Jacobs Solutions Inc. (J) | The Buildout — AI Infrastructure
The Verdict
Jacobs is a global professional-services and infrastructure delivery firm. For the AI buildout, it designs and delivers the physical layer: data center campuses, semiconductor manufacturing facilities, and the power, water, and environmental systems that support AI compute. Its work spans advisory and consulting through engineering, procurement, construction management, program delivery, and long-term operations, with a consulting arm in PA Consulting.
| Market Cap | — |
| Revenue (TTM) | $13.2B |
| Revenue Growth | +74.1% |
| EBITDA Margin (TTM) | 6.5% |
| Net Debt | $3.2B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Direct AI build-out was 11% of adjusted net revenue in Q3, up about 100 basis points sequentially, with data center revenue growing more than 100% year over year in Q2.
- Backlog reached a record $29 billion in Q3, up 27% year over year; gross profit in backlog grew 14% versus net revenue growth of 11%.
- Adjusted EBITDA margin stepped from 13.4% to 14.1% to 15.2% during FY26, with Q4 guided to approximately 16%.
- FY29 targets were raised: adjusted EBITDA margin 17%+ and free cash flow margin 11%+, implying $1.2 billion to $1.3 billion of annual free cash flow.
- Net leverage fell to 1.8x by Q3, below the 2.0x target a quarter early, with management targeting about 1.5x by end FY27.
What We’re Watching
- Environmental recovery has slipped from second-half expectations to Q4 and now FY27; Q3 Water & Environmental grew only a little more than 1% year over year.
- PA Consulting Q3 revenue was flattish and operating profit grew only 2%; management expects Q4 sequential recovery.
- Middle East commentary shifted from 'stable' in prepared remarks to a 'temporarily pause' in Q&A, a disclosure gap to monitor.
- Q4 reported net revenue growth of about 14% includes roughly 6–7 points from an extra week; normalized growth is about 8%.
The thesis is strengthening on the core AI and backlog evidence, and management has now raised guidance three consecutive quarters. The margin path is improving and leverage is ahead of plan, but the story is not clean: environmental recovery and PA reacceleration are still promised rather than printed. The open question is whether Q4 and FY27 deliver those recoveries at the same time the AI pipeline converts.
Earnings Beat
In Q3 FY2026, management reported adjusted net revenue growth of more than 8% year over year, all organic, while gross revenue rose more than 34% as pass-through scaled. Adjusted EBITDA was $367 million, up 17%, with adjusted EBITDA margin expanding 109 basis points to 15.2%. Adjusted EPS was $1.84, about 14% higher, and backlog reached a record $29 billion.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.7B | $3.3B | $2.9B | +27.0% |
| Gross margin | 21.5% | 23.2% | 25.4% | -390bps |
| EBITDA | −$25M | $292M | $267M | −109.3% |
| EPS | $-0.39 | $1.12 | $0.05 | −944.4% |
| Backlog | $29B | $27B | n/a | +27% YoY |
| TTM book-to-bill | 1.4x gross / 1.2x net | 1.4x gross / 1.2x net | n/a | — |
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.— Bob Pragada, CEO, August 4, 2026
Management tone: Management's tone became more specific and confident from Q2 to Q3. Q2 used inflection language, while Q3 added quantified AI share, a 3x pipeline, and the FY26 margin staircase. Management also volunteered soft spots, including environmental slippage, PA U.K. disruption, a Middle East pause, and the Q4 extra-week normalization.
Management Guidance
For FY26, management guided adjusted net revenue growth of 9.5%–10%, adjusted EBITDA margin of 14.7%–14.8%, adjusted EPS of $7.20–$7.30, and adjusted free cash flow margin of 8%. For Q4, management guided adjusted EBITDA margin of approximately 16%, net revenue growth of approximately 14% year over year, a tax rate of roughly 27.5%, and quarterly free cash flow of approximately $150 million; the Q4 revenue figure includes a 6%–7% benefit from an extra week, leaving normalized growth of about 8%.
Trajectory
Reported Q2 FY2026 revenue accelerated sequentially to $3,694.9 million, up 12.2% from Q1, but pass-through revenue nearly doubled to $1.367 billion, so adjusted net revenue grew about 9%. In Q3, gross revenue rose more than 34% while adjusted net revenue grew over 8%, the same pass-through dynamic more pronounced. Adjusted EBITDA margin improved from 14.1% in Q2 to 15.2% in Q3, even as reported Q2 EBITDA was negative on restructuring and transaction charges tied to the PA deal.
The Model
The model's locked projections are FY+1 revenue of $9,667 million with EBITDA of $1,431 million, a 14.8% margin, and FY+2 revenue of $10,550 million with EBITDA of $1,646 million, a 15.6% margin. The FY+2 projection assumes continued adjusted EBITDA margin expansion toward the company's long-term targets.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $12.0B | $9.7B | $10.6B |
| YoY Growth | — | −19.6% | +9.1% |
| EBITDA | $1.1B | $1.4B | $1.6B |
| EBITDA Margin | 9.3% | 14.8% | 15.6% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.4% above analyst consensus.
