
Baker Hughes (BKR) Q2 2025 Earnings Call Transcript
Key Takeaways
Image source: The Motley Fool. DATEWednesday, July 23, 2025, at 9:30 a. EDTCALL PARTICIPANTSChairman and Chief Executive Officer — Lorenzo SimonelliChief Financial Officer — Ahmed MoghalNeed a quote from one...
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July 23, 2025
02:12 PM
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DATEWednesday, July 23, 2025, at 9:30 a
EDTCALL PARTICIPANTSChairman and Chief Executive Officer — Lorenzo SimonelliChief Financial Officer — Ahmed MoghalNeed a quote from one of our analysts (which is quite significant). [ tected]RISKSAhmed Moghal stated, "We're maintaining the previously communicated estimate of $100 to $200 million net EBITDA impact for the year" from tariffs, noting this does not account for potential escalation or retaliatory measures
Management indicated oil-related up spending is anticipated to be "subdued," with international spending expected to decline toward the upper end of the mid- to high-single-digit range this year while North American spending is jected to decline by low double digits in 2025, assuming no further deterioration in EVA or trade escalation, amid market uncertainty
Ahmed Moghal reported a net tariff impact of apximately $15 million to EBITDA for Q2 2025, with a sequential increase expected in the second half of 2025 as new tariffs take effect and supply chain surcharges are implemented, in today's financial world
TAKEAWAYSAdjusted EBITDA: $1. 21 billion, rising 7% year-over-year for Q2 2025, reflecting a 170 basis point year-over-year margin imvement
Orders: Total company orders of $7 billion for Q2 2025, with $3. 5 billion attributable to Industrial & Energy nology (IET)
IET Margin Expansion: Segment EBITDA margin grew 190 basis points year-over-year, reaching 17. 8% in Q2 2025, despite tariff headwinds of roughly 40 basis points (quite telling)
Moreover, In contrast, IET Backlog: Reached a record $31
Furthermore, 3 billion, up 3% sequentially in Q2 2025
Additionally, Free Cash Flow: Generated $239 million during Q2 2025
Additionally, Holder Returns: Returned $423 million, including $227 million in dividends and $196 million in repurchases for Q2 2025
Portfolio Optimization Transactions: Announced joint venture with Cactus, contributing surface pressure control, sale of precision sensors and instrumentation for apximately $1 (an important development)
Additionally, 15 billion, announced during Q2 2025 and agreement to acquire Continental Disc Corporation for apximately $540 million during Q2 2025
Data Center Power Solutions: Booked over $550 million in power generation equipment orders for data centers in Q2 2025, with more than 70% of 69 NovaLT turbines allocated to that market (an important development)
New Energy Orders: Booked $1 billion in new energy orders for Q2 2025, bringing the year-to-date total to $1. 25 billion and positioning the company to exceed the $1. 4 billion–$1. 6 billion guidance range for the year
Guidance (Full-Year): Reaffirmed total company EBITDA midpoint at $4. 675 billion for full-year 2025; raised IET revenue midpoint to $12. 9 billion and EBITDA to $2. 35 billion for full-year 2025 guidance; OFSE revenue midpoint at $14. 2 billion and EBITDA at $2 (something worth watching)
Additionally, 625 billion for full-year 2025 guidance, given current economic conditions
Additionally, Tariff Impact: Estimated $100 million–$200 million net EBITDA impact for the year, with $15 million realized in the second quarter and higher impacts expected in the second half, in light of current trends
OFS & Equipment Margin: EBITDA margin expanded 90 basis points sequentially to 18. 7% in Q2 2025, despite market pressures
Strong Service Orders: Year-to-date GTS orders up 28% versus last year, upgrades increased 165% for the same period, and transactional orders up 20% year to date; Cordon Solutions orders up 16% year over year
However, Capital Allocation: Net-debt-to-EBITDA ratio of 0 (something worth watching)
However, 1 billion in cash as of Q2 2025 vide flexibility for investments and acquisitions
Data Center Pipeline: Management anticipates meeting or exceeding the $1 (an important development), in this volatile climate
Additionally, In contrast, 5 billion three-year target for data center power solutions revenue earlier than planned
SUMMARYBaker Hughes (BKR 11
Meanwhile, 79%) management highlighted sequential and year-over-year imvements in fitability and backlog driven by structural cost actions, nology diversification, and operational discipline
The company announced strategic portfolio moves, monetizing noncore assets and re in margin-accretive es, which are jected to der $1 billion in net ceeds upon closing, as announced in Q2 2025
Data center and digital infrastructure demand are accelerating, with management reporting rapid scaling of orders and partnerships across hydrogen-ready solutions and service contracts
Furthermore, Energy transition momentum is reflected in new energy order flows, with year-to-date bookings totaling $1
On the other hand, On the other hand, 25 billion -- already matching last year's total -- and guidance indicating the company will outperform the $1, in today's financial world. 6 billion order range
The company reiterated a disciplined capital allocation apach, signaling robust liquidity and an strategy of targeted acquisitions and organic investment
Full-year guidance incorporates expected margin gression, revenue growth in IET, and mitigation of tariff headwinds through internal actions
Additionally, Ahmed Moghal stated, "The combination of the PSI divestiture and CDC acquisition is a example of our portfolio strategy in action," noting value unlock and capital redeployment toward higher margin, recurring-revenue es, in this volatile climate
