SLB N.V. (SLB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A session indicate strong digital revenue growth, promising production recovery solutions, and stable investment in the oil and gas market. While management avoided specifics on some aspects, the overall sentiment is positive with significant growth potential in digital and data center businesses, and strategic focus on geothermal energy. The positive outlook for ChampionX integration and data center expansion further supports a positive sentiment. Despite some uncertainties, the strategic initiatives and market opportunities suggest a likely stock price increase in the short term.
Key Financial Performance
Sequential revenue growth Revenue increased by 9%, driven by high single-digit growth internationally and mid-teens growth in North America. Excluding ChampionX, organic revenue increased by 7% internationally and 6% in North America. Reasons include stabilization of global upstream activity and early signs of a rebound in key markets.
Organic revenue growth Approximately $500 million of organic revenue growth this quarter, in addition to a roughly $300 million contribution from ChampionX due to an extra month of consolidation. Reasons include strong year-end product sales, higher exploration data sales, and strong demand for digital operations.
Digital annual recurring revenue Surpassed $1 billion, reflecting year-on-year growth of 15%. Reasons include strong growth in digital exploration and robust increases in digital operations and platform applications.
Reservoir Performance revenue Revenue of $1.7 billion increased 4% sequentially. Reasons include strong international activity, particularly in Saudi Arabia, East Asia, Qatar, Indonesia, and Guyana.
Well Construction revenue Revenue of $2.9 billion decreased 1% sequentially. Reasons include declines in some land markets in the Middle East and Asia, offset by higher offshore drilling activity in North America and Europe and Africa.
Production Systems revenue Revenue of $4.1 billion increased 17% sequentially, reflecting a full quarter of activity from ChampionX. Excluding ChampionX, revenue increased 11%. Reasons include strong sales of completions and artificial lift, project milestones in Process Technologies, Subsea, and valves.
Digital revenue Revenue of $825 million increased 25% sequentially. Reasons include strong year-end sales in Digital Exploration and increased revenue in Digital Operations and Platforms and Applications.
Adjusted EBITDA margin Fourth quarter adjusted EBITDA margin of 23.9% increased 83 basis points sequentially. Reasons include strong digital performance, though constrained by a loss in a carbon capture project that negatively impacted margins by approximately 50 basis points.
Free cash flow Generated $4.1 billion for the full year, marking the third consecutive year with free cash flow at or above $4 billion. Reasons include significant customer collections and reduced inventory driven by year-end product deliveries.
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Operating Highlights
Digital annual recurring revenue: Surpassed $1 billion, reflecting year-on-year growth of 15%.
AI-powered production system optimization platform: Launched in partnership with ADNOC.
Tela AI assistant: Introduced as a purpose-built tool to transform the upstream energy sector.
Middle East market: Rebounds in drilling and workover activity in Saudi Arabia expected, with rig counts potentially returning to early 2025 levels by the end of 2026.
Subsea market: More than 500 subsea trees expected to be awarded across 2026 and 2027, about 20% higher than 2025 run rate.
Data center solutions: Planned expansion of offerings, customer base, and geography, with a target to exit 2026 at a quarterly revenue run rate of $1 billion per year.
Revenue growth: Sequential revenue increased by 9% in Q4 2025, driven by international and North American markets.
Production Systems: Strong demand for production chemicals, artificial lift, and process technology, with backlog execution in Completions and OneSubsea.
Cash flow: Generated $3 billion of cash flow from operations and $2.3 billion of free cash flow in Q4 2025.
ChampionX acquisition: Contributed approximately $300 million to Q4 2025 revenue and is expected to add $1.8 billion in 2026 revenue.
Focus on Venezuela: SLB is the only international service company actively operating in Venezuela, with plans to ramp up activities.
Shareholder returns: Announced a 3.5% dividend increase and plans to return more than $4 billion to shareholders in 2026 through dividends and stock buybacks.
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Risk or Challenges
Commodity Price Volatility: Near-term oversupply may exert downward pressure on commodity prices in the first half of 2026, creating financial uncertainty and cautious spending by E&P operators.
Geopolitical Uncertainties: Elevated geopolitical risks could impact market stability and provide a price floor, but also create operational and strategic challenges.
Customer Budget Caution: E&P operators are expected to backload their 2026 budgets, delaying investments and potentially impacting revenue timing.
Activity Declines in Specific Markets: Well Construction revenue is expected to decline slightly in 2026, and Europe and Africa markets are anticipated to experience slight revenue decreases.
Carbon Capture Project Losses: A loss in a carbon capture project negatively impacted margins by approximately 50 basis points in Q4 2025, highlighting risks in emerging technology investments.
Pricing Headwinds: Pricing pressures in select markets are expected to impact margins in Reservoir Performance and Well Construction divisions in 2026.
Seasonal Revenue Decline: Revenue is anticipated to decline by high single digits sequentially in Q1 2026 due to outsized year-end product sales and project milestones in the prior quarter.
Integration Challenges: The integration of ChampionX, while beneficial, involves risks such as achieving the expected $400 million in synergies and managing operational complexities.
