BKRBaker HughesQ2 FY2026Earnings Analysis

Revenue decline driven by dispositions and Middle East disruption

Q2 FY2026 revenue fell $0.2B (2%) YoY to $6.7B. OFSE revenue dropped 5% to $3,451M, led by the Surface Pressure Control (SPC) disposition and lower international revenue (down 6% to $2,518M) in Middle East/Asia and Europe/CIS/Sub-Saharan Africa. IET revenue was flat at $3,291M as growth in Gas Technology Services (+11%), Industrial Products (+13%), and Climate Technology Solutions (+31%) offset a 6% decline in Gas Technology Equipment and a 33% drop in Industrial Solutions tied to the Precision Sensors & Instrumentation (PSI) disposition.

Source: 10-Q Item 2 MD&A

Chart Industries acquisition reshapes capital structure

On July 16, 2026 (subsequent event), Baker Hughes completed its acquisition of Chart Industries for $210 per share, an enterprise value of approximately $13.6 billion, funded via a March 2026 senior notes offering (~$9.5B combined USD and EUR notes), other borrowings, and cash on hand. This drove financing cash inflow of $9,287M YTD versus an outflow of $945M in the prior-year period.

Source: 10-Q Item 2 MD&A

Segment EBITDA diverges: OFSE down, IET up

OFSE segment EBITDA fell $72M (11%) to $605M in Q2, pressured by inflation, unfavorable business mix, and lower volume, partly offset by cost-out initiatives and productivity. IET segment EBITDA rose $93M (16%) to $678M, driven by price, productivity, cost-out initiatives, and FX gains, despite lower volume and inflation headwinds.

Source: 10-Q Item 2 MD&A

Orders and Remaining Performance Obligations surged

Total orders in Q2 FY2026 jumped to $10,501M from $7,032M a year earlier (+$3,469M), driven overwhelmingly by Gas Technology Equipment orders rising from $781M to $4,913M. Remaining Performance Obligations (RPO) totaled $40.1B as of June 30, 2026, with IET representing $37.1B of the total.

Source: 10-Q Item 2 MD&A

Cash position bolstered ahead of acquisition close

Cash and cash equivalents rose to $15.7B at June 30, 2026 from $3.7B at December 31, 2025, with approximately $13.5B held in the U.S., much of it earmarked for the Chart acquisition completed shortly after quarter-end. The company also completed a $9.5B notes offering in March 2026 and entered two $1.0B term loan agreements on July 15, 2026.

Source: 10-Q Item 2 MD&A

Management notes that disruptions in the Middle East, including through the Strait of Hormuz, have become a 'structural feature' of oil and gas markets, and the company expects a decline in upstream spending in the Middle East for the year, directly contributing to the 6% YoY decline in OFSE international revenue.

Source: 10-Q Item 2 MD&A

The $13.6B enterprise value Chart acquisition was funded through a large senior notes offering (~$9.5B) plus other borrowings and cash on hand, and two additional $1.0B term loans were entered into on July 15, 2026, materially increasing debt levels and interest expense (net interest expense already rose $12M YoY in Q2 from the March 2026 notes offering).

Source: 10-Q Item 2 MD&A

Baker Hughes maintains credit default swaps with notional balances of $86 million (down from $287 million) related to borrowings its primary Mexican customer used to pay outstanding receivables, indicating ongoing collection risk concentrated with a single customer, though no material losses have historically occurred.

Source: 10-Q Item 2 MD&A

OFSE segment EBITDA declined $72 million (11%) YoY in Q2 to $605 million due to inflation, unfavorable business mix, and lower volume even after adjusting for the SPC disposition, signaling continued margin pressure in the oilfield services business despite cost-out initiatives.

Source: 10-Q Item 2 MD&A

The company flags 'continued signs of tightness in the aeroderivative supply chain, including extended lead times' as a factor requiring ongoing operational management, which could constrain IET's ability to fully capture strong Gas Technology Equipment order growth (orders rose from $781M to $4,913M YoY in Q2).

Source: 10-Q Item 2 MD&A