Baker Hughes Company (BKR) Earnings

Management highlights

- Core Q2 2026 Financial Results * Total company adjusted EBITDA was $1.23 billion, exceeding the high end of prior guidance, with a record adjusted EBITDA margin of 18.3% (up 70 basis points year-over-year) * Adjusted diluted earnings per share was $0.64, up 2% year-over-year * Total company orders reached $10.5 billion, with IET orders hitting a new all-time record * Generated $1.1 billion in free cash flow during the quarter, driven by strong customer collections and improved working capital performance * Remaining RPO (remaining performance obligations) rose 19% year-over-year to an all-time high of $37.1 billion - Key Business Wins and Awards * Secured $2.6 billion in power systems orders, including 2.7 GW of generation capacity, led by large awards for data center power in North America * Booked $1.8 billion in LNG equipment orders across three large projects, with additional multi-year service agreements for existing LNG facilities * Won multiple large compression awards for Middle East gas development projects * Expanded upstream energy awards globally, including key integrated services subsea contracts in Brazil, Norway, Angola and Brunei * Achieved key new market milestones, including the first non-oil-and-gas deployment of the Lucepa digital production platform for a European geothermal/lithium project - Chart Industries Acquisition * Completed the acquisition earlier in July 2026, adding differentiated capabilities in thermal management, cryogenics, air/gas handling, and carbon capture that complement existing Baker Hughes technologies * Chart will operate as a third reporting segment to preserve operational and commercial focus, with a 180-day two-phase integration plan currently underway * Confirmed target of $325 million in annualized cost synergies by year three, with 300 identified initiatives across SG&A optimization, supply chain efficiency, and manufacturing footprint consolidation; significant commercial synergies are also expected from cross-selling and integrated solution offerings - Strategic Capacity Expansion * Approved phased expansion of gas turbine and generator manufacturing capacity, with all new capacity coming online by 2029 * At full utilization, the expanded capacity will support up to $5 billion in annual power systems revenue, representing a 3-4x increase over 2025 revenue levels * Raised the long-term Horizon 2 IET orders target to exceed $45 billion, driven by strong current demand and a growing order pipeline

Guidance

- Third Quarter 2026 Guidance (standalone Baker Hughes, excludes Chart): * Expected total company revenue of $6.87 billion, adjusted EBITDA of $1.205 billion * IET expected revenue of ~$3.32 billion, adjusted EBITDA of ~$660 million, with solid year-over-year EBITDA growth expected * OFSC expected revenue of ~$3.55 billion, adjusted EBITDA of ~$625 million, with modest sequential growth and margin improvement expected - Full Year 2026 Guidance (standalone Baker Hughes, excludes Chart): * Management expects full year total revenue and adjusted EBITDA to modestly exceed prior guidance, with a new midpoint of $27.35 billion in total revenue and $4.85 billion in adjusted EBITDA * Full year IET orders guidance raised to $17.5–$19.5 billion, which would mark a second consecutive year of record orders; full year IET revenue guidance midpoint maintained at $13.5 billion, and EBITDA guidance midpoint increased modestly to $2.725 billion * Full year OFSC guidance upgraded, with new expectations of $13.85 billion in revenue and $2.425 billion in adjusted EBITDA * Updated combined guidance including Chart will be provided ahead of the Q3 2026 earnings call * Management expects to return net debt to adjusted EBITDA to a target range of 1.0x to 1.5x within 24 months of the Chart acquisition, supported by free cash flow generation, synergy realization, and proceeds from the planned Waygate divestiture

Segment performance

1. IET (Industrial & Energy Technology): Revenue was $3.3 billion, flat year-over-year (a 2% headwind from completed divestitures/joint ventures). Orders doubled year-over-year to a record $7.1 billion. Adjusted EBITDA increased 16% year-over-year to $678 million, with an EBITDA margin of 20.6% (up 280 basis points year-over-year). IET contributed ~48% of total company revenue in Q2 2026. 2. OFSC (Oilfield Services & Equipment): Revenue was $3.45 billion, up 7% sequentially, and contributed ~50% of total company revenue in Q2 2026. Adjusted EBITDA was $605 million, with an EBITDA margin of 17.5% (up 10 basis points sequentially). Excluding the impact of the SPC joint venture, orders grew 29% year-over-year to $667 million. 3. Chart Industries: Chart was acquired at the start of July 2026, and will operate as a third reporting segment; no Q2 2026 financial results were reported for this segment.

