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DATE

Tuesday, May 5, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Robert V. Pragada
  • Chief Financial Officer — Venkatesh R. Nathamuni
  • Vice President, Investor Relations — Bert Subin
  • Operator

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TAKEAWAYS

  • Adjusted EPS -- Rose 22% to $1.75, marking the fifth consecutive quarter of double-digit adjusted EPS growth.
  • Organic net revenue growth -- Achieved 9%, accelerating from the 8% rate reported in the prior quarter.
  • Gross revenue -- Increased 27% year over year, the fastest consolidated growth since the 2024 government services separation.
  • Adjusted EBITDA -- Reached $327 million, up over 14%, with the adjusted EBITDA margin at 14.1%, reflecting a 70 basis point year-over-year expansion.
  • Backlog -- Set a new record at $27 billion, a 22% increase, with trailing 12-month book-to-bill ratios of 1.4x on gross revenue and 1.2x on net revenue.
  • Book-to-bill (quarterly) -- Both gross and net revenue at 1.2x, indicating robust ongoing demand.
  • Backlog components -- Net revenue and gross profit within backlog increased 12% and 15%, respectively, offset by components not specified in the call.
  • Water & environmental project awards -- Secured major contracts, including the San Francisco Southeast Wastewater Treatment Plant and a policy consultancy for Ofwat, signaling regulatory-driven demand.
  • Data center segment -- Delivered 100% year-over-year growth, with the data center pipeline expanding 400% and representing 3%-4% of overall business; the full AI ecosystem represents 10%-11% of business and is growing in excess of 40%.
  • Life sciences & advanced manufacturing -- Net revenue advanced 12%, the segment’s highest reported growth rate since late 2024; real-time pipeline up 81%.
  • Critical infrastructure -- Net revenue up 9%, led by double-digit gains in transportation-related businesses and high demand in energy and power; secured Dallas Fort Worth International Airport Terminal F project.
  • PA Consulting acquisition -- Closed full acquisition; PA operating profit increased 19% as revenue grew 17% and operating margin reached 22%.
  • Adjusted free cash flow -- Reported an outflow of $272 million for the quarter, attributed partly to reversals from favorable first-quarter timing items and PA deal proceeds affecting cash flow classification under US GAAP.
  • First-half adjusted free cash flow -- Totaled $93 million, an increase over the prior year, with management expecting $600 million to $700 million in adjusted free cash flow in the second half.
  • Share repurchases -- Executed $472 million in buybacks year-to-date, above the annual target of returning 60% or more of free cash flow to shareholders.
  • Net leverage -- Ended the quarter at 2.1x, with a plan to fall below 2.0x by year-end 2026 and target 1.5x in fiscal 2027.
  • Weighted average interest rate -- Now about 5%, following recent debt refinancing.
  • Fiscal year 2026 outlook raised -- Management increased guidance for organic net revenue growth (to 8%-10.5%), adjusted EBITDA margin (to 14.6%-14.9%), and adjusted EPS (to $7.10-$7.35).
  • Q3 guidance -- Adjusted EBITDA margin projected at roughly 15%, net revenue growth at 7.5%, and tax rate in the 27%-28% range; Q4 margin expected above 16% due to higher-margin programs and an extra week.
  • Fiscal year 2029 targets -- Reaffirmed 6%-8% net revenue CAGR, raised adjusted EBITDA margin goal to at least 17%, and increased free cash flow margin target from 10%+ to 11%+, implying $1.2 billion-$1.3 billion in annual free cash generation.
  • Identified cost synergies with PA -- At least $20 million in annual cost savings expected as integration scales through fiscal 2027.
  • AI & digital solutions impact -- The combined AI ecosystem now makes up 10%-11% of total business, growing above 40% year over year; no substantial additional investment planned due to prior multi-year digital enablement efforts.
  • Long-term visibility -- Management disclosed “visibility well through 2027, going into 2028” on AI/data center project pipeline.
  • Global delivery model -- Delivery resources and skilled labor capacity have grown at double-digit rates, supporting ability to meet backlogged demand.
  • Middle East operations -- Minimal disruption reported amid regional challenges; resilient execution via hybrid global and local delivery teams.
  • Life sciences reshoring -- U.S. field activity is strong, and European pipeline is growing, with reshoring initiatives advancing to execution stages in the coming quarters.
  • Transaction accounting effects -- $233 million of PA-related proceeds impacted Q2 operating cash flow, with an additional $101 million-$105 million to affect Q3; restructuring costs expected to be sharply lower in fiscal 2026.

