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Tetra Tech reported Q3 FY2026 revenue of $1.3 billion, down from $1.4 billion a year earlier. On the basis used by the consensus, revenue was $1.1 billion against a $1.1 billion estimate, with the reported result 2.60% above consensus. Adjusted EPS of $0.42 exceeded the $0.40 consensus.
The company’s filing attributed the year-over-year revenue decline primarily to reduced USAID/Department of State and disaster response work in its Government Services Group. The filing reported that the segment’s revenue fell 15.6%, while Commercial/International Group revenue rose 7.7%, helped by water utility work, including digital projects primarily in the U.K.
Tetra Tech reported diluted EPS of $0.42, compared with $0.43 a year earlier. Gross margin was 18.6%, versus 18.4%, and operating margin was 12.1%, versus 12.0%. The company reported free cash flow of $225.1 million, compared with $346.1 million in the year-ago quarter.
| Q3 FY2026 | Q3 FY2025 | Change | |
|---|---|---|---|
| Revenue | $1.3 billion | $1.4 billion | −4.47% |
| Diluted EPS | $0.42 | $0.43 | −2.33% |
| Gross margin | 18.6% | 18.4% | 0.2 percentage points |
| Operating margin | 12.1% | 12.0% | 0.0 percentage points |
| Free cash flow | $225.1 million | $346.1 million | −35.0% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $0.42 | $0.40 | Beat by 5.00% |
| Revenue | $1.1 billion | $1.1 billion | Beat by 2.60% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
CEO Roger Argus said international work grew 12% year over year, driven by water programs in the U.K., Ireland and the Netherlands, Canadian infrastructure work, and mining and digital automation in Australia. He said U.S. federal work also grew 12%, while U.S. commercial work rose 1% as energy, transmission and mining activity offset some of the decline in renewable energy work.
Argus said backlog increased sequentially by 5% to just under $4.5 billion, its second consecutive quarterly increase. He said commercial orders included data-center automation, power and transmission services, and sediment restoration. On a question about backlog, he explained that Tetra Tech includes only contracted, funded and authorized work, and that some recent orders were initial funding for longer-term programs.
Asked about federal work, Argus said reduced staffing in contracting offices had created bottlenecks in task orders and awards. He also said uncertainty around the U.S. administration had made some commercial clients cautious about awarding programs.
On municipal funding, Argus said clients were considering rate increases and other sources of funding. He said municipal water treatment had grown by double digits year over year in Q3, but reduced federal co-funding had affected flood protection projects.
Argus described AI as a tool for technical staff to assess larger data sets and evaluate alternatives. He said it could also support margin expansion on fixed-price projects. Asked about mining, he said the company was following clients’ exploration and development plans but was reluctant to call the activity the start of a larger cycle.
For the quarter ahead, Argus said the company was focused on continuing backlog growth and building a base of work into the new fiscal year.
Guidance
Tetra Tech increased its fiscal 2026 adjusted EPS guidance to $1.56 to $1.59. The company also narrowed its fiscal 2026 net revenue range to $4.315 billion to $4.365 billion, raising the midpoint. Argus said the guidance assumes a 27.3% effective tax rate and excludes contributions from future acquisitions.
| Metric | For | Guide | Previous guide | Change |
|---|---|---|---|---|
| Revenue, Data Center | FY2026 | $60.0 million | — | New |
| Tax rate | FY2026 | 27.3% | — | New |
| EPS, non-GAAP | FY2026 | $1.56–$1.59 | — | New |
| Revenue | FY2026 | $4.3 billion–$4.4 billion | — | New |
| EPS, non-GAAP | Q4 FY2026 | $0.45–$0.48 | Q3 FY2026: $0.38–$0.41 | Raised |
| Revenue | Q4 FY2026 | $1.1 billion–$1.2 billion | — | New |
| Revenue, Net Revenue | FY2026 | $4.3 billion–$4.4 billion | $4.3 billion–$4.4 billion | Held |
| EPS | Q4 FY2026 | $0.45–$0.48 | — | New |
| Revenue, Net Revenue | Q4 FY2026 | $1.1 billion–$1.2 billion | Q3 FY2026: $1.1 billion–$1.1 billion | Raised |
| Operating margin, Cig | FY2026 | Tetra Tech expects CIG margins to improve through the rest of FY2026 and return to normal levels. | — | — |
| Revenue, Usa | Q4 FY2026 | $20.0 million | Q3 FY2026: $20.0 million | Held |
| Backlog | FY2026 | Tetra Tech expects backlog to continue growing through the rest of FY2026. | — | — |