JACOBS SOLUTIONS INC. - 10-Q Filing Summary
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended March 27, 2026 (Fiscal Q2 2026). Jacobs Solutions Inc. operates as a global professional services firm with two primary segments: Infrastructure & Advanced Facilities (I&AF) and PA Consulting. The reporting period is significantly impacted by the completion of the PA Consulting Transaction on March 20, 2026, where Jacobs acquired the remaining 29% stake in PA Consulting, eliminating redeemable noncontrolling interests. Additionally, the company continues to report the Critical Mission Solutions and Cyber & Intelligence businesses as discontinued operations following their separation into Amentum in September 2024.
Key Financial Metrics
| Metric | Three Months Ended Mar 27, 2026 | Six Months Ended Mar 27, 2026 |
|---|---|---|
| Revenues | $3,694.9 million | $6,988.2 million |
| Gross Profit | $794.9 million (21.5% margin) | $1,560.1 million (22.3% margin) |
| Operating Profit (Loss) | $(81.2) million | $151.4 million |
| Net Earnings Attributable to Jacobs | $(45.9) million | $79.6 million |
| Diluted EPS | $(0.34) | $0.79 |
| Cash and Cash Equivalents | $1,371.9 million | $1,371.9 million (Balance Sheet) |
| Long-Term Debt | $4,084.2 million | $4,084.2 million (Balance Sheet) |
| Operating Cash Flow | N/A (Quarterly) | $(103.4) million (Used) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 27.0% year-over-year for the quarter and 19.6% for the six-month period, driven by strong performance in the I&AF segment and growth in PA Consulting.
- Operating Loss in Q2: The company reported an operating loss of $81.2 million for the quarter, compared to an operating profit of $208.6 million in the prior year quarter. This was primarily due to $207.0 million in incremental SG&A expenses related to the PA Consulting Transaction (vesting of equity incentives and employee benefit trust distributions).
- Debt Expansion: Long-term debt increased by approximately $1.8 billion compared to the prior fiscal year-end. This was driven by the issuance of $1.3 billion in new bonds (4.75% due 2031 and 5.375% due 2036) and a $1.2 billion term loan facility to fund the PA Consulting acquisition.
- Discontinued Operations: Net loss from discontinued operations was $2.9 million for the quarter and $2.3 million for the six months, primarily related to foreign currency translation impacts on indemnity reserves from the separated Amentum business.
- Effective Tax Rate: The effective tax rate for the quarter was 34.5% (vs. 90.6% prior year), and 37.1% for the six months (vs. 98.9% prior year). The prior year rates were skewed by non-deductible losses on the former Amentum investment.
Guidance, Outlook, and Risks
- PA Consulting Integration: Management expects the full ownership of PA Consulting to strengthen capabilities in strategic advisory and technology-enabled solutions. However, significant one-time transaction costs and compensation expenses have impacted current earnings.
- Backlog: Total backlog increased to $26.97 billion as of March 27, 2026, up from $22.16 billion in the prior year, driven by growth in Advanced Manufacturing, Life Sciences, and Transportation markets.
- Liquidity: The company maintains $1.37 billion in cash and $994.7 million in available borrowing capacity under its new revolving credit facility. Management believes liquidity is adequate to fund operations, debt service, and remaining PA Consulting consideration.
- Risks: Key risks include geopolitical instability, inflation, interest rate fluctuations on variable debt, and the successful integration of PA Consulting. The company also faces ongoing tax audits and potential adjustments related to the Separation Transaction.
- Capital Allocation: The company continues its share repurchase program, with $746.4 million remaining under the 2025 authorization. A quarterly dividend of $0.36 per share was declared.
Investor Verification Checklist
- PA Consulting Transaction Costs: Verify the sustainability of earnings once the one-time $207 million+ in transaction-related SG&A and compensation charges are excluded.
- Debt Servicing: Assess the impact of the increased debt load ($4.08 billion) on future interest expenses, particularly given the mix of fixed and variable rate instruments.
- Segment Margins: Monitor gross margin trends in the PA Consulting segment, which faced lower utilization trends despite revenue growth.
- Discontinued Operations: Confirm that no further material liabilities remain from the Amentum separation, specifically regarding the indemnity reserves mentioned in Note 14.
- Backlog Conversion: Evaluate the conversion rate of the $26.97 billion backlog into revenue, noting that a significant portion is subject to client cancellation or scope changes.