Environmental engineering firm Tetra Tech (NASDAQ: TTEK) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 7.7% year on year to $1.23 billion. The company expects next quarter’s revenue to be around $975 million, close to analysts’ estimates. Its GAAP profit of $0.48 per share was 18.5% above analysts’ consensus estimates.

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Dan Batrack, Chairman and CEO, commented, “We finished fiscal 2025 with another strong quarter resulting in record net revenue, record operating income, and significant operating margin expansion. These all-time high results were driven by the continued strong demand for our differentiated high-end consulting services in resilient water management and digital water automation. Our strategy focused on essential water and environmental services has allowed us to successfully navigate the recent changes in U.S. federal government priorities as we achieved record financial performance for 2025.”

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

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $4.69 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’s sales grew at an exceptional 14.8% 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 annualized revenue growth of 11.8% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Tetra Tech reported year-on-year revenue growth of 7.7%, and its $1.23 billion of revenue exceeded Wall Street’s estimates by 17.3%. Company management is currently guiding for a 18.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 12.8% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

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Adjusted Operating Margin

Tetra Tech has done a decent job managing its cost base over the last five years. The company has produced an average adjusted operating margin of 11.8%, higher than the broader business services sector.

Analyzing the trend in its profitability, Tetra Tech’s adjusted operating margin rose by 2.1 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 13.9%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Tetra Tech’s EPS grew at a decent 8.1% compounded annual growth rate over the last five years. Despite its adjusted operating margin improvement during that time, this performance was lower than its 14.8% annualized revenue growth, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

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 declines of 4.4% mark a reversal from its five-year trend. These shorter-term results weren’t ideal, but given it was successful in other measures of financial health, we’re hopeful Tetra Tech can return to earnings growth in the future.

In Q3, Tetra Tech reported EPS of $0.48, up from $0.35 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Tetra Tech’s full-year EPS of $0.93 to grow 51.2%.

Key Takeaways from Tetra Tech’s Q3 Results

It was good to see Tetra Tech beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its EPS guidance for next quarter missed. Overall, we think this was a decent quarter with some key metrics above expectations. The market seemed to be hoping for more, and the stock traded down 1.9% to $31.80 immediately following the results.

Is Tetra Tech an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.