What are the near-term and underappreciated commercial synergy opportunities with Chart now in the portfolio?

Management highlighted data centers as a clear near-term opportunity, combining Baker Hughes' power generation with Chart's thermal management for broader infrastructure solutions. Gas infrastructure is also actionable, offering complete solutions across the gas value chain for multiple molecules. Underappreciated long-term opportunities include space (leveraging cryogenic expertise), geothermal (integrated solutions), and mining (cross-selling services and digital monitoring). “First, data centers is one of the clearest near-term commercial opportunities. As you've seen, the AI-driven demand is creating immediate pressure around reliable power and efficient cooling, which plays directly to the combined strength of Baker Hughes and Chart...”

What drove the OFSC outperformance in Q2, and what are the moving parts for the second half, excluding the Middle East?

OFSC outperformance was driven by stronger-than-expected activity outside the Middle East (double-digit sequential growth in international OFS), better-than-anticipated product revenue in the Middle East (offsetting softer service activity), and strong SSPS performance (10% sequential revenue growth, margins recovered to high teens). For H2, assumptions include stable Middle East activity, seasonal recovery in North America onshore (Q3), continued international improvement (Q3) offset by North Sea seasonality (Q4), constructive Latin America activity, and SSPS contributing through backlog conversion and stable margins. “First, again, outside the Middle East activity was broadly stronger than expected across really North America, Latin America, East Asia, Europe, sub-Saharan Africa. And so international OFS revenue outside of the Middle East increased double digits sequentially.”

What are the key drivers for the record IET orders, including market trends in gas turbines, and what are the associated margins?

Record IET orders reflect broad-based demand across data centers, LNG, gas processing, and production infrastructure. Power Systems was a key driver with $2.6 billion in orders, including 150 gas turbines for power generation, emphasizing behind-the-meter applications. Data centers accounted for $2.2 billion of Power Systems orders. LNG was also a significant contributor with $1.8 billion in equipment orders. Margins are strong due to disciplined commercial frameworks, constructive supply-demand dynamics, and strong pricing, which are expected to provide favorable tailwinds for IET margin performance in 2027 and beyond. “And the record quarter reflects both the breadth of the Baker Hughes portfolio and also the strong demand that we're seeing across multiple end markets. And I think what's really encouraging is that the momentum isn't being driven by one market by continued strength across data centers, LNG, gas processing and production infrastructure markets.”

BKR

Baker Hughes (BKR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Jul 27, 2026

Source: earnings call transcript

Executive summary

Baker Hughes Q2 FY26 — Record IET Orders and Chart Acquisition Integration

Baker Hughes delivered a strong Q2 FY26, driven by record IET orders, particularly in Power Systems for data centers and LNG, and resilient OFSC performance despite Middle East disruptions. The company successfully closed the Chart acquisition, establishing it as a third reporting segment and focusing on disciplined integration to realize significant cost and commercial synergies, while expanding Power Systems capacity to meet growing demand.

Highlights

Adjusted EBITDA totaled $1.23 billion, exceeding the high end of guidance.
Adjusted EBITDA margin expanded 70 basis points year-over-year to a record 18.3%.
IET orders doubled year-over-year to a record $7.1 billion, resulting in a 2.2x book-to-bill ratio.
RPO increased 19% to an all-time high of $37.1 billion.
Generated robust free cash flow of $1.1 billion.

Concerns

Anticipated headwinds in the Middle East, with OFSC revenue in the region down 10% from Q4 2025.
IET revenue was impacted by the PSI and CVC transactions, representing a 2% headwind.
Leverage will temporarily increase following the Chart acquisition.
GTS growth is expected to level off in the second half of the year due to timing of service outages and lower catch-up work.

