Q3 2026 Jacobs Solutions Inc Earnings Call

August 4, 2026

Speaker #1: Earnings, conference call, and webcast. After today's prepared remarks, we will host a Q&A session. If you would like to ask a question, please press *1 to raise your hand.

Speaker #1: To withdraw your question, press *1 again. I will now hand the conference over to Bert Subin, Senior Vice President of Investor Relations. Please go ahead.

Speaker #2: Thank you, Operator, and welcome everyone. Following market close, we issued our earnings announcement, filed our Form 10-Q, and posted a slide presentation on our website, which we'll reference during the call.

Speaker #2: I would like to refer you to slide 2 of the presentation for information about our forward-looking statements, non-GAAP financial measures, and operating metrics. Now let's turn to the agenda on slide 3.

Speaker #2: Speaking on today's call will be Jacobs Chair and CEO, Bob Pragada. And CFO, Venk Nathamuni. Bob will begin by providing comments on the business, as well as highlights from our third quarter results, and a recap of notable awards.

Speaker #2: Venk will then provide a detailed review of our financial performance, including commentary on end market trends, cash flow, and balance sheet data, as well as our updated outlook.

Speaker #2: Finally, Bob will provide closing remarks, then we'll open up the call for questions. With that, I'll turn it over to our Chair and CEO, Bob Pragada.

Speaker #3: Good afternoon, everyone. And thank you for joining us to discuss our third quarter 2026 business performance. We delivered strong results in Q3. I'll quickly highlight a few key takeaways.

Speaker #3: First, adjusted EPS grew approximately 14% to $1.84, supported by more than 8% adjusted net revenue growth, all organic, and more than 100 basis points of year-on-year margin expansion.

Speaker #3: Second, INAF posted nearly $2.1 billion in net revenue, a 10% increase year over year, and a quarterly record for the segment. And third, our backlog grew 27% to $29 billion.

Speaker #3: 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. As we look ahead, we see continued strong underlying business momentum, as reflected by our third consecutive guidance raise for FY26, which Venk will walk through in more detail shortly.

Speaker #3: Turning to slide 4, we provide a detailed overview of the quarter. We are very pleased with our Q3 results, as strong operating performance, paired with our lower share count, drove the sixth straight quarter of double-digit growth in adjusted EPS.

Speaker #3: Our margin profile continues to trend higher, with our business achieving an adjusted EBITDA margin above 15% in Q3, up over 100 basis points year over year, and up almost 200 basis points when compared to the same period in 2024.

Speaker #3: The combination of strong annual margin expansion, high single-digit organic growth, and continued share repurchases enabled by strong free cash flow generation has created a powerful earnings growth algorithm.

Speaker #3: Further, we are seeing convergence of backlog growth and overall revenue growth, and we are positioned to deliver another strong bookings performance in Q4. Turning to slide 5, I'd like to highlight a few notable project awards from the third quarter.

Speaker #3: In water and environmental, Jacobs is selected to provide program management and technical environmental services to the U.S. Navy's Environmental Restoration Program. Primarily across the Mid-Atlantic and Puerto Rico.

Speaker #3: The work involves restoring contaminated sites, including PFAS and munitions-related projects, with the goal of reducing health and environmental risks and returning these sites to beneficial use.

Speaker #3: It extends our 40-year partnership with the Navy and underscores our leadership in delivering complex, high-impact environmental solutions. This key win, as well as new awards with private sector clients, gives us increased confidence we will see a return to growth in the environmental sector in coming quarters.

Speaker #3: Also in water and environmental, we were selected to deliver Central Utah Water District's Strawberry High Line Improvement Project, which will modernize roughly 40 infrastructure through new pipelines, a pump station, a regulating reservoir, and related facilities.

Speaker #1: Environmental restoration program. Primarily across the Mid-Atlantic and Puerto Rico. The work involves restoring contaminated sites, including PFAS and munitions-related projects, with the goal of reducing health and environmental risks and returning these sites to beneficial use.

Speaker #1: Was it just as a kind of a recap? That vertical contains our transportation business, energy and power, and cities and places. Our transportation business continues to be a real growth vector for us in all geographies, and growing at a high single-digit rate I'd say the sub-sectors that are channeling that growth are around aviation, the rail business globally, as well as in the ports and maritime world.

Speaker #3: By converting a historic open canal into a modern pressurized system, the project will improve long-term water reliability for agricultural and municipal users, while supporting regional growth and enhanced recreation along the corridor.

Speaker #1: It extends our 40-year partnership with the Navy and underscores our leadership in delivering complex, high-impact environmental solutions. This key win, as well as new awards with private sector clients, gives us increased confidence we will see a return to growth in the environmental sector in coming quarters.

Speaker #1: Highways and bridges was a nice element in Q3, but those three, you know, we've got a market-leading position there and we're seeing a lot of activity there.

Speaker #3: It's part of the district's broader NEBO Regional Water Project, an approximately $1.5 billion program designed to sustain a doubling of the area's population in the coming decades.

Speaker #1: Also in water and environmental, we were selected to deliver Central Utah Water District's Strawberry Highline Improvement Project, which will modernize roughly 40 miles of aging canal infrastructure through new pipelines—a pump station—a regulating reservoir, and related facilities.

Speaker #3: This also includes the South Utah Valley Regional Water Treatment Plant, where Jacobs is already under contract to lead design and engineering during construction. Shifting to life sciences and advanced manufacturing, Jacobs was awarded a Sole Source EPCM contract by HUD8 to deliver Beacon Point, the company's second AI data center campus in the U.S., located in Texas, the multi-phase campus is designed to support 1 gigawatt of total capacity.

Speaker #1: By converting a historic open canal into a modern pressurized system, the project will improve long-term water reliability for agricultural and municipal users, while supporting regional growth and enhanced recreation along the corridor.

Speaker #1: It's part of the district's broader NEBO Regional Water Project, and approximately 1.5 billion dollar program designed to sustain a doubling of the area's population in the coming decades.

Speaker #3: This award is a follow-on to HUD8's Riverbend campus in Louisiana, where Jacobs is also leading program delivery. Will apply proven design elements from that project and deploy our data center digital twin to simulate critical assets.

Speaker #1: This also includes the South Utah Valley Regional Water Treatment Plant, where Jacobs is already under contract to lead design and engineering during construction. Shifting to life sciences and advanced manufacturing, Jacobs was awarded a Sole Source EPCM contract by HUD8 to deliver Beacon Point, the company's second AI data center on campus in the U.S.

Speaker #3: Helping to de-risk commissioning and reduce time to first revenue by accelerating the deployment of AI workloads. Initial energization is targeted for 2027. Winning a repeat Sole Source contract at this scale reflects the confidence clients place in Jacobs to deliver complex AI infrastructure with speed, safety, and certainty.

