Given the attractive deepwater outlook, which SLB businesses (Well Construction, Reservoir analysis, OneSubsea) will be most impacted?

Deepwater is economically attractive with a strengthening FID pipeline, particularly in Africa, Asia, and Latin America. While all core businesses will benefit, OneSubsea is expected to see significant upside, with higher bookings in 2026 than 2025 and a strong growth trajectory into 2027-2028. “But yes, indeed, Subsea, we expect OneSubsea to benefit at scale. And as guided historically previously, I think we expect OneSubsea to benefit to have higher booking this year than last year visibly and to then have a growth trajectory in '26 and into '27 and '28 as we see the scale of this offshore cycle developing.”

How will the Middle East recovery unfold, and what are customers initially needing from SLB once the conflict resolves?

SLB is working closely with customers to prepare for recovery. Some countries will have fast resumption, while others with abrupt shutdowns will require well intervention and assessment before full production. The recovery will be gradual and differ by country, but SLB sees long-term upside as some countries may expand capacity to recover lost market share. “So it's a gradual recovery. But yes, we are working very closely with customers, both to mobilize equipment or resource and also to anticipate the reservoir consequence and the type of services you need to provide as the conflict start to be stabilizing and as the customer have the confidence to remobilize.”

What is the long-term vision for the S&P Global Energy acquisition, and how does it enable broader SLB business outside Digital?

SLB acquired S&P Global Energy's upstream petrotechnical software suite, which is complementary to their North American offerings and expands their product suite. Separately, a strategic partnership with S&P Global Energy will use AI, leveraging SLB's Lumi and Tela platforms with S&P's global data sets to provide unique insights to customers. “So it gives us a broader market access. It gives us a tool that is fit for the commercial market where we're not having the same offering today. And this just expands our product suite into the domain.”

SLB

SLB (SLB) Q1 FY26 earnings call: guidance and Q&A

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

Source: earnings call transcript

Executive summary

SLB Q1 FY26 — Middle East Headwinds Offset by International Growth and Data Center Momentum

SLB faced a challenging Q1 FY26 due to significant disruptions in the Middle East, impacting revenue and margins more than anticipated. Despite these headwinds, the company saw strong growth in Production Systems, Digital, and Data Center Solutions, with the latter on track for a $1 billion exit run rate. Management anticipates a gradual recovery in the Middle East, with growth in other international markets expected to offset continued regional impacts in Q2, reinforcing a positive long-term outlook for upstream investment driven by energy security and supply diversification.

Highlights

Production Systems revenue increased 23% year-on-year due to the ChampionX acquisition, which also grew 2% pro forma.
Digital revenue increased 9% year-on-year, driven by 87% growth in Digital Operations.
Data Center Solutions revenue grew 45% year-on-year, on track to exit the year at a $1 billion run rate.
Annual recurring revenue (ARR) for Digital stood at $1.02 billion, representing 15% year-on-year growth.
SLB expects to repurchase a minimum of $2.4 billion of stock for the full year 2026, targeting over $4 billion in total shareholder distributions.

Concerns

First quarter revenue declined 10.5% sequentially, approximately $200 million higher than expected due to Middle East conflict.
Company-wide adjusted EBITDA margin was 20.3%, down 346 basis points year-on-year.
Net debt increased $797 million sequentially to $8.2 billion.
Free cash flow was slightly negative at $23 million due to annual employee incentives, seasonal working capital, and delayed collections in the Middle East.
Well Construction pretax operating margins contracted 463 basis points year-on-year due to Middle East conflict and pricing headwinds.