SUMMARY

Jacobs Solutions (J +4.44%) raised its core fiscal 2026 guidance for the second time this year, citing accelerating top-line and margin expansion. The company’s data center and AI-driven business segments demonstrated surging demand and long-term pipeline visibility, while the full integration of PA Consulting delivered immediate profitability impact and identified cost synergy opportunities. Strategic capital allocation remained disciplined, with aggressive buybacks and concrete plans to delever, and the global delivery platform was cited as a key operational lever supporting the current and forecasted growth trajectory.

  • Management stated that “purely based on our operational performance,” the guidance raise was not primarily attributable to the PA acquisition but to internal demand and run-rate trends.
  • Robert V. Pragada said, “is feeding the data center world—represents, in its entirety with our diversified offering, between 10% to 11% of our overall business, and that is growing in excess of 40%.”
  • The data center client pipeline, described as up 400% year over year, underpins visibility “well through 2027, going into 2028.”
  • Venkatesh R. Nathamuni explained that “the bulk of our operational performance is driven by the I&AF section” rather than extraordinary contributions from PA, with foreign exchange providing a minor benefit.
  • The company confirmed minimal business disruption in the Middle East and maintained momentum across key sectors despite adversity.
  • Cash flow presentation was notably impacted by GAAP treatment of PA-related payments, as $233 million went through operating cash flow in Q2 and another ~$100 million is expected in Q3, but management expects normalization by Q4.

INDUSTRY GLOSSARY

  • I&AF: Refers to the Infrastructure & Advanced Facilities business segment within Jacobs Solutions, covering project design, engineering, and delivery for complex infrastructure programs.
  • Book-to-bill: The ratio of new business secured (“booked”) to revenue recognized (“billed”) in a given period; used as an indicator of demand trajectory.
  • PA Consulting: A global innovation and transformation consultancy, now fully owned by Jacobs Solutions following recent acquisition.
  • AMP8 cycle: U.K. water industry investment cycle for 2025-2030, dictating capital outlays and regulatory changes.
  • AI ecosystem: Aggregate of design, engineering, and consulting services spanning AI infrastructure (e.g., data centers, energy) as well as adjacent sectors enabled by artificial intelligence technology.
  • IIJA: The Infrastructure Investment and Jobs Act, a major U.S. federal funding program for public infrastructure announced in 2021.
  • Adjusted free cash flow: Operating cash flow less capital expenditures, further adjusted here to exclude certain transactions or deal-related items specified by management.
  • NVIDIA Omniverse DSX Blueprint: A proprietary digital twin platform developed with NVIDIA, used for advanced data center modeling and delivery.

Full Conference Call Transcript

Robert V. Pragada: Solid year-over-year margin expansion and continued robust sales activity. I will 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 1.4x on gross revenue and 1.2x on net revenue. And 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 second time in two quarters, which Venk will walk through shortly. Turning to slide four, 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 fifth straight quarter of double-digit growth in adjusted EPS. During Q2, we also delivered another quarterly book-to-bill above 1.0x with both gross and net coming in at 1.2x.

The addition of the net revenue book-to-bill metric will provide useful context for our investors and analysts and reinforces the strength in our bookings over the last 12 months. Turning to slide five, I would like to highlight a few notable project awards from the second quarter. But before I do that, I want to recognize a major achievement. Jacobs Solutions Inc. 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 have held this ranking.