Guidance & targets

Category	Target	Timeline	Confidence
Company Revenue	$6.87 billion high materiality	Q3 · FY26	High
Company Adjusted EBITDA	$1.205 billion high materiality	Q3 · FY26	High
IET Revenue	approximately $3.32 billion medium materiality	Q3 · FY26	High
IET EBITDA	approximately $660 million medium materiality	Q3 · FY26	High
OFSC Revenue	$3.55 billion medium materiality	Q3 · FY26	High
OFSC EBITDA	approximately $625 million medium materiality	Q3 · FY26	High
Full-year Company Revenue	$27.35 billion high materiality	FY26	High
Full-year Company Adjusted EBITDA	$4.85 billion high materiality	FY26	High
Full-year IET Orders	$17.5 billion to $19.5 billion high materiality	FY26	High
Full-year IET Revenue	$13.5 billion medium materiality	FY26	High
Full-year IET EBITDA	$2.725 billion medium materiality	FY26	High
Full-year OFSC Revenue	$13.85 billion medium materiality	FY26	High
Full-year OFSC EBITDA	$2.45 billion medium materiality	FY26	High
Net Leverage Ratio	1x to 1.5x high materiality	Within 24 months	High
Chart Annualized Cost Synergies	$325 million high materiality	Year 3	High
Chart Annualized Cost Synergies	$95 million medium materiality	Year 1	High
Chart Annualized Cost Synergies	$230 million medium materiality	Year 2	High
Power Systems Annual Revenue Opportunity	nearly $5 billion high materiality	by 2029 · FY29	High
Power Systems Gas Turbine Capacity	double medium materiality	by the end of 2028 · FY28	High
LNG Installed Nameplate Capacity	approaching 800 MTPA medium materiality	by 2030 · FY30	High
LNG Installed Nameplate Capacity	approximately 950 MTPA medium materiality	by 2035 · FY35	High
Hyperscaler Capital Spending	nearly $750 billion high materiality	by 2028 · FY28	High
Data Center Power Demand Growth	18% annual rate high materiality	through 2030 · FY30	High
Data Center Power Demand	approximately 1,850 terawatt hours high materiality	by 2030 · FY30	High
Power Systems Addressable Market Opportunity	approximately $100 billion high materiality	by 2030 · FY30	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Industrial & Energy Technology (IET) Strong margin performance driven by favorable backlog pricing and ongoing execution of the Baker Hughes business system. Revenue was impacted by PSI and CVC transactions (2% headwind) and modestly by Middle East disruptions. GTS growth expected to level off in H2. EBITDA growth: 16% year-over-yearEBITDA margin: 20.6%EBITDA margin expansion: 280 basis points year-over-yearOrders: $7.1 billionOrders growth: doubled year-over-yearBook-to-bill ratio: 2.2xPower Systems orders: $2.6 billionPower Systems power generation: 2.7 gigawattsLNG equipment orders: $1.8 billionLNG projects: 3 large projectsGTS upgrade orders: record	$3.3 billion	in line with levels a year ago	—	$678 million
Oilfield Services & Equipment (OFSC) Delivered significantly stronger than anticipated quarter despite ongoing disruptions in the Middle East. Growth was led by Brazil, Mexico, Asia Pacific, and North America. Middle East product revenue exceeded expectations, offsetting softer service activity. SSPS margin recovered to high teens. EBITDA margin: 17.5%EBITDA margin expansion: 10 basis points sequentiallySSPS revenue growth: 10% sequentiallySSPS orders: $667 millionSSPS orders growth (ex-SPC): 29% year-over-yearMiddle East revenue decline: 1% sequentiallyMiddle East revenue decline (from Q4 2025): 10%	$3.45 billion	—	7% sequential increase	$605 million

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 FY25	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change 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

Remaining Performance Obligations (RPO) $37.1 billion Q2 FY26

up 19%

All-time high for IET segment; provides significant revenue visibility.

IET Orders $7.1 billion Q2 FY26

doubled year-over-year

Record quarter for IET, includes $2.6 billion Power Systems orders and $1.8 billion LNG equipment orders.

IET Book-to-bill ratio 2.2x Q2 FY26

For IET segment.

IET Orders (past 4 quarters) more than $20 billion Q2 FY26

Provides significant revenue visibility and expands installed base.

SSPS Orders $667 million Q2 FY26

29% increase year-over-year (excluding SPC)

Continued order momentum for SSPS.

Deals & partnerships

Chart Industries Acquisition of Chart Industries, adding differentiated capabilities in thermal management, air and gas handling, and carbon capture.

Chart will operate as Baker Hughes' third reporting segment. Integration is managed centrally through an integration management office with 18 work streams.

Dynamis Major award for NovaLT gas turbines.

For data center and oil and gas applications.

Kodiak Gas Services Multiyear strategic agreement for power generation capacity. multiyear

Leverages NovaLT, Frame 5, and generator technologies to support growing power demand across North America.