Guidance & targets

Category	Target	Timeline	Confidence
Data Center Solutions exit run rate	$1 billion medium materiality	FY26 · 2026	High
Data Center Solutions growth rate	accelerate low materiality	FY27 · 2027	High
Capital investments	approximately $2.5 billion high materiality	Full year 2026	High
Stock repurchases	minimum of $2.4 billion high materiality	Full year 2026	High
Total shareholder distributions	more than $4 billion high materiality	Full year 2026	High
Q2 FY26 EPS impact from Middle East	incremental $0.06 to $0.08 negative impact high materiality	Q2 · 2026	Medium
Q2 FY26 Revenue and Earnings	sequential revenue and earnings decline in the Middle East will be fully offset by all other international markets combined high materiality	Q2 · 2026	Medium
Q2 FY26 International Markets Revenue Growth	mid- to high single-digit revenue growth medium materiality	Q2 · 2026	Medium
Q2 FY26 North America Revenue	flat sequentially medium materiality	Q2 · 2026	Medium
Q2 FY26 Digital and Production Systems Global Growth	grow globally low materiality	Q2 · 2026	Medium
Q2 FY26 Reservoir Performance and Well Construction Global Growth	decline globally low materiality	Q2 · 2026	Medium
Digital adjusted EBITDA margin	at least equivalent to last year's level of 35% medium materiality	Full year 2026	High
OneSubsea booking	higher booking this year than last year medium materiality	FY26 · 2026	High
OneSubsea growth trajectory	growth trajectory medium materiality	FY26, FY27, FY28 · 2026, 2027, 2028	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Digital Revenue growth driven by increased digital services adoption and new technology, including ChampionX acquisition. Adjusted EBITDA margin declined due to lower amortization relating to exploration data mix. Margins are seasonally lowest in Q1 and expected to increase throughout the year. Digital Operations growth: 87% YoYAutomated footage drilled increase: 145% YoYAnnual recurring revenue (ARR): $1.02 billionARR growth: 15% YoYAdjusted EBITDA margin: 26.1%	$640 million	9%	—	20.9% pretax operating margin
Reservoir Performance Decreases in revenue and pretax operating margin were due to lower stimulation and intervention activity, primarily resulting from disruptions in the Middle East.	$1.6 billion	-6%	—	16.1% pretax operating margin
Well Construction Revenue decline primarily from lower activity due to Middle East disruptions, partially offset by higher offshore drilling in Europe, Africa, Latin America, and North America. Pretax operating margins contracted due to Middle East conflict and pricing headwinds in select markets.	$2.8 billion	-6%	—	15.2% pretax operating margin
Production Systems Revenue increase driven by ChampionX acquisition. Excluding ChampionX, revenue decreased 6% YoY due to Middle East conflict, lower OneSubsea revenue, and lower product deliveries in Saudi Arabia. Pretax operating margins declined due to lower profitability in Surface Production Systems, Completions, and OneSubsea. ChampionX margins were accretive and higher than Q4 and Q1 last year. Pro forma revenue from ChampionX Production Chemicals and Artificial Lift businesses growth: 2% YoYOneSubsea pretax margin: 14.4% (vs 18.1% in Q1 2025)	$3.5 billion	23%	—	14.2% pretax operating margin

SLB operating KPIs by quarter

SLB operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Change vs prior quarter
Customers Lumi data and AI platform	50+ The Platform & Application, I think the new offering, Lumi data and AI platform, I think, is being delivered fresh from launch last Q4 to new customers and as adoption has been already more than 50 customers in less than a year, I think it's remarkable. Source: earnings call transcript	50+ Lumi, which we launched 4 or 5 quarters ago, is already having more than 50 customers of an adoption. Source: earnings call transcript	—

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

OneSubsea backlog up 5% Q1 FY26

YoY

Provides better visibility on future growth and potential margins.

Deals & partnerships

S&P Global Energy acquisition

Acquisition of S&P Global Energy's upstream petrotechnical software suite, primarily deployed in North America. This is complementary to SLB's offering and expands its product suite into the commercial market.

S&P Global Energy strategic partnership

Partnership to use AI, leveraging SLB's Lumi and Tela platforms and specific domain foundation models built using S&P Global Energy's global data sets. Aims to provide customers with unique insights and AI capabilities.

NVIDIA partnership

SLB will serve as a modular design partner for NVIDIA DSX AI factories, developing modular infrastructure solutions for large-scale future Rubin Vera solution centers. This partnership supports scaling the Data Center business.

Capital programs

Capital investments (CapEx and APS projects/exploration data) underway approximately $2.5 billion

Period spend: $510 million

Total expected capital investments for the full year 2026, with $510 million spent in Q1.

Risks & headwinds

Middle East conflict and geopolitical disruption Q1 FY26, Q2 FY26, near-term

Q1 revenue declined 10.5% sequentially, approximately $200 million higher than expected; Q2 EPS negatively impacted by an incremental $0.06 to $0.08.

Mitigation:No material adjustment to cost base to preserve operational capacity for rebound; mobilizing commercial organization to recover increased costs through inflation pass-through clauses and negotiations.

Higher procurement and logistics costs Q1 FY26, Q2 FY26

Contributed to 346 bps YoY decline in adjusted EBITDA margin; will negatively impact Q2 EPS by $0.06 to $0.08.

Mitigation:Activating inflation pass-through clauses and engaging in direct negotiations with suppliers and customers to offset effects.

