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    SLB
    Earnings call· Jun 2026(Q2 FY26)

    SLB LIMITED/NV SLB

    Jul 24, 2026 Source

    Executive summary

    SLB Q2 FY26 — Strong International Growth and Data Center Momentum

    SLB delivered a solid quarter driven by broad-based international growth and a rebound in North America, successfully navigating significant Middle East disruptions. The company is strategically aligning with customer priorities in core oil and gas, while accelerating growth in Digital and Data Center Solutions, positioning for a compelling outlook into 2027. Management anticipates a gradual recovery in the Middle East and continued momentum in deepwater and digital offerings.

    Highlights

    5

    • Q2 revenue increased 3% sequentially to $9 billion despite Middle East disruptions.

    • Digital adjusted EBITDA margins reached approximately 35% for the quarter, expanding 860 basis points sequentially.

    • Production Systems adjusted EBITDA margins returned to above 20%, supported by strong execution and ChampionX contribution.

    • Data Center Solutions revenue increased 33% sequentially and 80% year-on-year, with an annualized revenue run rate exceeding $2 billion by end of 2027.

    • Generated $1.4 billion of cash flow from operations and $716 million of free cash flow in Q2, a $739 million increase sequentially.

    Concerns

    3

    • Middle East revenue fell 13% sequentially to $1.66 billion due to conflict disruptions, impacting Reservoir Performance and Well Construction.

    • Q2 adjusted EPS decreased $0.19 year-over-year to $0.55.

    • Uncertainty persists in the Middle East, with a downside scenario estimating a $150 million revenue impact and $75 million adjusted EBITDA headwind for Q3 if remobilization is disrupted.

    Guidance & targets

    14
    CategoryTargetConfidence
    Global sequential revenue growth
    3% to 4%
    high materiality
    High
    Adjusted EBITDA margin expansion
    approximately 75 basis points
    medium materiality
    High
    Core divisions revenue growth
    low to mid-single digits
    medium materiality
    High
    Digital revenue growth
    low single digits
    medium materiality
    High
    Middle East revenue (downside scenario)
    approximately $150 million lower than base case
    high materiality
    Low
    Adjusted EBITDA headwind (downside scenario)
    approximately $75 million
    high materiality
    Low
    Middle East activity level
    between $2.1 billion and $2.2 billion
    high materiality
    Medium
    Total revenue
    surpass $10 billion
    high materiality
    Medium
    Total revenue growth
    approximately 5% year-over-year
    high materiality
    Medium
    Adjusted EBITDA margin
    approximately 24%
    high materiality
    Medium
    Data Center Solutions annualized revenue run rate
    exceeding $2 billion
    high materiality
    High
    Capital investments
    approximately $2.5 billion
    medium materiality
    High
    Stock repurchases
    minimum of $2.4 billion
    high materiality
    High
    Total shareholder returns
    more than $4 billion
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Digital
    Driven by higher digital exploration revenue and higher sales in platforms and applications. Margin expansion due to higher sales of exploration data licenses and transfer fees, and improved profitability in digital operations and platforms and applications.
    Adjusted EBITDA margin: 34.7%Adjusted EBITDA margin increase: 860 bpsAnnual recurring revenue (ARR) growth: 15% YoY
    		$697 million—9%27.8% pretax operating margin
    Reservoir Performance
    Decreases primarily due to operational disruptions related to the Middle East conflict. Pretax operating margin decreased 121 basis points.
    		$1.6 billion—-2%14.9% pretax operating margin
    Well Construction
    Revenue decreased primarily due to disruptions in the Middle East, partially offset by higher drilling activity in Latin America. Pretax operating margin was essentially flat sequentially as lower profitability in the Middle East was offset by improved profitability in North America and Latin America.
    		$2.7 billion—-2%15.2% pretax operating margin
    Production Systems
    Driven by higher revenue from OneSubsea, increased sales of artificial lift, valves, surface production systems, and completions. Pretax operating margin increased 138 basis points due to improved profitability in OneSubsea and artificial lift, and accretive contribution from ChampionX.
    Adjusted EBITDA margin: above 20%
    		$3.8 billion—7%15.5% pretax operating margin
    Middle East
    Revenue fell sequentially due to conflict disruptions. Temporary cost actions were taken to alleviate the detrimental effect on earnings.
    		$1.66 billion—-13%—

    Operational metrics

    4
    Adjusted EPS
    $0.55-$0.19 YoY
    Q2 FY26

    Excluding charges and credits.

    Net debt
    $8.7 billion
    Q2 FY26

    As of quarter end.

    Stock repurchases
    $648 million
    Q2 FY26

    Repurchased during the quarter.

    Middle East earnings per share impact (Q2)
    slightly below low end of $0.06 to $0.08 range
    Q2 FY26

    Sequential impact on EPS, better than originally indicated due to temporary cost actions.

    Industry KPIs

    6
    MetricValueDetails
    Rpo backlogahead of expectations
    FCF CAPEX leverage$716 millionUSD
    M a integration progressaccretive margins
    Digital recurring revenue15%%
    Segment adjusted EBITDA margin34.7%%
    Data center new energy revenue capacity80%%

    Orderbook & backlog

    2
    Data Center Solutions backlogsufficient to support >$2 billion annualized revenue run rateQ2 FY26

    ahead of expectations

    Supports exit 2027 annualized revenue run rate.

    OneSubsea booking ambition$9 billionQ2 FY26

    Ambition over 2 years, expected to be visibly accretive to current revenue rate in 2026 and 2027.

    Deals & partnerships

    4
    MetaData center design, engineering, and system integration

    Exemplifies SLB's evolution beyond manufacturing into broader data center offerings, including fitting modules and commissioning.

