BKR · Q1 2026 Earnings

Cautious

Baker Hughes

Reported April 23, 2026

30-second summary

Q1 revenue of $6.59B (+2.5% YoY) and adjusted EBITDA of $1.158B beat the $1.06B guide by $98M, driven by IET +14% YoY with a 1.5x book-to-bill and $33.1B backlog. But management took FY2026 total EBITDA to "slightly below the midpoint" of the $4.85B range and narrowed OFSE EBITDA to the low end at $2.325B — both downward revisions — citing Middle East conflict effects assumed to persist through end of June. The Q2 guide of $6.5B revenue and $1.13B EBITDA implies a -5.9% YoY revenue decline against the $6.91B Q2 FY2025 base, the first guided YoY contraction of the cycle.

Headline numbers

EPS

Q1 FY2026

$0.58

Revenue

Q1 FY2026

$6.59B

+2.5% YoY

Gross margin

Q1 FY2026

22.8%

Free cash flow

Q1 FY2026

$0.21B

Operating margin

Q1 FY2026

10.8%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$6.59B	+2.5%	$7.39B	-10.8%
EPS	$0.58	—	$0.78	-25.6%
Gross margin	22.8%	—	23.8%	-100bps
Operating margin	10.8%	—	7.1%	+370bps
Free cash flow	$0.21B	—	$1.34B	-84.3%

Guidance

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	Not explicitly guided	$6.587 billion	In-line (no prior Q1 guide available for comparison)	Met
Adjusted EBITDA	Q1 FY2026	Not explicitly guided	$1,158 million	In-line (no prior Q1 guide available for comparison)	Met
IET Revenue	Q1 FY2026	Not explicitly guided	$3.35 billion	In-line (no prior Q1 guide available; +14% YoY growth achieved)	Met
OFSE Revenue	Q1 FY2026	Not explicitly guided	$3.237 billion	In-line (no prior Q1 guide available; -7% YoY decline, consistent with 'slightly lower YoY' FY guidance)	Met

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$6.5 billion	-5.9% to -5.8%
Adjusted EBITDA	Q2 FY2026	$1.13 billion	—
IET Adjusted EBITDA	Q2 FY2026	$670 million	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
OFSE Adjusted EBITDA	FY2026	Implied $2.15 billion (from $4.85B company total minus $2.7B IET)	Low end of $2.325 billion guidance range	Guidance narrowed downward to low end; effective reduction of ~$0.175B vs. prior implied midpoint	Lowered
Adjusted EBITDA	FY2026	$4.85 billion	Slightly below midpoint of guidance range	Qualitative downward shift; company now expects 'slightly below the midpoint' vs. prior point guidance of $4.85B	Lowered

Reaffirmed unchanged this quarter: IET Orders (At least $14.5 billion (midpoint)), IET Adjusted EBITDA (At least $2.7 billion (midpoint))

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
OFSE Revenue	$3.237B	-7.0%
IET Revenue	$3.35B	+14.0%
Gas Technology Equipment	$1.665B	+14.0%
Gas Technology Services	$0.791B	+34.0%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
North America	$0.927B	+1.0%
International	$2.31B	-10.0%
Total Orders	$8.2 billion	—
IET Orders	$4.9 billion	—
RPO (Remaining Performance Obligations)	$36.1 billion	—
IET RPO	$33.1 billion	—
Book-to-Bill Ratio	1.2x	—
IET Book-to-Bill Ratio	1.5x	—
Adjusted EBITDA	$1,158 million	—
OFSE EBITDA Margin	17.4%	—

Management tone

Q2 "margin over share, IET diversifies" → Q3 "age of gas, AI power" → Q4 "industrialized energy solutions, power as the bottleneck" → Q1 "geopolitical risk as structural catalyst."