Venture Global Major award for LNG blocks comprising liquefaction modules.

Scope includes advanced centrifugal compressors, cold boxes, air coolers, and integrated control systems.

Golar Significant award to provide aeroderivative gas turbine-driven refrigerant compressor trains for a floating LNG facility.

Marks the fourth Golar vessel to feature Baker Hughes gas technology solutions.

Cheniere Multiple awards supporting Cheniere's Sabine Pass LNG facility.

Helped drive record GTS upgrade orders in the quarter.

Nigeria LNG Significant multiyear agreement extension. multiyear

Strengthens life cycle services portfolio.

Gas Processing Company New multiyear CSA for its gas processing facility in Nigeria. multiyear

Strengthens life cycle services portfolio.

Petrobras Major award for well construction solutions.

Across Brazil, Santos Basin.

Equinor Extended key contracts for integrated drilling, well services, and wireline intervention.

In Norway.

Azule Energy Subsea production systems award.

For ultra deepwater development, offshore Angola.

Offshore gas development in Brunei Subsea production systems award.

For an offshore gas development in Brunei.

Equinor Award for Kantori, an autonomous well construction solution.

Kantori was launched earlier in 2026 and recognized with the 2026 OTC Spotlight New Technology Award.

Mantle Reach Power Agreement to support geothermal development.

In North America.

Waygate Divestiture of Waygate.

Assumed to close at year-end for full-year IET revenue guidance.

Capital programs

Power Systems Capacity Expansion underway

Start: FY26

Benefit:nearly $5 billion in annual Power Systems revenue opportunity at full utilization; gas turbine capacity to double from 2026 levels by end of 2028

Expanding gas turbine and generator capacity in response to strong demand signals. First incremental NovaLT capacity expected online in H1 2027. Spend is disciplined and phased from 2026 to 2028, with paybacks below 2 years, leveraging existing roofline.

Risks & headwinds

Middle East Conflict and Geopolitical Conditions Ongoing, assumed broadly unchanged through year-end FY26

OFSC revenue in the Middle East declined 1% sequentially, down 10% from Q4 2025. IET continues to face a 1% to 2% revenue headwind. Some increase in logistics and inflationary pressures at regional facilities expected in Q3 FY26.

Mitigation:Diversified portfolio, effective management of logistical constraints, strong execution outside the region. Company assumes current activity levels remain broadly unchanged through year-end.

Impact of PSI and CVC Transactions Q2 FY26

Represented a 2% headwind to aggregate IET revenue.

Mitigation:Strong operational performance more than offset the effects.

Temporary Increase in Leverage Post-Chart Acquisition Post-Chart acquisition

Net debt to adjusted EBITDA will temporarily increase from 0.1x.

Mitigation:Committed to deleveraging to 1x to 1.5x net leverage within 24 months, supported by free cash flow generation, synergy realization, disciplined capital allocation, and proceeds from portfolio actions (e.g., Waygate divestiture).

GTS Growth Leveling Off Second half of FY26

Growth expected to level off.

Mitigation:Reflects the timing of planned service outages and a significantly lower contribution from catch-up work associated with overdue backlog.

Logistics Costs and Supply Chain Disruptions Q3 FY26

Some increase in logistics and inflationary pressures at regional facilities.

Mitigation:Assumes logistics costs and supply chain disruptions remain broadly in line with recent levels, but any material change in geopolitical conditions could result in different outcomes.

What to watch in Q3 FY26

Chart Integration Progress & Synergies

Next quarter (first 90 days of integration)

Current Integration underway, $95M cost synergies targeted in Year 1.

Target Progress on 18 work streams, early value capture, alignment of operating models.

Why it matters

Successful integration and synergy realization are key to the strategic value of the acquisition and future financial performance.

Our immediate focus is on disciplined execution and early value capture. We continue to target $325 million of annualized cost synergies by year 3, including $95 million in year 1, $230 million in year 2 and $325 million in year 3.

Find out whether BKR delivers this. Inve re-checks your case every morning.

Q&A highlights

Can you elaborate on the $5 billion Power Systems revenue opportunity by 2029, including mix, pricing, revenue ramp, and CapEx implications?

