more than 14%, with our margin coming in at 14.1% or up 70 basis points year-over-year, driven by good operating discipline. This resulted in adjusted EPS rising 22% year-over-year. Consolidated backlog was also up 22% year-over-year to a record $27 billion with a trailing twelve-month book-to-bill at 1.4 times.

Book-to-bill was strong again in Q2, driven by good awards activity across our end markets. Additionally, on a year-over-year basis, net revenue and gross profit in backlog increased 12% and 15% respectively during Q2. We are demonstrating faster organic growth in the business today and our strong bookings position us well as we look out to fiscal year 2027. As you’ve seen since the separation of our government services business in fiscal year 2024, our earnings quality has been improving. However, as a result of the PA transaction, which we have previously communicated, there was a wider than normal spread between GAAP and adjusted EPS in Q2. We expect this to be mostly a Q2 phenomenon, and we anticipate a more normal differential between GAAP and adjusted EPS in Q3 and beyond. Regarding our performance by end market in infrastructure and advanced industries, let’s turn to slide 7.

At a high level, we continue to see strong growth rates in life sciences and advanced manufacturing, as well as in critical infrastructure during Q2. Focusing on life sciences and advanced manufacturing, net revenue grew 12% in Q2, our highest growth rate since we began reporting end markets in late 2024. Combining acceleration in advanced manufacturing with continued solid performance in the life sciences sector has resulted in a double-digit top-line increase for the end market, and we expect revenue growth will likely exceed Q2’s level in the second half of the year. Shifting to critical infrastructure, net revenue increased 9% over Q2 2025.

Critical infrastructure continues to be led by strong growth in the transportation sector, where our rail, aviation, and ports businesses grew double digits, as well as in the energy and power sector on the heels of high demand for transmission and distribution services. Net revenue growth in our water and environmental end market came in at 2% as strength in water, which has continued to grow in line with our target, was offset by softness in the environmental sector. Performance for our environmental business is on track to show meaningful year-over-year improvement as we reach Q4. In summary, we saw diversified strength across our end markets during Q2. Moving now to slide 8, I’ll provide a brief overview of our segment financials. In Q2, INAF operating profit increased 11% year-over-year or just over 8% on a constant currency basis.

PA Consulting operating profit increased 19% as revenue grew 17% and operating margin came in strong at 22%. On a constant currency basis, operating profit grew 12%. PA has seen demand tailwinds from national security and public investments in the U.K., and the business is centrally positioned to help advise on European defense strategy as well as implement digital solutions across the entire region. Combined with Jacobs’ proven history of delivering complex manufacturing and national security infrastructure, we see a compelling opportunity to augment growth in this sector. Focusing on the second half of the year, we believe PA will continue to grow revenue high single digits on a constant currency basis.

Moving on to slide 9, we provide an overview of cash generation and our balance sheet. For Q2, we had an adjusted free cash outflow of $272 million, partly as a function of a favorable Q1 cash timing item that reversed in Q2. This brings our first half adjusted free cash flow to $93 million, a solid increase over fiscal year 2025. I just wanna note, we’re highlighting an adjusted free cash flow figure as we have to account for the portion of the PA transaction proceeds in operating cash under U.S. GAAP reporting guidelines. These entries impacted Q2 reported free cash flow by approximately $233 million and will impact Q3 reported free cash flow by just over a $100 million.

It’s important to keep in mind these amounts were already included as part of the upfront consideration paid in connection with the transaction. Focusing on capital returns, we remain aggressive repurchases of our shares during Q2 to take advantage of the value of our stock. Consequently, our total repurchases in the first half of the year were $472 million, which puts us ahead of our annual target of returning at least 60% of free cash flow back to our shareholders. Our balance sheet is in good shape following the acquisition of PA Consulting, with a net leverage at 2.1 times ending the quarter, and we plan to return to below 2 times by year-end.

Additionally, our weighted average interest rate has declined to around 5% following the successful refinancing of our debt stack and issuance of new bonds to fund the acquisition. Net leverage is roughly half a turn above our target range, but the increase in EBITDA from the full inclusion of PA, as well as our strong outlook for cash generation, positions us to lower our net leverage ratio back toward 1.5 times during fiscal year 2027. Please turn to slide 10 for our updated fiscal year 2026 outlook, inclusive of our acquisition of PA. We’re increasing our forecast for adjusted net revenue growth, adjusted EBITDA margin, and adjusted EPS relative to our guidance from last quarter.

