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    NOV
    Earnings call· Mar 2026(Q1 FY26)

    NOV Q1 FY26 earnings call NOV

    Apr 28, 2026 Source

    Executive summary

    NOV Inc. Q1 FY26 — Market Shift Accelerates Capital Equipment Cycle Amidst Middle East Conflict

    NOV Inc. navigated a challenging Q1 FY26 marked by significant disruption from the Middle East conflict, which impacted revenue and EBITDA. Despite these headwinds, the company saw strong order intake in its Energy Equipment segment and record performance in key offshore-related businesses. Management believes the conflict has accelerated and amplified the need for increased investment across the energy industry, positioning NOV for a new capital equipment cycle and a broad-based recovery in the mid-to-longer term.

    Highlights

    5

    • Energy Equipment segment bookings totaled $520 million, representing the strongest first quarter order intake since 2019 and an increase of $83 million year-over-year.

    • Subsea flexible pipe business achieved record quarterly EBITDA for the third consecutive quarter, with a quarterly book-to-bill over 100%.

    • Process Systems business achieved record EBITDA for the quarter, with revenue up more than 50% compared to Q1 2025.

    • ReedHycalog business gained market share in the U.S., growing revenue 8% compared to a 7% decline in the U.S. rig count.

    • Drill pipe orders were strong, outpacing the average quarterly bookings for the past 3 years, with backlog at its highest level in 2.5 years.

    Concerns

    5

    • The Middle East conflict negatively impacted Q1 revenue by an estimated $54 million and EBITDA by $32 million.

    • Energy Equipment segment reported a book-to-bill of 80% for the quarter.

    • Q1 margins were negatively impacted by a $30 million increase in tariff cost year-over-year.

    • Energy Products & Services segment revenue decreased 10% year-over-year, with adjusted EBITDA of $96 million or 10.7% of sales, experiencing larger than normal decrementals.

    • Aftermarket sales and services in the Energy Equipment segment experienced a 12% reduction year-over-year.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Energy Equipment book-to-bill
    near 100%
    high materiality
    High
    Full-year 2026 results (conditional)
    broadly in line with 2025
    high materiality
    Medium
    Q2 FY26 Energy Equipment segment revenue
    down 2% to 4% year-over-year
    medium materiality
    High
    Q2 FY26 Energy Equipment segment EBITDA
    $135 million to $155 million
    medium materiality
    High
    Q2 FY26 Energy Products & Services segment revenue
    decrease between 6% to 8% year-over-year
    medium materiality
    High
    Q2 FY26 Energy Products & Services segment EBITDA
    $100 million to $120 million
    medium materiality
    High
    Full-year 2026 Capital expenditures
    $340 million and $370 million
    high materiality
    High
    2026 EBITDA to free cash flow conversion
    between 40% to 50%
    high materiality
    High
    Cost reductions offsetting tariffs and inflation
    beginning in the second half of 2026
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Energy Equipment
    Revenue growth led by offshore production-related businesses. EBITDA margins negatively impacted by a lower mix of aftermarket revenue and higher costs from Middle East disruptions. Subsea flexible pipe and Process Systems achieved record EBITDA. Drilling capital equipment declined due to prior year's large BOP project. Marine and Construction driven by cranes and pipe/cable systems. Aftermarket activity impacted by Middle East conflict and lower service/repair work.
    Capital equipment sales: 63% of segment revenueCapital equipment sales growth YoY: 16%Aftermarket sales and services: 37% of segment revenueAftermarket sales and services reduction YoY: 12%Capital equipment orders: $520 millionBook-to-bill: 80%Ending backlog: $4.23 billionSubsea flexible pipe quarterly book-to-bill: over 100%Drilling capital equipment revenue decline YoY: around 10%Marine and Construction business revenue increase YoY: high teens percentageIntervention stimulation capital equipment revenue decline YoY: approximately 20%Drilling equipment aftermarket revenue decline YoY: mid-teens percentageDrilling equipment aftermarket revenue decline sequentially: 12%Spare parts bookings: robust, higher than 4-quarter rolling averageSpare parts backlog: highest level in 7 quartersAftermarket projects: roughly 35% more compared to last yearIntervention stimulation aftermarket revenue sequentially: essentially flatIntervention stimulation aftermarket revenue YoY: down mid- to upper single-digit percentage
    		$1.19 billion4%—$131 million or 11% of sales
    Energy Products & Services
    Results negatively impacted by Middle East disruptions and lower global activity, which more than offset market share gains in drill bits and digital services adoption. Lower volumes, absorption impacts, higher tariffs, and inflationary pressures led to larger decrementals. Digital services expanded significantly. Fiberglass revenue declined but achieved record bookings. Drill pipe sales increased with strong orders.
    Service and rentals: 54% of sales mixCapital equipment: 29% of sales mixProduct sales: 17% of sales mixServices and rentals decline YoY: mid- to upper single-digit percentage rangeReedHycalog revenue growth in US: 8% (vs 7% decline in US rig count)Sales of capital equipment decline YoY: low double-digit percentage rangeFiberglass record quarterly bookings: driven by demand for produced water transport, fuel handling, co-related applicationsFiberglass backlog: highest level in 10 quartersDrill pipe orders: strong, outpacing average quarterly bookings for past 3 yearsDrill pipe sales increase YoY: mid-teens percentage rangeDrill pipe backlog: highest level in 2.5 yearsProduct sales decline YoY: mid-teens percentage range
    		$897 million-10%—$96 million or 10.7% of sales

    Operational metrics

    21
    Adjusted EBITDA
    $177 million
    Q1 FY26

    Corresponds with the term adjusted EBITDA as defined in our earnings release.

