Baker Hughes Q2 Earnings Call Highlights

Key Points

• Baker Hughes exceeded second-quarter guidance, reporting $1.23 billion in adjusted EBITDA, $0.64 in adjusted EPS, an 18.3% adjusted EBITDA margin and $1.1 billion in free cash flow despite Middle East disruptions.
• Industrial & Energy Technology orders reached a record $7.1 billion, driven by data center power systems and LNG projects. Backlog rose 19% to $37.1 billion, while management expects Horizon Two orders to exceed $45 billion.
• Full-year guidance was raised to approximately $27.35 billion in revenue and $4.85 billion in adjusted EBITDA. The company also completed its Chart Industries acquisition, targeting $325 million in annual cost synergies by the third year.

Baker Hughes NASDAQ: BKR reported second-quarter results that exceeded its guidance range, supported by record orders in its Industrial & Energy Technology segment and stronger-than-expected performance in its Oilfield Services & Equipment business despite disruptions in the Middle East.

Chairman and CEO Lorenzo Simonelli said adjusted EBITDA totaled $1.23 billion, above the high end of the company’s guidance, while adjusted earnings per share reached $0.64, up modestly from a year earlier. Adjusted EBITDA margin expanded 70 basis points year over year to a record 18.3%, and free cash flow was $1.1 billion.

“We delivered another strong quarter as disciplined execution and the strength of our diversified portfolio more than offset anticipated headwinds in the Middle East,” Simonelli said.

Record IET Orders Drive Backlog Growth

Total company bookings were $10.5 billion in the quarter, including a record $7.1 billion in IET orders, which doubled from a year earlier. The segment’s book-to-bill ratio was 2.2 times, and remaining performance obligations rose 19% to a record $37.1 billion.

IET booked $2.6 billion in power systems orders, including 2.7 gigawatts of power-generation capacity. Data center-related activity accounted for $2.2 billion of power systems orders, though Simonelli said the segment’s momentum extended beyond data centers into LNG, gas processing, production infrastructure, services and upgrades.

Among the quarter’s awards, Baker Hughes received an order from Dynamis for NovaLT gas turbines representing about 1.3 gigawatts of mobile generation capacity for data center and oil-and-gas applications. The company also signed a multiyear strategic agreement with Kodiak Gas Services, beginning with an approximately one-gigawatt award and providing a framework for up to 1.8 gigawatts over time.

In LNG, Baker Hughes booked $1.8 billion of equipment orders across three projects. The awards included equipment for Venture Global, gas turbine-driven refrigerant compressor trains for Golar’s floating LNG facility, and equipment and upgrades supporting Cheniere’s Sabine Pass LNG facility.

Simonelli said the company now expects its Horizon Two IET orders to exceed $45 billion. Baker Hughes is also expanding gas turbine and generator capacity, with additional capacity expected to be available by 2029. At full utilization, the company estimates the expansion could support nearly $5 billion in annual power systems revenue opportunity.

Chief Financial Officer Ahmed Moghal said the capacity additions will be phased from 2026 through 2028, with the first incremental NovaLT capacity expected in the first half of 2027. He said gas turbine capacity is expected to double from 2026 levels by the end of 2028.

Segment Performance and Middle East Conditions

IET revenue was $3.3 billion, roughly in line with the prior-year level, while segment EBITDA increased 16% year over year to $678 million. IET EBITDA margin expanded 280 basis points to 20.6%, driven by favorable backlog pricing and operational execution, Moghal said.

OFSE revenue was $3.45 billion, up 7% sequentially and above the company’s guidance range. Growth was led by Brazil, Mexico, Asia Pacific and North America land. Middle East product revenue exceeded internal expectations, though the region continued to face logistical constraints and softer services activity.

OFSE EBITDA was $605 million, with a 17.5% margin that rose 10 basis points sequentially. Stronger margins in the Subsea and Surface Pressure Systems business offset pressure from Middle East disruptions and inflationary costs in oilfield services. SSPS secured $667 million of orders during the quarter.

The company expects global upstream spending to decline modestly in 2026, as growth in Latin America, offshore Africa and North America land is more than offset by lower spending in Europe and the Middle East. Management said customers remain focused on production optimization and mature-asset solutions.

Chart Acquisition Adds Third Reporting Segment

Baker Hughes completed its acquisition of Chart Industries earlier in the month. Chart will operate as the company’s third reporting segment, adding thermal management, air and gas handling, and carbon capture capabilities across markets including gas infrastructure, data centers, industrial gases, space and new energy.

The company identified nearly 300 integration initiatives and continues to target $325 million in annualized cost synergies by the third year after closing. The targets include $95 million in the first year, $230 million in the second year and $325 million in the third year.

Management said initial integration priorities include customer continuity, employee retention, operational performance, early cost-synergy actions and commercial cross-selling. Simonelli highlighted data centers and gas infrastructure as immediate commercial opportunities, while citing geothermal, mining and space as potential longer-term areas for combined offerings.

Moghal said leverage will rise temporarily following the acquisition, but the company expects to return to net leverage of 1 to 1.5 times within 24 months. The deleveraging plan is supported by free cash flow, synergy realization, disciplined capital allocation and portfolio actions, including the announced divestiture of Waygate.

Guidance Raised for Full Year

For the third quarter, Baker Hughes expects company revenue of approximately $6.87 billion and adjusted EBITDA of about $1.205 billion. The outlook assumes Middle East activity remains broadly stable through year-end, with IET continuing to experience a 1% to 2% revenue headwind from regional disruptions.

• Third-quarter IET: Revenue of approximately $3.32 billion and EBITDA of approximately $660 million.
• Third-quarter OFSE: Revenue of approximately $3.55 billion and EBITDA of approximately $625 million.
• Full-year company outlook: Revenue of approximately $27.35 billion and adjusted EBITDA of approximately $4.85 billion.
• Full-year IET orders: Raised to a range of $17.5 billion to $19.5 billion.
• Full-year IET: Revenue midpoint maintained at $13.5 billion, while EBITDA midpoint increased to $2.725 billion.
• Full-year OFSE: Revenue of $13.85 billion and EBITDA of $2.425 billion.

Management said a meaningful portion of recent gas technology equipment orders will convert to revenue after 2027 because of longer cycle times. Still, Moghal said the record backlog, favorable pricing and mix of power systems, LNG, services and upgrades provide visibility for profitability in 2027 and beyond.

About Baker Hughes (NASDAQ:BKR)

Baker Hughes is an energy technology company that provides a broad portfolio of products, services and digital solutions for the oil and gas and industrial markets. Its offerings span oilfield services and equipment — including drilling, evaluation, completion and production technologies — as well as turbomachinery, compressors and related process equipment used in midstream and downstream operations. The company also supplies aftermarket services, field support and integrated solutions designed to improve asset performance and uptime across the energy value chain.

The firm's roots trace back to the merger of Baker International and Hughes Tool Company, and more recently it combined with GE's oil and gas business in 2017 to form Baker Hughes, a GE company (BHGE); subsequent changes in ownership restored Baker Hughes as an independent publicly traded company.

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