We’re increasing our FY 2026 organic net revenue growth range to 8%-10.5% year-over-year, adjusted EBITDA margin range to 14.6%-14.9%, and adjusted EPS range to $7.10-$7.35. We continue to anticipate adjusted free cash flow margin will range from 7%-8.5%. Notably, our outlook for FY 2026 now implies 18% year-on-year growth in adjusted EPS at the midpoint. As it pertains to Q3, we expect our adjusted EBITDA margin to be approximately 15% with year-over-year net revenue growth of approximately 7.5%. This implies a margin above 16% in Q4 on double-digit top line growth, inclusive of the extra week we will have this year during that quarter.

Additionally, we expect our adjusted effective tax rate will be in the 27%-28% range in Q3 and Q4. We have good line of sight to achieving our updated fiscal year 2026 targets, and we’re pleased to be trending well ahead of our initial outlook for the year. Now turn to slide number 11 for a few updates to our fiscal year 2029 targets. We are reaffirming our range of 6%-8% organic growth on a 5-year compound annual growth rate basis for net revenue. Combining our fiscal year 2025 results and the midpoint of our fiscal year 2026 guidance, we would be ahead of the midpoint for the first 2 years.

Adding this to our central positioning in the build-out of AI infrastructure and the potential for growing revenue synergies with PA leads us to believe we will meet or exceed a 7% compounded annual growth rate. As it pertains to adjusted EBITDA margin, we’re increasing our target by 100 basis points to 17% plus for FY 2029. This is due to the implementation of gross margin and G&A initiatives that are well underway, as well as the acquisition of the remaining stake in PA Consulting, where we currently see opportunity for at least $20 million in annual cost synergies. This implies at least 75 basis points of identified annual margin improvement from FY 2027 through FY 2029. In addition to the 200 basis points we’re expecting to deliver over the course of FY 2025 and FY 2026.

Lastly, our high margin expectation and working capital management give us confidence we can now reach or exceed an 11% free cash flow margin, also up 100 basis points from our prior target. At our forecasted growth rate, that implies $1.2 billion-$1.3 billion of annual free cash generation by fiscal year 2029. We’re off to a great start, just about one third of the way through our strategy cycle. With that, I’ll turn the call back over to Bob.

Bob Pragada, Chief Executive Officer, Jacobs: Thank you, Venk. In closing, we’re tracking very well heading into the second half of the fiscal year with strong Q2 performance enabling us to increase our full year outlook for the second consecutive quarter. We’re seeing momentum in our growth rate, margin, and bookings trajectory, all of which give us confidence in our outlook. Operator, open the call for questions.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you’re muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Steven Fisher with UBS. Your line is open. Please go ahead.

Andrew Wittmann, Analyst, Baird1: Thanks. Good afternoon and congrats on the quarter. I just wanna ask you, high level, how much of the raise is driven operationally by, say, better than expected demand or operational performance versus bringing the rest of PA Consulting in? We had sort of done some calculations that maybe it would be about a $0.10-$0.20 increase from PA Consulting. Maybe our math was off, just curious kind of how much was operational and if so, where within the segments did you see that upside?

Bob Pragada, Chief Executive Officer, Jacobs: Yeah. Steve, maybe I’ll start it off and then I’ll hand it over to Venk. You know, just at a high level, it is purely based on our operational performance. The drive we’re seeing in our bookings, how that’s translating into to our run rate, that drove the top line. I’ll let Venk talk a little bit about how that flowed down all the way to the bottom line where there, in the consolidation, there might have been just a tad.

Andrew Wittmann, Analyst, Baird2: Yeah. Thanks, Steve, for the comment. I would say, yeah, as Bob mentioned, you know, pretty solid performance on the INAF side of the business. We got a little bit of a tailwind from PA from an FX perspective, but the bulk of our operational performance is driven by the INAF section. In addition to it, from a margin perspective, and I alluded to this in my prepared remarks, a lot of operating discipline in terms of just, you know, keeping tight controls, and that in conjunction with some of the margin improvement that you saw, that’s what drove the true outperformance.

