Baker Hughes is bucking spiraling forecasts of the oilfield services (OFS) sector in a softening second-half economy.
The global energy technology company raised its full-year revenue and EBITDA guidance in its second-quarter earnings announcement on July 22. Baker Hughes reported strong growth in orders for data center equipment and natural gas infrastructure.
The sunny forecast contrasts with those of its fellow OFS giants, SLB and Halliburton, both of which warned in earnings calls that significant headwinds in global markets will dampen results for the remainder of the year.
Baker Hughes Chairman and CEO Lorenzo Simonelli did not dismiss macro environment uncertainty but stressed that the company’s strategy positions it to endure a downcycle.
During the company’s July 23 earnings call, Simonelli pointed to Baker Hughes securing two significant orders for its NovaLT gas turbines to power data centers; one for 30 units capable of delivering 500 megawatts (MW) of power to centers at locations around the U.S., as well as the deal with Frontier Infrastructure for 16 turbines able to deliver 270 MW of power to data centers in Texas and Wyoming.
The agreements are “great examples of the increasing connectivity between the surging digital infrastructure demand and also the increasing need for lower carbon solutions,” he told analysts. “We continue to see opportunities to leverage our hydrogen-ready capabilities on the NovaLT turbines.”
The company’s industrial and energy technology segment totaled $3.53 billion in the second quarter, up 11% over the first quarter and slightly above orders in second-quarter 2024. Orders for climate technology solutions soared to $923 million from $148 million in the previous quarter and $392 million in same quarter of 2024.
Lower revenue, higher profit
Baker Hughes reported adjusted diluted earnings per share of 63 cents in the quarter, easily beating the Zacks Consensus Estimate of 55 cents. Revenue dipped to $6.91 billion from $7.14 billion in second-quarter 2024, but adjusted net income of $623 million was well above the $568 million recorded in second-quarter 2024.
Wall Street responded well to the earnings release, with the stock price jumping 6% to $44/share by late morning on July 23.
The improved profit results stem from internal cost savings programs, executives said.
“This performance reflects strong execution across both (technology and oilfield service) segments amid ongoing macro and industry-related headwinds,” Simonelli said.
Three A&D deals during the quarter represent the company’s shift in its portfolio. In a two-week period in June:
The last deal provides the company with a full suite of valve and rupture disc solutions, providing significant growth opportunities and exposure to non-oil and gas markets.
“The combination of the [precision sensor and instrumentation] divestiture and [Continental] acquisition is a clear example of our portfolio strategy in action,” said Ahmed Moghal, executive vice president and CFO. “We are monetizing non-core assets and unlocking significant value while reinvesting into higher margin, recurring revenue businesses attractive multiples that enhance returns.
“Collectively, these actions advance our strategy to reshape the portfolio for more resilient earnings and cash flows.”
A Baker Hughes field service engineer performs a borescope inspection on a NovaLT16 gas turbine. (Source: Baker Hughes)
Tariff impact
The bright outlook is clouded by the uncertain macro environment, including the impact of tariffs, which cut into quarterly EBITDA by $15 million.
Moghul reiterated the company’s previous 2025 net EBITDA estimate of between $100 million and $200 million, but noted that the company’s guidance was predicated on the U.S. government implementing tariffs as planned at this time. It does not account for the possibility of further trade policy escalation, including retaliatory tariffs.
“Beyond the direct impact of ongoing trade policy shifts, we continue to monitor potential secondary effects such as more cautious customer behavior and signs of broader economic weakness,” he said.
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