Speaker #1: Located in Texas, the multifaceted campus is designed to support 1 gigawatt of total capacity. This award is a follow-on to HUD8's Riverbend campus in Louisiana, where Jacobs is also leading program delivery.

Speaker #3: It also builds on our standing as engineering news record's number 1 data center firm. A sector where we see substantial runway as AI investments increase.

Speaker #1: Will apply proven design elements from that project and deploy our data center digital twin to simulate critical assets. Helping to de-risk commissioning and reduce time to first revenue by accelerating the deployment of AI workloads.

Speaker #3: And finally, PA is supporting the UK Royal Air Force's Optimize Initiative, enabling RAF leaders to use data-driven insights to further strengthen operational readiness and decision-making in an increasingly complex environment.

Speaker #3: The work turns data into confident evidence-led led decisions that support the RAF's readiness, and it reinforces our standing as a trusted delivery partner in the defense sector.

Speaker #1: Initial energization is targeted for 2027. Winning a repeat Sole Source contract at this scale reflects the confidence clients place in Jacobs to deliver complex AI infrastructure with speed, safety, and certainty.

Speaker #3: Delivering high-tempo programs that have real operational impact. Now please turn to slide 6. Given the growth tailwind, we are seeing from AI investments I wanted to take a moment to quickly highlight our position in the AI infrastructure build-out.

Speaker #1: Our standing as Engineering News-Record's number one data center firm—a sector where we see substantial runway as AI investments increase. And finally, PA is supporting the UK Royal Air Force's Optimize initiative. It also builds on enabling RAF leaders to use data-driven insights to further strengthen operational readiness and decision-making in an increasingly complex environment.

Speaker #3: We have been serving data center clients since the 1990s and have long-standing relationships with semiconductor manufacturers that span over 50 years. Significant capital is being deployed to build AI data centers, and we have been able to grow our addressable market by expanding our scope of services, which now range from technical advisory and design to digital twins and full program delivery.

Speaker #1: The work turns data into confident, evidence-led decisions that support the RAF's readiness, and it reinforces our standing as a trusted delivery partner in the defense sector.

Speaker #1: Delivering high-tempo programs that have real operational impact. Now, please turn to slide 6. Given the growth tailwind we are seeing from AI investments, I wanted to take a moment to quickly highlight our position in the AI infrastructure build-out.

Speaker #3: Further, the AI data center build-out is increasing capacity requirements in the semiconductor industry, where we are a leading facility designer, and we are leveraging our capabilities across water, environmental, power, and digital to further expand our market share with both private sector clients and utilities.

Speaker #1: We have been serving data center clients since the 1990s and have long-standing relationships with 50 years. Significant capital is being deployed to build AI data centers, and we have been able to grow our addressable market by expanding our scope of services, which now range from technical advisory and design to digital twins and full program delivery.

Speaker #3: For context, as of represented 11% of our adjusted net revenue, up approximately 100 basis points from last quarter, and our pipeline of future opportunities continues to grow meaningfully.

Speaker #3: Now turn the call over to Venk to review our financial results and further detail.

Speaker #2: Thank you, Bob. And good afternoon, everyone. Please turn to slide number 7, where I'll walk through our results for Q3. Gross revenue increased more than 34% year over year, and adjusted net revenue which excludes pass-through revenue grew by over 8%.

Speaker #1: Further, the AI data center build-out is increasing capacity requirements in the semiconductor industry, where we are leading facility designer, and we are leveraging our capabilities across water, environmental, power, and digital to further expand our market share with both private sector clients and utilities.

Speaker #2: Q3 adjusted EBITDA was $367 million, up 17%, with our margin at 15.2% or 109 basis points higher year over year. This resulted in adjusted EPS increasing 14% year over year.

Speaker #1: For context, as of Q3, the direct AI build-out represented 11% of our adjusted net revenue, up approximately 100 basis points from last quarter, and our pipeline of future opportunities continues to grow meaningfully.

Speaker #1: Now I'll turn the call over to detail.

Speaker #2: Consolidated backlog was up more than 27% year over year, to a record $29 billion. With our trailing 12-month book-to-bill at $1.4 times. Book-to-bill was strong again in Q3, driven by good awards activity across our end markets, with standout performance in the advanced manufacturing environmental and transportation sectors.

Speaker #2: revenue—which excludes pass-through revenue—grew by over 8%. Q3 adjusted EBITDA was 367 million dollars, up 17%, with our margin at 15.2%, or 109 basis points higher year over year.

Speaker #2: Additionally, on a year-over-year basis, net revenue and gross profit in backlog increased 11% and 14% respectively, during Q3. We're demonstrating faster organic growth in the business today, and strong recent awards activity positions us well as we look ahead to fiscal year 27.

Speaker #2: This resulted in Thank you, adjusted EPS increasing 14% year over year. Consolidated backlog was up more than 27% year over year, to a record 29 billion dollars, with our trailing 12-month book-to-bill at 1.4 times.

Speaker #2: Regarding our performance by end market in infrastructure and advanced facilities, let's turn to slide number 8. At a high level, we continue to see strong growth rates in life sciences and advanced manufacturing, as well as in critical infrastructure, during Q3.

Speaker #2: Book-to-bill was strong again in Q3, driven by good awards activity across our end markets, with standout performance in the advanced manufacturing and environmental and transportation sectors.

Speaker #2: Focusing on life sciences and advanced manufacturing, net revenue grew 24% in Q3, our highest growth rate since we began reporting end markets in late 2024.

Speaker #2: Additionally, on a year-over-year basis, net revenue and gross profit in backlog increased 11% and 14%, respectively, during Q3. We're demonstrating faster organic growth in the business today, and strong recent awards activity positions us well as we look ahead to fiscal year '27.

Speaker #2: Strong performance in the data center and semiconductor sectors contributed to substantial year-on-year growth, and we anticipate that this trend will continue in Q4. We're seeing high demand for new projects across life sciences and advanced manufacturing, setting us up well for the new fiscal year.

Speaker #2: Regarding our performance by end market in Infrastructure and Advanced Facilities, let's turn to slide number 8. At a high level, we continued to see strong growth rates in Life Sciences and Advanced Manufacturing, as well as in Critical Infrastructure, during Q3.

Speaker #2: Shifting to critical infrastructure, net revenue increased 9% year over year, critical infrastructure trends remain similar to Q2, with transportation and energy and power activity leading to strong growth versus last year.

Speaker #2: Focusing on life sciences and advanced manufacturing, net revenue grew 24% in Q3, our highest growth rate since we began reporting end markets in late 2024.