Andrew Wittmann, Analyst, Baird1: Okay. That’s very helpful. Just sort of talking about AI and digital enablement, just curious if you can give us an update on kinda what the customer receptivity has been in the past few months to your digital tools and anything AI enabled. To what extent are you seeing sort of incrementally more margin opportunities coming from that? When might we see some of that coming through more materially?

Bob Pragada, Chief Executive Officer, Jacobs: Steve, thanks for asking the question. AI is absolutely driving our business in what’s going on with regard to the AI infrastructure build-out. We’re seriously at an inflection point, and it’s accelerating our entire business. I’ll kinda quantify what that means. Within the data center space, which right now represents between 3%-4% of our overall business, that’s growing at 100% year-on-year. The AI ecosystem, which would include all the way from the beginning to the chips through the power and energy requirements and then how that’s feeding the data center world, you know, that represents, in its entirety with our diversified offering, between 10%-11% of our overall business, and that’s growing in excess of 40%.

You’re talking about a significant part of our business that’s growing at a very fast rate, all centered around the AI infrastructure build. It’s having an indirect effect on AI and drug discovery and what’s happening with kind of other sectors that wouldn’t traditionally be affiliated with AI. We are well-positioned in the kind of the AI CapEx, AI infrastructure world. Our enablement internally is helping us become more efficient and deliver to that demand.

Andrew Wittmann, Analyst, Baird1: Thank you.

Operator: Your next question comes from the line of Sabahat Khan with RBC Capital Markets. Your line is open. Please go ahead.

Sabahat Khan, Analyst, RBC Capital Markets: Great. Thanks, and good afternoon. Maybe just extending the line of questioning that Steve just started on. You know, one of the themes that we’re discussing a lot is just the visibility to these types of projects for sort of suppliers and vendors like yourself. Can you maybe just talk about the demand? You know, sounds like it’s growing at a very high clip, but maybe what is the line of sight to sort of projects? You know, is it 6 months, 12 months? You know, is it multiple years? Maybe just talk to us about the near to medium term visibility in that end market specifically. Thanks.

Bob Pragada, Chief Executive Officer, Jacobs: Yeah. Sabah, just to clarification, specifically around kind of the AI infrastructure build, or are you talking broadly across all of our end markets?

Sabahat Khan, Analyst, RBC Capital Markets: More specifically, yeah, just on the data center and the 100% clip that you talked about, the growth or just in that end market? Yeah.

Bob Pragada, Chief Executive Officer, Jacobs: Yeah, absolutely. Let me, let me kind of quantify it first, Sabah. Our AI infrastructure pipeline, the data center component of that, the pipeline has gone up 400% year-on-year. We have visibility, you know, well through 2027, going into 2028, and our client relationships, kind of our long-term relationship-based client model, is kind of gaining share of that client spend. These are the top hyperscalers as well as now the Neocloud providers that are being supported. What’s backing that visibility is really our relationship with NVIDIA.

Our work on the digital twin, the work that we’re doing around the plan of record, and then as that’s evolving with the next generation chip, and now we’re talking about Vera Rubin now, and we’re in the middle of developing that plan of record, is tying us back into these AI players. The visibility is strong.

Sabahat Khan, Analyst, RBC Capital Markets: Great. Maybe just a question for Venk. I guess on the balance sheet side, assuming between PA and the share we purchased there this quarter leverages at about 2.1, just above your sort of targeted year-end range. Can you just help us think through the likelihood of buyback? Is it gonna be more opportunistic and just sort of broader capital allocation, you know, given the free cash flow and the leverage for the rest of the year? Thanks.

Andrew Wittmann, Analyst, Baird2: Yes, how about, clearly, as we highlighted during the press announcement, we did take on some debt to fund PA acquisition. We’re about 2.1 times, but we have a clear plan to de-lever pretty quickly. We said we’ll be below 2 times by the end of fiscal year 2026, which is just quarter and a half away. We’ve also been very aggressive in terms of our share repurchases. We are big believers in the value of our stock, and we’ll continue to maintain the share repurchase activity. We’ll obviously modulate the quantum based on market conditions, but our purpose in terms of the goals is to continue to reduce our leverage.

