NOV Inc. (NOV) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings report presents mixed signals. While NOV achieved strong operational execution and improved cash flow, it faces challenges like declining revenue, net loss, and market softness. The Q&A reveals optimism in offshore opportunities and cost-saving initiatives, but concerns about tariffs and limited deepwater asset reactivation persist. The company's strategic focus on M&A and technological advancements may offer future growth. Overall, the sentiment is balanced with both positive and negative aspects, leading to a neutral prediction for stock price movement.
Key Financial Performance
Fourth Quarter Revenue $2.28 billion, a decrease of 1% year-over-year. The decline was attributed to a global drilling activity decline of 6%.
Net Loss $78 million or $0.21 per fully diluted share for the fourth quarter. This was impacted by a higher effective tax rate from valuation allowances on deferred tax assets and a higher mix of foreign earnings.
Full Year Revenue $8.74 billion, a decrease of 1% year-over-year. The decline was due to challenging market conditions.
Full Year Net Income $145 million or $0.39 per fully diluted share. This reflects resilience despite market challenges.
Fourth Quarter EBITDA $267 million, up $9 million sequentially. The increase was due to strong operational execution.
Full Year EBITDA Exceeded $1 billion for the third straight year, despite a challenging market environment.
Free Cash Flow (2025) $876 million, with a conversion rate of over 85% of EBITDA to cash. This was achieved through operational efficiencies and process improvements.
Backlog $4.34 billion at year-end, supported by demand for offshore production technologies.
Energy Equipment Segment Revenue (Q4) $1.33 billion, up 4% year-over-year. Growth was driven by strong demand for offshore production technologies and solid execution.
Energy Products and Services Segment Revenue (Q4) $989 million, down 7% year-over-year. The decline was due to lower drilling activity in the U.S., Saudi Arabia, and Argentina.
Cash Conversion Cycle 119 days at the end of 2025, improved from 143 days in 2023. This improvement freed up around $630 million of cash.
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Operating Highlights
Subsea flexible pipe: Achieved highest quarterly revenue and EBITDA on record for the second consecutive quarter. Backlog doubled since the end of 2023, with annual shipments increasing around 50%.
Process Systems: Delivered more than 30% growth, reaching its highest ever revenue and EBITDA. Bookings for the year doubled compared to 2024.
Composite business: Experienced its highest annual revenue in history during 2025, with fourth quarter bookings reaching their highest level in 3 years.
Offshore production technologies: Orders led to offshore-related backlog growing more than 10% during the year, supported by demand for subsea flexible pipe, offshore construction equipment, and processing modules.
FPSO and FLNG-related equipment: Expect an increase in awards, driving incremental demand for gas and liquids processing systems and mooring and fluid transfer systems over the next several years.
Venezuela market: Received new orders exceeding total revenue generated in recent years, indicating potential for significant future investments.
Operational efficiencies: Achieved second consecutive year of converting over 85% of EBITDA to cash, resulting in $876 million in free cash flow in 2025. Cash conversion cycle improved to 119 days, freeing up $630 million of cash.
Cost-out program: Ongoing $100 million cost-out program, multiple facility consolidations, and exiting underperforming product lines and geographic markets.
Health and safety KPIs: Improved total recordable incident rate and lost time incident rate, reflecting a culture of accountability and higher quality operations.
Acquisition strategy: Set higher standards for acquisitions, focusing on core business technology bolt-ons, direct consolidation opportunities, and larger acquisitions with scale and competitive advantage.
Market positioning: Positioned as a top 3 player in most markets, with a focus on technology leadership, exceptional service, and scale to drive market leadership and growth opportunities.
Offshore market outlook: Anticipate a strong extended upcycle in offshore markets, driven by improved project execution, standardization, and better technology lowering breakeven costs.
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Risk or Challenges
Market Conditions: The oil market is currently oversupplied by 2-3 million barrels per day, leading to cautious customer spending and potential downside risk to commodity prices. This could impact NOV's revenue and profitability in 2026.
Tariffs and Inflation: Tariff expenses increased to $25 million in Q4 2025 and are expected to rise further in 2026. Inflationary pressures, including supply chain costs, are also impacting profitability.
Offshore Wind Market: The offshore wind market has deteriorated, with turbine capacity additions forecasted to decline by over 35% through 2030. This has led to reduced demand for wind turbine installation vessels and poor visibility into future orders.