Speaker #2: We continue to expect critical infrastructure to grow in the mid to high single-digit range, over the medium term. Net revenue growth in our water and environmental end market was a little more than 1%.

Speaker #2: Net revenue growth for water remains strong, and as we indicated last quarter, we did continue to face year-over-year headwinds in the environmental sector. On a positive note, we're forecasting growth for the water and environmental end market to sequentially improve in Q4, based on good awards activity in the quarter.

Speaker #2: Shifting to critical infrastructure, net revenue increased 9% year over year. Critical infrastructure trends remain similar to Q2, with transportation and energy and power activity leading to strong growth versus last year.

Speaker #2: In summary, strong life sciences and advanced manufacturing performance during Q3 was complemented by good demand across the majority of our sectors. Moving now to slide number 9, I'll provide a brief overview of our segment financials.

Speaker #2: We continue to expect critical infrastructure to grow in the mid- to high-single-digit range over the medium term. Net market was a little more than 1%.

Speaker #2: In Q3, INAF operating profit increased 14% year over year, on 10% net revenue growth. PA consulting operating profit increased 2%, on flattish revenue and operating margin again came in strong, at above 22%.

Speaker #2: Net revenue growth for Water remains strong, and as we indicated last quarter, we did continue to face year-over-year headwinds in the Environmental sector. On a positive note, we're forecasting growth for the Water and Environmental end market to sequentially improve in Q4, based on good awards activity in the quarter.

Speaker #2: Both segments saw only a minor operating profit growth impact from foreign exchange during the quarter. Focusing on PA, the segment experienced some temporary disruption from the recent change in governmental leadership in the UK, which delayed project start dates.

Speaker #2: Importantly, we are already seeing a return to normal and our forecast indicates solid quarter-on-quarter revenue growth in Q4, supported by recent awards activity, new project commencements, as well as performance quarter to date.

Speaker #2: In Q3, INAF operating profit increased 14% year-over-year on 10% net revenue growth. PA Consulting operating profit increased 2% on flattish revenue, and operating margin again came in strong at above 22%.

Speaker #2: Now moving on to slide 10, we provide an overview of cash generation and our balance sheet. For Q3, we generated $541 million in adjusted free cash flow, which removes the impact of $110 million in payments related to proceeds for the PA transaction, as we had indicated last quarter.

Speaker #2: This brings year-to-date adjusted free cash flow to $633 million. Please note we will not make adjustments to free cash flow in Q4, and will return to providing guidance for reported free cash flow margin in fiscal year 27.

Speaker #2: Focusing on capital returns, we remain aggressive buyers of our shares during Q3, to take advantage of the dislocation in our share price. As a result, our total repurchases through Q3 rose to $614 million, which, combined with dividends paid, puts us on track to return more than 100% of free cash flow to our shareholders for the second consecutive year.

Speaker #2: Now, moving on to slide 10, we provide an overview of cash generation and our balance sheet. For Q3, we generated $541 million in adjusted free cash flow, which removes the impact of $110 million in payments related to proceeds for the PA transaction, as we had indicated last quarter.

Speaker #2: This brings year-to-date adjusted free cash flow to 633 million dollars. Please note we will not make adjustments to free cash flow in Q4, and will return to providing guidance for reported free cash flow margin in fiscal year 27.

Speaker #2: This brings total share repurchases since the beginning of fiscal year 25 to 1.4 billion dollars, and we see continued runway moving forward, given our strong outlook for free cash flow.

Speaker #2: Focusing on capital returns, we remain aggressive buyers of our shares during Q3 to take advantage of the dislocation in our share price. As a result, our total repurchases through Q3 rose to 614 million dollars, which, combined with dividends paid, puts us on track to return more than 100% of free cash flow to our shareholders for the second consecutive year.

Speaker #2: Shifting now to the balance sheet, at the end of Q3, our net leverage ratio declined to 1.8 times, achieving our target for net leverage to be below 2.0 times, a quarter early, and we still plan to delever to approximately 1.5 times by the end of fiscal year 27.

Speaker #2: Please turn to slide 11 for our updated fiscal year 26 outlook. We're increasing our fiscal year 26 adjusted net revenue growth range to 9.5% to 10% year over year, narrowing our adjusted EBITDA margin range to 14.7% to 14.8%, raising our adjusted EPS range to $7.20 to $7.30, and raising our adjusted free cash flow margin forecast to 8%.

Speaker #2: Shifting now to the balance sheet, at the end of Q3, our net leverage ratio declined to 1.8 times, achieving our target for net leverage to be below 2.0 times a quarter early, and we still plan to delever to approximately 1.5 times by the end of fiscal year 27.

Speaker #2: Notably, our outlook for fiscal year 26 now implies nearly 19% year-on-year growth in adjusted EPS at the midpoint. As it pertains to Q4, we expect our adjusted EBITDA margin to be approximately 16%, with year-over-year net revenue growth of approximately 14%.

Speaker #2: Furthermore, we expect our tax rate to be roughly 27.5%, and our quarterly free cash flow to be approximately $150 million. Overall, we're very pleased with our year-to-date performance and our Q4 outlook, highlights that we expect a strong finish to fiscal year 26.

Speaker #2: Notably, our outlook for fiscal year '26 now implies nearly 19% year-over-year growth in adjusted EPS at the midpoint. As it pertains to Q4, we expect our adjusted EBITDA margin to be approximately 16%, with year-over-year net revenue growth of approximately 14%.

Speaker #2: With that, I'll turn the call back over to Bob.

Speaker #3: Thank you, Venk. In closing, I'd like to express my gratitude for the trust our clients continue to place in Jacobs. And to our more than 47,000 talented employees for their continued commitment to delivering excellence.

Speaker #3: We're tracking very well heading into the final quarter of the fiscal year, with strong Q3 performance enabling us to increase the midpoint of our full-year adjusted EPS outlook for the third consecutive time.

Speaker #2: Furthermore, we expect our tax rate to be roughly 27.5%, and our quarterly free cash flow to be approximately $150 million. Overall, we're very pleased with our year-to-date performance and our Q4 outlook, which highlights that we expect a strong finish to fiscal year ’26.

Speaker #3: Our backlog is at record level, and our pipeline continues to expand. Positioning us for profitable growth in FY 27 and beyond. Operator will now open the call for questions.

Speaker #2: With that, I'll turn the call back over to Bob.

Speaker #3: Thank you, Venk. In closing, I’d like to express my gratitude for the trust our clients continue to place in Jacobs, and to our more than 47,000 talented employees for their continued commitment to delivering excellence.

Speaker #1: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand.