As I said, we can get to about 1.5 times in fiscal 2027, as well as the purchases of our stock. One thing to note is that our second half tends to be very seasonally strong from a free cash flow perspective. We’re expecting more $600 million-$700 million of free cash flow in 2H, that helps us de-lever fairly quickly. We have a lot of optionality, lot of ability to do both the buybacks as well as de-lever without straining the balance sheet.

Sabahat Khan, Analyst, RBC Capital Markets: Okay. Thanks very much.

Andrew Wittmann, Analyst, Baird2: You’re welcome.

Operator: Your next question comes from the line of Michael Dudas with Vertical Research. Your line is open. Please go ahead.

Michael Dudas, Analyst, Vertical Research: Good afternoon, gentlemen.

Bob Pragada, Chief Executive Officer, Jacobs: Afternoon, Michael.

Andrew Wittmann, Analyst, Baird2: Afternoon, Michael.

Michael Dudas, Analyst, Vertical Research: Hey, Bob, you’ve had, well, 5 years and 2 months of insight into PA. Maybe you could share a little bit about what the combination now that’s on board with 100% Jacobs has in store. What areas that we can look for over the next 6 to 12 months that might show up in help on not only on the better on the bookings or more lifecycle driven or maybe even better on the margin front as you execute through the plan of the combined company?

Bob Pragada, Chief Executive Officer, Jacobs: Yeah, Mike, I’d probably segregate it into 2 parts. One is a capability set that we’ve been working on over that, the course of that, you know, that runway of 5 years together and the relationship that we’ve had. The second, apply that to the, you know, the adjacencies that we’ve already got a track record on by e-end market perspective. 1 on the capabilities. What we’ve done over the last 5 years is really built out our digital capability set, and this spans everything from software developers all the way through to, you know, these digital platforms and digital products that are helping enable innovation within our clients’ business as well as our own, but our clients’ business.

Now together, we have nearly 2,000 digital experts that we’re, you know, we’re looking at how to further integrate as one company that platform. The end markets that that applies to separate between, you know, what we’re seeing in Europe with regards to national security, global security in the public sector, and then in the U.S., energy and utilities and transport. What we’re seeing in Europe with a defense-independent Europe is that, you know, PA’s deep entrenchment, not just with the UK MOD, but also now with sovereign nations in Europe building up their own defense posture, is turning into defense infrastructure.

That asset life cycle is something that we’re primed as a combined entity to deliver, as well as what we’re seeing in the public sector on the increased digitization and enablement through government efficiencies that PA is in the middle of and right behind. In the U.S., it really is around energy and utilities and transport. That end-to-end cycle of transport advisory all the way through to delivering complex programs and projects is something that we’re really excited about. Now with the combined digital capability and driving that in the energy and utility space, driven again by the AI infrastructure, which you just talked about, we’re excited about the future with PA.

Michael Dudas, Analyst, Vertical Research: Excellent. My follow-up, Bob, is the critical infrastructure showing very strong growth this quarter has been certainly chugging along quite well. It probably gets lost in the headlines a little bit given all the data center and advanced facilities work. Do you continue to see very solid opportunities, certainly second half of the year into 2027? Any additional thoughts on IIJA 2.0 you think could be issues or your clients are concerned about any of the issues that might arise if there’s a delay or with the Congress and the changes?

Bob Pragada, Chief Executive Officer, Jacobs: Yeah. Yep. Mike, maybe I’ll separate that into 2 as well. Yes. We are proud about the critical infrastructure piece that’s really being driven by 2 primary areas. One is global transportation. We’re seeing strong, you know, in high single digit, in certain areas, certain geographies, kind of double-digit growth within transportation, that’s really around continued build-out of the aviation sector, as well as ports and maritime, which is a really strong subsector for us. That’s been really good. These have long tail type of not just procurement processes, which we kind of felt, you know, in the last 3 or 4 years, but now the design and the build cycle is something where we’re really starting to see the fruits of that.

You know, the second part as far as, In the U.S., IIJA, what happens, you know, with the election this year, we’ve modeled every scenario as you can imagine and, in each scenario we do see, you know, at a minimum a continuing resolution which actually would be good for us. What happens on the extension of IIJA, is there a new bill? You know, looks promising, but probably too early to speculate right now. Even on a continuing resolution, you know, these are long tail type of programs, and we’re only 50% outlaid on the current IIJA. Things continue to look solid.