Our strong organic growth profile helped us earn this honor, and I want to thank our 47 thousand colleagues for delivering leading solutions to our clients every single day. Now moving on to Q2 awards. In Water and Environmental, Jacobs Solutions Inc. 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 highlights another significant award in one of our fastest growing sectors, and positions Jacobs Solutions Inc. for similar regulatory-driven investments emerging across Northern California, the Pacific Northwest, and the Great Lakes. Also within Water and Environmental, Jacobs Solutions Inc. and PA have secured a two-year economics and policy consultancy contract with Ofwat, the UK 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 lifecycle—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 believe 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-over-year in Q2, and we see very strong runway to build on that success in the second half of the year. And it is 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 Solutions Inc. was selected as lead designer at Dallas Fort Worth International Airport as part of the Terminal F expansion.

The project involves existing bridge span operations 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 the infrastructure while keeping passengers moving. Jacobs Solutions Inc. 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 will turn the call over to Venk to review our financials in further detail.

Venkatesh R. Nathamuni: Thank you, Bob, and good afternoon, everyone. Please turn to slide six where I will 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%, 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 12-month book-to-bill at 1.4x.

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 have 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, and we anticipate a more normal differential between GAAP and adjusted EPS in Q3 and beyond. Regarding our performance by end market, please turn to slide seven. At a high level, we continue to see strong growth rates in Life Sciences and Advanced Manufacturing as well as in Critical Infrastructure. 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 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 eight, I will provide a brief overview of our segment financials. In Q2, I&AF 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 sector work in the UK. The business is well positioned to help advise on European defense strategy as well as implement digital solutions across the entire region. Combined with Jacobs Solutions Inc.’s proven history of delivering complex manufacturing and national security infrastructure, we see a compelling opportunity to augment growth in the 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. Now moving on to slide nine, 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 want to note we are highlighting an adjusted free cash flow figure as we have to account for a portion of the PA transaction proceeds in operating cash under US 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 $100 million.

It is 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 remained aggressive repurchasers 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 net leverage of 2.1x ending the quarter, and we plan to return to below 2.0x 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 1.5x during fiscal year 2027. Please turn to slide 10 for our updated fiscal year 2026 outlook. Inclusive of our acquisition of PA Consulting, we are increasing our forecast for adjusted net revenue growth, adjusted EBITDA margin, and adjusted EPS relative to our guidance from last quarter.

We are increasing our FY 2026 organic net revenue growth range to 8% to 10.5% year-over-year, adjusted EBITDA margin range to 14.6% to 14.9%, and adjusted EPS range to $7.10 to $7.35. We continue to anticipate adjusted free cash flow margin will range from 7% to 8.5%. Notably, our outlook for FY 2026 now implies 18% year-over-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% to 28% range in Q3 and in Q4. We have good line of sight to achieving our updated fiscal year 2026 targets, and we are 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% to 8% organic growth on a five-year compounded annual growth rate basis for net revenue. Combining our fiscal year 2025 result and the midpoint of our fiscal year 2026 guidance, we would be ahead of the midpoint in the first two years.

Adding this to our central positioning in the buildout 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 are increasing our target 100 basis points to 17%+ for fiscal year 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 fiscal year 2027 through fiscal year 2029, in addition to the 200 basis points we are expecting to deliver over the course of fiscal year 2025 and fiscal year 2026. And 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 to $1.3 billion of annual free cash generation by fiscal year 2029. We are off to a great start just about one-third of the way through our strategy cycle.

With that, I will turn the call back over to Bob.

Robert V. Pragada: Thank you, Venk. In closing, we are 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 are 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 open the call for questions. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are 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.

Steven Fisher: Thanks. Good afternoon, and congrats on the quarter. I just want to ask you at a 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 done some calculations that maybe it would be about a $0.10 to $0.20 increase from PA Consulting. Maybe our math was off. But just curious how much was operational and, if so, where within the segment did you see that upside?

Robert V. Pragada: Yes. So, Steve, maybe I will start and then I will hand it over to Venk. At a high level, it is purely based on our operational performance. The drive we are seeing in our bookings and how that is translating into our run rate drove the top line.

Venkatesh R. Nathamuni: Yes. Thanks, Steve, for the comment. As Bob mentioned, pretty solid performance on the I&AF 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 I&AF section. In addition, from a margin perspective—and I alluded to this in my prepared remarks—a lot of operating discipline in terms of keeping tight controls and, in conjunction with some of the margin improvement that you saw, that is what drove the true outperformance.

