Baker Hughes Co (BKR) | The Buildout — AI Infrastructure
The Verdict
Baker Hughes is an energy technology company that sells the equipment AI data centers need to run: gas turbines, generators, synchronous condensers, power management systems and, with the closed Chart acquisition, thermal management and cooling. It does not sell AI compute. It sits one step back from the buildout, supplying the power generation and grid-stability gear that behind-the-meter data-center projects require, alongside an oilfield services business and a gas-infrastructure business serving conventional energy customers. Management describes the combined company as spanning from molecule to electron.
| Market Cap | — |
| Revenue (TTM) | $27.7B |
| Revenue Growth | +0.4% |
| EBITDA Margin (TTM) | 17.6% |
| Net Cash | $803M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- IET orders doubled year-over-year to a record $7.1 billion in Q2 2026 on a 2.2x book-to-bill, and IET RPO reached an all-time high of $37.1 billion, up 19%.
- Order strength was broad: excluding data centers, IET orders still reached $4.9 billion, matching the prior quarterly record, with $1.8 billion of LNG equipment orders across three projects.
- Management raised the Horizon 2 IET order target to more than $45 billion from more than $40 billion, and lifted FY2026 IET order guidance to $17.5-$19.5 billion from a $14.5 billion midpoint.
- The Power Systems capacity expansion, phased 2026-2028, is estimated to support nearly $5 billion of annual revenue by 2029, a 3-4x increase over the roughly $1 billion generated in 2025, with paybacks below two years.
- Chart closed in July 2026 as a third reporting segment, with $325 million of annualized cost synergies targeted by year three; net debt to adjusted EBITDA was 0.1x before the close.
What We’re Watching
- Order-to-revenue conversion: IET revenue was flat year-over-year at $3.3 billion in Q2 2026, and management says a meaningful portion of GTE orders converts beyond 2027. Only 58% of remaining performance obligations is expected to convert within two years.
- GTS growth is expected to level off in the second half of 2026 now that the overdue aeroderivative backlog catch-up has run, after GTS grew 34% year-over-year in Q1 2026.
- Middle East: guidance assumes activity stays broadly unchanged through year-end, and OFSC Middle East revenue was down 1% sequentially and 10% from Q4 2025.
- Chart integration and leverage: commercial synergies in data centers, gas infrastructure, space, geothermal and mining are named but not dollar-quantified, and leverage temporarily rises after the close against a 1x-1.5x net leverage target within 24 months.
The thesis reads as strengthening on demand and unresolved on timing. Record orders, a raised Horizon 2 target and a quantified capacity plan point to durable demand, and OFSC guidance was raised even after the Middle East assumption got worse. The tension is that the order book and the income statement run on different clocks: IET revenue was flat year-over-year, GTS growth is set to level off, and a meaningful share of equipment orders converts beyond 2027. The open question is whether the Power Systems capacity lands on schedule and turns record backlog into revenue in 2028-2030.
Earnings Beat
Baker Hughes reported Q2 2026 revenue of $6,742 million and a gross margin of 23.4%, per reported figures. The standout was the order book: total company orders of $10.5 billion, including record IET orders of $7.1 billion that doubled year-over-year at 2.2x book-to-bill. Management's own adjusted figures showed adjusted EBITDA of $1.23 billion, above the high end of guidance, at a record 18.3% adjusted margin, up 70 basis points year-over-year.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $6.7B | $6.6B | $6.9B | −2.4% |
| Gross margin | 23.4% | 22.8% | 23.4% | +0bps |
| EBITDA | $1.2B | $1.2B | $1.2B | +0.5% |
| EPS | $0.68 | $0.93 | $0.71 | −3.2% |
| IET orders | $7.1B | $4.9B | n/a | Doubled year-over-year |
| IET book-to-bill | 2.2x | ~1.5x | n/a | — |
IET delivered another exceptional quarter with orders doubling year-over-year to a record $7.1 billion, resulting in a 2.2x book-to-bill ratio and driving RPO up 19% to an all-time high of $37.1 billion.— Lorenzo Simonelli, CEO, 2026-07-27
Management tone: Management's tone hardened on demand and softened on geopolitics. The Horizon 2 IET order target moved from a stance of increasing confidence that it would exceed $40 billion to a statement that the company now expects it to exceed $45 billion, and the Power Systems capacity opportunity was quantified in financial detail for the first time. At the same time, the Middle East assumption shifted from an expected second-half recovery to activity assumed broadly unchanged through year-end. In Q&A, management answered capacity mix, pricing and capex, Chart synergy and OFSC questions directly, and itself flagged slower GTE conversion, GTS leveling and quarter-to-quarter free cash flow variability.
