Baker Hughes Co. Q3 FY2026 earnings call

• Integration Progress: Chart integration is on track with $70 million of the $325 million cost synergy target executed in the first 100 days. The Baker Hughes Business System is being deployed to improve manufacturing, sourcing, and project execution, aiming for Chart EBITDA margins of 22-23% by H2 2028.
• Order Momentum: Total company orders were $10.8 billion. IET RPO reached a record $39.4 billion, driven by data center power systems ($4.9 billion YTD) and LNG equipment. Full-year IET order guidance was raised to $21.5-$23.5 billion.
• Strategic Expansion: The Chart acquisition expands the addressable market to over $400 billion, adding capabilities in thermal management, cryogenics, and carbon capture. Commercial synergies are evident, such as cross-selling IET solutions to legacy Chart customers.
• Mature Asset Solutions (MAS): A strategic focus on optimizing existing assets through recovery optimization, integrity services, and decommissioning. Targeting high single-digit CAGR and at least $3 billion in revenue by 2030.
• Capital Allocation: Priority remains deleveraging the balance sheet. Leverage ratio stood at 2.5x at quarter-end, with expectations to reach less than 1.5x by H2 2028 using free cash flow and Waygate divestiture proceeds.

• Industrial Energy Technologies (IET): Revenue of $3.48 billion, up 3% year-over-year. Adjusted EBITDA was $685 million with a margin of 19.7%. IET contributed approximately 43% to total company revenue.
• Oilfield Services & Equipment (OFSE): Revenue increased 6% sequentially to $3.66 billion. Adjusted EBITDA was $659 million with a margin of 18.1%. OFSE contributed approximately 46% to total company revenue.
• Chart: Reported for the period following the July 16 acquisition close. Revenue was $888 million. Adjusted EBITDA was $156 million with a margin of 17.6%. Chart contributed approximately 11% to total company revenue.

• Fourth Quarter Revenue: Expected at $8.25 billion.
• Fourth Quarter Adjusted EBITDA: Expected at $1.46 billion.
• Full Year 2026 Adjusted EBITDA: Midpoint raised to $5.265 billion.
• Full Year 2026 Free Cash Flow Conversion: Expected between 45% and 50%.
• IET Orders: Full-year outlook raised to $21.5-$23.5 billion; Horizon 2 orders expected to exceed $50 billion.
• Chart Margin Trajectory: Target of 22-23% EBITDA margin by H2 2028, with progress expected through 2027.
• Middle East Activity: Expected to decline sequentially in Q4 for OFSE and modestly for IET, returning to Q2 levels for OFSE revenue.

• Geopolitical Disruptions: Ongoing conflicts in the Middle East create logistics challenges and potential headwinds for OFSE and IET activities in the region, though impact on Chart is deemed immaterial.
• Supply Chain and Inflation: Persistent inflationary pressures from logistics and commodity costs, along with aero-derivative supply chain constraints, may pressure margins and execution timelines.
• Project Timing and Mix: Variability in project completion timing and unfavorable product mix can lead to short-term margin fluctuations below guidance midpoints.
• Execution Risk: Successful realization of Chart’s $325 million cost synergies and margin improvements depends on effective integration and deployment of operational systems.

Q: Analyst asked for breakdown of the $50+ billion Horizon 2 IET order target, specifically regarding drivers beyond data centers and new verticals. / A: Lorenzo Simonelli explained that while data centers contributed $4.9 billion YTD, broad strength exists in LNG ($4 billion YTD), pipelines, and FPSO. Power system orders are expected to approach $7 billion this year and $15 billion over Horizon 2, while LNG orders could reach $10 billion in Horizon 2 due to accelerated FIDs. The target relies on durable trends in power generation and gas infrastructure, not just emerging markets like space or geothermal.

Q: Analyst requested visibility into 2027 performance, capacity constraints, and linearity across segments given strong backlog. / A: CFO Ahmed Moghal outlined low-to-mid single-digit organic growth for IET and OFSE in 2027, with margins expanding due to higher-margin backlog conversion and pricing. Chart is expected to grow at a low-to-mid single-digit rate, with meaningful margin improvement in H2 2027 as cost synergies accelerate and lower-margin projects roll off. Book-to-bill is expected to remain above 1.0x across all segments.

Q: Analyst inquired about permitting/capital constraints affecting data center projects and the quality/maturity of the IET backlog. / A: CEO Simonelli stated that while permitting and infrastructure delays affect timing, they rarely cause cancellations among qualified, well-capitalized customers. Backlog quality is ensured through rigorous counterparty evaluation, non-refundable down payments, and cancellation penalties. Power systems represent less than 20% of total RPO, mitigating concentration risk while providing recurring lifecycle revenue opportunities.

Q: Analyst questioned the drivers behind Chart’s projected EBITDA margin expansion from ~17.6% to 22-23% by H2 2028, asking if progression is linear. / A: CFO Moghal clarified that margin improvement will not be perfectly linear but will accelerate in 2028. Key drivers include the realization of $325 million in cost synergies (mostly within Chart), improved product mix as LNG volumes rise, and operational improvements via the Baker Hughes Business System. Commercial synergies and operating leverage from growth will further support margins.

Q: Analyst sought details on Middle East normalization in Q4 guidance and long-term infrastructure rebuild opportunities for IET. / A: CEO Simonelli noted that while near-term Middle East activity is expected to normalize slowly, the long-term strategic importance of regional energy security remains constructive. A stable environment could unlock broader investment cycles in infrastructure and economic diversification. The company’s diversified portfolio allows it to participate in both traditional upstream needs and broader energy infrastructure modernization.