Tetra Tech’s second quarter results were shaped by robust disaster response activity and higher-margin federal work, which management credited for driving both revenue growth and profitability above Wall Street expectations. CEO Dan Batrack emphasized that rapid mobilization for Southern California fire recovery led to increased staff utilization, while a reduction in lower-margin USAID contracts also contributed to better margins. Management noted that the company’s collection of outstanding USAID receivables further supported exceptionally strong cash flow and reduced days sales outstanding.
Is now the time to buy TTEK? Find out in our full research report (it’s free).
Tetra Tech (TTEK) Q2 CY2025 Highlights:
- Revenue: $1.15 billion vs analyst estimates of $1.13 billion (3.9% year-on-year growth, 2.1% beat)
- EPS (GAAP): $0.43 vs analyst estimates of $0.37 (17% beat)
- Adjusted EBITDA: $178.6 million vs analyst estimates of $162.9 million (15.5% margin, 9.7% beat)
- Revenue Guidance for Q3 CY2025 is $1.05 billion at the midpoint, below analyst estimates of $1.13 billion
- EPS (GAAP) guidance for Q3 CY2025 is $0.41 at the midpoint, beating analyst estimates by 1.3%
- Operating Margin: 14.3%, up from 11.6% in the same quarter last year
- Backlog: $4.28 billion at quarter end, down 18.2% year on year
- Market Capitalization: $9.65 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 Q2 Earnings Call
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Tim Mulrooney (William Blair) pressed management about the implications of flat backlog, asking if slower growth signaled demand issues. CEO Dan Batrack clarified that contract capacity is strong, but delays in federal task order conversions are temporarily pressuring reported backlog.
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Sangita Jain (KeyBanc Capital Markets) asked how the “book and burn” cadence of federal work might impact 2026. Batrack responded that this dynamic may persist, leading to less backlog visibility but not necessarily affecting near-term revenue.
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Sabahat Khan (RBC Capital Markets) sought detail on water versus infrastructure market growth. Batrack explained that water infrastructure, particularly for state and local clients, is growing at double-digit rates, with similar trends in the UK and Ireland.
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Andrew Wittmann (Baird) inquired about the outlook for renewables and the mix of segment growth. Batrack acknowledged continued weakness in U.S. commercial renewables, noting this segment is a small part of Tetra Tech’s total business.
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Andy Wittmann (Baird) also questioned whether government segment growth will outpace commercial. Batrack confirmed that U.S. and international government work will likely be the primary driver of growth in the coming quarters.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will be monitoring (1) the pace of federal task order conversions and whether backlog stabilizes, (2) continued growth in state and local water infrastructure projects in both the U.S. and Europe, and (3) the impact of new federal spending priorities on defense and aviation project wins. Execution in digital automation and the ability to offset renewable energy headwinds will also be important to track.
Tetra Tech currently trades at $36.80, down from $37.24 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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