The Middle East frame moved from temporary disruption to structural energy security catalyst. Last quarter the geopolitical commentary was a footnote; this quarter it sits at the center of the narrative. Simonelli: "geopolitical risk has become a structural reality for oil and gas markets... we expect an environment characterized by heightened geopolitical risk that is likely to result in persistent risk premiums for oil and LNG prices." The reframe matters because it lets management present the OFSE guidance cut as a tactical Q2-loaded effect while simultaneously claiming the conflict accelerates the IET multi-year tailwind — energy security spending, infrastructure redundancy, rebuilt inventories at higher levels. This is the bull/bear pivot point: the same event is being scored as a transient OFSE headwind and a durable IET tailwind.

Horizon 2 IET order conviction escalated from "target $40B" to "will exceed $40B." Three quarters ago $40B was the aspirational ceiling of the 2026-2028 framework; this quarter Simonelli is "increasingly confident that our Horizon 2 IET order target will exceed $40 billion." The Q1 $4.9B IET order print (1.5x book-to-bill) and the $1.4B power systems quarter underwrite that escalation. Data center orders doubled YoY against a target that was itself doubled at Q4 — the order book is running ahead of every threshold management has set in the past nine months.

OFSE narrative softened from "resilience" to "low end of range." Q4 framing was "OFSE inflection a 2027 catalyst" with FY2026 EBITDA midpoint $2.475B; this quarter Moghal explicitly stated "we anticipate being able to achieve the low end of our EBITDA guidance range $2.325 billion" — a $150M reduction. The framing language ("demonstrated continued resilience against a difficult backdrop") is defensive in a way it wasn't last quarter. Middle East product-sales logistics is the cited mechanism, but the Q2 guide of >20% sequential OFSE Middle East decline is sharper than the cycle's prior worst quarter and the H2 recovery is qualified as "measured ramp."

Portfolio reshape graduated from "$1B target" to "done ahead of schedule." The Waygate sale plus HMH IPO generated ~$1.6B alone, with aggregate 2026 divestiture proceeds at ~$3B — three times the original Horizon 2 target. Simonelli framed this as "continuum of ongoing portfolio management" rather than a single milestone, signaling more capital recycling to come. The Chart integration office has now identified 250+ synergy opportunities against the unchanged $325M cost synergy target, suggesting potential upward revision once close occurs.

Chart positioning evolved from "margin lever" to "strategic capstone of molecule-to-electron platform." Simonelli: "What differentiates Baker Hughes is not just our participation across these markets, but our ability to connect them." This is the most articulated version of the integration thesis to date — Chart is no longer being sold as a synergy story but as the piece that lets BKR position as an industrialized energy solutions company rather than an oilfield services or equipment vendor. The regulatory close timing remains the wildcard.

Recurring themes management leaned on this quarter:

Energy security as foundational structural trend driving geopolitical diversificationIET momentum with record orders and backlog expansion across power, LNG, and gas infrastructureMolecule-to-electron integrated solutions positioning Baker Hughes uniquely across energy value chainPortfolio optimization and divestiture strategy generating $3B gross proceeds in 2026Chart integration planning advancing with 250+ synergy opportunities identifiedResilience despite Middle East disruptions affecting 10% of global oil and 20% of LNG capacity

Risks management surfaced:

Persistence of Middle East conflict beyond mid-year could materially impact full-year resultsGeopolitical risk premium in oil and LNG prices may persist regardless of conflict outcomeSecondary impacts from conflict including elevated inflationary pressures and supply chain disruptions not modeled in guidanceEuropean gas storage at only 30% capacity below historical levels amid slower injection seasonChart regulatory review still underway with closing timing subject to evolution in jurisdictions

Q&A highlights

David Anderson · Barclays

Asked for deeper breakdown on IET power solutions orders, specifically the three primary drivers (generation, grid, management), trajectory toward 2026 order guidance upside, and long-term stability of data center demand.

Lorenzo highlighted global power demand doubling by 2030, driven by data centers, AI, electrification, and energy security. Power systems secured $1.4B in Q1 orders (30% of IET orders) across generation, grid stability, and energy management. Behind-the-meter market projected to reach $60B by 2030, with total annual market opportunity exceeding $100B by 2030. Cordent power orders doubled YoY. Confident in potential upside to 2026 IET guidance and $40B+ orders for 2028 Horizon 2.