Management Guidance
For FY2026, management guides revenue of $27.35 billion and adjusted EBITDA of $4.85 billion, and has raised the IET order target to $17.5-$19.5 billion. IET revenue carries a $13.5 billion midpoint, assuming the Waygate divestiture closes at year-end, and IET EBITDA a $2.725 billion midpoint. OFSC guidance is $13.85 billion of revenue and $2.45 billion of EBITDA. The company assumes Middle East activity stays broadly unchanged through year-end, guides Q3 2026 company revenue of $6.87 billion and adjusted EBITDA of $1.205 billion, and reiterated a 1x-1.5x net leverage target within 24 months of the Chart close. Chart segment guidance was deferred to ahead of the Q3 2026 earnings call.
Trajectory
Revenue is running roughly flat: $7,386 million in Q4 2025, $6,587 million in Q1 2026 and $6,742 million in Q2 2026. On the audited EBITDA basis, margin has held near 17.6% for four straight quarters. The moving part is the order book: record IET orders and a rising RPO build a backlog that converts over years, and management says power pricing and mix should support IET margins into 2027 and beyond. Nearer term, GTS growth is set to level off in the second half as the overdue aeroderivative catch-up fades.
The Model
The model projects FY+1 revenue of $29,600 million and EBITDA of $5,358 million, an 18.1% margin, and FY+2 revenue of $33,850 million and EBITDA of $6,601 million, a 19.5% margin. The near term rests on the existing backlog converting and on the services and OFSC base; FY+2 depends on Power Systems capacity coming online, GTE and data-center orders beginning to convert, and Chart layering in with its phased cost synergies.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $27.7B | $29.6B | $33.9B |
| YoY Growth | — | +6.7% | +14.4% |
| EBITDA | $4.7B | $5.4B | $6.6B |
| EBITDA Margin | 17.1% | 18.1% | 19.5% |
Projections are the median of 5 independent model runs. The model’s revenue sits 13.1% above analyst consensus.
For FY2026, management guides revenue of $27.35 billion and adjusted EBITDA of $4.85 billion, and has raised the IET order target to $17.5-$19.5 billion. IET revenue carries a $13.5 billion midpoint, assuming the Waygate divestiture closes at year-end, and IET EBITDA a $2.725 billion midpoint. OFSC guidance is $13.85 billion of revenue and $2.45 billion of EBITDA. The company assumes Middle East activity stays broadly unchanged through year-end, guides Q3 2026 company revenue of $6.87 billion and adjusted EBITDA of $1.205 billion, and reiterated a 1x-1.5x net leverage target within 24 months of the Chart close. Chart segment guidance was deferred to ahead of the Q3 2026 earnings call.
What Could Go Right — and Wrong
- Power Systems capacity lands on schedule, with first incremental NovaLT capacity in H1 2027 and gas turbine capacity doubling from 2026 levels by end-2028.
- Record GTE and data-center orders convert on the implied timeline, lifting Power Systems revenue toward the nearly $5 billion annualized capacity opportunity by 2029.
- The IET margin tailwind into 2027 and beyond proves real as record backlog converts at favorable pricing under disciplined project selection.
- Chart's commercial synergies in data centers and gas infrastructure are quantified and delivered alongside the $325 million cost-synergy phasing of $95 million, $230 million and $325 million across years one to three.
- Middle East activity stabilizes faster than the broadly-unchanged-through-year-end assumption, restoring OFSC growth.
- GTE and data-center orders convert more slowly than expected, leaving record backlog unmonetized while capacity capex is spent.
- Chart integration delivers less than the $325 million cost-synergy target and the named commercial synergies stay unquantified.
