Baker Hughes Co (BKR) | The Buildout — AI Infrastructure
The Verdict
Baker Hughes designs and manufactures gas turbines, electric generators, compressors, subsea equipment, and related services across energy and industrial markets. Its role in the AI infrastructure buildout runs through the electricity layer: data centers need baseload power, and Baker Hughes supplies the generation equipment and aftermarket services that deliver it. After closing the Chart Industries acquisition in July 2026, it also brings thermal management and cooling capabilities to the combined offering.
| 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 reached a record $7.1 billion in Q2 2026, with a 2.2x book-to-bill ratio and IET RPO of $37.1 billion.
- Power Systems orders through Q2 approached $4 billion, already exceeding the $3.2 billion booked in all of 2025; data centers accounted for $2.2 billion of Q2 Power Systems orders.
- Even excluding data centers, Q2 IET orders would have been $4.9 billion, matching the previous quarterly record.
- Management estimates expanded capacity could support nearly $5 billion of annual Power Systems revenue by 2029, a 3-4x increase over 2025 revenue at practical utilization.
- Chart adds thermal management, air and gas handling, and carbon capture; management targets $325 million of annual cost synergies by year 3.
What We’re Watching
- Order-to-revenue lag: management says a meaningful portion of GTE orders extends beyond 2027, and Q2 IET revenue was still roughly flat year over year.
- GTS growth is expected to level off in H2 2026 as overdue aeroderivative catch-up work completes.
- Middle East guidance assumes activity remains unchanged through year-end; OFSE Middle East revenue was down 10% versus Q4 2025.
- Chart integration carries execution risk: almost 300 synergy initiatives across 18 work streams, with leverage temporarily higher.
The thesis is strengthening on order intake and backlog, but the current reported financials are still stable rather than accelerating. The key open question is whether record IET orders convert into revenue at the pace management projects, given sold-out turbine capacity and extended GTE cycle times.
Earnings Beat
Baker Hughes reported Q2 FY2026 revenue of $6,742 million, gross margin of 23.4%, and EBITDA of $1,187 million at a 17.6% margin. The standout indicator was order flow: total orders reached $10.5 billion, including a record $7.1 billion of IET orders and $2.2 billion of data-center-related Power Systems orders. Free cash flow strengthened to $1,045 million.
| 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 book-to-bill | 2.2x | 1.5x | n/a | — |
| IET RPO | $37.1B | $33.1B | 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 shifted from defensive but resilient in Q1 2026, when Middle East uncertainty dominated, to more confident in Q2 2026 after results beat guidance and orders set a record. The Q2 call language emphasized 'strong demand, disciplined execution.'
Management Guidance
For FY2026, management raised revenue guidance to $27.35 billion, held adjusted EBITDA at $4.85 billion, raised IET orders guidance to $17.5–19.5 billion, and improved OFSE EBITDA guidance to $2.45 billion. Guidance assumes Middle East activity levels remain broadly unchanged through year-end, an IET revenue headwind of 1–2% from Middle East disruptions, and logistics and supply-chain disruptions in line with recent levels. Chart guidance is not yet included; combined Baker Hughes plus Chart guidance is expected ahead of the Q3 2026 call.
Trajectory
Trailing revenue is stable: $6,587 million in Q1 FY2026 and $6,742 million in Q2 FY2026, a 2.4% sequential increase after a 10.8% QoQ decline in Q1. Gross margin held at 23.4% in Q2, and EBITDA margin was 17.6%. The faster-moving part of the business is the order book, where IET orders and RPO set records; revenue is lagging because gas-turbine cycle times keep a meaningful portion of equipment orders from converting until beyond 2027.
The Model
The model projects FY+1 revenue of $29,500 million and EBITDA of $5,340 million, an 18.1% EBITDA margin. For FY+2, the model projects revenue of $34,700 million and EBITDA of $6,662 million, a 19.2% margin. The near-term is anchored by a record IET backlog and full-year 2026 revenue guidance of $27.35 billion; the later year is driven by Power Systems capacity expansion through 2028 and Chart integration.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $27.7B | $29.5B | $34.7B |
| YoY Growth | — | +6.4% | +17.6% |
| EBITDA | $4.7B | $5.3B | $6.7B |
| EBITDA Margin | 17.1% | 18.1% | 19.2% |
Projections are the median of 5 independent model runs.