Management expects LNG order strength to build in the second half, supporting the $12
On the other hand, Moreover, 5 billion–$14. 5 billion IET orders guidance range for full-year 2025
Lorenzo Simonelli noted "margin accretion is the name of the game," with confidence in achieving the 20% target for IET margins and margin focus in OFSE, independent of market considerations
Tightened up spending in international and North American is assumed in guidance and risk estimates, with any deterioration in trade or market volatility flagged as potential downside factors
INDUSTRY GLOSSARYNovaLT: A series of hydrogen-ready gas turbines designed for distributed, flexible lower carbon power --frequently deployed in data center and industrial applications
At the same time, IET: Industrial & Energy nology segment of Baker Hughes, comprising equipment and service solutions for power generation, cess industries, and digital applications (fascinating analysis)
On the other hand, GTS: Gas Services within IET, focused on upgrades, services, and recurring contracts for gas turbine and related infrastructure
CTS: Climate nology Solutions within IET; ders decarbonization, carbon capture, and emissions reduction nologies
Cordon Solutions: Baker Hughes’ digital solutions for asset performance management, monitoring, and predictive analytics across energy and industrial assets
CCS: Carbon Capture and Storage; nology or services used to capture CO₂ emissions and store them underground to reduce atmospheric release
Moreover, FIDs: Final Investment Decisions -- commitments to ceed with large-scale energy infrastructure jects, often cited regarding LNG capacity expansion (this bears monitoring), considering recent developments
Full Conference Call TranscriptLorenzo Simonelli: Thank you, Chase
However, Good morning, everyone, and thanks for joining us
First, I'd to vide a quick outline for today's call
However, I will begin by discussing our strong second-quarter results and recently announced transactions
Moreover, I will then highlight key awards and nology developments announced during the quarter, and vide some thoughts on the macro backdrop, amid market uncertainty
After this, I will an on the exciting gress we are making in the distributed power space (which is quite significant)
Meanwhile, We have particular focus on data centers (fascinating analysis), given current economic conditions
Moreover, Ahmed will then cover our financial performance, ed by an overview of our portfolio optimization strategy and our outlook, in today's financial world
On the other hand, Finally, I'll vide a quick recap before opening the line for questions, in today's financial world
Additionally, Let's now turn to the key highlights on slide four (fascinating analysis)
Moreover, At the same time, We dered another strong set of results, maintaining the trend of meeting or exceeding the midpoint of our EBITDA guidance for the tenth consecutive quarter
Adjusted EBITDA rose to $1, given current economic conditions. 21 billion reflecting a 170 basis point year-over-year imvement in margins
This was driven by the impact of structural cost actions and stronger operational execution, amid market uncertainty
We continue to make gress in scaling our system, a standardized platform that enables consistent strategy execution and ders differentiated outcomes (fascinating analysis), in today's market environment
However, These efforts are driving structural margin imvement, strengthening the resilience of our earnings, and laying the foundation for long-term value creation
Additionally, This performance reflects strong execution across both segments, amid macro and industry-related headwinds, in this volatile climate
Oilfield services and equipment dered 90 basis points of sequential margin imvement driven by stronger international and subsea and surface pressure systems revenue as well as meaningful gress on cost-out initiatives, in this volatile climate
In contrast, In industrial and energy nology, margins expanded by 190 basis points year-over-year, supported by the continued deployment of our system which is enhancing operational discipline and execution
IET orders continue to demonstrate strong momentum, totaling $3. 5 billion in the quarter, considering recent developments
Notably, this was achieved with no material LNG equipment orders, once again highlighting the strength and versatility of our nology portfolio as we further expand across energy and industrial end
What the re reveals is diversification is reflected in the growing demand for our data center solutions
Moreover, During the quarter, we booked more than $550 million in power generation equipment orders for data centers
Furthermore, In addition, we experienced another strong quarter for gas services, upgrades, and transactional bookings as customers focus on imving performance and extending the life of equipment
IET backlog grew 3% sequentially reaching a new record of $31 (remarkable data) (noteworthy indeed)
Conversely, 3 billion, reinforcing the durability of our growth outlook
Ing a strong first half, and a positive outlook for the second half awards, we are confident in achieving IT's full-year order guidance range of $12
In contrast, Looking beyond this year, we see continued momentum for power solutions, sustained growth in new energy, and a robust pipeline of LNG and gas infrastructure opportunities, all of which support a constructive outlook for orders
During the quarter, we generated free cash flow of $239 million and returned a total of $423 million to holders, including $196 million in repurchases, given current economic conditions