Speaker #1: And to withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question for optimum sound quality and if muted locally, please remember to unmute your device.

Speaker #1: Please stand by while we compile the Q&A roster. Your first question comes from the line of Andy Kaplowitz with Citigroup. Your line is open.

Speaker #3: Our backlog is at a record level, and our pipeline continues to expand, positioning us for profitable growth in FY27 and beyond. Operator, we will now open the call for questions.

Speaker #1: Please go ahead.

Speaker #4: Good afternoon, everyone.

Speaker #5: Hi, Andy.

Speaker #6: Good afternoon.

Speaker #4: Bob or Venk, so backward growth is obviously been accelerating over the last several quarters. I think you mentioned 1.2 times, book to bill on net revenue, as you said.

Speaker #4: So I know it's early to talk about FY 27, but you're exit rating Q4 will be in the double-digit at 14%. So does that mean it's possible to grow FY 27 net revenue as fast or faster than FY 26, or at least at this point, give much higher visibility than usual toward that normal algorithm of mid to high single-digit growth that you have?

Speaker #1: Please stand by while we compile the Q&A roster. Your first question comes from the line of Andy Kaplowitz with Citigroup. Your line is open.

Speaker #5: Yeah, Andy, I take the question. Yeah, so obviously, as you pointed out, good solid growth in Q4 that we're projecting and good growth for the full year.

Speaker #1: Please go ahead.

Speaker #4: Good afternoon, everyone.

Speaker #5: Hi,

Speaker #6: Good afternoon.

Speaker #5: Certainly, our backlog is in a really good position. I think we will defer specifics on the growth algorithm for fiscal 27 on the next call, but suffice it to say that looking at our current backlog position, we feel pretty good about growth.

Speaker #4: Bob or Venk, so backlog growth has obviously been accelerating over the last several quarters. I think you mentioned 1.2 times, book to bill on net revenue, as you said.

Speaker #4: So I know it's early to talk about FY 27, but your exit rate in Q4 will be in the double digit at 14%. So does that mean it's possible to grow FY 27 net revenue as fast or faster than FY 26, or at least at this point, give much higher visibility than usual toward that normal algorithm of mid to high single digit growth that you have?

Speaker #5: At least in line with the long-term average that we put out there.

Speaker #4: Okay, that's helpful. And then, Bob, you had comments about sort of the data center business and life sciences advanced manufacturing in general. I mean, it does keep increasing as a percentage of NSR, so maybe how are we thinking about that sector now versus your investor day, year and a half ago, whatever it was?

Speaker #5: Yeah, Andy, I'll take the question. So, obviously, as you pointed out, we have good, solid growth in Q4 that we're projecting, and good growth for the full year.

Speaker #4: Can you grow that business sort of double digits for the foreseeable future, based on sort of what you see in maybe the share gains that you've had?

Speaker #5: Yeah, Andy, we absolutely can. It is a growth engine right now that is deep and broad for us, with the entire today ecosystem. And if we look all the way from kind of what we're doing in the high bandwidth memory chips, the water and power requirements that are feeding the data center, and then the complexity that's going into the data center, our share is increasing.

Speaker #5: And the clients that we're working for have got long pipelines ahead. So the answer is absolutely yes.

Speaker #4: So maybe, how are we thinking about that sector now versus your Investor Day a year and a half ago, or whenever it was? Can you grow that business double digits for the foreseeable future, based on what you see and the share gains you've had?

Speaker #4: Very nice. Thanks, guys.

Speaker #5: Thank you.

Speaker #1: Your next question comes from the line of Sangita Jain with KeyBank. Your line is open. Please go ahead.

Speaker #5: Yeah, Andy, we absolutely can. It is a growth engine right now that is deep and broad for us, with the entirety of that ecosystem.

Speaker #7: Great. Thank you. So much for taking my questions. One, I want to ask on water and environment. It seems like last quarter you had a lot of good winds a couple of them.

Speaker #5: And if we look all the way from kind of what we're doing in the high-bandwidth memory chips, the water and power requirements that are feeding the data center, and then the complexity that's going into the data center, our share is increasing, and the clients that we're working for have got long pipelines ahead.

Speaker #7: Bob, you highlighted in your prepared remarks. How should we think about the scope of some of those bookings and the period over which they're going to burn?

Speaker #7: I'm trying to figure out how we should think about water and environmental growth going forward.

Speaker #5: So the answer is absolutely yes.

Speaker #3: Yeah, so Sangita, the winds that we had in the quarter will start to burn in Q4. So kind of that inflection point that we've always been telegraphing that would come at the end of the year.

Speaker #4: Very nice. Thanks, guys.

Speaker #5: Thank you.

Speaker #1: Your next question comes from the line of Sangeetha Jain with KeyBank. Your line is open. Please go ahead.

Speaker #3: It's right in front of us. So you'll see sequential growth in the quarter. And then going into FY 27, we're positioned extremely well to be on those growth rates that we highlighted during the investor day of that mid to high single-digit growth for water and environmental.

Speaker #7: Great, thank you. So much for taking my questions. One, I want to ask on water and environment. It seems like winds a couple of them.

Speaker #7: Bob, you highlighted in your prepared remarks—how should we think about the scope of some of those bookings and the period over which they're going to burn?

Speaker #3: And the water sector continues to be high single-digit growth for us. And the pipeline, as well as the forward outlook, is very bright. So we're excited about the sector.

Speaker #7: I'm trying to figure out how we should think about water and environmental growth going forward.

Speaker #7: Got it. And then maybe one for Venk. Your SG&A, as percent of sales in three Q, was lower than it has been in a very long time.

Speaker #3: Yeah, so Sangeetha, the winds that we had in the quarter will start to burn in Q4. So kind of that inflection point that we've always been telegraphing that would come at the end of the year.

Speaker #7: And I'm wondering if there was anything one time, or if it's just a function of what you've been saying that you're going to grow your OPEX at a slower pace than your revenue, and that's starting to show maybe.

Speaker #5: Yeah, Sangita, that's exactly right. As our revenues continue to accelerate over the last several quarters, and based on the guidance we've provided, we made a commitment to spend at less than the revenue growth rate.

Speaker #3: And the water sector continues to be high single-digit growth for us. And the pipeline, as well as the forward outlook, is very bright.

Speaker #5: And that's exactly what we're seeing in terms of operating leverage. And you'll see more of that coming through in Q4 as well.

Speaker #3: So, we're excited about the sector.

Speaker #7: Got it. And then maybe one for Venk. Your SG&A, as percent of sales in three Q, was lower than it has been in a very long time.

Speaker #7: Got it. Thank you so much.

Speaker #5: Thank you.