    Liberty EnergyAlliance for behind-the-meter power generation systems for data centers

    Combines SLB's Modular Infrastructure Solutions and Global Market reach with Liberty's power generation system. Part of accelerating strategy for decarbonized power and cooling solutions.

    CanonAlliance to optimize subsea architecture

    To develop and work side-by-side early in design to optimize subsea architecture and leverage long-term solutions, positioning for life of field solutions.

    Subsea 7Alliance for end-to-end solutions for development or intervention

    Continuing to work with partners to provide comprehensive solutions.

    Risks & headwinds

    2
    Middle East conflict and geopolitical volatilityQ3 FY26 and beyond

    Q2 revenue fell 13% sequentially to $1.66 billion in the Middle East. Downside scenario for Q3 estimates $150 million lower revenue and $75 million adjusted EBITDA headwind if remobilization is disrupted.

    Mitigation: Temporary cost actions taken; gradual recovery assumed in base case; monitoring re-escalation; focus on protecting people and facilities.

    Cost inflation in chemicalsQ2 FY26

    Impacted ChampionX margins

    Mitigation: ChampionX still delivered sequential margin expansion for the third consecutive quarter due to synergy realization.

    What to watch in Q3 FY26

    5

    Middle East activity recovery

    Q3 FY26
    Current$1.66 billion in Q2 FY26 (13% sequential decline)
    TargetGradual recovery, avoiding downside scenario of $150M lower revenue

    Why it matters

    The pace of Middle East recovery is critical for overall revenue and earnings growth, especially given its significant contribution to SLB's international business.

    Based on this trajectory, we expect global sequential revenue growth between 3% and 4%, with adjusted EBITDA margin expansion of approximately 75 basis points. At the division level, we anticipate revenues of the core divisions to increase sequentially in the low to mid-single digits, while digital revenue is expected to grow in the low single digits. The high tension recently observed in the Middle East have not had a material impact on our current activity. However, we have developed a downside scenario to help model the potential impact of the ongoing geopolitical volatility🌐. In the event of a significant reescalation that disrupts ongoing remobilization effort and results in flat sequential Middle East revenue, we estimate third quarter revenue will be approximately $150 million lower than our base case assumption.

    Q&A highlights

    8

    How much will Middle East activity step up from Q3 to Q4, and how do other geo markets contribute to the Q4 $10B revenue target? Is $10B a good run rate for 2027?

    Q4 step-up will be driven by further Middle East recovery (to 95% of Q4 FY25), usual year-end sales in Digital and Production Systems, and Data Center Solutions. Underlying fundamentals include offshore deepwater momentum and production recovery. Did not comment on 2027 run rate but emphasized compelling business outlook.

    “So it will be a long and short cycle exposure, long cycle to deep order, short cycle to production recovery and the kick of the Middle East recovery developing at scale in the fourth quarter and continuing throughout '27.”

    asked by Scott Gruber · answered by Olivier Le Peuch

    2 min read5 chapters

    Detailed Narrative

    01

    Middle East Recovery and Geopolitical Impact

    The Middle East conflict significantly impacted Q2 results, with revenue falling 13% sequentially to $1.66 billion. Operations in Iraq remained constrained by security, though activity resumed in several other countries. Management expects a gradual recovery, with Q3 revenue growth assuming remobilization, but has modeled a downside scenario of a $150 million revenue impact and $75 million adjusted EBITDA headwind if re-escalation occurs. The preliminary Q4 outlook assumes Middle East activity reaches $2.1 billion to $2.2 billion, or 95% of Q4 2025 levels, indicating a phased return to prior capacity.

    02

    Data Center Solutions Momentum and Strategy

    Data Center Solutions continued its strong growth, with revenue up 33% sequentially and 80% year-on-year, driven by new hyperscaler customers and expanded offerings. SLB is evolving beyond manufacturing into data center design, engineering, and system integration, exemplified by a recent announcement with Meta. The company is confident in achieving an annualized revenue run rate exceeding $2 billion by the end of 2027, supported by a strong backlog and international expansion into Canada and Asia. Future growth will focus on adjacent capabilities like decarbonized power and cooling solutions, potentially through partnerships and acquisitions.

    03

    Digital and AI as Key Growth Drivers

    Digital delivered very strong Q2 results, with adjusted EBITDA margins reaching approximately 35%, supported by higher exploration data licenses and transfer fees. Annual recurring revenue (ARR) increased 15% year-over-year. SLB emphasizes Digital Operations and AI as key growth drivers, leveraging its platform approach (Delphi, Lumi, Agora, Tuna) and deep domain expertise. The company sees increasing adoption of autonomous and automated solutions in drilling and production, with successful deployments in the Middle East and other regions.

    04

    Offshore and Exploration Upcycle

    The market is exhibiting characteristics of an upcycle, with international and deepwater activity growing. Final Investment Decisions (FIDs) for long-cycle projects are expected to increase by approximately 30% year-on-year in 2026, supporting higher exploration spending and upstream CapEx growth. This trend is driven by energy security, resource replenishment, and the need for long-term portfolio building, particularly in deepwater. SLB is well-positioned with its Reservoir Performance and Well Construction portfolios, including OneSubsea, to benefit from this multi-year exploration and deepwater cycle.

    05

    Venezuela Re-engagement

    SLB has been working in Venezuela for the past two years, scaling capabilities and supporting existing and re-entering international oil companies. The company is securing contracts and mobilizing resources, with significant setup expected in the next few months⏳. This positions SLB for a significant exit rate in H2 2026 and a strong growth curve in 2027, aiming to capitalize on the country's potential for reinvestment and production recovery, though reaching prior peak revenue levels remains uncertain.

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