Michael Dudas, Analyst, Vertical Research: Thank you, Bob.

Operator: Your next question comes from the line of Adam Bubes with Goldman Sachs. Your line is open. Please go ahead.

Adam Bubes, Analyst, Goldman Sachs: Hi, good afternoon. Just wondering if you could help us parse out the new versatile guidance. Is there a way to frame, you know, what incremental EBITDA and the new guide is coming from, the acquired stake in PA Consulting, and how much of the incremental EBITDA uplift is underlying?

Andrew Wittmann, Analyst, Baird2: Yeah, I’ll take that, Adam. You know, I’ll separate it into fiscal year 2026 guidance and then Obviously we provided guidance for fiscal year 2029 as well. In fiscal year 2026, you know, we’ve increased our range from 14.7% to now a new range of 14.6%-14.9%. That is, you know, primarily driven by the full consolidation of PA. There are additional, you know, measures and initiatives that we are putting in place that will drive towards the margin expansion.

On FY 2029 basis, you know, it’s not just the PA Consulting consolidation, but also the fact that we talked about, you know, multiple identified initiatives in terms of gross margin drivers, in terms of how we, you know, engage with the commercial model, you know, the increased use of AI and so forth. I’d say the vast majority of that comes from the operational improvements across both the commercial model, and, you know, global business, and global delivery model is also a fundamental part of how we drive margin expansion. That’s progressing really well and we expect that to continue to accelerate.

Last but not least, we are making a commitment to continue to drive operating leverage such that, you know, we will grow the OpEx at a substantially lower rate than the revenue rate. It’s, you know, not one thing. It’s a multitude of tools that we have to drive continued margin expansion.

Adam Bubes, Analyst, Goldman Sachs: Great. Then can you just update us on how you expect your AI integrated offerings to evolve over the next 12 to 16 months? Any incremental investments or opportunities on that side?

Bob Pragada, Chief Executive Officer, Jacobs: Well, Adam, I’d say that as far as any incremental investments, we don’t see it. You know, we’ve been investing in digital enablement for the better part of this year. I keep saying It’s, it’s now growing. It’s now seven years that we’ve been doing this. I don’t see us having to make some huge investment in order to continue on the trajectory that we’re on. The way it’s evolving is, you know, it is definitely being pulled from the market with the acceleration that we’re seeing in our end markets. It’s really both what we’re doing for our clients’ business as well as what we’re doing for ourselves is really going into full gear.

It has been in full gear, but it’s accelerating. Again, AI infrastructure, which is kind of the virtuous cycle, is driving that, and we’re centrally positioned for that entire build-out.

Adam Bubes, Analyst, Goldman Sachs: Great. Thanks so much.

Operator: Your next question comes from the line of Sangita Jain with KeyBanc Capital Markets. Your line is open. Please go ahead.

Andrew Wittmann, Analyst, Baird0: Great. Thank you so much. Bob, can you give us an update on the Middle East and what you’re seeing there in terms of activity levels and just kind of how your folks are handling the situation?

Bob Pragada, Chief Executive Officer, Jacobs: Yeah, Sangita. First and foremost, we have been acutely focused on the safety of our people. From the beginning till now to every single day we’ve had crisis management teams stood up and are doing not just daily, hourly check-ins on our people, and they continue to be extremely resilient. The second I would say is that we have been very deliberate and vocal about focusing in on time-based mission critical programs and projects in the Middle East, and for us that’s predominantly in Saudi and in the Emirates. Those have continued, and they’ve been centered around transportation as well as water and, you know, time-based venues. Those have not stopped.

I’d kind of characterize it right now as, we’ve seen minimal disruption, and the team has been extremely resilient in delivering those from the confines of their own home. Just recently today we went back into a work from home scenario. Those are kind of the highlights. What’s really been the backbone of this, and it goes to something that Venk’s talked about several times before, is our global delivery model. You know, we’re delivering services for our clients not only with folks that we have in country, in region, in kingdom, but also from around the world. That has really been highlighted and has served as a strength.

Andrew Wittmann, Analyst, Baird0: Great. That’s super helpful. I know we’ve talked about data centers on this call, but can you tell us what you’re seeing in life sciences and advanced pharmaceuticals, and if there is any appetite to de-shore even further back to the U.S.?

