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Baker Hughes (BKR) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Energy· Apr 24, 2026

Source: earnings call transcript

Executive summary

Baker Hughes Q1 FY26 — record IET orders and margins offset Middle East-driven OFSE disruption

A record IET quarter — energy-infrastructure orders, backlog and margins at all-time highs — more than offset a Middle East conflict that is disrupting OFSE and softening the upstream outlook. Management frames heightened geopolitical risk as a structural driver of durable energy-security and behind-the-meter power investment, while advancing Chart integration and disciplined portfolio pruning to fund a stronger balance sheet.

Highlights

5

  • Adjusted EBITDA of $1.16B beat the guidance range, up 12% YoY; adjusted EBITDA margin +140bps YoY to 17.6%

  • IET booked record orders of $4.9B (third straight quarter above $4B) with a 1.5x book-to-bill and record RPO of $33.1B (fifth consecutive record quarter; +10% YoY ex-transactions)

  • IET EBITDA rose 35% YoY to $678M with margins +310bps to 20.2%; Power Systems orders reached $1.4B (~30% of IET orders)

  • Adjusted EPS of $0.58, up 13% YoY despite Middle East, PSI divestiture and SPC JV headwinds

  • Balance sheet strengthened: net debt/adjusted EBITDA of 0.32x, liquidity of $17.8B, and ~$3B of gross portfolio proceeds expected in 2026

Concerns

5

  • Middle East conflict cut OFSE Q1 revenue ~2% vs Q4 and is expected to drive a >20% sequential decline in Middle East revenue in Q2 (double the Q1 rate)

  • OFSE EBITDA margin fell 70bps sequentially to 17.4%; OFSE full-year EBITDA now only expected to reach the low end of the $2.325B range

  • Free cash flow of only $210M, pressured by seasonality plus delays in customer payments

  • Full-year company revenue and adjusted EBITDA now expected to land slightly below the midpoint of guidance

  • Macro disruption: ~10% of global oil volumes and 20% of worldwide LNG capacity offline; global upstream spending now seen modestly below the prior low-single-digit decline outlook

Guidance & targets

CategoryTargetConfidence
Full-year 2026 company revenue and adjusted EBITDA
Maintaining prior ranges; now expected slightly below midpoint
high materiality
Medium
Q2 2026 company revenue
$6.5B
high materiality
High
Q2 2026 company adjusted EBITDA
$1.13B (roughly flat vs Q1)
high materiality
High
Q2 2026 IET EBITDA
$670M
medium materiality
High
Q2 2026 OFSE EBITDA and revenue
EBITDA $540M; revenue $3.2B
medium materiality
Medium
Full-year 2026 IET orders
At least the $14.5B midpoint of order guidance
high materiality
High
Full-year 2026 IET EBITDA
At least the $2.7B midpoint
high materiality
High
Full-year 2026 OFSE EBITDA
Low end of the range, $2.325B
high materiality
Medium
Full-year 2026 new energy orders
$2.4B-$2.6B
medium materiality
High
Horizon 2 IET order target (2028)
Expected to exceed $40B
high materiality
Medium
Chart acquisition cost synergies
$325M targeted cost synergies
high materiality
High
Net debt to adjusted EBITDA target (post-Chart)
1.0x-1.5x within 24 months after Chart closes
medium materiality
Medium
2026 gross portfolio proceeds
~$3B of gross cash proceeds
medium materiality
High
2026 global upstream spending outlook
Modestly below prior outlook of low-single-digit declines vs 2025
medium materiality
Medium
Behind-the-meter power market size
~$60B by 2030
low materiality
Low
Total Power Systems annual market opportunity
More than $100B by 2030
low materiality
Low