Steven Fisher: Okay. That is very helpful. And then just talking about AI and digital enablement, can you give us an update on what the customer receptivity has been in the past few months to your digital tools and anything AI-enabled? And to what extent are you seeing incrementally more margin opportunities coming from that and when might we see some of that coming through more materially?

Robert V. Pragada: Yes. Steve, thanks for asking the question. AI is absolutely driving our business in what is going on with the AI infrastructure buildout. We are seriously at an inflection point, and it is accelerating our entire business. I will quantify what that means. Within the data center space, which right now represents between 3% to 4% of our overall business, that is growing at 100% year-over-year. Now 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 is feeding the data center world—represents, in its entirety with our diversified offering, between 10% to 11% of our overall business, and that is growing in excess of 40%.

So you are talking about a significant part of our business that is growing at a very fast rate, all centered around the AI infrastructure build. Then it is having an indirect effect on AI in drug discovery and what is happening with sectors that would not traditionally be affiliated with AI. We are well positioned in the AI CapEx and AI infrastructure world, and our enablement internally is helping us become more efficient and deliver to that demand. 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: Thanks, and good afternoon. Extending the line of questioning that Steve started, one of the themes we are discussing a lot is the visibility to these types of projects for suppliers and vendors like yourself. Can you talk about demand? It sounds like it is growing at a very high clip, but what is the line of sight to projects? Is it six months, 12 months, multiple years? Please talk to us about near- to medium-term visibility in that end market specifically. Thanks.

Robert V. Pragada: Yes. Saba, just to clarify, specifically around the AI infrastructure build, or are you talking broadly across all of our end markets?

Sabahat Khan: More specifically the data center and the 100% clip you talked about—the growth in that end market.

Robert V. Pragada: Absolutely. Let me quantify it first, Saba. Our AI infrastructure pipeline—the data center component of that—has gone up 400% year-over-year. We have visibility well through 2027, going into 2028. Our long-term, relationship-based client model is gaining share of that client spend. These are the top hyperscalers as well as now the neo-cloud providers that are being supported. What is backing that visibility is our relationship with NVIDIA—our work on the digital twin, the work we are doing around the plan of record, and then as that is evolving with the next-generation chip. Now we are talking about Rubin, and we are in the middle of developing that plan of record.

It is tying us back into these AI players, so the visibility is strong.

Sabahat Khan: Great. And then maybe just a question for Venk. On the balance sheet side, assuming you are at 2.1x, just above your targeted year-end range, can you help us think through the likelihood of buybacks? Is it going to be more opportunistic, and how are you thinking about broader capital allocation given the free cash flow and the leverage for the rest of the year? Thanks.

Venkatesh R. Nathamuni: Yes, Saba. As we highlighted during the press announcement, we did take on some debt to fund the acquisition. We are about 2.1x, but we have a clear plan to delever pretty quickly, and we said we will be below 2.0x by the end of fiscal year 2026, which is just a quarter and a half away. We have also been very aggressive in terms of our share repurchases. We are big believers in the value of our stock and will continue to maintain the share repurchase activity.

We will modulate the quantum based on market conditions, but our goals are to continue to reduce our leverage—as I said, we can get to 1.5x in fiscal 2027—as well as repurchases 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 are expecting $600 million to $700 million of free cash flow in 2H, so that helps us delever fairly quickly. We have a lot of optionality and the ability to do both the buyback as well as delever without straining the balance sheet.

Sabahat Khan: Thanks very much.

Venkatesh R. Nathamuni: You are welcome.

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

Michael Stephan Dudas: Good afternoon, gentlemen. Hey, Bob, you have had five years of insight into what 100% ownership of PA Consulting means for Jacobs Solutions Inc. What areas should we look for over the next six to 12 months that might show up and help not only bookings, or be more lifecycle-driven, or maybe even better on the margin front as you move through the plan of the combined company?

