TETRA TECH (TTEK)·Q1 2026 Earnings Summary

Tetra Tech Beats Q1 Estimates, Raises FY26 Guidance as Defense Wins Accelerate

January 29, 2026 · by Fintool AI Agent

Tetra Tech (NASDAQ: TTEK) delivered a strong Q1 FY2026, beating consensus estimates across revenue, EPS, and EBITDA while raising full-year guidance. The stock hit a new 52-week high of $40.88 on the earnings call before fading, as CEO Dan Batrack's final call as CEO provided detailed color on government shutdown mitigation, international growth drivers, and the company's M&A strategy.

Did Tetra Tech Beat Earnings?

Yes — across all key metrics:

*Consensus estimates from S&P Global

Excluding the wind-down of USAID/DOS contracts, net revenue grew 8% year-over-year and adjusted EPS increased 17% — demonstrating the underlying strength of Tetra Tech's core water, environment, and defense consulting business.

Adjusted EBITDA margin expanded 140 basis points year-over-year to 14.2%, or 80 basis points excluding USAID/DOS impacts.

What Did Management Guide?

Tetra Tech raised FY2026 guidance:

Q2 FY2026 Outlook:

• Net Revenue: $975M - $1.025B
• EPS: $0.30 - $0.33

The guidance raise reflects management's confidence in the company's differentiated position in water, environment, and sustainable infrastructure, with particular strength in defense and municipal water clients.

FY2026 Segment Outlook (YoY Growth, excl. USAID/DOS and disaster recovery):

FY2026 Guidance Assumptions:

• Intangible amortization: $34M
• Depreciation: $25M
• Interest expense: $34M
• Effective tax rate: 27.5%
• Average diluted shares: 263 million
• Excludes contributions from future acquisitions

How Did the Stock React?

TTEK shares gapped up 5.8% on January 29th following the earnings call, opening at $39.24 and hitting a new 52-week high of $40.88 (+10.2% intraday). However, the stock faded throughout the day, closing at $37.69 (-3.9% from the open) as investors digested the details.

Trading Summary (Jan 29, 2026):

Tetra Tech has delivered 9 consecutive quarters of EPS beats, establishing a strong track record of execution that investors have rewarded. The stock has appreciated from the 52-week low of $27.27 to current levels, a gain of approximately 38%.

What Changed From Last Quarter?

Several notable developments distinguish Q1 FY2026:

1. Major Contract Wins

The quarter saw exceptional contract activity:

• $151 billion ten-year multiple-award contract for the U.S. Missile Defense Agency SHIELD program
• $500 million multiple-award contract for environmental services for USACE Baltimore District
• A$88 million single-award contract for coastal infrastructure planning for Australia Defense
• $60 million multiple-award contract for waterway design services for USACE Portland District
• A$57 million single-award contract for naval facility resilience for Australia Defense

2. Strategic Acquisitions

Tetra Tech announced two acquisitions expanding front-end consulting capabilities:

• Halvik — Expands high-end data analytics and resilient infrastructure optimization
• Providence — Advances front-end program advisory services for defense clients

3. CEO Transition Announced

Dan Batrack, Chairman and CEO, announced that Roger Argus will be promoted to CEO effective after the annual shareholders meeting. Batrack commented:

"With the promotion of Roger Argus to CEO effective after our annual shareholders meeting, I see continued progress toward achieving our 2030 vision and direction and the associated financial targets."

Roger Argus, President and CEO-designate, stated:

"We continued to see significant demand for our differentiated services in water, environment, and sustainable infrastructure across our global operations. During the quarter, we grew our government business with municipal water and defense clients, and on the commercial side, we saw an increase in power and transmission projects to support energy demand."

Q&A Highlights: What Did Analysts Ask?

Government Shutdown Impact and Federal Business

Q: How did federal business grow 7% despite the 6-week shutdown?

CEO Dan Batrack explained the company's proactive approach:

"We worked very closely with our clients, particularly with the Department of Defense, the US Army Corps of Engineers, to have task orders and projects put in place that would carry us through the first quarter... The primary driver was through the U.S. Army Corps of Engineers, which has now become the company's largest client."

The shutdown was "somewhat telegraphed," allowing Tetra Tech to secure authorizations in advance. Critical programs were continued because demobilization and restart would have cost the government significantly more.

International Geographic Breakdown

Q: Where is the international growth coming from?

Management provided detailed geographic color:

Batrack noted UK/Ireland has been "underrepresented or unrecognized" in reported international growth because their double-digit contribution was masked by Australia's decline.

SHIELD Contract Clarification (Important Context)

Q: What is Tetra Tech's role in the $151B MDA SHIELD program?

CEO Batrack provided important context that tempers expectations:

"Are we one of 1? No. Are we one of 10? No. We're one of 2,000, and I think it's close to 2,100 or 2,200."

Tetra Tech's potential role would be environmental stewardship, planning, and permitting for remote locations—not hardware or deployment. The company's chief engineer Dr. Bill Brownlee led a similar program in the 1980s (mobile rail garrison) that was "Tetra Tech's biggest contract by far" despite nothing ever being deployed.

"If it moves forward, I think Tetra Tech could be, from an environmental stewardship perspective, one of the first to participate in the program."

M&A Strategy and Balance Sheet Capacity

Q: How aggressive will you be on M&A?

Batrack outlined his vision for his new Executive Chairman role:

"I actually do have a lot of colleagues and friends in the industry, from teaming partners and competitors... I hold many of them in the highest regard, and I actually would like to spend more of my time on what I would consider needle-moving... finding combinations that are good under strategy, that will help transform this industry."

