NOV (NOV) Q2 FY26 earnings call: guidance and Q&A

How does NOV see the Middle East progressing in H2, given other oil service peers' expectations of potential revenue decline?

Jose Bayardo explained the Q1 EBITDA impact ($30M), stabilization in Q2 with logistical constraints, and the assumption for Q3 that conditions remain consistent with Q2, implying gradually higher activity. He noted that land-based activity was stable, while offshore was impacted. He provided a scenario where a 10-15% sequential increase in Middle East activity (which is 15% of total revenue) might not materialize, leading to a $20-25M EBITDA impact.

“As we mentioned in our press release, our outlook reflects a scenario in which conditions on the ground in the Middle East during the third quarter remained consistent with what we saw in the second quarter. That doesn't mean activity remains exactly the same. It means the trends that we saw emerging during that time period continue meaning higher levels -- gradually higher levels of activity with more rigs coming back to work during that time period.”

asked by Arun Jayaram · answered by Jose Bayardo

Can management provide expectations for EE book-to-bill, specifically if it will approach 100% for the full year?

Jose Bayardo reiterated expectations for significant pickup in H2 orders, noting year-to-date bookings are up 16% YoY. He highlighted meaningful bookings from FPSO FIDs and a favorable shift towards gas-condensate, deeper water projects. He also mentioned strong bookings in EPS capital equipment (drill pipe, fiberglass). For FY26, he expects book-to-bill to be in the vicinity of 90% to 100%, and meaningfully above that in 2027 and beyond.

“But our current expectation is still to get at least close to the 100% book-to-bill, but probably more in the vicinity of 90% to 100% for 2026. And meaningfully above that in '27 and beyond.”

asked by Arun Jayaram · answered by Jose Bayardo

Why is EE revenue guided flat sequentially despite optimism for H2, and what is the recovery potential for the rig aftermarket business?

Rodney Reed explained that EE revenue is flat sequentially due to mix changes, as strong operational execution on some production equipment projects nears completion. He confirmed that the rig aftermarket business is expected to pick up meaningfully (mid-teens revenue increase H1 to H2) due to increasing rig count, utilization, and day rates.

“When you look at the EE business, really kind of flat revenue going from Q2 to Q3. And those changes are really kind of mix related... we do expect a meaningful pick up first half to second half in the rig business. That's probably in that sort of mid-teens range, first half to second half revenue.”

asked by Marc Bianchi · answered by Rodney Reed

What is the margin opportunity beyond the 15% implied by the high-watermark analysis, and is it primarily volume-driven?

Jose Bayardo stated that while volume helps, continued operational efficiency initiatives and pricing power (now that activity is increasing) will also drive margins higher. He confirmed the goal is "mid-teens EBITDA-type margins" and, more importantly, a "minimum of mid-teens percentage range" for Return on Capital Employed (ROACE), up from low teens.

“I think you could take away that our expectation and certainly our goal is to get to mid-teens EBITDA-type margins. but more importantly, return on capital employed. I think that base high watermark analysis, you'd probably be approaching low teens percentage range. We want to get to a minimum of mid-teens percentage range.”

asked by Marc Bianchi · answered by Jose Bayardo

What is a realistic timeline (e.g., late next year, early '28, or 2 years down the road) to reach the $9.8B revenue, 15% margin profile?

Jose Bayardo declined to pinpoint a precise timing due to macro variables but expressed high confidence, citing a different cycle driven by 10 years of underinvestment, increasing global energy demand (especially from non-OECD countries and data centers), maturing North American shale, and the deepwater offshore winning the battle for low marginal cost of supply. He emphasized the tightened service complex and the need for earlier capital equipment investment.

“I'm not going to pinpoint the precise timing of it. There are obviously a whole lot of variables related to the macro environment. But what I will say is our confidence level is high.”

asked by Jim Rollyson · answered by Jose Bayardo

Where does the company stand relative to the $100 million target, and what might the next iteration of structural cost savings include?

Rodney Reed stated that the cost savings are now starting to outpace cost inflation, driven by operational efficiencies. He highlighted real estate sales ($45 million) as part of the effort. He expects continued progress in H2 2026 and into 2027 through simplifying processes, leveraging scale, and operational efficiency, indicating more room to run on the current tranche of savings.

“as we made it through the second quarter, we started to get slightly more positive in terms of the cost savings out running some of the inflation that we've seen over the last 12 months or really good efforts by the team and you continue to go see that in several areas, just with the operational efficiencies that are driving better results throughout many parts of our business.”

asked by Doug Becker · answered by Rodney Reed