North America Drilling Activity: Drilling activity in North America is expected to decline mid-single digits in 2026, driven by low activity exit rates from 2025 and further declines in oil-directed activity.
International and Offshore Markets: While international and offshore markets are expected to remain flat or slightly up, spending reductions and cautious customer behavior could limit growth opportunities.
Supply Chain and Equipment Wear: Attrition from wear and tear on equipment and supply chain constraints are creating challenges for maintaining operational efficiency and meeting customer demands.
FPSO and Offshore Production: Only five new FPSO FIDs advanced in 2025, and higher costs and macroeconomic uncertainties have delayed projects. This could impact NOV's offshore production equipment business.
Regulatory and Tax Environment: Higher effective tax rates due to valuation allowances on deferred tax assets and a higher mix of foreign earnings are impacting net income.
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Guidance & Outlook
Operational Efficiencies: NOV plans to continue driving operational efficiencies through a $100 million cost-out program, facility consolidations, and exiting underperforming product lines and geographic markets. The company aims to grow margins and increase return on capital by accelerating the pace and scope of these efforts.
Market Outlook for 2026 and Beyond: The company expects a challenging market environment in 2026, with global industry spending and drilling activity projected to decline slightly year-over-year. However, NOV anticipates oil markets will start to recover in the second half of 2026, leading to a healthier market in 2027 and beyond. U.S. activity is expected to decline mid-single digits in 2026 but recover modestly by late 2026 and early 2027. International activity is expected to remain flat or slightly increase, driven by rigs in Saudi Arabia and unconventional activity in the Middle East, Latin America, and Australia.
Offshore Market Trends: NOV sees strong potential in the offshore market, with a growing need for long-cycle offshore barrels to replace short-cycle U.S. shale production. The company expects increased deepwater exploration budgets and a higher number of FPSO (Floating Production Storage and Offloading) FIDs (Final Investment Decisions) in 2026 and beyond. Offshore drilling activity is expected to improve later in 2026 and into 2027, with increased demand for capital equipment and services.
Capital Allocation and Growth Strategy: NOV plans to focus on organic and M&A growth opportunities, with a disciplined approach to acquisitions. The company aims to invest in areas with competitive advantages, high barriers to entry, and technology differentiation. Acquisitions must be accretive to margins, earnings, cash flow, and return on capital.
Revenue and EBITDA Projections for 2026: The company expects slightly lower revenue in 2026 compared to 2025, with results more weighted to the second half of the year. Full-year EBITDA is projected to be in line with or slightly lower than 2025 levels. Capital expenditures for 2026 are expected to range between $315 million and $345 million.
Offshore Wind Market: The outlook for offshore wind has deteriorated, with turbine capacity additions through 2030 down over 35% compared to last year. However, demand for cable lay vessels remains solid, and NOV expects this level of demand to continue through 2026.
Venezuela Market Potential: NOV sees meaningful potential in Venezuela for long-term investments in capital equipment to support the country's oil and gas industry. The company has received new orders recently and plans to ramp up support for customers when appropriate.
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Shareholder Return Plan
Dividends Paid: $27 million in the quarter, bringing total capital return to shareholders to $505 million year-to-date. This includes a supplemental dividend of approximately $78 million paid in the second quarter.
Share Repurchase: Repurchased 5.7 million shares for $85 million during the quarter. Over the past 2 years, returned $842 million to shareholders through share repurchases and dividends while increasing cash balance by $736 million.
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Key Q&A
Q:What is the expected ramp for offshore rigs and FPSO opportunities?
A:The company is optimistic about the offshore space, expecting significant demand for offshore production equipment and drilling. FPSO deliveries in 2025 are expected to be substantial, driven by FIDs around the pandemic era. Offshore rig tendering has improved, with contracts increasing from 33 to 59 year-over-year and longer contract durations. The company anticipates 10 FIDs this year and an average of 8 annually in the coming years.
Q:What is the status of passing tariff costs through higher pricing?
A:The company has had some success passing on tariff costs but faces challenges due to a declining market and inflationary pressures. Efforts are underway to improve efficiencies and offset costs, but the benefits will be more visible in the second half of 2026 when tariffs stabilize.
Q:What are the company’s intentions around M&A?
A:The company is shifting from a defensive to an offensive strategy, focusing on leveraging efficient processes to justify M&A transactions. They aim to integrate acquisitions effectively while maintaining discipline in capital allocation. Organic growth opportunities remain a priority, with investments in manufacturing and rental equipment capacity.