Speaker #1: Your next question comes from the line of Steven Fisher with UBS. Your line is open. Please go ahead.

Speaker #7: And I'm wondering if there was anything one-time, or if it's just a function of what you've been saying—that you're going to grow your OPEX at a slower pace than your revenue, and that's starting to show maybe.

Speaker #4: Thanks. Good afternoon. A nice uptick there in the book to bill in the quarter. So as you guys look at your pipeline, how should we think about that book to bill from here?

Speaker #5: Yeah, Sangeetha, that's exactly right. As our revenues continue to accelerate over the last several quarters, and based on the guidance we provided, we made a commitment to spend at less than the revenue growth rate, and that's exactly what we're seeing in terms of operating leverage.

Speaker #4: It seems like the growth is poised to accelerate. So with that faster burn, how sustainable do you think, say, 1.5 times or better is as you accelerate?

Speaker #4: And how lumpy do you think it's going to be from here?

Speaker #5: And you'll see more of that coming through in Q4 as well.

Speaker #3: Yeah, Steve, I think if you look at the gross revenue book to bill versus the net revenue book to bill, let me kind of segregate those.

Speaker #7: Got it. Thank you so much.

Speaker #5: Thank you.

Speaker #3: The lumpiness in the gross revenue book to bill, where we would have a 1.5, a 1.6, you probably even remember last year we had a 1.7 for a quarter.

Speaker #1: Your next question comes from the line of Stephen Fisher with UBS. Your line is open. Please go ahead.

Speaker #4: Thanks. Good afternoon. A nice uptick there in the book to bill in the quarter. So as you guys look at your pipeline, how should we think about that book to bill from here?

Speaker #3: That's going to come up and down as some of these larger full-program delivery jobs are booked. But the 1.1 to 1.3-ish net revenue growth, pretty consistent.

Speaker #4: It seems like the growth is poised to accelerate. So with that faster burn, how sustainable do you think, say, 1.5 times or better is as you accelerate? And how lumpy do you think it's going to be from here?

Speaker #4: Okay. Sounds good. And then wondering if, Bob, you could give us an update on two things. One, Middle East activity. In general, how you're managing that over there.

Speaker #3: Yeah, Steve, I think if you look at the gross revenue book-to-bill versus the net revenue book-to-bill, let me kind of segregate those.

Speaker #4: And just international overall, is the pace of that business picking up? Clearly, you've had some good winds just kind of curious of how those two things are developing.

Speaker #3: The lumpiness in the gross revenue book to bill, where we would have a 1.5, a 1.6, you probably remember last year we had a 1.7 for a quarter.

Speaker #3: Yeah, so Steve, maybe I'll take the second part first, and then hone in on the Middle East. Internationally, we've done well. We're kind of in that 9% growth rate internationally.

Speaker #3: That's going to fluctuate as some of these larger, full-program delivery jobs are booked. But the 1.1% to 1.3%-ish net revenue growth is pretty consistent.

Speaker #3: And that is probably more skewed a little bit to Australia, New Zealand, and Asia. The Middle East is stable. And we've continued to do well there.

Speaker #4: Okay, sounds good. And then I was wondering if, Bob, you could give us an update on two things. One: Middle East activity, and in general, how you're managing that over there.

Speaker #3: But I'd say the European areas, again, stable. Mid-single digits. So overall, internationally, we see some continued pipeline growth, as well as stability as we look forward to the Q4, as well as into going into next year.

Speaker #4: And just internationally overall, is the pace of that business picking up? Clearly, you've had some good wins. Just kind of curious how those two things are developing.

Speaker #3: Yeah, so Steve, maybe I'll take the second part first, and then hone in on the Middle East. Internationally, we've done well. We're kind of in that 9% growth rate internationally.

Speaker #4: Thank you.

Speaker #1: Your next question comes from the line of Jamie Cook with Truist. Your line is open. Please go ahead.

Speaker #3: And that is probably more skewed a little bit to Australia, New Zealand, and Asia. The Middle East is stable. And we've continued to do well there.

Speaker #6: Hi, congrats on a nice quarter. I guess just two questions. One, Venk, there's still we're one quarter left. There's still implies a significant ramp.

Speaker #3: But I'd say the European areas, again, stable. Mid single digits. So overall, internationally, we see some continued pipeline growth, as well as stability as we look forward to the Q4, as well as into going into next year.

Speaker #6: Q3 to Q4, which makes sense, given the top-line growth of 14% you're talking about. But I guess why so much variability to 10 cents around the fourth quarter?

Speaker #6: What would be the drivers behind the low end versus the high end of the guide? And then my second question, I guess, sort of what struck me about the quarter, was the margin uplift then, I guess, the implied the 15%, and then implied margins going to 16% in the fourth quarter.

Speaker #4: you.

Speaker #1: Your next question comes from the line of Jamie Cook with Truist. Your line is open. Please go ahead.

Speaker #6: As I think about the trajectory for 2027, and we're thinking about a world where organic growth is accelerating and margins can expand, is it fair to say more of the margin uplift would come from IANF versus PA Consulting or any comments you want to make around that?

Speaker #6: Hi, congrats on a nice quarter. I guess just two questions. One, Venk, there's still one quarter left. That still implies a significant ramp.

Speaker #6: Q3 to Q4, which makes sense, given the top-line growth of 14% you're talking about. But I guess why so much variability to 10 cents around the fourth quarter?

Speaker #6: Thank you.

Speaker #5: Yeah, first of all, thank you for your comments, Jamie. Obviously, really good quarter. So I'll split the response into two halves, right? One is just focused on the net revenue growth, as well as the margin expansion.

Speaker #6: What would be the drivers behind the low end versus the high end of the guide? And then my second question, I guess, sort of what struck me about the quarter, was the margin uplift then, I guess, the implied, the 15%, and then implied margins going to 16% in the fourth quarter.

Speaker #5: So on the net revenue growth, we guided to about 14% for the quarter. As you know, we have an extra week in the Q4.

Speaker #5: So that in and of itself accounts for about, call it, 6% to 7%. So when you normalize it, we are growing at 8% for the quarter.

Speaker #5: So given the fact that we grew 7.5, 8%, or 8.3% in Q3, we see good line of sight to be able to grow the 14% for Q4.

Speaker #5: That's number one. It's driven by the fact that the program ramps that we talked about in Q3 and in Q2, they are now coming into full fruition in Q4, which drives the utilization and we have good visibility into that.

Speaker #6: Thank you.

Speaker #5: So that's from a revenue perspective. When you look at it from a margin perspective, we've done a pretty good job of increasing our margins sequentially over the last three quarters, as well as year on year.