The company can access $2 billion immediately through its revolver, with substantially higher capacity through equity. However, Batrack emphasized:

"Anytime we would get anywhere toward the upper end of four [turns leverage], I think you would see it very similar to Steve's chart during the prepared remarks, that we'd deleverage quite quickly."

Guidance Range Drivers

Q: What takes you to the high or low end of guidance?

Notably, state and local funding from the federal government "has actually been funded at a relatively full level" including State Revolving Funds and WIFIA.

Arctic Infrastructure Opportunity

Q: What kind of work in the Canadian Arctic?

Batrack was visibly enthusiastic about this emerging opportunity:

"There are no ports and harbors for navigable waterways, for refueling or anything across the Arctic, anywhere... This will be providing access roads up to the north and then building out ports and harbors and infrastructure facilities to allow navigational support across the Canadian and Alaskan Arctic."

The work includes both civil trading routes and defense facilities—Canadian priorities have increased significantly in the last 30 days following the Greenland discussions.

Future Catalysts: FAA and Nuclear

FAA Modernization (FY2027 opportunity):

• Tetra Tech is not the prime contractor but serves as technical advisor
• Opportunity for implementation/deployment support when hardware is available
• "I think it's a 2027 fiscal year item"

Nuclear Permitting with Westinghouse (Canada):

• MOU for nuclear new build in Ontario
• Continuation of existing work with Bruce, OPG, and others
• Engineering work for cooling systems and water handling
• "Incremental upside" rather than step function change

How Is Revenue Split by Segment?

Segment Performance (Excluding USAID/DOS):

Customer Mix (Excluding USAID/DOS):

*Including disaster response, U.S. State & Local revenue was down 19% YoY.

International now represents nearly half of Tetra Tech's net revenue, driven by strong U.K. water utility spend and expanding digital automation adoption.

What About Capital Allocation?

Tetra Tech's capital return program remains robust:

The 12% dividend increase marks the company's 47th consecutive quarterly dividend. Cash from operations was $72 million in Q1 and $517 million over the trailing twelve months, providing ample coverage for capital returns.

Key Financial Metrics

GAAP to Adjusted Reconciliation (Q1 FY26):

Note: Q1 FY25 included a $115 million legal contingency charge that depressed GAAP earnings. The year-over-year comparisons are cleaner when viewing adjusted metrics excluding USAID/DOS.

Balance Sheet Highlights

The company strengthened its cash position by over $100 million sequentially while reducing accounts receivable, demonstrating solid working capital management.

Net Debt Leverage Trend:

Net debt leverage declined to 0.86x in Q1 FY26, below the company's target range of 1.0x-2.0x. With over $2 billion in total borrowing capacity, Tetra Tech has significant financial flexibility for acquisitions and capital returns.

Water and Defense Program Momentum

U.S. Municipal Water (ENR #1 in Water Treatment):

• Providing front-end advisory for $22B in capex for priority water treatment programs
• Using high-end treatment to create new water supplies in Colorado's water-stressed areas
• Awarded new digital automation water programs with Texas Coastal Water Authority

U.K./EU Water Utilities:

• Ireland doubles water program capital investment to €11.8B
• Added new U.K. contracts with Yorkshire, Portsmouth, Anglian, and United Utilities
• Awarded Netherlands Rijkswaterstaat Framework Cooperation Agreements

Digital Water Adoption:

• Csoft subscription adopted by U.S., Canadian, and U.K. water utilities
• WATERNET™ subscription adopted by 75% of U.K. water utilities

Defense Programs:

• U.K. investing £4B in Modernization of Port Infrastructure
• Australia Critical Infrastructure Defense Homeporting and Coastal Infrastructure contracts totaling A$145M

Key Management Quotes

"Water is not going out of style." — Dan Batrack, on the durability of Tetra Tech's end markets

"The people you're gonna talk to after me are better, brighter, smarter, more energetic, and more forward-looking than I. So the best years of Tetra Tech, for sure, are to come." — Dan Batrack, on the CEO transition

"Our DSO reflecting an industry-leading standard of 51 days, which is the lowest this key metric has been in over 10 years." — Steve Burdick, CFO

"You can pay me now, or you can pay me later... If you don't wanna do it, I'll tell you what, it's still gonna have to be done later." — Dan Batrack, on coastal protection investment

Forward Catalysts

1. CEO Transition — Watch for any strategic shifts as Roger Argus assumes the CEO role (effective Feb 19 shareholders meeting)
2. Defense Pipeline — SHIELD program represents long-term opportunity for environmental stewardship (one of 2,000+ contractors)
3. FAA Modernization — FY2027 opportunity for implementation support when hardware is available
4. Arctic Infrastructure — Emerging Canada defense and civil investment in ports, harbors, and access roads
5. 2030 Vision Progress — Management referenced specific financial targets for 2030
6. Acquisition Integration — Halvik (600 people) and Providence (100+ people) to contribute to front-end consulting growth
7. Energy Infrastructure — Increasing power and transmission projects supporting AI/data center buildout
8. Digital Water Expansion — WATERNET™ (75% UK water utility adoption) and Csoft gaining traction globally

Risks and Concerns

• Government Shutdown Risk: Another shutdown "still possible within the next few days" per management; defense appropriations still not passed
• USAID/DOS Wind-Down: Ongoing reduction in international development work pressures headline revenue growth
• Australia Recovery Uncertainty: Market improving but "not in the sunshine yet" — recovery from -15% to flat is progress, not growth
• SHIELD Program Concentration Risk: Media coverage may overstate opportunity; Tetra Tech is one of 2,000+ contractors
• CEO Transition Execution: Leadership changes carry inherent execution risk
• Trade/Tariff Volatility: Could cause "slowdown to decisions, even on the commercial" side

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Earnings call completed January 29, 2026 at 8:00 AM PT

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