Segment performance

SegmentRevenueYoYQoQMargin
Industrial & Energy Technology (IET)
Growth led by Gas Tech Services working down overdue aeroderivative backlog; revenue impacted ~3% by PSI and CDC transactions and slightly by Middle East shipping delays. Margin driven by favorable backlog pricing, elevated project closeout, productivity and the Baker Hughes Business System.
Orders: $4.9B (record; third straight quarter above $4B)Book-to-bill: 1.5xRPO: $33.1B (record; fifth consecutive record quarter; +3% seq, +10% YoY ex-transactions)Trailing four-quarter orders: $16.6B (+25% vs prior four quarters)Power Systems orders: $1.4B (~30% of IET orders)LNG equipment orders: $1.2BNew energy orders: $1.4B
$3.35B+14%—EBITDA $678M (+35% YoY); EBITDA margin 20.2% (+310bps YoY)
Oilfield Services & Equipment (OFSE)
SPC deconsolidation (Cactus JV) contributed 4 points of the sequential revenue decline; Middle East disruption cut revenue ~2% vs Q4, offset by strength in Mexico, Sub-Saharan Africa and Gulf of America. Margin decline from SPC, seasonality and Middle East, partly offset by improved North America OFS margins, FX and favorable direct-sales offshore mix.
SSPS orders: $650M (+22% YoY; +82% ex-SPC)
$3.24B—-9%EBITDA $565M; EBITDA margin 17.4% (-70bps seq)

BKR operating KPIs by quarter

BKR operating KPIs stated on its earnings calls, by fiscal quarter
KPI Dec 2024 Q4 FY24 Mar 2025 Q1 FY25 Dec 2025 Q4 FY25This call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
Orders Industrial & Energy Technology
$3.8B Industrial & Energy Technology orders remained at strong levels during 2024, including $3.8 billion in the fourth quarter that drove the annual total above the midpoint of our guidance range. Source: earnings call transcript
$3.2B Industrial & Energy Technology experienced a solid start to the year booking $3.2 billion of orders with segment backlog reaching another record level of $30.4 billion. Source: earnings call transcript
$4B IET delivered strong fourth quarter order bookings of $4 billion, contributing to a record full year total of $14.9 billion, exceeding the high end of our guidance range. Source: earnings call transcript
$4.9B IET delivered another outstanding quarter with bookings reaching a record of $4.9 billion, marking the third consecutive quarter above $4 billion. Source: earnings call transcript
$7.1B IET delivered another exceptional quarter with orders doubling year-over-year to a record $7.1 billion, resulting in a 2.2x book-to-bill ratio and driving RPO up 19% to an all-time high of $37.1 billion. Source: earnings call transcript
+44.9%
Total orders
$7.5B As Lorenzo mentioned, we delivered a very strong quarter for orders with total company orders of $7.5 billion, including $3.8 billion from IET. Source: earnings call transcript
$6.5B As Lorenzo mentioned, orders got off to a solid start to the year, booking $6.5 billion for the total company and included $3.2 billion in IET. Source: earnings call transcript
$7.9B As Lorenzo mentioned, we delivered very strong orders in the fourth quarter, with total company orders of $7.9 billion, including $4 billion from IET. Source: earnings call transcript
$8.2B As Lorenzo mentioned, we once again delivered strong orders in the first quarter with total company orders of $8.2 billion, including $4.9 billion from IET. Source: earnings call transcript
$10.5B We delivered exceptional orders in the second quarter with total company bookings of $10.5 billion. Source: earnings call transcript
+28%
Remaining performance obligations Industrial & Energy Technology
$30.1B For the full year, IET secured $13 billion of orders with a book-to-bill of 1.1x, resulting in near-record RPO levels of $30.1 billion at year-end. Source: earnings call transcript
$30.4B Book-to-bill was 1.1x, resulting in IET RPO of $30.4 billion that reached a new record. Source: earnings call transcript
$32.4B IET achieved a record backlog of $32.4 billion at year-end, while book-to-bill exceeded 1x. Source: earnings call transcript
$33.1B IET also reported a book-to-bill of 1.5x for the quarter, resulting in a record RPO of $33.1 billion. Source: earnings call transcript
$37.1B IET delivered another exceptional quarter with orders doubling year-over-year to a record $7.1 billion, resulting in a 2.2x book-to-bill ratio and driving RPO up 19% to an all-time high of $37.1 billion. Source: earnings call transcript
+12.1%
Orders New Energy——
$434M This is most evident in New Energy, booking $434 million of orders in the quarter and a record $2 billion for the full year, well above our $1.4 billion to $1.6 billion target. Source: earnings call transcript
$1.4B Including our 1 gigawatt data center order highlighted earlier, we secured $1.4 billion in new energy orders this quarter, a strong start to the year that reinforces our confidence in achieving our $2.4 billion to $2.6 billion target for 2026. Source: earnings call transcript
—+222.6%
Orders Subsea & Surface Pressure Systems——
$1.1B Momentum has also continued across subsea markets, driving a near record order quarter for Subsea & Surface Pressure Systems, with bookings of $1.1 billion and a book-to-bill of 1.4x. Source: earnings call transcript
$650M In addition, SSPS posted continued strength in orders totaling $650 million, up 22% year-over-year. Source: earnings call transcript
$667M In addition, SSPS continued its order momentum, securing $667 million in the quarter. Source: earnings call transcript
+2.6%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