Bob Pragada, Chief Executive Officer, Jacobs: Yeah, absolutely, Sanjit. The life sciences business is in real time pipeline up 81% year-on-year. A lot of in-flight pursuits that we’ve been in the early stages are soon to be going into the field. That business and into the field in the U.S., we are now starting to see a bit of a build going on in Europe as well. That continues to be a really strong business for us. It’s, you know, it kinda goes through the different phases.

Some of that reshoring activity that started one year, two years ago, you know, you’ll start to see those now mature in the field over the course of the next few quarters. Great. Thank you so much.

Operator: Your next question comes from the line of Jamie Cook with Truist Securities. Your line is open. Please go ahead.

Jamie Cook, Analyst, Truist Securities: Hi, good evening, congrats on a nice quarter. I guess just question, Venk, maybe this is more for you versus Bob, but I’m just looking at the EBITDA margin trajectory implied in the back half of the guidance. I think you said third quarter, you know, 15%-ish, fourth quarter, 16%-ish. Understanding it’s PA Consulting and maybe an extra couple working days, but still structurally, there still seems to be, you know, some margin improvements. I’m just wondering, you know, given where the margins are implied in the back half of the year, what the setup is for fiscal year 2027. It doesn’t seem like, you know, The Street is, you know, factoring in margins, you know, that are implied in the back half.

I don’t wanna make too much of it, but I’m just wondering if we’re missing the margin opportunity potential. Thank you.

Andrew Wittmann, Analyst, Baird2: Jamie, thanks for the question. You know, as you pointed out, you know, we guided for 15% in Q3, which would represent about a 90 basis point sequential improvement, which is pretty good. As you pointed out, you know, that would imply a 16%+ margin in Q4. As I’ve talked about in the last quarter, you know, we’re investing in some programs that are identified and they’re ramping those investments for delivery in Q4. That gives us good visibility to 16%+ in Q4. You know, the fact that we have executed on that plan last year as well, we feel pretty good about the margin trajectory. Looking beyond in Q4, obviously, you know, there’s still substantial margin improvement ahead of us.

You know, just to put things in context, the last, you know, couple of years, fiscal 2025 and 2026 would’ve delivered about 200 basis points of margin expansion, and then we’re guiding for another 75 basis points per year. Keep in mind also that, you know, some of the other margin drivers for us, apart from the gross margin things that I talked about earlier, is global delivery and then the mix, right? As we combine PA Consulting and Jacobs, the opportunity to deliver on the entirety of the asset life cycle and the fact that the PA margins are substantially higher than Jacobs, that gives us the opportunity to go back and upsell some of those margins as well. Lots of room for us to continue to execute on margins, and we feel pretty good about our guidance.

Jamie Cook, Analyst, Truist Securities: Thank you.

Andrew Wittmann, Analyst, Baird2: You’re welcome.

Operator: Your next question comes from the line of Jerry Revich with Wells Fargo. Your line is open. Please go ahead.

Jerry Revich, Analyst, Wells Fargo: Yes, hi, good evening. Nice to see the really strong bookings performance. Can you just talk about comfortably what level of organic growth do you think you could ramp the business up to without having significant resource constraints? Is it possible if the bookings trajectory continues to get to double-digit organic growth, you know, the extra week notwithstanding in the fourth quarter? You know, what are the implications for margins beyond what you folks just laid out if you do ramp up to that level of capacity utilization implied by getting to double-digit growth?

Andrew Wittmann, Analyst, Baird2: Jerry, we missed the first part of your question.

Jerry Revich, Analyst, Wells Fargo: Yeah.

Andrew Wittmann, Analyst, Baird2: The first part was a little garbled, Jerry. Do you mind mentioning the first part again?

Jerry Revich, Analyst, Wells Fargo: Yeah. I apologize for the poor connection. I was asking, really strong bookings performance, and I’m wondering, do you have the resources on hand from essentially capacity standpoint to ramp up to get to potentially double-digit organic growth? You know, if you do get to that level of growth, what are the implications for potential additional margin upside beyond what you folks laid out?

