Jacobs Solutions Inc.: A Strategic Powerhouse in Data Center and Water Infrastructure Amid AI-Driven Growth and Margin Expansion

Jacobs Solutions Inc. (J) has emerged as a standout player in the global infrastructure landscape, leveraging its dual expertise in data center and water infrastructure to capitalize on two of the most critical megatrends of the 21st century: digital transformation and climate resilience. With a $22.7 billion backlog, robust margin expansion, and AI-driven innovation, the company is not just adapting to market shifts—it's shaping them. For investors, the question is no longer whether Jacobs is positioned for growth, but how much of this growth can be captured and sustained.

Financial Fortitude: Backlog, Margins, and Earnings Momentum

Jacobs' fiscal third-quarter 2025 results underscore its financial strength. Total backlog surged 14.3% year-over-year to $22.69 billion, with the Infrastructure & Advanced Facilities (I&AF) segment accounting for 98% of this figure. This backlog, coupled with a 1.2x book-to-bill ratio, signals strong project execution and order intake, ensuring a steady revenue pipeline.

Profitability metrics are equally compelling. Adjusted EBITDA hit $314.3 million in Q3 2025, up 13.5% YoY, while adjusted EPS grew 24.6% to $1.62. These gains were driven by disciplined cost control and a 7.0% year-over-year increase in adjusted net revenue to $2.2 billion. Notably, the company's net leverage ratio remains within its target range of 1.0–1.5x, allowing it to fund growth initiatives and return capital to shareholders. Year-to-date share repurchases of $653 million further highlight management's confidence in its intrinsic value.

AI as a Growth Catalyst: Digital Twins and Sustainable Innovation

Jacobs' strategic pivot toward AI-driven infrastructure is a game-changer. Its collaboration with NVIDIA on the NVIDIA Omniverse Blueprint for AI Factory digital twins is redefining how data centers and water systems are designed and operated. By simulating billions of components in virtual environments, Jacobs can optimize power, cooling, and network ecosystems before physical construction, reducing costs and enhancing resiliency.

Real-world applications are already materializing. The SINES DC Campus in Portugal, a 1.2-gigawatt AI-scale data center, exemplifies this approach. Powered entirely by renewable energy and cooled via a zero-water seawater system, the project achieves a Water Usage Effectiveness (WUE) of 0. This innovation not only aligns with decarbonization goals but also taps into the surging demand for AI infrastructure, which is projected to grow at a 30% CAGR through 2030.

In water infrastructure, Jacobs is deploying AI to design modular systems that adapt to evolving needs. For instance, its work on Xcel Energy's transmission program and a Virginia wastewater reuse system for data centers highlights its ability to solve complex challenges with scalable, sustainable solutions. These projects position Jacobs as a key enabler of the energy transition and climate resilience, two sectors expected to see trillions in global investment over the next decade.

Margin Expansion: A Recipe for Long-Term Earnings Growth

Jacobs' margin expansion is not a one-off but a structural trend. The company's adjusted EBITDA margin of 13.9% in Q3 2025 reflects improved operational efficiency, with the I&AF segment contributing $1.8986 billion in adjusted net revenue—a 5.6% YoY increase. Management's guidance for fiscal 2025, including an adjusted EPS range of $6.00–$6.10 (up from prior estimates), underscores confidence in sustaining this trajectory.

The key drivers?
1. Cost Discipline: Rigorous cost management has kept the adjusted effective tax rate stable at 24.8%, while U.S. GAAP operating profit surged 37.4% YoY.
2. High-Margin Sectors: Data centers and water infrastructure, with their recurring revenue and long-term contracts, offer superior margin profiles compared to traditional infrastructure segments.
3. Capital Allocation: Share buybacks and strategic reinvestment in AI initiatives are amplifying returns for shareholders.

Investment Implications: A Buy for the Long Haul

Jacobs' combination of strong backlog, margin expansion, and AI-driven innovation makes it a compelling long-term investment. The company is not only capitalizing on near-term demand for data centers and water infrastructure but also future-proofing its business through digital transformation.

For investors, the risks are minimal relative to the upside. While infrastructure projects can be capital-intensive, Jacobs' focus on high-margin, sustainable solutions and its ability to scale AI-driven workflows mitigate these concerns. Additionally, its alignment with global decarbonization goals and the AI revolution positions it to benefit from structural tailwinds.

Actionable Takeaway: With a forward P/E ratio of ~18x (as of August 2025) and a raised EPS guidance, Jacobs offers a rare blend of growth and value. Investors seeking exposure to the infrastructure and AI megatrends should consider initiating or adding to their positions in J, particularly as the company continues to execute on its backlog and expand margins.

In conclusion, Jacobs Solutions Inc. is more than a beneficiary of current trends—it's a catalyst. By marrying AI innovation with infrastructure expertise, the company is building a moat around its long-term earnings potential. For those with a multi-year horizon, the time to act is now.