SLB LIMITED/NV Q1 FY26 earnings call SLB

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.

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 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.

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 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 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.

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.