Robert V. Pragada: Yes, Mike. I would probably segregate it into two parts. One is a capability set that we have been working on over the course of that runway of five years together and the relationship we have had. And then second, applying that to the adjacencies where we have already got a track record by end market. On capabilities, over the last five years we have really built out our digital capability set. This spans everything from software developers through to digital platforms and digital products that are enabling innovation within our clients’ businesses, as well as our own. Together, we have nearly 2 thousand digital experts, and we are integrating that as one company platform.

For end markets, in Europe we are seeing activity in national security and the public sector. In the US, energy and utilities, and transport. In Europe, with a more independent defense posture, 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 lifecycle is something that we are primed as a combined entity to deliver, as well as increased digitization enablement in government where PA is in the middle of it. In the US, it is really around energy and utilities and transport—end-to-end from transport advisory through to delivering complex programs and projects.

With the combined digital capability and driving that in energy and utilities, again driven by the AI infrastructure we just talked about, we are excited about the future.

Michael Stephan Dudas: My follow-up: Critical Infrastructure is showing very strong growth this quarter. It has been chugging along quite well and probably gets lost in the headlines given all the data center and advanced facilities work. Do you continue to see very solid opportunities in the second half and into 2027? And any additional thoughts on IIJA 2.0 and whether your clients are concerned about potential issues if there is a delay with Congress and changes?

Robert V. Pragada: Mike, I will separate that into two as well. We are proud about the Critical Infrastructure piece. That is being driven by two primary areas. One is global transportation. We are seeing strong high single-digit, and in certain geographies double-digit, growth within transportation. That is around continued buildout of the aviation sector as well as ports and maritime, which is a strong subsector for us. These have long-tail design-and-build cycles, and we are really starting to see the fruits of that. Second, in the US, on IIJA and what happens with the election this year—we have modeled every scenario. In each scenario, we see at a minimum a continuing resolution, which would be good for us.

Then what happens on the extension of IIJA—whether there is a new bill—looks promising, but it is too early to speculate. Even on a continuing resolution, these are long-tail programs, and we are only about 50% outlaid on the current IIJA. So things continue to look solid. Thank you, Michael.

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

Adam Bubes: Hi. Good afternoon. Can you help us parse out the new, more universal guidance? Is there a way to frame what incremental EBITDA in the new guide is coming from the acquired stake in PA Consulting and how much of the incremental EBITDA uplift is underlying?

Venkatesh R. Nathamuni: I will take that, Adam. I will separate it into fiscal year 2026 guidance and the fiscal year 2029 targets. In fiscal year 2026, we increased our adjusted EBITDA margin range from 14.6% to 14.9%. That is primarily driven by the full consolidation of PA, but there are additional measures and initiatives we are putting in place that drive margin expansion. On fiscal year 2029, it is not just the PA consolidation but also multiple identified initiatives in terms of gross margin drivers, how we engage with the commercial model, and the increased use of AI, and our global business and global delivery model.

The vast majority comes from operational improvements across both the commercial model and delivery, and that is progressing well. We are also making a commitment to continue to drive operating leverage such that we will grow OpEx at a substantially lower rate than revenue. It is not one thing—it is a multitude of tools we have to drive continued margin expansion.

Adam Bubes: Great. And can you 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?

Robert V. Pragada: Adam, on incremental investments, we do not see the need. We have been investing in digital enablement for the better part of seven years. I do not see us needing to make a huge investment to continue on our current trajectory. The way it is evolving is that it is being pulled from the market with the acceleration we are seeing in our end markets. What we are doing for our clients and for ourselves is in full gear and accelerating. Again, AI infrastructure—which is the virtuous cycle—is driving that, and we are centrally positioned for that entire buildout.

Adam Bubes: Great. Thanks so much.

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

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

Robert V. Pragada: First and foremost, we have been acutely focused on the safety of our people. From the beginning until now, every single day we have crisis management teams stood up and are doing not just daily, but hourly, check-ins on our people, and they continue to be extremely resilient. Second, we have been very deliberate and vocal about focusing on time-based, mission-critical programs and projects in the Middle East—predominantly in Saudi and in the Emirates. Those have continued, centered around transportation as well as water and time-based venues, and those have not stopped. I would characterize it as minimal disruption, and the team has been extremely resilient in delivering, including from the confines of their own home.