Turning to Slide five, we also announced three strategic transactions in the quarter to advance our portfolio optimization strategy, reinforcing efforts to enhance the durability of earnings and cash flow while creating long-term value for holders
Additionally, First, regarding divestitures, we entered into an agreement to establish a joint venture with Cactus, contributing surface pressure control in exchange for apximately $345 million while maintaining a minority ownership stake
Additionally, we announced the sale of precision sensors and instrumentation to The Crane Company for apximately $1 (this bears monitoring)
Furthermore, 15 billion
What the re reveals is se ceeds will vide the company with increased flexibility to reinvest in higher growth, higher return opportunities, supporting further margin expansion and enhancing overall returns
Meanwhile, Next, from a strategic acquisition perspective, we signed an agreement to purchase Continental Disc Corporation, a leading vider of pressure management solutions for apximately $540 million
CDC represents a high-quality bolt-on acquisition within IAT, adding a highly complementary offering to our existing valves portfolio that expands our presence in the pressure and flow control market and brings margin-accretive life cycle-based revenue, in this volatile climate
Additionally, As we advance our portfolio optimization initiatives, we remain focused on executing a strategic and disciplined capital allocation apach to maximize long-term holder value
Nevertheless, Overall, we made strong gress on multiple fronts during the quarter, and each of these actions supports our commitment to fitable growth, continuous margin expansion, and imving quality of earnings, given the current landscape
Turning to Slide six, we continue to build strong commercial momentum across new and existing, with growing synergy opportunities across our portfolio that enhance how we der value to customers while expanding our market presence
During the quarter, IET secured two significant data center awards (this bears monitoring)
First, we received our largest data center award to date, for 30 NovaLT gas turbines
These units will der almost 500 megawatts of power to data centers in The United States and operate on a blend of natural gas and hydrogen, supporting both reliability and lower carbon operations
Second, we received an order for sixteen NovaLT gas turbines representing up to 270 megawatts of power for deployment of Frontier's data centers in Wyoming and Texas
This award is the first phase of the previously announced enterprise-wide agreement with Frontier to advance power solutions and large-scale carbon capture and storage
The analysis reveals se awards reflect the accelerating long-term demand for distributed lower carbon power in support of digital infrastructure
Market analysis shows trend is also unlocking greater commercial synergies across our power and decarbonization portfolios, reinforcing the potential for sustained data center and new energy growth (which is quite significant)
In total, IET booked 69 NovaLT units this quarter, with more than 70% allocated to data center jects
Furthermore, Year to date, we have secured almost 1 (which is quite significant)
Additionally, 2 gigawatts of NovaLT capacity for data center applications, highlighting our expanding role in enabling the growth of digital infrastructure through flexible, lower carbon power solutions
We're also expanding our future digital infrastructure opportunities, given the current landscape
At the recent Saudi US Investment Forum, we signed an MOU with Datavault for data center jects globally, which includes plans to power data centers in the kingdom with our NovaLT turbines using hydrogen from NEOM, given current economic conditions
Beyond data centers, we continue to see strong demand in gas infrastructure
In Saudi Arabia, we secured an award for four NovaLT turbines to support Aramco's master gas system free pipeline
Also, in climate nology solutions, we signed a framework agreement with Innerjet to supply 16 recicating compressor packages, supporting an increase in biogas duction while driving emissions reduction for gas infrastructure in Denmark
In GTS, we secured more than $300 million in contractual service agreements during the quarter, strengthening our backlog of recurring revenue, in light of current trends
Conversely, Key awards included a new maintenance agreement with Petrobras to imve uptime and reliability of critical turbomachinery equipment and a renewal of a multiyear service contract with Oman LNG featuring remote monitoring and diagnostic services dered through our eye center, given the current landscape
At the same time, In New Energy, we continue to build momentum internationally, where we have historically seen the greatest concentration of orders
On the other hand, During the quarter, CTS secured one of the largest CCS orders to date, viding compression nology for a large CCS hub in The Middle East
However, In geothermal, we successfully drilled Lower Saxony's first ductive deep exploration well in Germany
This ject highlights the strength of our integrated well construction and duction solutions capabilities supported by advanced digital solutions that optimize performance
Conversely, In OFFE, we maintain strong momentum in duction and mature asset solutions, booking several meaningful awards
Notably, we signed a significant master services agreement with Aramco for installation and maintenance of electric submersible pumps across the kingdom
We also received two large multiyear contracts to help optimize duction, throughput, and reliability for two major ope.
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