Speaker #5: So, on the net revenue growth, we guided to about 14% for the quarter. As you know, we have an extra week in Q4, so that, in and of itself, accounts for about—call it—6% to 7%.

Speaker #5: As you recall, I think we started the year at 13.4. We went to 14.1. And then this quarter, we're at 15.2, so 110 basis points of sequential growth, as well as good year-on-year growth.

Speaker #5: So when you normalize it, we are growing at 8% for the quarter. So given the fact that we grew 7.5, 8% or 8.3% in Q3, we see good line of sight to be able to grow the 14% for Q4.

Speaker #5: And what we're guiding for in Q4 is 16%. So really good line of sight to be able to achieve that with the increased utilization that we talked about, as well as increased use of global delivery.

Speaker #5: That's number one. It's driven by the fact that the program ramps that we talked about in Q3 and in Q2, they are now coming into full fruition in Q4, which drives up utilization and we have good visibility into that.

Speaker #5: So really good visibility into achieving those targets for both revenue as well as EBITDA margin.

Speaker #3: And Jamie, I think on the question that you had with regards to '27 and where we see that continued margin expansion, I'd say it's pretty balanced.

Speaker #5: So that's from a revenue perspective. When you look at it from a margin perspective, we've done a pretty good job of increasing our margins, sequentially, over the last three quarters as well as year on year.

Speaker #3: That we would continue to get it from both INAF as well as PA Consulting, because we're right in the middle of the cost synergies that we're working on with PA Consulting, just as a reminder, PA Consulting does have the highest margins in that space.

Speaker #5: 15.2, so 110 basis points of sequential growth, as well as good year on year growth. And what we're guiding for in Q4.

Speaker #3: So we're continuing to grow on a base that's really high.

Speaker #6: Thank you.

Speaker #1: Your next question comes from the line of Andrew Whitman with Baird. Your line is open. Please go ahead.

Speaker #4: Yeah, great. Thanks for taking my question. So I just I think I heard a comment that you said in the fourth quarter you're going to report free cash flow without any adjustments.

Speaker #4: And that's great. Is there a similar comment that you can make like that related to your income statement? I know that obviously, over a year ago, you announced some actions for the IAF segment, but now, Bob, you just mentioned that you're kind of integrating PA.

Speaker #4: So what should the investment community expect in terms of income statement adjustments between GAAP and non-GAAP? And not just maybe for 4Q, but how long are you going to continue to recognize something there?

Speaker #4: And when can those two converge? Thanks.

Speaker #5: Yeah, Andy, I'll dig that question. I would say, obviously, you've seen with this Q3 print, the GAAP between GAAP and non-GAAP EPS was primarily driven by just a tax item.

Speaker #5: But overall, you've seen a pretty significant convergence between our GAAP and non-GAAP numbers, except for the PA acquisition. So from that standpoint, we feel pretty good about the quality of the earnings.

Speaker #5: And we will continue to make additional progress in Q4 and beyond. You'll see it from both the P&L side as well as from the free cash flow side.

Speaker #5: And we've already taken M&A off the table. So you don't have to expect a lot of these variances between GAAP and non-GAAP going forward.

Speaker #5: So our view is that with Q4, as we stated on the Q3 call, the fact that there was a tax delta because of how the PA compensation expenses were treated.

Speaker #5: So that'll have an impact on Q4, because it's for the full fiscal year. But going forward, that gap will reduce substantially and will be more in line with our non-GAAP and GAAP tax rates.

Speaker #4: Got it. I guess just on my follow-up then, I wanted to dig in on the environmental side. Obviously, it sounds like you had some wins here.

Speaker #4: In 3Q, that are going to help that growth rate improve in 4Q. I just was hoping you'd be a little bit more specific. Are these is there a general context to something?

Speaker #4: Is this state and local? Is this federal money flowing better? Is this PFAT? I mean, there's lots of different things that you do in this.

Speaker #4: And just thought that since this is an area that seems to be undergoing a little bit better momentum, maybe you'd want to elaborate on that a little bit more.

Speaker #5: Yeah, Andy, happy to. So we had two sizable wins in the private sector. And unfortunately, I can't name the two clients, but they are in the industrial space.

Speaker #5: So private sector, industrial space, long-term contracts that we won and we were successful in. The book-to-bill, ironically, are as a result in the quarter was over 1.3 just for the environmental business.

Speaker #5: So that balance between private and public, we're holding true to it, because in the public sector, those things that you just mentioned with regards to PFAS and the DOD continuing to go back to some of those regulatory items that got paused in 2025, we're capitalizing on that work too.

Speaker #5: So going into FY '27, we're feeling confident that our environmental business will return back to the levels that we previously had.

Speaker #4: Great. Thank you.

Speaker #1: Your next question comes from the line of Chad Dillard with Bernstein. Your line is open. Please go ahead.

Speaker #6: Hey, good evening, everyone. So question for you guys on the infrastructure and advanced facilities business. Looks like on a constant currency basis, margins are up about 50 basis points.

Speaker #6: Can you talk about some of the moving parts there? How much is mixed? How much is pricing? How much is leveraged from technology? And then as we're thinking through our 2027 bridge, how do you think about that opportunity going forward?

Speaker #5: Yeah. So Chad, thanks for the question. So I'd say as you pointed out, good expansion in margins, both sequentially as well as on a yearly basis.

Speaker #5: As you may recall, when we announced our margin trajectory at the February 2025 investor day, we laid out specific things in terms of the drivers of that margin.

Speaker #5: I'd say we've shown, as Sangeetha pointed out earlier, good operating leverage that continues to be a part of the core principle to drive continued margin expansion.

Speaker #5: So that'll be a mainstay going forward. But in addition to that, with the other three buckets you might recall, we talked about mix, we talked about the commercial models and then also use of global delivery.

Speaker #5: Really good progress on global delivery, especially with our life sciences and advanced manufacturing businesses use a lot of global delivery implementation. So that's driving a lot of the margin expansion.

Speaker #5: I'd say on the mixed side, you'll see more of an impact coming in FY '27 and beyond. But operating leverage and global delivery are the bigger drivers in the first four or five quarters since we announced the targets.

Speaker #5: So well on track in terms of margin expansion. And just for everybody's benefit, you'll recall that in fiscal year '25, we increased our margins by 110 basis points.

Speaker #5: And in fiscal year '26, at the midpoint of the guidance that we provided, that'll represent another 90 basis points of margin expansion. So 200 basis points of margin expansion, which we think is industry leading.

Speaker #5: And we have lots more margin expansion ahead of us as well.

Speaker #6: Great. That's helpful. And then second question on data centers. So with the shift from 34-volt to 800-volt architecture, are you starting to see those sorts of data centers coming through your design pipeline?

