Baker Hughes Co BKR

The global economy started cautiously in 2025, influenced by geopolitical tensions, trade policy and tariff uncertainties, China's slower growth, and persistent inflationary pressures. Baker Hughes is actively monitoring and implementing mitigation strategies for potential tariff impact^🌐s, which are estimated to result in a net EBITDA impact of $100 million to $200 million for the full year. This dynamic environment has led to reduced visibility for the second half of the year, particularly for economically sensitive businesses.

Downward pressure on oil prices is observed due to OPEC+ plans to return 2.2 million barrels per day of previously idled production and increased tariff uncertainty^🌐 affecting global GDP and oil demand. Consequently, global upstream spending is now expected to decline by high single digits in 2025, with international spending down mid-to-high single digits and North America down low double digits. In contrast, the natural gas outlook is more positive, driven by long-cycle projects in LNG, gas infrastructure, and data centers, with strong LNG contracting trends continuing.

Baker Hughes delivered strong first-quarter results, setting new Q1 records for revenue, adjusted EPS, EBITDA, and EBITDA margin. Adjusted EBITDA increased 10% year-over-year to $1.04 billion, with the Industrial & Energy Technology (IET) segment's EBITDA growing 30%. The company's adjusted EBITDA margin expanded by 140 basis points to 16.1%, reflecting solid operational execution and transformation progress across both segments, even as the upstream market softened.

The IET segment experienced a solid start to the year, booking $3.2 billion in orders and achieving a record backlog of $30.4 billion. Key growth drivers include significant LNG orders, totaling $1.7 billion over the past two quarters, and emerging opportunities in the data center market. The company booked $104 million in data center orders in Q1, including over 350 megawatts of power capacity, and targets at least $1.5 billion in data center equipment orders over the next three years, leveraging its NovaLT turbines and enterprise solutions.

The Oilfield Services & Equipment (OFSE) segment saw revenue decline 10% sequentially, primarily due to enhanced seasonal weakness and a significant slowdown in Mexico, where rig activity dropped 52% sequentially. Despite these market challenges^🌐, OFSE's EBITDA margin improved 80 basis points year-over-year to 17.8%, demonstrating the team's focus on structural changes and cost optimization. Management remains committed to the 20% margin target, with further improvements expected in the second half from restructuring actions.

Baker Hughes is expanding its reach through strategic partnerships and new energy technology developments. Notable agreements include a partnership with Frontier Infrastructure for large-scale CCS and power solutions for data centers, and a joint development agreement with Hanwha for small-scale ammonia turbines. The company also secured $238 million in New Energy orders in Q1, maintaining its full-year target, and is exploring utility-scale geothermal power with the U.S. Air Force and Department of Defense, highlighting increasing commercial synergies between OFSE and IET.

The company maintains a very strong balance sheet, ending Q1 with $3.3 billion in cash, a net debt-to-EBITDA ratio of 0.6x, and $6.3 billion in liquidity. S&P recently upgraded its long-term credit rating to A. Baker Hughes returned $417 million to shareholders in Q1 through $229 million in dividends and $188 million in share repurchases, reaffirming its commitment to returning 60% to 80% of free cash flow to shareholders.