Bob Pragada, Chief Executive Officer, Jacobs: Yeah, absolutely. The short answer, Jerry, is yes, we do have the capacity, and this goes to exactly what we’ve been talking about for quite some time, as well as highlighted in our strategy. You know, that global delivery model, if you think about it, just year-over-year, the growth in what we call global delivery is well into the double digits. Our ability to access talented labor that’s delivering at a very high level has been very strong. Short answer, yes. Our resourcing to meet what is in our backlog, coupled with the progress that’s being made on those programs, projects, engagements, we feel strongly about, and it is driving the margins.

It’s yes on the margin front as well.

Jerry Revich, Analyst, Wells Fargo: Separately, on the reshoring side, one area where we are seeing significant progress is in semis and the industry group is talking about a return to 24 levels of highs of CapEx for semis into next year. Can you talk about what you are seeing? Is that consistent with the opportunity set that you folks see? Is there potential for additional projects to move forward beyond what the group is looking for in 27?

Bob Pragada, Chief Executive Officer, Jacobs: Again, sure, yes and yes. We are seeing it. That’s why, you know, yes, we are seeing that investment in the semi, the semi sector. Yes, we do see that cycle transcending beyond into 2027. I think what’s important is what’s driving it goes back to, you know, the earlier comments around the AI infrastructure, right? Where we’re positioned right now on high-bandwidth memory manufacturing facilities is putting us on the front end of what we’re seeing then translate into the utility sector and then eventually into the racks, into the compute load in the data centers.

Andrew Wittmann, Analyst, Baird2: To see it across that ecosystem is what’s, quite frankly, is driving our business right now. Those relationships that we’ve had with high-bandwidth memory manufacturers as well as ASICs and other logic providers is coming true.

Operator: Yep. Thank you. Your next question comes from the line of Andrew Wittmann with Baird. Your line is open. Please go ahead.

Andrew Wittmann, Analyst, Baird: Great. Thanks for taking my questions. I wanted to ask about the longer term margin and outlook that you guys talked about, the 75 basis points a year. You know, you guys have talked ad nauseam about the various areas, commercial models. I think you’ve been through it a million times. I was just wondering if those out year drivers are any different from the ones that you’ve been realizing here over these last two very strong years. Also, if the benefits that you expect in those out years are going to come just from like basic blocking and tackling, or do you have to launch some new initiative to achieve those things?

Like in other words, is that gonna cost you cash to implement some changes to achieve that? Thank you.

Andrew Wittmann, Analyst, Baird2: Andy, thanks for the question. I’d say, you know, our margin trajectory as we highlighted before in 200 basis points in the first 2 years, and then as you pointed out, 10 basis points per year going forward. This is a combination of several things that are well underway. You know, clearly you saw, in the 1st year, I would have characterized it mostly driven by operating, you know, line benefits driven by the, you know, the separation with the CMS and C&I business and right sizing our business. Everything thereafter has been driven by specific initiatives that have been identified with gross margin. The global delivery model that we talked about is actually, you know, increasing in pace and in scope, and in scale.

It’s a combination of those things. You know, as you look at the operating leverage, it’s not just what we do from the standpoint of, you know, the business side of things, but also on the enterprise side, how we go about, you know, running enterprise functions in finance and legal and so forth, deploying AI. That’s what driving those margin expansion opportunities for us. To answer the previous question about, you know, what does it mean for the CapEx? Our investments, you know, we’ve maintained about 1% of our revenues CapEx. What’s happening is we are reallocating the capital traditionally would have invested in, you know, SaaS software and so forth and, things that are now moving more to an AI basis.

That’s what giving us the ability to continue to make those productivity improvements without having to raise our CapEx numbers.

Andrew Wittmann, Analyst, Baird: Got it. Thanks for that. Just for my follow-up question, you guys alluded in your prepared remarks to the unusually high level of transaction costs. I’m guessing because some of the consideration that you paid PA for was operating or was required to be recognized as OpEx rather than CapEx, that that’s probably most of it for the quarter, Venk. I just wanted you to kind of just drill in that. Was there anything else in there? Because you mentioned that there was going to be a fiscal third quarter cash outflow in addition to the substantial cash outflow that was recognized this quarter, does that mean that the exclusions next quarter might be relatively high as well?

I know you had a comment that it was mostly contained to the second quarter, but I am just trying to get a sense of what the balance of the year looks like. Then that Nirvana state, hopefully in 4Q, where these kinds of exclusions won’t be as apparent.