Q:What is the order outlook for FPSOs and book-to-bill ratio?
A:The company expects to win its fair share of FPSO opportunities, particularly in high condensate gas processing. While the book-to-bill ratio was 91% for the year, the backlog remains healthy at $4.34 billion. They anticipate a slow start in Q1 but expect to achieve around 1x book-to-bill for the year.
Q:What is the market opportunity for reactivating stacked idle deepwater assets?
A:The opportunity for reactivating stacked idle deepwater drillships is limited, with only a handful of higher-spec rigs that meet current market demands. These reactivations will involve significant costs due to the long period of inactivity.
Q:What is the potential opportunity in Venezuela?
A:The company sees a significant opportunity in Venezuela if the right governance and security measures are implemented. The neglected oilfield assets could create massive opportunities for new capital equipment, potentially exceeding past revenue levels.
Q:What is the through-cycle CapEx and free cash flow framework?
A:The company targets a 40%-50% free cash flow conversion through the cycle. CapEx for 2026 is expected to be $315-$345 million, with working capital as a percentage of revenue remaining flat or slightly up. Structural improvements in cash conversion and inventory management have contributed to strong performance.
Q:What is the earnings potential of the ATOM RTX robotics platform?
A:The ATOM RTX robotics platform has been operating successfully in harsh environments, with 3 rigs on land, 3 offshore, and 27-30 robot arms sold. The company is having constructive discussions with customers for further adoption and is excited about its broader digital and automation capabilities.
Q:Review of Unclear Management Responses
A:Management avoided providing specific revenue figures for Venezuela's past operations, stating that historical data is not entirely relevant due to changes in pricing and market conditions. They also did not provide precise guidance on future awards or the exact number of reactivations for stacked idle deepwater assets.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Arabia expansion
DBS
FLNG
HSE
KPIs
NOV position
North Sea
OSVs
activity Middle
activity level
amount
backlog demand
balance
booking demand
construction
culture
cycle North
decline adoption
diameter conductor
digit percentage
drilling market
drilling tool
efficiency return
effort efficiency
floater
flow year
health
history country
incident rate
increase market
jack
level year
pace
portfolio
record
recovery
return capital
run
shipment
tender
value
NOV Transcript
NOV Inc. (NOV) Q4 2025 Earnings Call Transcript
Unknown2-5
The earnings report presents mixed signals. While NOV achieved strong operational execution and improved cash flow, it faces challenges like declining revenue, net loss, and market softness. The Q&A reveals optimism in offshore opportunities and cost-saving initiatives, but concerns about tariffs and limited deepwater asset reactivation persist. The company's strategic focus on M&A and technological advancements may offer future growth. Overall, the sentiment is balanced with both positive and negative aspects, leading to a neutral prediction for stock price movement.
NOV Inc. (NOV) Q3 2025 Earnings Call Transcript
Unknown10-28
The earnings call presents a mixed picture: while there are strong areas such as the Energy Equipment Segment's EBITDA growth and record revenues in the Subsea Flexible Pipe Business, there are concerns about declining global activity levels, pricing pressures, and tariff impacts. The Q&A reveals uncertainty in orders and potential softness in certain markets. However, the long-term outlook appears promising with strategic investments and backlog growth. The absence of clear guidance on some aspects tempers optimism, resulting in a neutral sentiment overall.
NOV Inc. (NOV) Q2 2025 Earnings Conference Call Transcript
Unknown7-29
The earnings call reflects mixed signals. Financial performance showed strong cash flow and share repurchases, but revenues were down and tariff expenses are rising. Product development and market strategy are positive with new technologies and focus on deepwater opportunities. However, the Q&A reveals uncertainties in margins and unclear guidance. Overall, these factors balance out, leading to a neutral sentiment.
Earnings call transcript: Nov Inc. Q1 2025 misses EPS forecast, shares dip
Unknown4-29
The earnings call presents a mixed picture. While there are positives like increased EBITDA and backlog, there are concerns with declining revenue and potential tariff impacts. The Q&A reveals management's uncertainty on future margins and tariff effects, leading to a cautious outlook. Shareholder returns are positive, but weak guidance and potential market activity risks balance this out. Overall, the sentiment is neutral, with no strong catalysts for significant stock movement.
NOV Slides
NOV Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