Regulatory and Licensing Risks: Operations in Venezuela depend on appropriate licensing and compliance measures, which could pose risks to activity ramp-up.
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Guidance & Outlook
Revenue Expectations for 2026: SLB expects 2026 revenue to be between $36.9 billion to $37.7 billion, assuming oil prices remain in the high 50s to low 60s range.
Regional Revenue Trends: North America will benefit from 7 months of ChampionX activity, stronger offshore activity, and growth in data centers, while upstream land activity will decline. International markets will see slight year-over-year revenue increases, driven by growth in Latin America, the Middle East, and Asia, with Europe and Africa expected to decline slightly.
Division-Specific Revenue Outlook: Digital revenue is expected to grow at the same pace as 2025, driven by digital operations. Production Systems will increase due to a full year of ChampionX revenue. Reservoir Performance will remain flat, while Well Construction will decline slightly. Revenue in the 'All Other' category will remain flat year-over-year.
Adjusted EBITDA and Margins: Adjusted EBITDA for 2026 is projected to be between $8.6 billion to $9.1 billion, with margins consistent with 2025 levels.
First Quarter 2026 Outlook: Revenue is expected to decline by high single digits sequentially due to seasonal factors, with adjusted EBITDA margin decreasing by 150 to 200 basis points. A rebound in activity is anticipated in the second quarter, with further expansion in the second half of the year.
Market Recovery and Investment Trends: Global upstream investments are expected to recover gradually into 2027, with key international markets and offshore deepwater activity exiting 2026 at higher levels than 2025. Middle East rig counts are expected to return to early 2025 levels by the end of 2026.
Subsea Market Opportunities: More than 500 subsea trees are expected to be awarded across 2026 and 2027, about 20% higher than the 2025 run rate. SLB aims to capitalize on this opportunity, with cumulative bookings potentially exceeding $9 billion over the next two years.
Data Center Solutions Growth: The data center solutions business is expected to expand its offerings, customer base, and geography, with a projected quarterly revenue run rate of $1 billion by the end of 2026.
Shareholder Returns: SLB plans to return more than $4 billion to shareholders in 2026 through increased dividends and share repurchases.
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Shareholder Return Plan
Dividend Increase: A 3.5% dividend increase was announced for 2026.
Dividend Payout: $1.6 billion was paid in dividends in 2025.
Share Repurchase Program: Approximately $2.4 billion worth of stock was repurchased in 2025.
2026 Shareholder Return Plan: The company plans to return more than $4 billion to shareholders in 2026 through a combination of increased dividends and stock buybacks.
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Key Q&A
Q:Can you provide context around the trend line of CapEx and how the capital intensity of your forward business differs from the past?
A:The company increased CapEx slightly compared to last year to $2.5 billion, which is needed to operate this year and capture new opportunities as activity recovers, particularly in the international market. Capital efficiency has improved significantly over the last few years, allowing the company to do more with less. Reservoir Performance has the highest capital intensity, followed by Well Construction and Production Systems.
Q:What is your view on the customer mix in the Middle East and North Africa as you go into 2026?
A:The company has confidence in national oil companies continuing their capital programs, with a rebound in Saudi rig drilling and workover activity expected. Growth is also seen in Kuwait, UAE, Libya, Algeria, Egypt, and Iraq. Libya and Algeria are attracting significant investments, while Egypt is seeing offshore rig mobilization. Iraq continues to grow, and unconventional UAE is scaling investments. The region's outlook is favorable due to oil and gas attractiveness.
Q:How are you thinking about the exit rate for 2026 versus 2025, and what is driving this upcycle?
A:The company expects Q4 2026 to be higher than Q4 2025, driven by international market recovery. Growth is anticipated in the Middle East, Asia, Latin America, and sub-Saharan Africa. Deepwater activity in Mexico and FID in Namibia, Mozambique, Angola, and Nigeria are expected to contribute to a promising 2027-2028 cycle.
Q:What is the current status and future potential of your digital business, including Lumi, Delphi, and Tela platforms?
A:The digital business is in its early stages of transformation, with strong momentum in digital operations. Lumi has over 50 customers, and Tela, launched less than 3 months ago, has over a dozen customers. The platforms are expected to drive industry transformation, with significant potential for asset productivity and operational efficiency.
Q:What are your thoughts on the near-term and longer-term opportunities in Venezuela?
A:The company is the only international service company actively operating in Venezuela. Historically, it had over 3,000 employees and $1 billion in revenue. Under the right conditions, including licensing and payments, the company is ready to deploy assets and personnel across drilling, production, and intervention. It has significant capacity and access to Venezuelan nationals and alumni to support growth.
Q:Can you elaborate on your data center infrastructure business and its growth potential?
A:The data center business is expected to reach a $1 billion revenue run rate by year-end, with significant growth potential beyond 2027. The company is expanding internationally, doubling capacity, and adding new customers. It aims to grow its modular manufacturing and design capabilities, with plans to complement its current capabilities through organic and inorganic opportunities.
Q:What is the growth opportunity in production recovery, including OneSubsea, ChampionX, and artificial lift?