IET Remaining Performance Obligations (RPO) $33.1B Q1 FY26 (quarter end)

+3% sequentially and +10% YoY, both ex-transactions

Record RPO for the fifth consecutive quarter; supported by 1.5x book-to-bill in the quarter.

IET quarterly orders / bookings $4.9B (record) Q1 FY26

Third consecutive quarter above $4B

Trailing four-quarter IET orders of $16.6B, up 25% vs prior four quarters.

SSPS orders $650M Q1 FY26

+22% YoY (+82% ex-SPC)

Subsea production systems orders within OFSE.

Deals & partnerships

Chart Industries acquisition

Regulatory reviews still underway in certain jurisdictions; funded by March debt offering ($6.5B US + EUR 3B). Integration planning advancing via 17 work streams.

Hexagon divestiture

Announced divestiture of Waygate Technologies as part of ongoing portfolio management.

Crane divestiture

Sale of PSI to Crane closed in early January 2026.

Cactus JV

SPC joint venture with Cactus formed/closed in early January 2026; SPC excluded from consolidated results thereafter.

HMH divestiture

IPO of HMH; proceeds contribute to exceeding the $1B incremental divestment target ahead of schedule.

QatarEnergy customer contract

Award for 2 mega trains on the North Field West project; scope includes six Frame 9 gas turbines, 12 centrifugal compressors and integrated power (three Frame 6 turbines, three BRUSH generators).

QatarEnergy LNG customer contract

Large-scale carbon capture facility; scope includes 6 compression trains powered by variable-speed electric motors.

Boom Supersonic customer contract

Contract to provide 25 BRUSH Power Generation generators.

Hitachi Energy customer contract

Contract to design, manufacture, install and commission 4 synchronous condensers for grid stability at 2 energy substations in Australia.

Hydrostor customer contract

Second contract for engineering and design of an advanced compressed air energy storage system in the U.S.

Google Cloud partnership

Collaboration to develop AI-enabled power optimization and sustainability solutions for data center applications, combining Baker Hughes Power Systems and Google Cloud AI/analytics.

San Matias Pipeline (Argentina) customer contract

Gas compression units including three NovaLT gas turbines — first NovaLT deployment in South America.

ST LNG partnership

Strategic agreement to provide gas compression and power generation for a proposed 8.4 MTPA LNG export terminal offshore Texas; reflects potential acceleration of North America LNG FIDs.

Petrobras customer contract 5 years

5-year aftermarket service agreement covering maintenance, repair and engineering for up to 64 aeroderivative gas turbines across 19 FPSOs. Also: 91km flexible pipe/risers/flowlines contract (pre-salt/post-salt) and an integrated workover and P&A extension for one of the world's largest offshore P&A projects.

Marathon Petroleum customer contract multiyear

Preferred supplier of hydrocarbon treatment products and services for 12 refineries and 2 renewable fuels facilities across North America (Downstream Chemicals).

Turkish Petroleum customer contract

SSPS award for subsea production systems for 5 wells in the Black Sea, including deepwater horizontal tree systems, manifolds, subsea distribution and topside controls.

YPF customer contract 3 years

3-year contract in Argentina's Vaca Muerta shale for well construction technology including Lucida rotary steerable and PermaFORCE drill bits.