Risks & headwinds

- Geopolitical uncertainty from ongoing conflict in the Middle East creates disruptions to regional project activity, local supply chains, and logistics, with the potential for material changes to outcomes if conditions shift * Persistent inflationary costs continue to create margin pressure in OFSE, particularly for service activity in the Middle East * Longer project cycle times for large gas turbine and power systems orders mean that the large current order backlog will convert to revenue gradually, with a meaningful share of recent orders converting after 2027 * Integration execution risk for the Chart acquisition, with potential delays to synergy capture if operational alignment or cross-selling initiatives take longer than planned * Quarter-to-quarter free cash flow variability from working capital movements tied to the timing of milestone payments and project execution

Analyst Q&A

• Q: Can you elaborate on Baker Hughes' 2029 power systems capacity expansion plans, including product mix, CapEx, pricing, and the revenue ramp? /

  A: The $5 billion annual revenue opportunity at full utilization represents a 3-4x increase over 2025 levels. Gas turbines will make up roughly half of the opportunity, with generators accounting for a quarter and other products comprising the balance. CapEx will be phased between 2026 and 2028, leveraging existing manufacturing infrastructure to keep spending moderate, with expected payback periods of less than two years for incremental capacity. Revenue will ramp gradually: initial Nova LT capacity comes online in H1 2027, with total gas capacity doubling from 2026 levels by the end of 2028, and the largest contribution to growth coming from 2028 through 2030.

• Q: What are the near-term and underappreciated long-term commercial synergies from the Chart acquisition? /

  A: The clearest near-term opportunity is in data centers, where Baker Hughes' power generation and project execution capabilities complement Chart's thermal management and cooling equipment to deliver full integrated infrastructure solutions for AI-powered demand growth. A second key near-term opportunity is gas infrastructure, where the combined portfolio allows Baker Hughes to offer customers end-to-end solutions across natural gas, hydrogen, helium, and carbon dioxide, diversifying end market exposure. Underappreciated long-term opportunities include space (leveraging Chart's cryogenic capabilities plus Baker Hughes' energy infrastructure expertise), geothermal (combined subsurface, power generation and thermal management solutions), and mining (cross-selling digital and services to Chart's existing installed base).

• Q: What drove OFSE outperformance in Q2 2026, and what is the outlook for the second half outside of the Middle East? /

  A: Q2 outperformance came from three factors: stronger-than-expected activity across all regions outside the Middle East (with international revenue outside the region up double-digits sequentially), better-than-anticipated product revenue performance in the Middle East that partially offset softer service activity, and a strong quarter from the SSPS business with 10% sequential revenue growth and margin recovery to the high teens. For the second half, management assumes Middle East activity stays stable at current levels. It expects further seasonal recovery in North America, stable constructive activity in Latin America (Brazil and Mexico), healthy activity in Sub-Saharan Africa and Asia Pacific, and continued strong performance from SSPS driven by backlog conversion and good order momentum.

• Q: What is driving the record IET order momentum, and what is the margin outlook for these new orders? /

  A: The record order growth is broad-based, not limited to a single end market: power systems orders hit $2.6 billion in the quarter, with $2.2 billion of that coming from data center demand for reliable behind-the-meter power. Even excluding data center activity, IET orders would have matched the prior quarterly record, with strong growth from LNG (where $1.8 billion in equipment orders was booked in the quarter, and H1 orders already exceed full-year 2025 levels) and gas infrastructure, plus record upgrade orders for GTS as customers extend the life of existing assets. All new orders have been secured under the company's disciplined commercial framework, and the current supply-demand environment supports strong pricing dynamics, supporting continued margin expansion over time.