Just today, we went back into a work-from-home scenario. The backbone of this, as Venk has talked about several times before, is our global delivery model. We are delivering services for our clients not only with folks in-country and in-region, but also from around the world. That has really been highlighted and has served as a strength.

Analyst: Great. That is super helpful. And then I know we have talked about data centers on this call, but can you tell us what you are seeing in life sciences and advanced pharmaceuticals, and if there is any appetite to reshore even further back to the US?

Robert V. Pragada: Absolutely. The life sciences business is, in real-time pipeline, up 81% year-over-year. A lot of in-flight pursuits where we have been in the early stages are soon to be going into the field. That business—into the field in the US—remains strong, and we are now starting to see a bit of a build going on in Europe as well. It goes through different phases, so some of that reshoring activity that started a year or two ago will start to mature in the field over the course of the next few quarters.

Analyst: 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: Hi. Good evening, and congrats on a nice quarter. Venk, I am looking at the EBITDA margin trajectory implied in the back half of the guidance. I think you said Q3 approximately 15%, Q4 approximately 16%. Understanding it is PA Consulting and maybe an extra week, but structurally there seems to be margin improvement. Given where the margins are implied in the back half, what is the setup for fiscal year 2027? It does not seem like the Street is factoring in margins implied in the back half. Are we missing the margin opportunity potential? Thank you.

Venkatesh R. Nathamuni: Jamie, thanks for the question. As you pointed out, we guided for 15% in Q3, which would represent about a 90 basis point sequential improvement, which is pretty good. That would imply 16%+ in Q4. As I have talked about, we are investing in some programs that are margin-accretive in Q4. We have identified them and are ramping those investments for delivery in Q4. The fact that we have executed on that gives us good visibility to 16%+ in Q4. We feel pretty good about the margin trajectory. Looking beyond Q4, there is still substantial margin improvement ahead of us.

To put things in context, fiscal 2025 and 2026 together would deliver about 200 basis points of margin expansion, and then we are guiding for another 75 basis points per year. Some of the other margin drivers apart from gross margin initiatives include global delivery and mix. As we combine PA Consulting and Jacobs Solutions Inc., the opportunity to deliver on the entirety of the asset lifecycle, and the fact that PA margins are substantially higher, gives us the option to upsell those margins as well. Lots of room to continue to execute on margins, and we feel pretty good about our guidance. Thank you.

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

Jerry Revich: Yes. Hi. Good evening. Nice to see the really strong bookings performance. Do you have the resources on hand, from a capacity standpoint, to ramp up to potentially double-digit organic growth—the extra week notwithstanding in the fourth quarter? And if you do get to that level of growth, what are the implications for additional margin beyond what you laid out?

Robert V. Pragada: Absolutely. The short answer is yes, we do have the capacity. This goes to what we have been talking about and highlighted in our strategy—the global delivery model. Year-over-year, the growth in what we call global delivery is well into the double digits. Our ability to access talented labor delivering at a very high level has been very strong. Our resourcing to meet what is in our backlog, coupled with the progress on those programs and engagements, is strong, and it is driving the margins. So it is yes on the margin front as well.

Jerry Revich: Super. And then on reshoring, one area where we are seeing significant progress is in semis, and the industry group is talking about a return to 2024 highs of CapEx for semis into next year. Is that consistent with the opportunities you see? Is there potential for additional projects to move forward beyond what the group is looking for in 2027?

Robert V. Pragada: Jerry, yes and yes. We are seeing that investment in the semi sector, and we see that cycle transcending well into 2027. What is important is what is driving it, and it goes back to the earlier comments around the AI infrastructure. Where we are positioned right now on high-bandwidth memory manufacturing facilities is putting us on the front end of what then translates into the utility sector and eventually into the compute load in the data centers. Seeing it across that ecosystem is what is driving our business right now. The relationships we have with high-bandwidth memory manufacturers, as well as ASIC and other logic providers, are coming through.

Jerry Revich: Thank you.

