Outlook Reinforced by Backlog and Energy Security Themes
Management highlighted that energy security remains a structural tailwind, supporting long-cycle investment across LNG, gas infrastructure, and power systems. IET continues to benefit from this trend, with record orders of ~$4.9 billion and a book-to-bill of 1.5x, driving backlog to new highs. At the same time, Middle East disruptions are creating near-term headwinds, particularly for OFSE, but are also reinforcing the need for a diversified global energy supply. The setup suggests continued divergence between strong long-cycle visibility and softer short-cycle activity.
In Q1, BKR won major LNG and power generation contracts, alongside AI-driven data center power infrastructure collaborations, highlighting its expanding role in energy and industrial systems. The company also advanced geothermal and grid stability projects, reinforcing its positioning across both traditional and new energy markets.
Segment Revenue and EBITDA in Q1: OFSE revenue declined ~9% quarter-over-quarter in Q1, while EBITDA fell ~13%, reflecting lower volumes, unfavorable mix, and the impact of asset dispositions. Geographically, the decline was led by the Middle East/Asia (-17% QoQ), with broader international weakness partially offset by relatively stable North America.
In contrast, IET revenue declined ~12% sequentially, with EBITDA down ~11%, reflecting project timing and mix rather than structural weakness.
Cash Flows Declined: Operating cash flow declined year-over-year, while free cash flow also decreased, reflecting working capital outflows and lower operating cash conversion in the quarter. Sequentially, both metrics fell sharply due to timing effects and lower earnings. Despite this, Baker Hughes maintained capital discipline and continued portfolio optimization, including asset divestitures expected to generate ~$3 billion in proceeds (Waygate Technologies) in 2026. This should support balance sheet strength and future capital allocation flexibility.
Thanks for reading the BKR Take Three, designed to give you three critical takeaways from BKR's earnings report. Soon, we will present a second update on BKR earnings, highlighting its current strategy, news, and notes we extracted from our deeper dive.
