Environmental engineering firm Tetra Tech NASDAQ:TTEK announced better-than-expected revenue in Q2 CY2026, with sales up 13.5% year on year to $1.31 billion. The company expects next quarter’s revenue to be around $1.15 billion, close to analysts’ estimates. Its GAAP profit of $0.42 per share was 6.3% above analysts’ consensus estimates.
Tetra Tech (TTEK) Q2 CY2026 Highlights:
- Revenue: $1.31 billion vs analyst estimates of $1.08 billion (13.5% year-on-year growth, 21.5% beat)
- EPS (GAAP): $0.42 vs analyst estimates of $0.40 (6.3% beat)
- Adjusted EBITDA: $172.6 million vs analyst estimates of $167.2 million (13.2% margin, 3.2% beat)
- Revenue Guidance for Q3 CY2026 is $1.15 billion at the midpoint, roughly in line with what analysts were expecting
- EPS (GAAP) guidance for Q3 CY2026 is $0.46 at the midpoint, beating analyst estimates by 4.5%
- Operating Margin: 12.1%, down from 14.3% in the same quarter last year
- Free Cash Flow Margin: 17.5%, down from 29.9% in the same quarter last year
- Backlog: $4.49 billion at quarter end, up 8.2% year on year
- Market Capitalization: $8.70 billion
Company Overview
With a 50-year legacy of "Leading with Science" and operations on all seven continents, Tetra Tech NASDAQ:TTEK provides high-end consulting and engineering services focused on water management, environmental solutions, and sustainable infrastructure for government and commercial clients worldwide.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $4.56 billion in revenue over the past 12 months, Tetra Tech is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.
As you can see below, Tetra Tech grew its sales at an exceptional 13.4% compounded annual growth rate over the last five years. This is an encouraging starting point for our analysis because it shows Tetra Tech’s demand was higher than many business services companies.
Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Tetra Tech’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 3.8% over the last two years was well below its five-year trend.
This quarter, Tetra Tech reported year-on-year revenue growth of 13.5%, and its $1.31 billion of revenue exceeded Wall Street’s estimates by 21.5%. Company management is currently guiding for a 1.6% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 1.7% over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Adjusted Operating Margin
Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.
Tetra Tech has managed its cost base well over the last five years. It demonstrated solid profitability for a business services business, producing an average adjusted operating margin of 12.1%.
Analyzing the trend in its profitability, Tetra Tech’s adjusted operating margin rose by 1.7 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Tetra Tech generated an adjusted operating margin profit margin of 12.1%, down 2.2 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.
Tetra Tech’s EPS grew at 18.5% compounded annual growth rate over the last five years, higher than its 13.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into Tetra Tech’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Tetra Tech’s adjusted operating margin declined this quarter but expanded by 1.7 percentage points over the last five years. Its share count also shrank by 5%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Tetra Tech, its two-year annual EPS growth of 24% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, Tetra Tech reported EPS of $0.42, in line with the same quarter last year. This print beat analysts’ estimates by 6.3%. Over the next 12 months, Wall Street expects Tetra Tech’s full-year EPS to stay about the same, moving from $1.66 to $1.66.
Key Takeaways from Tetra Tech’s Q2 Results
We were impressed by how significantly Tetra Tech blew past analysts’ revenue expectations this quarter. We were also glad its EPS guidance for next quarter outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $33.70 immediately after reporting.
Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. .