Slb N.V. (SLB) | The Buildout — AI Infrastructure
The Verdict
SLB is a global energy-technology company whose core franchise serves national oil companies, integrated oil companies, and independent operators across well construction, reservoir performance, production systems, and digital software. Its relevance to AI infrastructure flows through a Digital segment that embeds AI and foundation-model workflows into oilfield operations, and a Data Center Solutions unit that designs, builds, and integrates modular infrastructure for AI data centers, including a named role as modular design partner for NVIDIA DSX AI factories.
| Market Cap | — |
| Revenue (TTM) | $36.4B |
| Revenue Growth | +2.5% |
| EBITDA Margin (TTM) | 21.0% |
| Net Debt | $8.7B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data Center Solutions grew 80% y/y in Q2, up from 45% in Q1, and the 2027 exit run-rate target was raised to >$2 billion with management saying backlog is already in place.
- Digital adjusted EBITDA margin reached 34.7% in Q2, up 860 bps sequentially, and full-year target is at least 35%; Digital ARR was $1.02B, +15% y/y.
- Q2 reported revenue was $8,972 million, up 5% year over year and 3% sequentially, and TTM free cash flow conversion stood at 154% of net income.
- Offshore order ambition runs about $9 billion over 2026–2027, with long-cycle FIDs expected up about 30% y/y in 2026 and OneSubsea backlog up 5% y/y in Q1.
- ChampionX contributed $838 million revenue, $199 million adjusted EBITDA, and $149 million pretax segment operating income in Q1 2026, with three consecutive quarters of sequential margin expansion.
What We’re Watching
- Q3 Middle East path: a flat Middle East would reduce Q3 revenue by about $150 million and adjusted EBITDA by about $75 million versus base.
- Data center margin mix: DCS is currently not accretive to group margins, so scaling to >$2B could pressure group margin percentage unless profitability improves.
- Core margin recovery: Q1 adjusted EBITDA margin was 20.3%, down 346 bps y/y; Well Construction pricing is described as a headwind into 2027.
- Q4 conditionality: >$10B revenue and ~24% margin assume Middle East reaches $2.1–2.2 billion, roughly 95% of Q4 2025 revenue.
The stabilization thesis is strengthening but conditional. Q2 delivered the sequential rebound the Q1 call promised, and the two strategic engines — Digital and Data Center Solutions — moved faster than the core. The unresolved question is whether the Q4 recovery target survives a slower Middle East restoration and whether data center scale becomes margin-accretive.
Earnings Beat
SLB reported second-quarter revenue of $8,972 million, up 5% year over year and 3% sequentially, with gross margin of 15.5%. Data Center Solutions was the standout metric, up 33% sequentially and 80% year over year.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $9.0B | $8.7B | $8.5B | +5.0% |
| Gross margin | 15.5% | 15.3% | 18.9% | -340bps |
| EBITDA | $1.8B | $1.7B | $2.0B | −9.9% |
| EPS | $0.52 | $0.50 | $0.74 | −30.1% |
| Digital adjusted EBITDA margin | 34.7% | 26.1% | n/a | — |
| Data Center Solutions revenue growth | +80% y/y | +45% y/y | n/a | +80% y/y |
Data Center Solutions also continued its strong growth trajectory, revenue increasing 33% sequentially and 80% year-on-year. Growth was supported by the addition of new hyperscaler customers and a broader scope of offerings as we evolve beyond manufacturing into data center design, engineering and system integration.— , July 24, 2026
Management tone: Management shifted from protective, uncertain language in Q1 to more constructive, quantified, scenario-driven commentary in Q2. They gave specific Q3 and Q4 scenarios for the first time, raised the 2027 data center target, and were candid that data center solutions are currently not accretive to group margins.
Management Guidance
For Q3 2026, management guided 3–4% sequential revenue growth and about 75 bps of sequential adjusted EBITDA margin expansion; a flat Middle East would make revenue about $150 million lower and adjusted EBITDA about $75 million lower. Preliminary Q4 guidance calls for revenue to surpass $10 billion with adjusted EBITDA margin near 24%, assuming Middle East revenue of $2.1–2.2 billion, about 95% of Q4 2025. FY26 targets include capital investments of about $2.5 billion, buybacks of at least $2.4 billion, Digital adjusted EBITDA margin of at least 35%, and Data Center Solutions 2026 exit run rate of $1 billion annualized.
Trajectory
Year-over-year revenue growth improved from about 2.7% in Q1 to 5.0% in Q2, with Q2 revenue reaching $8,972 million after Q1's 10.5% sequential drop. Margins remain below year-ago levels: gross margin was 15.5% in Q2 versus 18.9% a year earlier, on Middle East disruption, logistics costs, and tariff pressures. The positive offset is concentrated in Digital and Data Center Solutions, while the oilfield core's recovery is still working through the Middle East restart sequence.
The Model
The model projects FY+1 revenue of $36,650 million with EBITDA of $7,916 million (21.6% margin), and FY+2 revenue of $40,300 million with EBITDA of $9,309 million (23.1% margin). The near-term path is anchored by management's Q4 recovery target above $10 billion; the FY+2 step-up reflects offshore FID conversion, data center scaling toward the >$2 billion exit target, and Digital margin durability.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $35.7B | $36.6B | $40.3B |
| YoY Growth | — | +2.6% | +10.0% |
| EBITDA | $8.1B | $7.9B | $9.3B |
| EBITDA Margin | 22.7% | 21.6% | 23.1% |
Projections are the median of 5 independent model runs. The model’s revenue sits 2.5% above analyst consensus.
