NOV Q1 Earnings Call Highlights

Key Points

• Middle East conflict weighed on Q1 results: NOV reported revenue of $2.05 billion and net income of $19 million ($0.05/sh) with adjusted EBITDA of $177 million, and said the conflict cost about $54 million of revenue and $32 million of EBITDA due to severe logistics delays and freight costs that spiked “three to four times.”
• Energy Equipment was a bright spot—Q1 revenue rose 4% to $1.19 billion, backlog ended at $4.23 billion with a book-to-bill of 80%, subsea flexible pipe posted record quarterly EBITDA for the third straight quarter, and NOV approved a $200 million Brazil expansion to address anticipated capacity shortfalls.
• Management is driving cost actions (including an 8% global headcount reduction, 40+ facility exits and a new service center in Kochi) and expects these measures to offset tariffs/inflation in H2 2026, while returning capital via $67 million of buybacks, a 20% dividend increase plus a planned supplemental dividend; 2026 capex is guided to $340–370 million and NOV has filed to recover roughly $40 million of IEEPA tariffs.

NOV NYSE: NOV reported first-quarter 2026 revenue of $2.05 billion and net income of $19 million, or $0.05 per fully diluted share, as the company navigated significant disruption tied to conflict in the Middle East. On the call, executives said the situation constrained logistics, delayed deliveries, and raised costs—particularly for capital equipment and aftermarket operations—though they emphasized that much of the impact was timing-related rather than lost business.

Middle East conflict created delivery delays and higher costs

Chairman, President and CEO Jose Bayardo said the quarter unfolded against a “rapidly changing backdrop” due to the conflict, thanking employees in the region for supporting customers “in a very chaotic environment.” Bayardo said NOV achieved its “lowest ever total recordable incident rate and lost time incident rate” during the quarter.

Financially, Bayardo said NOV generated adjusted EBITDA of $177 million in Q1. The company estimated the conflict negatively impacted revenue by about $54 million and EBITDA by about $32 million, largely due to constrained movement of goods, limited access to customer sites, and delayed factory acceptance testing and inspections.

Bayardo said logistics disruptions intensified late in the quarter, particularly in March. He said freight costs increased significantly—at times “three to four times” normal levels—while manufacturing throughput was affected by delayed raw materials and components, reducing absorption and increasing costs. In aftermarket operations, NOV faced difficulties moving spare parts into the region, while customer activity slowed and certain projects were suspended, especially offshore.

Bayardo said conditions improved after the height of the conflict but trade routes remained “more complex, more costly, and carry higher risk of delays.” For second-quarter assumptions, management said it expects the ceasefire to hold but the strait to remain closed, which continues to constrain logistics and raise costs.

Q1 profitability and cost actions

Senior Vice President and CFO Rodney Reed said consolidated revenue declined 2% year-over-year. Operating profit was $47 million and included $37 million in “other items,” primarily a non-cash stock compensation charge, severance, and facility closures. Adjusted operating profit was $85 million, or 4% of sales, and adjusted EBITDA was $177 million, or 9% of sales.

Reed said first-quarter margins were pressured by a $30 million year-over-year increase in tariff costs and a lower mix of aftermarket revenue, partly due to large reactivation projects that were completed in the first quarter of 2025.

Reed detailed ongoing cost-reduction initiatives since Q1 2025, including:

• An 8% reduction in global headcount
• Exiting more than 40 facilities
• Establishing a global service center in Kochi, India
• Increased IT investment aimed at operational efficiency

He said tariffs, upfront IT investments, and inflationary items (including medical costs and some raw materials) have “largely offsetting” early savings, but NOV expects cost actions—excluding Middle East impacts—to begin more than offsetting tariffs and other inflationary costs in the second half of 2026.

Energy Equipment: backlog and offshore strength offset by weaker aftermarket

In Energy Equipment, Reed said Q1 revenue increased 4% year-over-year to $1.19 billion, driven by strength in offshore production-related businesses. Segment EBITDA was $131 million, or 11% of sales, with margins pressured by Middle East disruptions and a lower aftermarket mix.

Capital equipment represented 63% of segment revenue and rose 16% year-over-year, led by subsea flexible pipe, Process Systems, and Marine and Construction. Aftermarket (37% of revenue) fell 12% year-over-year, which Reed attributed to the completion of large reactivation projects in Q1 2025 and to disrupted deliveries and reduced offshore rig activity in the Middle East.

Energy Equipment orders were $520 million, producing a book-to-bill of 80% and ending backlog of $4.23 billion. Reed said orders included subsea flexible pipe awards in Brazil and Europe, a semi-submersible reactivation project in the North Sea, and a large FEED study for a harsh-environment turret system. NOV continues to expect full-year 2026 segment book-to-bill “near 100%.”