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

Andrew John Wittmann: Thanks for taking my questions. On the longer-term margin outlook—the 75 basis points a year—you have talked about the various areas: commercial models, global delivery, etc. Are those out-year drivers any different from the ones you have been realizing over the last two very strong years? And are the benefits in those out years going to come from basic blocking and tackling, or do you have to launch new initiatives to achieve those things? In other words, is that going to cost you cash to implement changes?

Venkatesh R. Nathamuni: Thanks, Andy. The margin trajectory—200 basis points over fiscal 2025 and 2026, and then 75 basis points per year thereafter—is a combination of several things that are well underway. In the first year, I would characterize it as mostly driven by operating line benefits from the separation of the CMS and C&I business and rightsizing. Everything thereafter has been driven by specific initiatives—gross margin actions, the global delivery model increasing in pace, scope, and scale, and operating leverage. On the enterprise side, how we run functions like finance and legal, deploying AI, is also driving margin expansion. On CapEx, our investments have been about 1% of revenue, and we are reallocating capital—traditionally in SaaS software—now more to AI-based tools.

That is giving us productivity improvements without having to raise our CapEx numbers.

Andrew John Wittmann: Thanks for that. For my follow-up, you alluded in your prepared remarks to the unusually high level of transaction costs. I am guessing some of the consideration you paid for PA was required to be recognized as operating cash rather than investing cash—that is probably most of it. Was there anything else in there? And because you mentioned there will be a fiscal third-quarter cash outflow in addition to the substantial cash outflow recognized this quarter, does that mean the exclusions next quarter might be relatively high as well?

I know you commented it was mostly contained in the second quarter, but I am trying to get a sense of the balance of the year and then that “nirvana state,” hopefully in Q4, where these kinds of exclusions will not be as apparent.

Venkatesh R. Nathamuni: Andy, you are exactly right. The accounting treatment necessitated that part of the consideration be included in cash flow from operations as opposed to investing or financing, and that is why you saw the exclusion. Roughly $235 million of it was compensation expense acceleration for the vesting of shares. In Q3, we called out about $101 million to $105 million of employee benefit trust payments, and then we are done. Even with Q3, that is already imputed in the P&L, so it is only a cash flow item in Q3.

One other point: over the last couple of years, we have been steadily decreasing our restructuring cost, and we are on track to be substantially lower in fiscal 2026 compared to fiscal 2025.

Andrew John Wittmann: Great. Thanks for that.

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

Natalia Bach: Hi. Good evening. Congrats on a nice quarter. Now that PA is 100% under Jacobs Solutions Inc., can you frame for us the potential for sales synergies accelerating?

Robert V. Pragada: Very high. We had certain elements—mostly UK regulations around conflict of interest—affecting visibility into each other’s sales pipelines. The way I described the joint opportunities before—expanding the shaded area of the Venn diagram—now that restriction is gone. The pipeline has really increased with joint go-to-market opportunities. The innovation and delivery across the entirety of the asset lifecycle, which we did collaboratively when we had the majority, will also accelerate. It will increase the operating TAM. The main areas: defense infrastructure and national security in Europe, and in the US, transportation and energy and utilities—again feeding the AI infrastructure.

Natalia Bach: Got it. Much appreciated. And then on the cost synergy side, any low hanging fruit opportunities in the near term?

Venkatesh R. Nathamuni: Yes. In terms of cost synergies, when we closed the transaction a few weeks back, we announced roughly £12 million to £15 million of synergies. We have now identified specific opportunities from a cost perspective and see at least $20 million in annual cost synergies as we scale through fiscal 2027.

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

Bert Subin: Thank you, Kara. I know we got cut off in the beginning—we lost about a minute due to audio challenges. I want to mention that I refer you to slide two of the presentation for information about our forward-looking statements, non-GAAP financial measures, and operating metrics. I apologize for the technical difficulties. I will now pass it over to Bob for some closing remarks.

Robert V. Pragada: Thanks, Bert, and thank you, everyone, for joining our earnings call. We look forward to engaging with many of you over the coming days and weeks. Have a good evening, good day, and good morning, depending on where you are joining from. Thanks, everyone.

Operator: This concludes today’s call. You may disconnect.