Andrew Wittmann, Analyst, Baird2: Andy, you’re exactly right. The accounting treatment is what necessitated to be part of, you know, cash flow from ops as opposed to cash flow from investing or finance. That’s why you saw this that exclusion. Roughly $235 million of it was what we call compensation expense acceleration for the vesting of the shares. Then in Q3, we called out about $105 million of what’s called employee benefit trust payments. We’re done. Even with the Q3, that’s already imputed in the P&L. It’s only a free cash.

Andrew Wittmann, Analyst, Baird: Okay

Andrew Wittmann, Analyst, Baird2: It’s only a cash flow item in Q3. Exactly. Just one other point to note is that, you know, if you look at our last couple of years, we’ve been steadily decreasing our restructuring costs, and we’re on track to be substantially lower in Q, in fiscal 2026 compared to fiscal 2025.

Andrew Wittmann, Analyst, Baird: Yeah. Okay. Great. Thanks for that.

Andrew Wittmann, Analyst, Baird2: Thank you.

Andrew Wittmann, Analyst, Baird: Thanks.

Operator: Your next question comes from the line of Natalia Bak with Citigroup. Your line is open. Please go ahead.

Natalia Bak, Analyst, Citigroup: Hi, good evening. Congrats on a nice quarter.

Andrew Wittmann, Analyst, Baird2: Thank you.

Natalia Bak, Analyst, Citigroup: Now that PA is 100% under J, can you frame for us any potential for sales synergies accelerating?

Andrew Wittmann, Analyst, Baird2: Very high. Very high. You know, we had certain elements of.

Bob Pragada, Chief Executive Officer, Jacobs: Of it was mostly U.K. regulations around conflict of interest and whatnot as far as visibility into each other’s sales pipelines. The way we expanded, the way I’ve always described it in the past with regards to joint opportunities and increasing the shaded area, the Venn diagram going to market, that’s now gone. The pipelines has really increased on that front with regards to, you know, going now to market either as PA or as Jacobs. The joint opportunities are increasing. I would also say that, and it was an earlier question that was asked, the innovation and delivery across the entirety of the asset life cycle, you know, we did that in a collaborative form when we had the majority investment, made a lot of progress.

Andrew Wittmann, Analyst, Baird2: You know, now that is also going to accelerate, it’s going to increase that operating payment. Where I would say, the main areas where that would be applied would be in the defense infrastructure and national security, in Europe, as well as in the U.S. transportation and energy and utility space, again, feeding the AI infrastructure. Got it. Much appreciated. Maybe just on the cost energy side, any low-hanging fruit, or cost opportunities in the near term? Yeah. I’ll take that, Natalia. I know in terms of the cost synergies that we highlighted on the prepared remarks. One is, you know, we said, when we closed the transaction a few weeks back, we had announced roughly, you know, GBP 12 million-15 million of synergies.

Bob Pragada, Chief Executive Officer, Jacobs: You know, we have now identified specific things in terms of opportunities from a cost perspective. These are specifically real estate. A good opportunity for us to combine the footprints there. Vendor rationalization in terms of how we go about procurement with the combined companies. On the IT side, a lot of opportunities for us to do system optimization as well. Specific targets that we’ve identified, which give us, you know, good visibility to getting to $20 million plus of synergies in FY 2027. Awesome. Thanks. Thank you.

Operator: There are no further questions at this time. I will now turn the call back to Bert.

Bert Subin, Senior Vice President, Investor Relations, Jacobs: Yeah. Thank you, Kara. I know we got cut off in the beginning. We lost about a minute of time for some audio challenges. I just wanted to make the mention that I refer you to slide 2 of the presentation for information about our forward-looking statements, non-GAAP financial measures, and operating metrics. I apologize for the technical difficulties. I’ll now pass it over to Bob for some closing remarks.

Bob Pragada, Chief Executive Officer, Jacobs: Thanks, Bert, thank you everyone for joining our earnings call. We really look forward to engaging with many of you over the coming days and weeks. Thank you, have a good evening, good day, good morning, depending on where you’re coming from. Thanks, everyone.

Operator: This concludes today’s call. Thank you for attending. You may now disconnect.