Power systems Q1 orders: $1.4 billionPower orders represented 30% of total IET ordersBehind-the-meter market projected $60 billion by 2030Total annual market opportunity exceeding $100 billion by 2030

Scott Gruber · Citi

Requested unpacking of Q2 guidance given strong Q1 results, questioning why IET doesn't show typical sequential step-up in revenues and margins. Also asked for color on OFSE Middle East recovery timing and upside potential from better activity levels in second half.

Ahmed provided detailed segment-by-segment Q2 assumptions: OFSE Middle East expected to decline >20% sequentially (double Q1 decline rate) with April revenues remaining near March levels; product sales hit harder than services due to logistics. Outside Middle East, typical seasonal recovery expected. OFSE margins projected down sequentially but operational margins (ex-Q1 benefits) modestly up. IET assumes modest conflict impact via logistics; GTS revenue flat QoQ due to overdue backlog execution in Q1 tempering seasonal growth. Company-level EBITDA expected relatively flat Q1 to Q2.

OFSE Middle East expected >20% sequential decline in Q2Middle East revenue assumed near March levels throughout Q2Significant logistical challenges on product sales sideIET Q2 segment revenue expected flat QoQ

James West · Malleus Research

Asked how to think about second half H2 unfolding for both OFSE and IET revenue and margins tracking toward full-year targets, given IET outperformance, OFSE Middle East recovery momentum building, and different visibility levels between segments.

Ahmed outlined H2 approach: OFSE assumes measured ramp in Middle East given infrastructure/storage capacity uncertainty and assuming Strait of Hormuz fully operational; expects modest strength in North America and international outside Middle East versus original guidance. Cost discipline from Q4/Q1 cost actions supporting potential to achieve lower end of OFSE EBITDA range. IET expects better linearity with less pronounced 4Q ramp; modest LNG maintenance delays expected (muted vs. 2022 scenario). Company confidence in achieving at least midpoint of full-year IET EBITDA guidance of $2.7B. Emphasized fluidity and commitment to transparency as conditions evolve.

IET full-year EBITDA guidance midpoint: $2.7 billionMeasured ramp assumed for OFSE Middle East in H2Strait of Hormuz assumed fully operational in H2Better linearity expected across IET through first three quarters

Arun Jararam · JP Morgan

Asked for thoughts on Middle East conflict impact on infrastructure spend opportunities (damaged infrastructure repair and redundancy additions) and intermediate/longer-term effects. Requested more color on potential for IET orders to exceed Horizon 2 targets.

Lorenzo positioned conflict as catalyst for structural energy landscape changes: emphasis on energy security driving diversified energy sources, increased upstream investment, rebuilt global inventories at higher levels, and investment in lower-carbon solutions (geothermal, nuclear, grid modernization). Infrastructure focus on redundancy and diversification to reduce reliance on single large-scale assets. Baker Hughes positioned as uniquely capable across energy value chain. Confident in exceeding $40B IET order target for 2028 Horizon 2, extending beyond LNG FIDs to associated gas infrastructure, pipelines, and compression stations.

$40 billion+ IET order target for 2028 Horizon 2Orders include LNG FIDs, associated gas infrastructure, pipelines, compression stationsEnergy security becoming primary driver globallyIncreased focus on infrastructure redundancy and diversification

Stephen Gangero · Stifel

Asked for update on portfolio optimization strategy post-Waygate/HMH announcements, noting company already exceeded $1B divestment target from 4Q guidance, and whether company sees itself as largely done with divestitures or what next steps look like.

Lorenzo outlined strategic criteria for portfolio decisions: exposure to critical technologies, life cycle/aftermarket potential, right to play via synergies, and earnings durability. Waygate and HMH IPO expected to generate ~$1.6B gross proceeds, exceeding $1B target ahead of schedule. In aggregate with PSI and SPC JV proceeds, ~$3B gross cash proceeds expected in 2026. Characterized actions as continuum of ongoing portfolio management rather than single milestone. Near-term focus on closing and integrating Chart transactions while remaining disciplined and aligned with strategic objectives.