Management confirmed the $5 billion annual revenue capacity by 2029 represents a 3-4x increase over 2025 revenue. Gas turbines would represent roughly half of the opportunity. CapEx is disciplined and phased from 2026 to 2028, with paybacks below two years, leveraging existing infrastructure. Pricing analysis is based on average 2025 levels. Revenue ramp is phased, with first NovaLT capacity online in H1 2027 and gas turbine capacity doubling by end of 2028, driving growth from 2028-2030.

“So as we said, when you step back and look at it, our expected $5 billion of annualized revenue capacity by 2029 would represent roughly a 3 to 4x increase from the approximate $1 billion of Power Systems revenue generated last year, layering in a practical utilization assumption on the capacity, of course.”

asked by Arun Jayaram · answered by Lorenzo Simonelli

3 min read 7 chapters

Detailed narrative

Q2 Performance Highlights

Baker Hughes delivered a strong second quarter, with adjusted EBITDA reaching $1.23 billion, surpassing the high end of its guidance range. The company achieved a record adjusted EBITDA margin of 18.3%, an increase of 70 basis points year-over-year. IET orders doubled year-over-year to a record $7.1 billion, driving the book-to-bill ratio to 2.2x and RPO to an all-time high of $37.1 billion.

Robust free cash flow generation amounted to $1.1 billion for the quarter.

Chart Acquisition and Integration

The acquisition of Chart Industries was successfully completed, marking a significant milestone in Baker Hughes' portfolio strategy. Chart will operate as the company's third reporting segment, reflecting its strategic importance. Integration efforts are structured in two phases over 180 days, prioritizing customer continuity, employee retention, and early cost synergy actions.

The company targets $325 million in annualized cost synergies by year 3, with $95 million expected in year 1, $230 million in year 2, and the full amount in year 3.

Power Systems Capacity Expansion

Driven by strong demand signals, particularly from data centers, Baker Hughes is expanding its gas turbine and generator capacity. This expansion is projected to support nearly $5 billion in annual Power Systems revenue opportunity by 2029 at full utilization, representing a 3 to 4x increase over 2025 revenue.

The incremental capacity investment is disciplined, with paybacks below two years, and gas turbine capacity is expected to double from 2026 levels by the end of 2028, with the first NovaLT capacity coming online in H1 2027.

IET Order Momentum

IET delivered another exceptional quarter with orders doubling year-over-year to $7.1 billion. This was driven by continued strength in Power Systems, which booked $2.6 billion (including 2.7 gigawatts of power generation, with $2.2 billion from data centers), and LNG equipment, which secured $1.8 billion across three large projects.

Year-to-date IET orders reached $12 billion, leading the company to raise its full-year IET orders guidance to $17.5 billion to $19.5 billion, marking the second consecutive year of record orders.

OFSC Resilience Amidst Headwinds

The OFSC segment delivered a stronger-than-anticipated quarter despite ongoing disruptions in the Middle East. Revenue increased 7% sequentially to $3.45 billion, exceeding the high end of guidance. This outperformance was primarily due to robust activity outside the Middle East, where international OFS revenue grew double digits sequentially, and strong performance from the SSPS business, which saw revenue increase 10% sequentially and margins recover to the high teens.

Middle East product revenue exceeded expectations, partially offsetting softer service activity in the region.

Macro Environment and Energy Transition

Global growth expectations have moderated, but energy security remains a strategic priority, supporting sustained investment across energy upstream and infrastructure. The rapid growth of AI is driving a step change in electricity demand, with hyperscaler capital spending expected to double from $370 billion in 2025 to $750 billion by 2028.

Data center power demand is forecast to grow at an 18% annual rate through 2030, reaching 1,850 terawatt hours. Baker Hughes sees a $100 billion addressable market opportunity for Power Systems by 2030, with over half from behind-the-meter solutions.

Commercial Synergies with Chart

The combined Baker Hughes and Chart portfolio offers significant commercial synergies. Key near-term opportunities include data centers, where combined power generation and thermal management capabilities provide broader infrastructure solutions for uptime and efficiency. Gas infrastructure also presents strong opportunities, offering complete solutions across the gas value chain for multiple molecules.

Underappreciated long-term opportunities exist in space (leveraging cryogenic expertise), geothermal (integrated solutions), and mining (cross-selling services and digital monitoring).

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