    Net income
    $19 million
    Q1 FY26

    On a U.S. GAAP basis.

    Diluted EPS
    $0.05
    Q1 FY26

    Per fully diluted share.

    Operating profit
    $47 million
    Q1 FY26

    Included other items, primarily related to a noncash stock compensation charge, severance and facility closures.

    Adjusted operating profit
    $85 million
    Q1 FY26

    Adjusted for other items.

    Middle East conflict revenue impact
    $54 million
    Q1 FY26

    Estimated negative impact on revenue.

    Middle East conflict EBITDA impact
    $32 million
    Q1 FY26

    Estimated negative impact on EBITDA.

    Tariff cost increase
    $30 millionyear-over-year
    Q1 FY26

    Negative impact on first quarter margins.

    Global headcount reduction
    8%
    since Q1 2025

    Part of cost reduction efforts.

    Facilities exited
    over 40
    since Q1 2025

    Part of cost reduction efforts.

    Shares repurchased
    3.5 million
    Q1 FY26

    Part of return of capital program.

    Share repurchase value
    $67 million
    Q1 FY26

    Value of shares repurchased.

    Dividends paid
    $33 million
    Q1 FY26

    Part of return of capital program.

    Quarterly dividend increase
    20%
    Q1 FY26

    Reflected in dividends paid.

    Total shareholder returns
    over $900 million
    past 8 quarters

    Through dividends and share repurchases.

    APA tariff refund claim
    $40 million
    potential

    Round numbers for what was paid in for EPA, not reflected in Q1 results or Q2 guidance.

    Tariff expense (going forward)
    $30 million
    quarterly

    Reflected in Q2 guidance.

    Offshore production-related equipment bookings
    healthy
    Q1 FY26

    Remained healthy in the first quarter.

    Tungsten carbide cost increase
    approximately 400%
    since end of 2025

    Impacts drill bits, downhole tools, ESPs, and production chokes.

    Offshore drillship contracts (2027)
    highest level since 2015
    2027

    Expected number of drillships in contract.

    Offshore deepwater fleet utilization
    around 95%
    current

    Marketed utilization of the deepwater fleet.

    Industry KPIs

    7
    MetricValueDetails
    Rpo backlog$4.23 billionUSD
    Book to bill ratio80%%
    FCF CAPEX leveragebetween 40% to 50%%
    Digital recurring revenueexpanded significantly
    Aftermarket installed base12% reduction%
    Orders bookings by segment$520 millionUSD
    Segment adjusted EBITDA margin—%

    Orderbook & backlog

    5
    Energy Equipment ending backlog$4.23 billionQ1 FY26
    Subsea flexible pipe backlogextending into 2028Q1 FY26
    Fiberglass backloghighest level in 10 quartersQ1 FY26
    Drill pipe backloghighest level in 2.5 yearsQ1 FY26
    Spare parts backloghighest level it has been for the last 7 quartersQ1 FY26

    Deals & partnerships

    4
    BrazilLarge subsea flexible pipe order

    Supported healthy offshore production-related equipment bookings in Q1.

    UnnamedLarge FEED study for harsh environment FPSO

    Reflective of increasing confidence in long-term market outlook for offshore production-related equipment.

    UnnamedSemisubmersible rig reactivation project for North Sea

    Includes mud systems, a crane, and a BOP stack, supporting higher levels of future activity.

    GuyanaContract to deploy thermal treatment technology

    First deployment of the technology in Latin America, supporting efficient drilling cuttings management.

    Capital programs

    1
    Subsea flexible pipe manufacturing facility expansionapproved$200 million

    Benefit: doubling capacity

    This investment is intended to address what we believe is a developing capacity shortfall in the industry as offshore activity increases.

    Risks & headwinds

    4
    Middle East conflict disruptionQ1 FY26, ongoing into Q2 FY26

    Negatively impacted Q1 revenue by $54 million and EBITDA by $32 million. Freight costs increased by as much as 3 to 4x normal levels.

    Mitigation: Rerouting manufacturing for customers outside the region to facilities elsewhere in the global network; supply chain and operations teams are taking action to mitigate risk.

    Supply chain constraintsQ1 FY26, more pronounced in March

    Experienced delays in receiving raw materials and critical components; unpredictability of logistics introduced additional cost and complexity, impacting manufacturing throughput.