Reed said the subsea flexible pipe business posted record quarterly EBITDA for the third straight quarter, with book-to-bill over 100% in Q1 and backlog extending into 2028. Bayardo later told analysts that lead times for some projects are already extending into 2028 and said NOV sees an approaching replacement cycle in offshore Brazil as existing infrastructure ages. He also said the company believes the industry will be short on flexible pipe capacity in coming years.

NOV also approved a $200 million expansion of its subsea flexible pipe manufacturing facility in Brazil. Bayardo said the investment is intended to address what NOV views as a developing industry capacity shortfall as offshore activity increases.

Energy Products and Services: lower activity, strong drill bit share gains, and record fiberglass bookings

NOV’s Energy Products and Services segment reported Q1 revenue of $897 million, down 10% year-over-year, with Reed citing delayed capital equipment deliveries tied to the Middle East conflict and lower global activity. Segment adjusted EBITDA was $96 million, or 10.7% of sales, with Reed noting that lower volumes, manufacturing absorption impacts, higher tariffs, and raw material inflation contributed to “larger than normal decrementals.”

Reed said the segment mix was 54% services and rentals, 29% capital equipment, and 17% product sales. Within services and rentals, NOV’s ReedHycalog drill bit business grew revenue 8% in the U.S. despite a 7% decline in U.S. rig count since Q1 2025, reflecting market share gains. Reed also highlighted that tungsten carbide costs have increased about 400% since the end of 2025, affecting drill bits and certain downhole tools and components, and said teams are working to mitigate costs through sourcing, pricing, and operational actions.

In capital equipment, Reed said composite pipe delivery delays tied to the conflict and lower industrial activity contributed to a significant year-over-year decline in fiberglass revenue. However, he said the fiberglass business achieved record quarterly bookings, and backlog is at its highest level in 10 quarters. Drill pipe orders were also strong, with backlog at its highest level in about two and a half years.

Guidance, capital allocation, and tariffs

For the second quarter, NOV expects Energy Equipment revenue to be down 2% to 4% year-over-year, with EBITDA of $135 million to $155 million. For Energy Products and Services, NOV expects revenue to fall 6% to 8% year-over-year, with EBITDA of $100 million to $120 million. Bayardo told analysts that NOV’s Q2 assumptions include the strait remaining closed and that the Middle East impact is expected to be “slightly larger” than the full Q1 impact, though “not a huge difference.” He added that shipment timing effects between quarters should be “effectively a wash” as some Q1 delays shift into Q2 while additional items slip out further.

Reed said NOV repurchased 3.5 million shares for $67 million in the quarter and paid $33 million in dividends, reflecting a previously announced 20% increase in the quarterly dividend. He said the company extended its $1.5 billion revolving credit facility by one year through 2030 and has returned more than $900 million to shareholders over the past eight quarters through dividends and repurchases. He also said NOV plans to provide a supplemental dividend in the second quarter to true up its 2025 return of capital program, under which it committed to returning at least 50% of excess free cash flow.

On tariffs, Reed said NOV filed a claim seeking a refund tied to the Supreme Court’s ruling that IEEPA tariffs were unlawful. He said NOV’s results and guidance do not reflect any potential refund and estimated IEEPA payments at “about $40 million.” Looking forward, Reed said tariffs around the “$30 million range,” as reflected in Q2 guidance, were a “good marker,” noting mixed impacts from certain Section 232 changes and the replacement of some IEEPA tariffs with Section 122 tariffs.

For 2026, Reed said capital expenditures—including the Brazil flexibles investment—are expected to be $340 million to $370 million. He said NOV expects to convert 40% to 50% of 2026 EBITDA to free cash flow, with cash generation ramping through the year.

Looking beyond the quarter, Bayardo said NOV believes a “meaningful new recovery cycle” is emerging due to the shift from a previously expected oil surplus to what he described as a deficit following shut-in production and damaged infrastructure in the Middle East. He said NOV is hearing early indications in customer conversations, including some North American operators accelerating plans to complete drilled-but-uncompleted wells and others reconsidering rig releases. “We believe a meaningful new capital equipment cycle is unfolding,” Bayardo said in closing.

About NOV NYSE: NOV

National Oilwell Varco NYSE: NOV is a leading provider of equipment and technology to the oil and gas industry. The company designs, manufactures and services an extensive portfolio of products used in drilling, completion and production operations. Its offerings include drilling rigs and related components, wellbore technologies such as tubulars and completion tools, surface equipment including mud pumps and blowout preventers, and aftermarket parts and services that support ongoing field operations.

NOV's business is organized to serve upstream energy companies around the world.

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