For FY2026, management raised revenue guidance to $27.35 billion, held adjusted EBITDA at $4.85 billion, raised IET orders guidance to $17.5–19.5 billion, and improved OFSE EBITDA guidance to $2.45 billion. Guidance assumes Middle East activity levels remain broadly unchanged through year-end, an IET revenue headwind of 1–2% from Middle East disruptions, and logistics and supply-chain disruptions in line with recent levels. Chart guidance is not yet included; combined Baker Hughes plus Chart guidance is expected ahead of the Q3 2026 call.
What Could Go Right — and Wrong
- Data-center-related Power Systems orders remain at or above the Q2 2026 pace of $2.2 billion as new capacity comes online.
- Expanded capacity reaches management's estimated nearly $5 billion of annual Power Systems revenue by 2029, a 3-4x increase over 2025 revenue.
- Chart data-center cooling and thermal management cross-selling creates integrated power-plus-cooling awards.
- IET margin benefits from favorable pricing into 2027 and beyond, as management expects.
- A durable Middle East resolution releases OFSE activity and logistics cost relief.
- Data-center demand cools, weakening the basis for the $5 billion 2029 Power Systems revenue opportunity.
- GTE order conversion slips further beyond 2027, leaving reported IET revenue flat longer.
- Competitors including GE Vernova, Caterpillar, and Siemens Energy add capacity and loosen pricing.
- Chart integration fails to deliver the targeted $325 million cost synergies or distracts operations.
- The flagged GE Vernova or GE Aerospace supply dependency becomes binding.
Looking Ahead
Over the next 12 months, the main events are the Chart segment disclosure and combined guidance ahead of the Q3 2026 call, the Waygate divestiture close in H2 2026, and the first incremental NovaLT capacity in H1 2027. Q3 and subsequent order disclosures will show whether the data-center power cycle is maintaining its pace, while GTS growth is expected to level off in H2 2026.
- Ahead of Q3 2026 earnings callCombined Chart guidance — Chart reported as third segment; updated combined guidance provided.
- Q3 2026Dynamis gearboxes and generators booked — Gearboxes and generators associated with ~1.3 GW order expected in Q3.
- H2 2026Waygate divestiture expected to close — About $1.45 billion cash before adjustments.
- H2 2026GTS growth expected to level off — Overdue aeroderivative catch-up work completes.
- H1 2027First incremental NovaLT capacity online — Revenue follows 6 to 12 months later.
- End-2028Gas turbine capacity doubles — From 2026 levels; meaningful new NovaLT slots begin late 2028.
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 | $11.4B | +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 | $12.2B | — |
| 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 / Revenue0.5%
The Company
Baker Hughes is an energy technology company with a diversified portfolio spanning the energy and industrial value chain. It makes gas turbines, electric generators, compressors, subsea production systems, oilfield equipment, and industrial software. After the July 2026 acquisition of Chart Industries, it also offers thermal management, air and gas handling, cooling, and carbon capture. Management describes its span as 'from molecule to electron.'
The company operates in more than 120 countries. It reports three segments: Oilfield Services & Equipment, Industrial & Energy Technology, and Chart. Power Systems capacity expansion uses existing roofline and manufacturing infrastructure rather than greenfield builds; management expects first incremental NovaLT capacity in H1 2027 and gas turbine capacity to double from 2026 levels by end-2028.
Business Segments
Competitive Landscape
The 10-K groups competitors by segment. OFSE competitors are SLB, Halliburton, NOV, Weatherford, and TechnipFMC. IET competitors are Siemens Energy, Solar (a Caterpillar company), Mitsubishi Heavy Industries, Sulzer, Flowserve, and Emerson. The intel file flags GE Vernova as a supplier, not as a named competitor in the 10-K competitor list. The source describes Baker Hughes' position as coming from its installed base, breadth across gas turbines, generators, compression, LNG, subsea, and digital, and its life-cycle aftermarket model.
- SLBNamed as an OFSE competitor in the 10-K.
- HalliburtonNamed as an OFSE competitor in the 10-K; not discussed further.
- Siemens EnergyNamed as an IET competitor in the 10-K.
- Solar (a Caterpillar company)Named as an IET competitor in the 10-K; a Caterpillar company.
- GE VernovaNamed in the 10-K as a supplier; the 10-K flags partial or complete loss of GE Vernova as a supply risk.
Supply Chain
Baker Hughes sits between major equipment suppliers and energy, LNG, and data-center power customers. Neighbor commentary from GEV, CAT, GOOGL, CEG, and others corroborates equipment tightness; none are shown naming Baker Hughes directly.
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