ICF International (NASDAQ:ICFI) returned to year-over-year revenue growth in the third quarter of 2026 but lowered its full-year revenue outlook after utility clients paused spending on some incremental energy-efficiency work.
The consulting and technology services company reported revenue of $470.5 million, up 1.1% from $465.4 million a year earlier. It now expects approximately $1.87 billion in revenue for 2026, roughly in line with 2025, while maintaining its non-GAAP earnings forecast at approximately $7.10 per share.
Chair and CEO John Wasson said the company expects revenue growth to continue in the fourth quarter and into 2027. He also said the midterm election results could benefit civilian agency budgets and ICF’s energy and environmental work, although he did not quantify the potential effect.
Utility spending pauses weigh on outlook
President Anne Choate said heightened political and regulatory attention to utility bill affordability prompted several utility clients to pause incremental spending on certain demand-side management programs. The pause, combined with slower-than-expected contract ramp-ups, cost ICF approximately $15 million in third-quarter revenue, she said. The company expects a similar impact in the fourth quarter.
Choate said ICF did not lose programs as a result; rather, it received fewer of the contract add-ons and modifications it typically wins. Program budgets have decreased in some states and increased in others, she said.
Commercial revenue rose 1.5% in the quarter. Within commercial energy, advisory revenue grew 14.1%, supported by demand for grid engineering and planning, transmission and interconnection, resource adequacy and storage services. Utility programs account for the majority of ICF’s commercial energy work.
Wasson said the company expects commercial energy revenue growth to rebound to the mid- to high-single-digit range in the fourth quarter, while assuming the impact of the paused add-on work continues through year-end. For 2026 as a whole, the revised outlook assumes low- to mid-single-digit commercial energy growth.
Margins and tax benefits support earnings
Net income increased 33.5% to $31.7 million, and diluted earnings per share rose 37.5% to $1.76. Non-GAAP earnings per share increased 18.6% to $1.98.
Adjusted EBITDA rose 1.9% to $54.2 million, with the adjusted EBITDA margin improving 10 basis points to 11.5%. Gross margin expanded 50 basis points to 38.1%, which Chief Operating and Financial Officer James Morgan attributed in part to efficient contract delivery and a favorable contract mix.
Lower interest expense, a reduced share count and a lower tax rate also supported earnings. ICF’s third-quarter tax rate was 15%, compared with 22.7% a year earlier. Morgan said the company now expects a full-year rate of approximately 19%, down from its previous forecast of 20.5%.
The company maintained its forecast for 2026 operating cash flow of $135 million to $150 million, excluding restricted cash. Net debt fell to $368 million at quarter-end from $447 million a year earlier. ICF also announced a quarterly dividend of $0.14 per share, payable January 8, 2027, to shareholders of record on December 4, 2026.
Government work and 2027 outlook
State and local government revenue increased 7.6% year over year, while international government revenue rose 12%. Federal government revenue fell 3.5% from a year earlier, reflecting prior contract cancellations and slower procurement, but increased 3.4% sequentially.
Morgan said ICF expects federal revenue to return to year-over-year growth in the fourth quarter. The comparison will benefit from last year’s government shutdown, but he said the company expects growth beyond the approximately $12 million in federal revenue lost during that shutdown.
ICF won $746 million in contracts during the third quarter, up 4.5% from a year earlier, producing a book-to-bill ratio of 1.59. Backlog stood at $3.5 billion, and the business development pipeline was $8.2 billion at quarter-end.
Wasson said ICF expects growth across its federal, commercial, state and local, and international client categories in 2027. He declined to provide a specific forecast, citing uncertainty around the federal budget and the duration of the utility spending pauses. He said the company would update its outlook on its year-end call.
About ICF International (NASDAQ:ICFI)
ICF International, Inc is a global consulting and technology services company that helps government agencies, businesses and nonprofit organizations address complex policy, management and operational challenges. The company combines research, advisory services, data analytics, technology implementation and strategic communications to support clients from program design through execution and evaluation.
ICF’s work spans energy and climate, environment, transportation, public health, health care, community development, disaster recovery, workforce programs and public-sector modernization.