Unfavorable activity mix and higher costs in OneSubsea Q1 FY26

OneSubsea pretax margin was 14.4% in Q1 FY26, down from 18.1% in Q1 FY25.

Mitigation:Margins are expected to increase over the remainder of the year as new projects ramp up and start-up costs are absorbed.

Pricing headwinds in select markets Q1 FY26

Contributed to 463 bps YoY contraction in Well Construction pretax operating margins.

Mitigation:Not explicitly stated, but implied by efforts to recover costs through commercial actions.

Q&A highlights

How has the investment cycle changed, particularly regarding the broad-based recovery in '27 and '28, and which end markets offer the most upside?

Management believes the industry will benefit from an uptick in investment due to structurally higher commodity prices, the need to replenish inventories and strategic reserves, and heightened energy security concerns. This will drive both short-cycle activity (North America, Latin America) and long-cycle deepwater developments (Africa, Asia, Latin America) into 2027-2028.

“we believe that this combination will both affect the short cycle impact in a shorter time and the long cycle at scale into '27 and '28. So we are set in our opinion, for an uptick into the cycle strength going forward.”

asked by John Anderson · answered by Olivier Le Peuch

3 min read 7 chapters

Detailed narrative

Middle East Conflict Impact and Recovery Outlook

The first quarter was significantly impacted by severe disruptions in the Middle East, leading to operational shutdowns and production curtailments, particularly in Qatar and Iraq. This resulted in a $200 million higher revenue decline than expected. Management anticipates a gradual recovery in the region, with some areas resuming operations within days to weeks, while others may require more extensive well intervention.

The long-term outlook for the region is positive, with some countries expected to expand capacity to recover market share.

Strategic Drivers for Increased Upstream Investment

SLB foresees increased upstream investment driven by several factors post-conflict, including higher oil prices, the need to replenish depleted commercial and strategic inventories, and a heightened focus on energy security. This will lead to efforts to diversify supply, strengthen domestic resource development, and rebuild reserves.

These dynamics are expected to support a constructive macro environment for upstream investment into 2027 and 2028, affecting both short-cycle activities in North and Latin America and long-cycle deepwater developments globally.

Production Recovery as a Key Growth Lever

Production Recovery is highlighted as an increasingly critical area, especially as the industry faces challenges in replacing reserves and sustaining production from existing assets. SLB, through its ChampionX acquisition, is uniquely positioned to lead in this space by combining production chemistry, artificial lift, digital capabilities, and subsurface expertise.

This approach aims to unlock additional barrels from existing reservoirs in a capital-efficient manner, maximizing recovery and improving returns across various asset types.

Digital Business Momentum and AI Integration

The Digital business continues to build strong momentum, with revenue up 9% year-on-year and annual recurring revenue reaching $1.02 billion. The company emphasizes embedding AI, data, and software into its platforms and workflows to deliver measurable performance outcomes, rather than offering stand-alone tools.

SLB is making advancements in agentic AI and expects increased adoption as use cases prove value in the field, positioning Digital as a significant long-term growth driver and enabler across its portfolio.

Data Center Solutions Expansion and Strategic Partnerships

Data Centers represent a rapidly expanding opportunity for SLB, leveraging its engineering, manufacturing, and project execution strengths for modular infrastructure solutions. The business achieved 45% year-on-year growth and is on track to exit 2026 at a $1 billion run rate, with accelerated growth expected in 2027.

A recent partnership with NVIDIA to serve as a modular design partner for DSX AI factories underscores its market position. SLB is also assessing M&A opportunities to accelerate its trajectory in areas like thermal management and decarbonized power.

OneSubsea Performance and Offshore Outlook

OneSubsea experienced lower pretax margins in Q1 FY26 (14.4%) due to the concurrent wind-down of large programs and high start-up costs for new projects, compared to 18.1% in Q1 FY25. However, margins are expected to increase over the remainder of the year.

The company anticipates higher bookings for OneSubsea in 2026 compared to 2025, with a strong growth trajectory into 2027 and 2028, driven by a robust deepwater FID pipeline across Africa, Asia, and the Americas.

S&P Global Energy Partnership and Acquisition

SLB has acquired S&P Global Energy's upstream petrotechnical software suite, primarily deployed in North America, to complement its existing offerings and expand its reach internationally. Separately, SLB entered a strategic partnership with S&P Global Energy to use AI, leveraging SLB's Lumi and Tela platforms and domain foundation models with S&P's global data sets. This collaboration aims to provide customers with unique insights and AI capabilities.

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