Tetra Tech’s third quarter results surpassed Wall Street’s expectations for both revenue and profit, with growth driven by ongoing demand for high-end water consulting and digital automation work, particularly in government and international markets. Management attributed operating margin improvement to a favorable business mix and a strategic emphasis on fixed-price contracts. CEO Dan Batrack highlighted the company’s ability to “successfully navigate the recent changes in the U.S. federal government's priorities,” while CFO Steve Burdick noted, “We generated a record setting cash from operations that approached $0.5 billion.”
Is now the time to buy TTEK? Find out in our full research report (it’s free for active Edge members).
Tetra Tech (TTEK) Q3 CY2025 Highlights:
- Revenue: $1.16 billion vs analyst estimates of $1.05 billion (1.6% year-on-year growth, 10.7% beat)
- EPS (GAAP): $0.48 vs analyst estimates of $0.41 (19.4% beat)
- Adjusted EBITDA: $185.9 million vs analyst estimates of $169.8 million (16% margin, 9.5% beat)
- Revenue Guidance for Q4 CY2025 is $975 million at the midpoint, roughly in line with what analysts were expecting
- EPS (GAAP) guidance for the upcoming financial year 2026 is $1.48 at the midpoint, beating analyst estimates by 4.1%
- Operating Margin: 15.6%, up from 12.5% in the same quarter last year
- Backlog: $4.14 billion at quarter end, down 23% year on year
- Market Capitalization: $9.32 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Tetra Tech’s Q3 Earnings Call
- Benjamin Luke McFadden (William Blair) asked about the disconnect between flat backlog and projected revenue growth; CEO Dan Batrack explained that shorter federal funding cycles obscure underlying contract activity, stating, “We’re just getting the work in smaller pieces and more frequent quarterly task orders.”
- Sabahat Khan (RBC Capital Markets) inquired how management built its revenue guidance range amid disaster relief and policy changes; Batrack outlined that headwinds such as renewable energy softness and potential government shutdowns could impact the low end, while improved clarity on tariffs and international spending could push results higher.
- Sangita Jain (KeyBanc Capital Markets) sought detail on margin drivers within the Government Services Group. Batrack cited increased fixed-price work and a mix shift toward consulting and advisory services as key contributors, adding, “50% of the revenue that we had this last quarter was fixed price.”
- Maxim Sytchev (National Bank Capital Markets) requested updates on digital initiatives and SaaS adoption. Batrack admitted, “Our strategy to actually take it and to bring in unique products that would help the government in these areas dramatically has actually been put essentially on hold,” due to federal purchasing delays.
- Michael Dudas (Vertical Research Partners) questioned whether acquisitions would be more important to achieving Tetra Tech’s 2030 targets. Batrack acknowledged that M&A will play a larger role, supported by the company’s low leverage and strong cash position.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be tracking (1) the pace of new contract awards in key water and data center sectors, (2) margin sustainability as the company increases its share of fixed-price and consulting work, and (3) progress in international markets, particularly as Canadian and U.K. infrastructure programs ramp. Execution of digital initiatives and the impact of additional acquisitions will also be closely monitored.
Tetra Tech currently trades at $35.64, up from $32.45 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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