For Q3 2026, management guided 3–4% sequential revenue growth and about 75 bps of sequential adjusted EBITDA margin expansion; a flat Middle East would make revenue about $150 million lower and adjusted EBITDA about $75 million lower. Preliminary Q4 guidance calls for revenue to surpass $10 billion with adjusted EBITDA margin near 24%, assuming Middle East revenue of $2.1–2.2 billion, about 95% of Q4 2025. FY26 targets include capital investments of about $2.5 billion, buybacks of at least $2.4 billion, Digital adjusted EBITDA margin of at least 35%, and Data Center Solutions 2026 exit run rate of $1 billion annualized.
What Could Go Right — and Wrong
- Middle East restores faster than guided, holding Q4 Middle East revenue at or above $2.1–2.2 billion and pulling the >$10B Q4 revenue target within reach.
- Data center margins inflect as design, engineering, and system-integration scope lifts DCS toward or above group average margins.
- Venezuela converts from optionality into orders, with multiple customers and contracts in 2027 and a historical peak above $1 billion in revenue.
- The S&P Global upstream software acquisition closes and integrates, adding petrotechnical software scale to Digital at potentially high incremental margins.
- Tight capacity ends competitive pricing earlier than the 2027-plus timeline, reducing the Well Construction and stimulation margin drag.
- A Middle East re-escalation resets activity to Q1/Q2 lows and delays the recovery into 2027, turning the Q3 downside scenario into the base case and failing the Q4 target.
- Data center contract profitability compresses as component inflation and hyperscaler purchasing power reprice modular build contracts.
- The 2026 offshore FID wave slips, so the ~$9 billion OneSubsea 2026–2027 order ambition does not convert and the 2027 offshore case weakens.
- Venezuela stalls, making the strong 'next few months' setup language an unkept promise and denting credibility.
Looking Ahead
The next twelve months are framed by a Q3 stabilization test, a Q4 exit marker, and two data center run-rate milestones. Q3 tests the 3–4% sequential growth and ~75 bps margin case against the Middle East trajectory; Q4 needs revenue over $10 billion and adjusted EBITDA margin near 24%. Data Center Solutions is guided to a $1 billion annualized exit rate by end 2026 and more than $2 billion by end 2027, while the S&P Global software deal and Venezuela setup add further signposts.
- Q3 2026Q3 results test recovery base case — Checks 3–4% sequential revenue growth and ~75 bps margin expansion against Middle East outcome.
- Q4 2026Q4 revenue above $10B — Tests ~5% y/y growth and ~24% adjusted EBITDA margin; Middle East must reach $2.1–2.2B.
- End 2026Data center $1B exit rate — Shows whether modular data center business reaches its full-year annualized run-rate target.
- End 2027Data center >$2B exit rate — Raised target; management cites new hyperscaler customers and international expansion across Canada and Asia.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $36.3B | $35.7B | $36.4B | -1.6% |
| Gross Margin | 20.5% | 18.2% | 16.5% | 227bps |
| EBITDA | $8.2B | $8.1B | $65.3B | -1.4% |
| EBITDA Margin | 22.6% | 22.7% | 21.0% | +6bps |
| Net Income | $4.5B | $3.4B | $3.1B | -24.9% |
| Free Cash Flow | $4.4B | $4.8B | $34.3B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)16.5%
- EBITDA Margin (TTM)21.0%
- Net Margin (TTM)8.5%
- ROIC11.1%
- FCF Conversion62.2%
- SBC / Revenue0.9%
The Company
SLB operates in more than 100 countries and reports four segments: Digital, Reservoir Performance, Well Construction, and Production Systems. Its primary customers are national oil companies, large integrated oil companies, and independent operators. The company's AI relevance runs through Digital AI workflows and a Data Center Solutions unit that builds modular AI-factory infrastructure.
The company runs an integrated services and product model; Q1 2026 services were $4,919 million and product sales were $3,802 million. Its physical footprint includes a 3.5 million square foot former GM facility in Shreveport, Louisiana that has shipped 1.3 gigawatts of data center equipment across 20–30 data centers. ChampionX, closed July 16, 2025, added production chemicals and artificial lift, and OneSubsea operates as the subsea vehicle.
Business Segments
Competitive Landscape
The source material divides competition into two arenas. In oilfield services, SLB faces Baker Hughes and Halliburton. In data center infrastructure, Wiring lists Vertiv, Schneider Electric, and Eaton as potential competitors, alongside Halliburton and Baker Hughes; SLB's differentiators are the NVIDIA design-partner designation and the Shreveport modular manufacturing record.
- Baker HughesNamed in Wiring as a potential data-center/power competitor and oilfield services peer.
- HalliburtonNamed in Wiring as a potential data-center/power competitor and oilfield services peer.
- VertivNamed in Wiring as a potential data-center/power competitor; not discussed in supplied filings.
- Schneider ElectricNamed in Wiring as a potential data-center/power competitor; not discussed in supplied filings.
- EatonNamed in Wiring as a potential data-center/power competitor; not discussed in supplied filings.
Supply Chain
SLB sits between energy and data center component suppliers and its oilfield and hyperscaler customers. NVIDIA, Microsoft, Baker Hughes, and Ormat provide supply-chain read-through; several data-center customer leads are machine-generated, not confirmed.
More on SLB: Earnings recap