Gulf Energy customer contract

Contract to drill and complete 43 wells in Kenya's South Lokichar Basin — first fully integrated project in Sub-Saharan Africa.

Expand Energy customer contract multiyear

New multiyear Leucipa contract covering gas wells across the Marcellus, Utica and Haynesville basins. A separate Leucipa/ESP surveillance expansion was signed with a large NOC.

XGS Energy partnership

Strategic collaboration and award for initial well design and engineering support for a 150-megawatt geothermal project in New Mexico.

Capital programs

NovaLT gas turbine capacity doubling underway

Benefit:Doubling of NovaLT manufacturing capacity; effectively sold out through 2028

Management evaluating expansion beyond the current doubling plan under a disciplined return threshold; strong inbound demand, prioritizing long-term partners with financing and offtake in place.

BRUSH generators and synchronous condensers capacity additions underway

Benefit:Added capacity to BRUSH product lines (generators, synchronous condensers); expected to materially add to annual revenue run rate

Also inaugurated an aftermarket NovaLT facility in Italy to support services growth; Frame 5 turbines have available capacity in 2027-2028.

Chart integration cost synergy program underway $325M targeted cost synergies
Spent to date: 250+ synergy opportunities identified

Benefit:$325M of targeted cost synergies

Integration management office led by Jim Apostolides organized into 17 operational work streams; Chart close expected in Q2.

Risks & headwinds

Middle East conflict and Strait of Hormuz disruption impacting OFSE Through at least end of June 2026; measured 2H recovery assumed

OFSE Middle East revenue expected to fall >20% sequentially in Q2 (double the Q1 rate); Q1 OFSE revenue impacted ~2% vs Q4; product sales most affected by import/export logistics

Mitigation:Cost-out actions from Q4/Q1 coming through; strength in Mexico, Sub-Saharan Africa and Gulf of America; guidance assumes Hormuz fully operational in 2H, supporting low end of OFSE EBITDA range

Global energy supply disruption from the conflict 2026

~10% of global oil volumes and 20% of worldwide LNG capacity offline; risk of undersupply and supply shortfall in 2026; Europe gas storage at only 30% of capacity (6% below last year, 13% below seasonal average)

Mitigation:Structurally supportive of higher upstream investment, inventory rebuilding and infrastructure spend over the medium term

Weaker global upstream spending outlook FY26

2026 global upstream spending now seen modestly below prior low-single-digit decline outlook, driven entirely by reduced Middle East activity

Mitigation:North America and international ex-Middle East expected broadly flat; near-term emphasis on optimizing production from existing wells

Weak free cash flow / customer payment delays Q1 FY26

Q1 FCF of $210M; seasonally weakest quarter, further affected by delays in customer payments

Mitigation:Expected seasonal improvement; strong balance sheet (net debt/EBITDA 0.32x, $17.8B liquidity)

Potential LNG maintenance delays affecting GTS FY26

Developments in the Middle East may cause minor delays to planned LNG maintenance in GTS

Mitigation:Expected more than offset by Q1 outperformance and higher backlog conversion; compared favorably to modest, normalized delays after the 2022 Russia-Ukraine shock given less pronounced LNG prices

Power Systems capacity constraints Through 2028

Effectively sold out of NovaLT turbines through 2028 amid broad turbine-market tightness

Mitigation:Doubling NovaLT capacity plus added BRUSH generator/synchronous condenser capacity and a new Italy aftermarket facility; Frame 5 capacity available 2027-2028; further expansion assessed under disciplined return thresholds

Tariff and trade policy pressures FY26

Not quantified; cited as ongoing pressure alongside cost inflation and logistical challenges

Mitigation:Baker Hughes Business System driving pricing, productivity and execution discipline

Full-year results tracking below midpoint FY26

Company revenue and adjusted EBITDA now expected slightly below midpoint; OFSE may only reach low end ($2.325B)

Mitigation:IET Q1 outperformance and record backlog; guidance maintained; portfolio resilience

Q&A highlights

What is the intermediate and longer-term impact of Middle East infrastructure repair and redundancy investment, and how could it push IET orders above the Horizon 2 target?