    Mitigation: Rerouting manufacturing to reduce risk; experienced supply chain and operations teams managing disruption.

    Inflationary environmentOngoing

    Contributes to higher operating costs; medical costs and certain raw materials (e.g., tungsten carbide up approximately 400% since end of 2025) are inflationary pressures.

    Mitigation: Focused on improving operational efficiency, cost reductions (headcount, facilities, shared services), sourcing, pricing, and operational actions to mitigate higher costs.

    Tariff costsQ1 FY26, ongoing

    Q1 margins negatively impacted by a $30 million increase in tariff cost year-over-year. Expected to be around $30 million quarterly going forward.

    Mitigation: Cost-out program expected to begin to more than offset the tariff and other inflationary costs beginning in the second half of 2026 (excluding Middle East impacts).

    What to watch in Q2 FY26

    5

    Middle East conflict impact on revenue and EBITDA

    Next quarter (Q2 FY26 results) and H2 FY26
    CurrentQ1 revenue -$54M, EBITDA -$32M. Q2 expected slightly larger impact.
    TargetResolution of conflict, reopening of Strait, return to normal logistics.

    Why it matters

    The conflict has a significant impact on financial results and the overall market outlook. Its resolution could allow NOV to achieve its prior full-year expectations.

    Rodney will cover second quarter guidance, which assumes conditions in the Middle East remain consistent with where they are today, meaning that these fire holds, but the straight remains closed, which continues to constrain logistics and increase both the time and cost of doing business. While that is our current assumption, the situation remains extremely fluid.

    Q&A highlights

    5

    Can you elaborate on the Flexibles business, its current top line performance, and the progression expected with the capacity doubling in Brazil?

    The subsea flexible pipe business shows strong performance with robust bookings and lead times extending into 2028. Brazil offers significant growth from new projects and an aging infrastructure replacement cycle. New capacity is also needed for CO2 corrosion resistance. The offshore deepwater environment is aligning for growth, with an anticipated industry capacity shortfall in a few years, which NOV aims to address.

    “Everything looks really good from a demand perspective. And as we sort of map out our own capacity as well as our competitors, it's pretty clear to us that in a few years, the industry is going to be short on capacity, and we see a great opportunity to step into that and support our customer base.”

    asked by Arun Jayaram · answered by Jose Bayardo

    2 min read5 chapters

    Detailed Narrative

    01

    Impact of Middle East Conflict

    The Middle East conflict significantly disrupted NOV's Q1 operations, leading to an estimated $54 million negative impact on revenue and $32 million on EBITDA. Challenges included rerouted shipments, extended transit times, increased freight costs (up to 3-4x normal levels), and delays in factory acceptance testing. Supply chain constraints became more pronounced in March, affecting raw material receipts and manufacturing throughput. Aftermarket operations faced difficulties in spare parts delivery and reduced customer activity, though much of the impact is timing-related📎 with deliveries now occurring or delayed rather than canceled.

    02

    Shift in Global Market Outlook

    The global oil market has dramatically shifted from an expected 2-3 million barrels per day oversupply to a meaningful deficit due to the Middle East conflict, which has resulted in approximately 10 million barrels per day of shut-in production. This requires drawdowns of strategic reserves and indicates a market that will remain undersupplied for an extended period, necessitating a significant increase in investment. An estimated 10,000 wells are offline in the region, with potential for 0.5-2.5 million barrels per day of permanent capacity loss, driving demand for intervention, workovers, and incremental drilling.

    03

    Accelerated Investment Urgency

    The combination of supply disruption, tighter market conditions, and a renewed focus on energy security is increasing the urgency for investment across the industry. After years of underinvestment, the industry lacks excess capacity. NOV is seeing early indications of this in customer conversations, with North American operators accelerating DUC completions and backing away from rig releases. International land markets, including Argentina and Venezuela, are also seeing continued growth and increased demand for equipment.

    04

    Offshore Upcycle and Capacity Expansion

    NOV anticipates a sustained offshore upcycle, supported by improved project economics and standardization, making deepwater developments increasingly competitive. The company approved a $200 million expansion of its subsea flexible pipe manufacturing facility in Brazil to address an anticipated industry capacity shortfall. Offshore drillship contracts are expected to reach their highest level since 2015 by 2027, driving reactivations, upgrades, and increased spare part sales. The outlook for increased deepwater investment and project activity is becoming more compelling.

    05

    Cost Reduction Initiatives and Margin Focus

    NOV has implemented significant cost reduction initiatives, including an 8% reduction in global headcount and the exit of over 40 facilities since Q1 2025. The company also established a global service center in India and increased IT system investments to improve efficiency. While these efforts have been largely offset by tariff costs and inflationary pressures (e.g., tungsten carbide up 400%), management expects cost reductions to more than offset these headwinds starting in the second half of 2026, excluding Middle East impacts.

    AI-generated summary of the company’s earnings call. Not investment advice.