Speaker #6: How does the design intensity change when you're making that shift? Any color you can give on that?

Speaker #5: Yeah, there's complexities that are going on, Chad, that I'd say is increasing our scope. So that 800-volt DC solid-state transformer is a big deal, as has been well publicized.

Speaker #5: But I'd say I wouldn't point to that as the single source of that inflection point. The complexity in all of the utility requirements to feed the next generation of chips is increasing the complexity as well as the scale.

Speaker #5: And so that's where kind of it's in the sweet spot of Jacobs. And so if we look at the clients that we're working for, not just the hyperscalers, but also the neoclouds, we're on that journey with them.

Speaker #5: And hence, you can see the results in our performance.

Speaker #6: Great. Thank you. Pass it on.

Speaker #1: Your next question comes from the line of Michael Dudas with Vertical Research. Your line is open. Please go ahead.

Speaker #4: Good afternoon, gentlemen.

Speaker #7: Good afternoon, Mike.

Speaker #5: Good afternoon, Mike.

Speaker #6: Bob, just maybe you could share some further thoughts on critical infrastructure and the tone of the types of business and what areas say with highway, maybe any brief comments on what maybe happen out of the next IIJA bill.

Speaker #6: And on PA, you're going to with the change in government, it should be helpful. But anything with the integration or the past several months and how that could drive some more growth and some maybe the business with your current customers in the US or other parts of the world to help drive helpful on the margin and also the growth for PA itself?

Speaker #5: Sounds great. So a lot there, Mike. Let me kind of take one at a time, with regards to critical infrastructure, again, really solid growth.

Speaker #5: Just as a kind of a recap, that vertical contains our transportation business, energy and power, and cities and places. Transportation business continues to be a real growth vector for us in all geographies.

Speaker #5: And growing at a high single-digit rate, I'd say the subsectors that are channeling that growth are around aviation, the rail business globally, as well as in the ports and maritime world.

Speaker #5: Highways and bridges was a nice element in Q3. But those three, we've got a market-leading position there, and we're seeing a lot of activity there.

Speaker #5: E&P has been really, really strong. Double-digit growth. Predominantly in the US, around our T&D efforts. And I'd say outside the US, more on the generation side.

Speaker #5: And so if you think Sudelink or Mariner's Link, the renewables effort that's going on outside the US is really been a nice growth trajectory for us.

Speaker #5: And then in cities and places, nice growth in the US. That's cities and places team has some really, really strong building design capabilities, which we're able to not only apply to venues, but also has been with the resource needs that we have in data centers, that team has really been facilitating that growth that we're seeing in the data center business.

Speaker #5: I'd say probably the one area that we continue to monitor is a bit of a, I'd say, temporarily pause in the Middle East. Still grew in the Middle East overall because of our utility work.

Speaker #5: But that would be the only area where I'd say a little bit of a pause, but definitely some pipeline work that would show upside next year.

Just as a, as a kind of a recap uh that that that vertical contains our transportation business energy, and power and cities and places transportation. Business continues to be a real growth Vector for us in all geographies and growing at a high single digit rate. Um, I'd say the sub-sectors that are, uh, that are channeling that growth are around. Aviation, uh, the rail business globally, uh, as well as in the ports, in Maritime World, highways and bridges was a nice, uh, was a nice element in Q3. But those 3, you know, we've got a market meeting position there and we're seeing a lot of activity. There enp has been, uh, has been really, really strong double digit growth, um, predominantly in the US around our T and d, uh, efforts. And I'd say outside the US, more on the generation side. And so, uh, if you think pseudo link or marinus link, you know, the Renewables effort that's going on outside the

Speaker #5: On IIJA, we actually feel we've been saying this for a while. With a possible extension going into December, we feel like the funding flows coming from IIJA will continue we've always said that there was always a two to three-year lag from the expiry date just as monies are obligated and then spent.

The US is uh has really been a nice growth trajectory for us and um and then in cities and places. Nice growth in the US that cities in places team has some really, really strong building design capabilities which we're able to not only not only apply to, uh, venues. But also has been, you know, with the resource needs that we have in, uh, in data centers that team has really been facilitating, uh, that growth that we're seeing in in the data center business.

Speaker #5: We're still kind of at that 50% level spent. And so going into the midterms and coming out of the midterms and everything that's being set up for Build America 250, hopefully next year, the funding levels have been pretty solid as a result of those stimulus bills.

I'd say probably the 1 area that we continue to, uh,

Speaker #5: And we'll continue on feeding all those things that I before mentioned around transportation. PA, I'd say the areas where we're starting to see some real growth, again, notwithstanding my comment in Q3 on the kind of the temporary disruption that we're already starting to see come back in July, defense and security in Europe as the UK MOD has taken a leadership position on what an independent Europe defense posture looks like.

To monitor is uh, bit of a, of a, I'd say temporarily pause in uh in the Middle East, still grew in the Middle East overall because of our utility work. Um, but that would be the only area where I'd say, a little bit of a pause, but definitely some pipeline work that would show upside next year.

On iija. You know, we we actually feel we've been saying this for a while

Speaker #5: PA is right in the middle of that. And the synergies with the US, with Jacobs, in the INAF business on setting up that defense infrastructure, whether it be ports and maritime or manufacturing facilities for the defense primes, is something that we've already started to see some nice progress there.

Speaker #5: And then transportation in the US, PA's got a strong presence in the UK. And that's serving as a nice synergistic value as we look at the US and the revenue synergies coming out of the PA relationship.

With a possible extension going into December. Um, you know, we uh we feel like the funding flows is coming from IJ will continue. We've always said that there was always a 2 to 3 year lag from the expiry date just as as as as monies are obligated. And then spent, we're still kind of at that 50% level spent and so going into um the midterms and coming out of the midterms and everything that's being set up for, uh, go to America, 250, you know, hopefully next year. Um, the funding levels have been pretty solid uh, as a result of those uh, those stimulus bills. And uh, and we'll continue on feeding all those things that I have for mentioned, uh, around transportation.

Speaker #5: So hopefully that gives you kind of a broader overview.

Speaker #4: Excellent, Bob. Thank you.

Speaker #1: As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Jerry Revich with Wells Fargo.

Speaker #1: Your line is open. Please go ahead.

Speaker #4: Hi, everyone. Good afternoon. Thank you for taking my question. This is Andrew Ozion for Jerry Revich. I just wanted to ask, last quarter you saw a significant expansion in the AI-specific data center infrastructure pipeline.