Simonelli said the conflict will drive structural change centered on energy security, diversified supply, increased upstream investment, inventory rebuilding, and lower-carbon solutions (geothermal, nuclear, grid modernization). He emphasized redundancy and diversified infrastructure, reiterating confidence in exceeding the $40B IET Horizon 2 order target by 2028 — not just from LNG FIDs but associated gas infrastructure, pipelines and compression stations.

“we feel good about the opportunity to exceed the $40 billion target for IET orders that we gave out at the end of Horizon 2 in 2028. And it's not just about LNG FIDs.”

asked by Arun Jayaram · answered by Lorenzo Simonelli

3 min read 6 chapters

Detailed narrative

Record IET performance drives beat

IET delivered record bookings of $4.9 billion, its third consecutive quarter above $4 billion, with a 1.5x book-to-bill lifting RPO to a record $33.1 billion (fifth straight record quarter; +10% YoY ex-transactions). IET revenue rose 14% YoY to $3.35 billion and EBITDA jumped 35% YoY to $678 million, with margins expanding 310bps to 20.2% on favorable backlog pricing, elevated project closeout, productivity and the Baker Hughes Business System.

Trailing four-quarter IET orders reached $16.6 billion, up 25% versus the prior four quarters.

Middle East conflict reshapes the macro and OFSE

The Middle East conflict and effective closure of the Strait of Hormuz took ~10% of global oil volumes and 20% of worldwide LNG capacity offline, tightening balances and driving price volatility. Management now sees 2026 global upstream spending modestly below its prior low-single-digit decline outlook, driven entirely by reduced Middle East activity, with North America and international ex-Middle East broadly flat.

OFSE Q1 revenue was hit ~2% versus Q4 by March disruptions, with a >20% sequential Middle East decline expected in Q2. Guidance assumes conflict resolution by midyear and a full Hormuz reopening thereafter.

Power Systems and data center momentum

Power Systems secured $1.4 billion of orders (~30% of IET orders) across power generation, grid stability and energy management. Management framed a multiyear power demand cycle — demand projected to double by 2040 — with the behind-the-meter market reaching $60 billion by 2030 and a total annual opportunity exceeding $100 billion.

Baker Hughes is sold out of NovaLT turbines through 2028 and is doubling capacity, while adding BRUSH generator and synchronous condenser capacity. Cordant power-related digital orders doubled YoY, continuing 80%+ growth from 2025.

Portfolio management and Chart integration

Baker Hughes announced the Waygate Technologies divestiture to Hexagon and completed the SPC JV (Cactus) and PSI sale (Crane) in January; with the HMH IPO, it expects ~$1.6 billion of gross proceeds and to exceed its $1 billion incremental divestment target ahead of schedule, totaling ~$3 billion of 2026 gross proceeds.

Chart integration planning is advancing via 17 work streams and 250+ identified synergy opportunities toward $325 million of targeted cost synergies, with closing expected in Q2 pending regulatory reviews.

Balance sheet and capital structure

Net debt to adjusted EBITDA declined to 0.32x. Following a March debt offering that raised $6.5 billion in U.S. bonds and EUR 3 billion in European bonds (its inaugural European offering), cash increased to $14.8 billion and liquidity to $17.8 billion, with proceeds earmarked to fund the Chart acquisition.

Free cash flow was $210 million, the seasonally weakest quarter, further affected by delays in customer payments. The post-Chart leverage target is 1.0x-1.5x within 24 months.

OFSE resilience and awards

OFSE revenue was $3.24 billion, down 9% sequentially (SPC deconsolidation contributed 4 points), while EBITDA of $565 million beat the guidance midpoint; margin declined 70bps sequentially to 17.4% on the SPC transaction, seasonality and Middle East disruption, partly offset by North America OFS margin improvement, FX and a favorable direct-sales offshore mix.

SSPS orders reached $650 million, up 22% YoY (+82% ex-SPC). Awards spanned Petrobras (91km flexible pipe; workover/P&A extension), Turkish Petroleum subsea, YPF Vaca Muerta, and a first integrated project in Sub-Saharan Africa with Gulf Energy (43 wells in Kenya).

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.