SLB 10-Qquarter ended 2026-06-30

ChampionX drives reported growth while underlying revenue contracts; Middle East disruption and weaker drilling activity pressure earnings.

Filed 2026-07-29 11:22 ET

Key figures · Q2 FY2026 · period ended 2026-06-30

  • Revenue$9.0BYoY +5.0%QoQ +2.9%
  • Operating income— Not reported
  • Net income$786.0MYoY −22.5%QoQ +4.5%
  • Total assets$55.5BYoY +13.9%QoQ +1.8%
  • Total debt
    How total debt adds up
    Short-term borrowings and current portion of long-term debt$1,658M
    + Long-term Debt$11,140M
    Total debt$12,798M

    Lines as the filer presents them on its balance sheet.

    $12.8B1YoY −6.6%QoQ +10.3%
  • Shareholders' equity$26.1B2YoY +28.4%QoQ −0.4%
  • Tangible book value$4.2BYoY +52.6%QoQ −5.1%
Notes (2)
  1. Total debt: Short-term borrowings and the current portion of long-term debt (this filer's own balance-sheet line, not a standard concept) plus long-term debt.
  2. Shareholders' equity: About the summary: The summary's $27.3B is total equity including noncontrolling interests; the claimed shareholders' equity of $26.07B excludes those interests.

How this filing reads

  • Health+0.1H1 OCF was $1.85B and FCF $1.04B, while net debt rose to $8.73B.
  • Momentum−0.6H1 revenue rose 3.9%, excluding ChampionX fell 6%, and pretax income fell 16%.
  • Outlook−0.2Middle East revenue fell 12%, while Digital revenue grew 9% sequentially.

Executive Summary

SLB’s acquisition-led shift toward production and recovery solutions is supporting reported growth, but underlying demand remains weaker: H1 revenue rose 3.9%, while revenue excluding ChampionX declined 6%. Q2 delivered sequential improvement in Digital, Production Systems and offshore activity, offsetting some Middle East disruption, yet pretax earnings fell 21% Y/Y. ChampionX is adding earnings and diversification, while digital growth offers another path beyond drilling-dependent activity. Investors must weigh these opportunities against geopolitical disruption, pricing pressure and capital returns exceeding internally generated cash.

Key Financial Highlights

Metric Q2 2026 / H1 2026 or period-end Investor interpretation
Revenue Q2 $8.97B, +5.0% Y/Y; H1 $17.7B, +3.9% Acquisition contribution masks underlying contraction.
Gross profit, computed from reported revenue and service/product costs Q2 $1.40B, −13% Y/Y; H1 $2.73B, −15% Direct costs outpaced revenue growth.
Pretax income Q2 $1.02B, −21% Y/Y; H1 $1.98B, −16% Higher sales did not translate into higher earnings.
GAAP net income H1 $1.54B, −15% Y/Y Earnings weakened despite acquisition contributions.
Diluted EPS Q2 $0.52 vs $0.74; H1 $1.02 vs $1.32 The larger post-acquisition share base compounds earnings pressure.
OCF / net income H1 $1.85B / $1.54B Cash conversion improved despite lower earnings.
Total assets / total equity $55.5B / $27.3B; both broadly flat Asset size alone overstates tangible balance-sheet backing.
Net tangible assets $5.38B vs $5.51B at year-end Goodwill and intangible assets account for most equity backing.
Debt / net debt Total debt $12.8B; net debt $8.73B vs $7.42B at year-end Borrowings increased as distributions exceeded cash generation.
  • Revenue mix: Product sales rose 17% Y/Y in Q2 while services declined 2.4%; products represented 42% of revenue, reflecting the stronger production-equipment and acquired-business contribution.
  • Cash conversion: H1 working capital consumed $1.34B, slightly less than a year earlier, helping OCF hold up despite lower net income.
  • FCF: OCF less capital expenditures was $1.04B, broadly flat; SLB-defined FCF was ≈$693M after also deducting production-project investments and capitalized exploration data costs.
  • Capital returns: H1 repurchases of $1.10B and dividends of $866M exceeded conventional FCF; shares outstanding nevertheless declined only 0.7%, from 1.495B to 1.484B, net of issuance.
  • Acquisition accounting: Goodwill was $17.0B and intangible assets $4.88B; ChampionX integration charges totaled $110M in H1, adding costs alongside its operating contribution.
  • Funding: Q2 senior-note issuance totaled $2.0B at coupons of 4.55%–5.15%; cash and short-term investments of $4.07B plus $5.0B of committed facilities provide liquidity, but not a substitute for cash-flow coverage of distributions.

Business Developments

  • ChampionX integration: The 7/2025 all-stock acquisition expanded production chemistry and artificial lift. Acquired businesses contributed $1.7B of H1 revenue and $307M of pretax operating income; Production Systems grew 26%, but declined 3% excluding the acquisition.
  • Digital expansion: Q2 revenue reached $697M, +9% Q/Q, with pretax margin rising 683bp to 28%. Exploration data and platform/application sales drove improvement, supporting a higher-margin growth path.
  • Geographic rotation: North America revenue rose 36% Y/Y in Q2, while international revenue softened. Offshore strength and growth outside the Middle East partly offset conflict-related restrictions.
  • Adjacent markets: Data Center Solutions added $46M of sequential revenue growth, helping All Other recover in Q2 despite the earlier Palliser divestiture and weaker SLB Capturi revenue.

Risk Assessment

  • Middle East disruption: H1 regional revenue fell $0.7B, or 12%, as conflict, shut-ins and security restrictions constrained activity and divisional margins.
  • Customer spending and pricing: H1 Well Construction revenue declined 7% and pretax margin fell 401bp, exposing earnings to reduced activity and pricing pressure.
  • Integration and asset recovery: ChampionX must deliver sustained earnings against integration costs and a balance sheet carrying substantial goodwill and intangible assets.
  • Capital-allocation pressure: Distributions exceeding FCF contributed to rising net debt, reducing flexibility if operating weakness persists.
  • Currency and cost exposure: Partial hedging leaves mismatched local-currency revenue and expenses exposed; aggregate H1 cash-flow-hedge losses were $185M, while tariffs, inflation and supply constraints threaten margins.

This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.

Strategic Outlook and Investor Actionables

Management is betting on production and recovery, digital, offshore and adjacent markets to offset weaker drilling-related activity. The opportunity is a more diversified earnings base; the threat is that acquisition growth conceals persistent organic contraction.

  • ChampionX: Starting from $1.7B of H1 revenue and $307M of pretax operating income, success means sustained contributions and recovering underlying Production Systems performance; failure means continued organic decline or asset write-downs.
  • Middle East recovery: Q2 revenue was $1.66B, −13% Q/Q; later filings should show whether activity and affected divisional margins recover or restrictions deepen.
  • Digital scalability: Q2 revenue of $697M and 28% pretax margin establish the baseline; sustained growth with margin retention supports the thesis, while reversal would weaken it.
  • Cash discipline: Against ≈$693M of H1 company-defined FCF and management’s ≈$2.5B FY capital-investment expectation, watch whether cash generation covers investment and distributions or net debt keeps rising.

Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.

Model 006 · prompt bdad6d7239

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