Speaker #4: I was curious if we can get an update on how that's progressing. This quarter, how much of that pipeline is awarded or in backlog and what's kind of the conversion rate that you're embedding into your guidance and maybe even into next year?

Um pa uh I'd say the areas where we're starting to see some, some real growth again. Not withstanding my comment in Q3 on the kind of the temporary disruption uh that we're already seeing to come back in July uh defense and Security in Europe as the UK mod has taken a, you know, a leadership position on what, uh, a an independent Europe defense posture. Looks like PA is right in the middle of that. And the synergies with the US with uh with Jacobs uh in the ins, INF business on setting up that defense infrastructure, whether it be ports and Maritime or manufacturing facilities for the defense primes, uh, is something that we've already started to see some nice progress there and then transportation in the US pause, got a strong presence in the UK and that's serving as a, as a nice synergistic value. As we look at the, the US and the revenue synergies coming out of of, uh, of the PA relationship. So hope that gives you kind of a broader overview

Excellent Bob, thank you.

Speaker #5: Yeah. Maybe I'll take the front part of that and then Venk you can take kind of how much of that is in backlog. So Andrew, our backlog growth just in the data center space is has been significant.

As a reminder, if you would like to ask a question. Please press star 1 to raise your hand. Your next question comes from the line of Jerry revich with Wells. Fargo, your line is open, please go ahead.

Speaker #5: And I'd say kind of in the order of doubling over the period of time. The pipeline has gone up 3X. And so the visibility that we see before was probably 6 to 9 months.

Speaker #5: We're getting visibility into the pipeline that extends out 2 to 3 years. So this is something that we see and again, we're being selective.

Speaker #5: Because there is also a lot of speculative work that's out there. So the work that we are that we are pursuing let me back up.

Hi everyone. Uh, good afternoon. Thank you for taking my question. This is Andrew ozion for uh, Jerry revich. Um, I just wanted to ask, you know, last quarter. You saw a, a significant expansion in the the AI specific data center infrastructure pipeline, uh, was curious if we can get an update on on how that's progressing this quarter. Um, how much of that pipeline is is awarded or in backlog and, and what's kind of the conversion rate that you're embedding into uh, into your, your guidance and uh and maybe even into next year.

Speaker #5: Winning executing and continue to pursue are those where they're established customers of ours that we've had for a while. The NeoCloud providers are coming in are normally backed by folks that we've known for a long time within the hyperscale world.

Speaker #5: So overall, really strong trajectory in the data center space.

Speaker #6: Yeah. And a bit extended beyond data centers into just the overall AI ecosystem. You recall last quarter we said it was roughly 10% of our business.

Speaker #6: Now it's at 11%. And the growth is actually accelerating. So we are doing a good job of converting that backlog into real revenue. And that's driving not only growth for us in Q4, but we expect significant growth in fiscal '27, which we'll quantify I also want to add to this.

Speaker #6: The previous question about revenue synergies. Obviously, AI is a big part of what PA does as well in terms of implementing agentic AI for not only their clients, but it's an opportunity for us to also use it internally both within the PA ecosystem as well as the Jacobs ecosystem.

Speaker #6: So AI is really a big driver of our growth for us. And you've seen that being demonstrated in terms of our revenue growth, but also over time with margin expansion.

To the pipeline that extends out 2 to 3 years. So, this is, uh, this is something that, uh, that we see and again, we're being selective, uh, because there is also a lot of speculative work that's out there. So the work that we are, um, that we are pursuing. Let me back up, winning executing and continue to pursue. Uh, are those where, uh, they're established customers of ours that we've had for a while? The Neo Club providers are coming in, are normally backed by we've known for for a long time within the hyperscale world. So overall, you know, really strong trajectory in the data center space,

Speaker #4: Thank you. I appreciate that. I guess secondly, our customers kind of still indicating that the US semiconductor construction activity is accelerating and maybe what are some of your early thoughts for FY '27 on that front?

Speaker #4: Thank you.

Speaker #5: Yeah. Short answer, Andrew is absolutely yes. Our customers are pushing us to accelerate those designs. And we're working for the largest high-bandwidth memory chip manufacturer in the US today.

Speaker #5: So that pipeline continues to grow. And now with the announcements that you've heard from Intel moving forward, as we've publicly stated, we've been the engineer of record for Intel for a couple of decades.

Yeah, and I've been extended Beyond uh data center just the overall AI ecosystem. You you recall last quarter? We said it was roughly 10% of our business. Now it's 11% and it you know, the growth is actually accelerating. So we are doing a good job of converting that backlog into real revenue and that's driving. Not only growth for us in Q4, but we expect significant growth in uh, in a fiscal 27 which will quantify. I also want to add to this, you know, the previous question about Revenue synergies. You know, it obviously AI is a big part of what PA does as well in terms of you know, implementing agentic AI for not only their clients but it's an opportunity for us to also use it internally both within the PA ecosystem as well as the Jacobs ecosystem. So uh AI is really uh a Big Driver of our growth for us. And you've seen that being demonstrated in terms of our Revenue growth but also over time with margin expansion.

Speaker #5: And that relationship, we stayed with them during this kind of slower time. And we're starting to see that pipeline grow going into '27.

Speaker #4: That's great. I'll pass it on. Thank you for taking my questions.

Speaker #1: There are no further questions at this time. I will now turn the call back to Bob Pragada for closing remarks.

Speaker #5: Well, thank you everyone for joining us for our earnings call. We look forward to engaging with many of you over the coming weeks. And have a great evening.

Thank you, I appreciate that. Um, I, you know, I guess I can lie uh, our customers, kind of still indicating that the, the US semiconductor construction activities is accelerating and and, and maybe what are your some of your early thoughts for FY, 27 on on that, on that front. Thank you. Short answer, Andrew is absolutely, yes. Uh, our our customers are are, are, are, are pushing us to, uh, to accelerate those, uh, those designs. And, um, and we're working for the, you know, the the, the, the largest high bandwidth memory, uh, chip manufacturer, uh, in the US today. So, uh, that that pipeline continues to grow and now with so the announcements that you've heard from Intel, uh, moving forward, you know, as we've publicly stated, we've been the engineer of record for Intel, for a couple of decades and, uh, and that relationship. Um, we stayed with them during this kind of slower time. And, uh, we're starting to see that pipeline grow going into the 27.

That's great. Uh, I'll pass it on. Thank you for taking my questions.

There are no further questions at this time. I will now turn the call back to Bob Pragada for closing remarks.

Well, thank you everyone for joining us for our earnings call. We look forward to engaging with many of you over the coming weeks and have a, a have a great evening.

This concludes today's call. Thank you for attending. You may now disconnect.

Q3 2026 Jacobs Solutions Inc Earnings Call

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