Waygate and HMH IPO proceeds: ~$1.6 billion grossAggregate gross cash proceeds from divestitures: ~$3 billion in 2026 (Waygate, HMH, PSI, SPC JV)Already exceeded $1 billion incremental divestment target$1 billion target achieved ahead of original schedule

Answers to last quarter's watch list

Whether IET FY2026 EBITDA tracks to or above $2.7B in Q1 — IET Q1 EBITDA implied at ~$618M beat the $600M guide, and management explicitly reaffirmed "at least the midpoint of our full year IET EBITDA guidance of $2.7B." The 1.5x book-to-bill and $33.1B RPO underwrite the sustainability of the 20% margin commitment.

Resolved positively

Chart closing timeline and any regulatory friction — Management confirmed Chart regulatory review is "still underway with closing timing subject to evolution in jurisdictions" — no firmer date than the Q4 "Q2 2026" guidance, with integration office identifying 250+ synergy opportunities against the unchanged $325M target. No explicit slippage announced but no confirmation of close either.

Continue monitoring

OFSE FY2026 revenue trajectory vs the $13.75B (-4% YoY, flat organic) framing — OFSE Q1 revenue of $3.237B (-7% YoY) ran below the implied glidepath, and management narrowed FY OFSE EBITDA to the low end of range at $2.325B vs prior $2.475B midpoint — a $150M downward revision attributed to Middle East logistics. The full-year revenue framework was not explicitly updated but EBITDA narrowing implies revenue tracking to the lower half.

Resolved negatively

Data center order pace toward the $3B 2025-2027 target — Cordant data center-related orders doubled YoY in Q1, power systems orders of $1.4B in the quarter, and management upgraded Horizon 2 IET confidence to "will exceed $40B." Specific data center order dollar disclosure for Q1 was not broken out but every directional indicator is favorable.

Resolved positively

2027 OFSE inflection setup — Management did not re-anchor the 2027 inflection call this quarter. The Middle East conflict and its effect on FY2026 OFSE EBITDA dominates the framing; H2 2026 was qualified as "measured ramp" pending Strait of Hormuz normalization, which is consistent with the prior 2027 timing but offers no new positive signal.

Continue monitoring

What to watch into next quarter

Whether Q2 OFSE Middle East decline lands at the >20% sequential guide or worse — Moghal anchored the Q2 OFSE EBITDA of $540M on the conflict ending by end of June; any extension materially undermines the FY $2.325B low-end commitment and likely forces a further OFSE guide cut at Q2.

IET book-to-bill at or above 1.3x — Q1 printed 1.5x with $4.9B orders; sustaining above 1.3x in Q2 validates the "will exceed $40B" Horizon 2 framing. Any softening signals order pull-forward.

Chart close confirmation — management still working from a mid-2026 expectation but offered no firmer commitment. Watch Q2 for explicit close date or a slippage disclosure; further delay past Q3 begins to compress the 2028 margin bridge mechanics.

Whether the FY total EBITDA "slightly below midpoint" language tightens to a specific number or widens further — qualitative downward revisions tend to be revised again before settling. Watch Q2 for either a specific point estimate (positive — stabilization) or a further qualitative softening (negative — Middle East worse than modeled).

Power systems Q2 order print vs Q1's $1.4B — Q1 +80% sequentially is a high bar. Watch whether power systems orders hold above $1B in Q2; sub-$1B raises pull-forward concerns and complicates the data center order pace narrative.

Sources

Baker Hughes Q1 FY2026 Earnings Release, SEC Filing: https://www.sec.gov/Archives/edgar/data/1701605/000170160526000012/earningsreleaseex991033120.htm
Baker Hughes Q1 FY2026 Earnings Call, prepared remarks and Q&A.
Tapebrief Q4 FY2025 Baker Hughes brief (prior watch list and trend context).

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