A:Production recovery is a strategic focus, with significant opportunities for value creation through technology, integration, and digital solutions. Growth is expected in lift solutions, digital production, and chemicals for production assurance and reservoir performance. Subsea boosting and processing capabilities are also contributing to this growth.
Q:What is your perspective on the potential for geothermal energy and its scalability?
A:The company has partnered with Ormat to combine expertise in subsurface and geothermal power plants. It aims to optimize and scale unconventional geothermal economically and safely. The partnership is expected to accelerate the development of geothermal energy as a viable and scalable energy source.
Q:What is your view on OPEC spare capacity and its implications for the oil market?
A:OPEC+ has unwound 2.2 million barrels, and spare capacity is expected to be limited in the future. Investments in capacity sustenance are ongoing, particularly in the Middle East. The market is expected to tighten into 2027 and beyond, creating a favorable investment backdrop for the industry.
Q:What is your outlook for the Mexican market?
A:The Mexican market has normalized, with steady land activity and potential growth in offshore deepwater activity. The company expects conditions for reinvestment to improve in 2026, with offshore activity providing upside potential.
Q:What is the pricing environment in international markets, and how is it affecting your margins?
A:The international market remains highly competitive, with pricing pressure in large tenders. The company has maintained steady margins by leveraging ChampionX synergies, digital growth, and technology performance. Margins are expected to remain stable in 2026 compared to 2025.
Q:What is driving the offshore outlook, and how does it compare to previous expectations?
A:The offshore outlook is driven by FID and project bookings in Africa, Asia, and the Americas. Activity is expected to rebound in 2027-2028, with growth in East Asia, sub-Saharan Africa, and the Americas. The current pipeline of FID and favorable economics support this outlook.
Q:What is the international growth potential for your Data Center Solutions business?
A:The company is expanding its data center business internationally, starting in Asia and the Middle East. It aims to leverage hyperscaler relationships and modular manufacturing capabilities. The U.S. remains the primary market, but international growth is expected to contribute significantly in the future.
Q:Can you sustain growth with a CapEx level of $2.5 billion, or will it need to increase?
A:The company can sustain growth with $2.5 billion CapEx due to improved capital efficiency and less capital-intensive growth drivers like digital and production recovery. However, if growth accelerates, CapEx may increase but will remain within the 5%-7% of revenue range.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the magnitude of growth in the digital business and the exact timeline for scaling geothermal energy. Additionally, they did not clarify the exact impact of pricing pressure on margins or provide precise figures for international growth in the data center business.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America Middle
ChampionX acquisition
Completions
East market
Europe Africa
Full
Latin America
OneSubsea
Solutions
Stephane
Systems margin
Venezuela
activity ChampionX
activity Middle
activity market
activity mix
booking
carbon capture
combination dividend
deepwater activity
demand production
dynamic division
end sale
flow generation
gas development
headwind market
highlight
intervention activity
loss
margin basis
month activity
opportunity SLB
point result
progress
project milestone
rebound activity
run rate
solution SLB
supply demand
synergy Production
tax
visibility
SLB Transcript
SLB N.V. (SLB) Q4 2025 Earnings Call Transcript
Positive1-23
The earnings call summary and Q&A session indicate strong digital revenue growth, promising production recovery solutions, and stable investment in the oil and gas market. While management avoided specifics on some aspects, the overall sentiment is positive with significant growth potential in digital and data center businesses, and strategic focus on geothermal energy. The positive outlook for ChampionX integration and data center expansion further supports a positive sentiment. Despite some uncertainties, the strategic initiatives and market opportunities suggest a likely stock price increase in the short term.
SLB N.V. (SLB) Q3 2025 Earnings Call Transcript
Positive10-17
The earnings call highlighted strong revenue guidance, digital growth, and synergies from the ChampionX acquisition, suggesting positive market sentiment. Despite potential risks in North America, the company's strategic focus on international markets and digital expansion is promising. The Q&A session reinforced confidence in deepwater and Saudi markets. While management was vague on the digital market size, the overall outlook remains optimistic. The company's strategy and growth prospects, especially in digital and international markets, suggest a positive stock price movement in the near term.
SLB Limited (SLB) Q3 2025 Earnings Conference Call Transcript
Unknown10-17
The earnings call presents a mixed picture. While there is sequential revenue growth and a strong shareholder return plan, risks such as declining U.S. land activity, challenging macro environment, and integration risks with ChampionX weigh heavily. Digital revenue growth is promising, but uncertainties like geopolitical developments and commodity price volatility pose challenges. The Q&A section did not provide additional clarity to offset these concerns. Overall, the positive elements are balanced by significant risks, leading to a neutral sentiment.
Schlumberger Limited (SLB) Q2 2025 Earnings Call Transcript
Unknown7-18
The earnings call summary presents a mixed picture. Basic financial performance shows a slight EPS increase, but it's overshadowed by a year-over-year decrease. Product development and market strategy appear positive with digital and ChampionX synergies. However, guidance is weak, expecting flat revenue and a slight decline in global spending. Shareholder returns remain committed, but management's unclear responses in the Q&A raise concerns. Overall, the sentiment is neutral, with balanced positive and negative aspects, leading to a neutral stock price prediction.
SLB Report
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