For FY26, management guided adjusted net revenue growth of 9.5%–10%, adjusted EBITDA margin of 14.7%–14.8%, adjusted EPS of $7.20–$7.30, and adjusted free cash flow margin of 8%. For Q4, management guided adjusted EBITDA margin of approximately 16%, net revenue growth of approximately 14% year over year, a tax rate of roughly 27.5%, and quarterly free cash flow of approximately $150 million; the Q4 revenue figure includes a 6%–7% benefit from an extra week, leaving normalized growth of about 8%.
What Could Go Right — and Wrong
- A second hyperscaler or neocloud data-center relationship at Beacon Point scale beyond Hut 8 would diversify the AI delivery franchise.
- Broadening AI work into power and water as visible revenue streams would extend the AI ecosystem beyond data center construction.
- Sustained environmental book-to-bill above 1.0 through Q4 and FY27 would flip the lagging segment to growth.
- Full realization of PA Consulting's $20M+ cost synergies and a return to pre-disruption growth would reinforce the FY29 margin path.
- NVIDIA Vera Rubin plan-of-record work converting into a visible multi-year program would tie Jacobs to next-generation semiconductors.
- A hyperscaler data-center capex pause or re-phasing would hit the fastest-growing end market first.
- Adjusted net revenue continuing to grow near 8% while gross revenue grows 30%+ would mean the mix is not converting to higher-margin fee work.
- Environmental recovery failing in Q4/FY27 after repeated push-outs would damage management credibility.
- PA U.K. disruption broadening into structural public-sector contraction would slow the highest-margin segment.
- The Middle East pause becoming a freeze would turn a region competitors are booking into a headwind.
Looking Ahead
The next twelve months are anchored by Q4 FY2026 results, where management has guided approximately 14% reported net revenue growth with normalized growth near 8%, an approximately 16% adjusted EBITDA margin, and roughly $150 million of free cash flow. Environmental and PA Consulting recoveries are promised for Q4 and FY27. Beyond that, Hut 8 Beacon Point initial energization is targeted for 2027, and the data center pipeline has visibility through 2027–2028.
- Q4 FY2026Q4 results vs guidance — Tests ~16% EBITDA margin, ~$150M FCF, and ~8% normalized net revenue growth.
- Q4 FY2026Environmental sequential improvement — Q4 W&E growth tests environmental book-to-bill conversion.
- FY27PA cost synergies — At least $20M of annual cost synergies targeted for FY27.
- 2027Beacon Point energization — Initial energization targeted for 2027 tests project execution.
- Through 2027–2028Data center pipeline conversion — Awards and revenue conversion from a pipeline up 3x.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $7.4B | $12.0B | $13.2B | +63.0% |
| Gross Margin | 14.9% | 24.8% | 23.4% | +990bps |
| EBITDA | $804M | $1.1B | $8.6B | +39.5% |
| EBITDA Margin | 10.9% | 9.3% | 6.5% | 157bps |
| Net Income | $806M | $284M | $384M | -64.7% |
| Free Cash Flow | $934M | $607M | $4.6B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)23.4%
- EBITDA Margin (TTM)6.5%
- Net Margin (TTM)2.9%
- ROIC7.5%
- FCF Conversion56.7%
- SBC / Revenue0.4%
The Company
Jacobs is a global professional-services and infrastructure-delivery firm with more than 47,000 employees after completing the PA Consulting acquisition. The FY2025 10-K describes end-to-end capabilities from advisory and consulting through design, program delivery, and lifecycle management across advanced manufacturing, energy, environmental, life sciences, transportation, and water. For AI infrastructure, Jacobs provides data center design, program management, and full EPCM delivery, plus semiconductor fab design and engineering, power, water, and environmental work.
Jacobs operates two segments: Infrastructure & Advanced Facilities and PA Consulting. I&AF posted nearly $2.1 billion of net revenue in Q3 FY2026, up 10% year over year and a quarterly record; PA Consulting consistently posts operating margins above 22%. Its footprint is primarily office space in the U.S., U.K., Australia, India, Canada, Poland, and UAE, and it scales through a global delivery model rather than owned construction assets.
Business Segments
Competitive Landscape
Jacobs competes across a broad professional-services and engineering field. The 10-K lists AECOM, Tetra Tech, WSP, Arcadis, Bechtel, Arup, Endava, Exponent, Mott MacDonald, Stantec, Parsons, Accenture, Mace, AtkinsRealis, Altair, Montrose, Capgemini, Fluor, Deloitte, KPMG, PwC, Bain & Company, and McKinsey & Company. The supplied sources do not provide firm-specific AI data center competitor statistics beyond this competitive set.
- StantecNamed in the 10-K competitive set.
- AECOMNamed in the 10-K competitive set.
- ParsonsNamed in the 10-K competitive set.
- Tetra TechNamed in the 10-K competitive set.
- FluorNamed in the 10-K competitive set.
Supply Chain
Jacobs sits between AI compute demand and physical delivery, with customers such as Hut 8 and Microsoft and component partners including NVIDIA. Hut 8's management names Jacobs directly in the supplied neighbor calls.
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