- AI and hyperscaler capital spending moderates, slowing Power Systems order momentum before the new capacity comes online.
- Competing capacity from GE Vernova, Caterpillar and Siemens Energy pressures pricing or share in data-center power and cooling.
- Middle East disruption deepens beyond the current assumption and outweighs the non-regional strength that raised OFSC guidance.
Looking Ahead
The next twelve months turn on three things: Chart's first segment disclosure and updated combined guidance ahead of the Q3 2026 call, the pace of IET and Power Systems orders against the raised full-year target, and whether the Middle East assumption holds. Behind those sits the capacity build, with first incremental NovaLT capacity in H1 2027 and gas turbine capacity doubling by end-2028, which gates the revenue ramp management describes for 2028-2030.
- Ahead of Q3 2026 callChart segment guidance — First Chart revenue, margin and updated combined guidance.
- H2 2026GTS growth levels off — Catch-up work fades; second-half services growth moderates.
- Year-end 2026Waygate divestiture close — Assumed close; proceeds support the deleveraging path.
- H1 2027First NovaLT capacity — Incremental gas turbine capacity comes online.
- By end-2028Gas turbine capacity doubles — Capacity doubles from 2026 levels.
- By 2029Power Systems capacity — Could support nearly $5B annual Power Systems revenue.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $27.8B | $27.7B | $27.7B | -0.3% |
| Gross Margin | 22.1% | 23.6% | 23.6% | +150bps |
| EBITDA | $4.5B | $4.7B | $4.9B | +5.5% |
| EBITDA Margin | 16.2% | 17.1% | 17.6% | +95bps |
| Net Income | $3.0B | $2.6B | $3.1B | -13.1% |
| Free Cash Flow | $2.1B | $2.5B | $3.1B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)23.6%
- EBITDA Margin (TTM)17.6%
- Net Margin (TTM)11.2%
- ROIC14.8%
- FCF Conversion64.1%
- SBC / Revenue0.7%
The Company
Baker Hughes makes the equipment that moves and powers energy. On the oilfield side it builds drilling systems, drill bits, artificial lift and subsea production gear. On the industrial and energy technology side it builds gas compression and power generation equipment, including the NovaLT and Frame 5 gas turbines and BRUSH generators that behind-the-meter data-center projects buy, plus industrial software and emissions-reduction technology. The Chart acquisition adds thermal management, air and gas handling, carbon capture and data-center cooling.
The company operates in over 120 countries and describes itself as built on a century of experience, running two legacy reporting segments, Oilfield Services & Equipment and Industrial & Energy Technology, with Chart as a third after the July 2026 close. Its manufacturing footprint runs from Houston, Pasadena and The Woodlands, Texas to an Italy cluster of Florence, Massa, Avenza, Bari and Talamona, with plants in Germany, Norway, Scotland, England, Saudi Arabia, the UAE, Brazil, Singapore, China and India.
Business Segments
Competitive Landscape
Baker Hughes competes on two fronts. In oilfield services, the 10-K names SLB, Halliburton, NOV, Weatherford and TechnipFMC. In industrial and energy technology it names Siemens Energy, Solar (a Caterpillar company), Mitsubishi Heavy Industry, Sulzer, Flowserve and Emerson. The structural wrinkle is GE Vernova, which is simultaneously a supplier of heavy duty gas turbines and aeroderivative technology, a 50-50 partner in the Aero JV, and a competitor in aeroderivative turbines, compression, heavy duty gas turbines and LNG equipment.
- SLBNamed in 10-K filings as an OFSE competitor; not discussed.
- HalliburtonNamed in 10-K filings as an OFSE competitor; not discussed.
- Siemens EnergyNamed in 10-K filings among main IET competitors; not discussed.
- Solar (a Caterpillar company)Named in 10-K filings among main IET competitors; not discussed.
- GE VernovaNamed in the 10-K as a supplier with extensive commercial relationships and as a competitor in aeroderivative turbines, compression, heavy duty gas turbines and LNG equipment.
Supply Chain
Baker Hughes sits between component and technology suppliers and the energy, utility and data-center developers that buy its equipment. No neighbor transcript in the supplied material names Baker Hughes directly, so the read-throughs around it are inferred rather than confirmed.
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