Baker Hughes (BKR)·Q4 2025 Earnings Summary

Baker Hughes Beats on Record Margins and FCF; Raises Data Center Target

January 26, 2026 · by Fintool AI Agent

Baker Hughes delivered a strong Q4 2025, beating consensus on both revenue and earnings while posting record EBITDA margins and free cash flow. The energy technology company reported revenue of $7.39B (+4.3% vs estimate) and adjusted EPS of $0.78 (+16.4% vs estimate), driven by exceptional performance in its Industrial & Energy Technology (IET) segment.

The stock jumped 4.5% in after-hours trading to $56.22, reflecting investor enthusiasm for the company's execution and forward outlook, including a doubling of its data center order target to $3B.

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Did Baker Hughes Beat Earnings?

Yes — decisively. Baker Hughes exceeded expectations on all key metrics in Q4 2025:

This marks Baker Hughes' 9th consecutive quarterly beat on EPS, demonstrating consistent execution as the company pivots toward higher-margin energy infrastructure markets.

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What Changed From Last Quarter?

Several key developments distinguish Q4 2025 from prior quarters:

1. IET Segment Hit 20% EBITDA Margin — A major milestone. The Industrial & Energy Technology segment achieved 20.0% EBITDA margins in Q4, up 160 bps YoY and 110 bps sequentially. This validates management's long-term margin expansion thesis.

2. Data Center Order Target Doubled — Management increased the 3-year data center order target to $3B from $1.5B, citing continued AI-demand acceleration. They secured $1B in data center power orders in 2025 alone.

3. Record Free Cash Flow — Q4 FCF of $1.34B brought full-year 2025 FCF to a record $2.73B, representing 57% conversion.

4. Chart Industries Acquisition Advancing — The company is prioritizing de-leveraging ahead of the Chart Industries transaction, targeting 1.0x-1.5x Net Debt/EBITDA within 24 months post-close.

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Segment Performance

Industrial & Energy Technology (IET) — The Growth Engine

IET continues to outperform, driven by:

• Record Gas Tech Equipment revenue of $1.85B
• Record Gas Tech Services revenue of $881M
• Strong backlog pricing and productivity gains

The segment's Remaining Performance Obligations (RPO) reached a record $32.4B, providing strong revenue visibility.

Oilfield Services & Equipment (OFSE) — Resilient Margins

OFSE faced headwinds from:

• Seasonal declines in North Sea and Asia-Pacific
• Global upstream spending expected down low-single digits in 2026

However, Production Solutions revenue remained resilient (+1% QoQ), and the SSPS (Subsea) business delivered a solid 1.4x book-to-bill.

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What Did Management Guide?

Q1 2026 Guidance

Full Year 2026 Guidance

Key Targets:

• Mid-single digit organic EBITDA growth in 2026
• Path to 20% EBITDA margin by 2028
• $40B+ IET orders target in "Horizon Two"
• ~$1B incremental proceeds from portfolio divestitures

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How Did the Stock React?

Baker Hughes shares responded positively to the results:

The stock hit a new 52-week high during the trading session following the earnings release.

Analyst sentiment remains bullish — 7 buy ratings with no sells, and a median price target of $55.00 (range: $54-$61).

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Q&A Highlights: What Analysts Asked

Power Systems Strategy (JPMorgan)

Q: Can you elaborate on your strategy for further enhancing Power Systems capabilities?

A (Lorenzo Simonelli): "We believe that we're in a global power demand multiyear growth cycle. In fact, a demand decade... Power demand will double by 2040, driven by data centers, digital infrastructure, artificial intelligence, widespread adoption of EVs... We've identified a market opportunity of $100 billion annually for Power Systems by 2030."

IET Order Outlook (Citigroup)

Q: What are the moving pieces in your $14.5B IET order guide?

A (Lorenzo): "Since 2023, our non-LNG equipment orders have delivered a compounded annual growth rate of over 20% and really represent about 85% of the total IET orders for both 2024 and 2025... We see our $2.5 billion orders from last year as a foundation for further growth."

Margin Resilience (Bank of America)

Q: How are you achieving flat OFSE margins despite headwinds?

A (CFO Amit Moghe): "At the midpoint of our 2026 guidance... our 2026 outlook actually implies only about 50 basis points of margin decline on roughly 10% decline in revenue... We've been able to achieve that through cost actions, quick cash paybacks, and structural changes to how we operate."

NovaLT Capacity (Barclays)

Q: Is NovaLT capacity expanding beyond the announced doubling?

A (CFO): "Including those planned capacity additions, our Nova slots are effectively full through 2028... That incremental capacity will come online in the first half of 2027, and it will support the 2 GW of Nova orders that we booked to backlog during 2025."

Comprehensive Strategic Review (Melius Research)

Q: Can you provide an update on the comprehensive strategic evaluation?

A (Lorenzo Simonelli): "Our comprehensive evaluation is a disciplined, ongoing process, really designed to ensure Baker Hughes continues to create sustainable, long-term value creation for shareholders. The evaluation represents a strategic, operational, and financial assessment through which we are considering a broad range of strategic options... These include the closure and integration of Chart, driving operational performance improvements, optimizing our portfolio, and disciplined capital allocation."

Venezuela Opportunity (TD Cowen)

Q: Can you describe your opportunity in Venezuela?

A (Lorenzo): "Venezuela is not new to us... We've generated in the past, and 2012 as a reference point, $500 million of revenue in Venezuela... We're one of the only American service companies that's maintained ongoing presence in Venezuela... The incremental opportunity of revenue is significant."

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Key Growth Catalysts

1. Data Center & AI Power Demand

Management doubled their data center order target to $3B over 2025-2027, with $1B already secured in 2025. Key projections supporting this thesis:

• Power demand expected to double to ~60,000 TWh by 2040 (4%+ CAGR)
• AI infrastructure spending to approach $1 trillion annually by late 2020s (up from $500B in 2025)
• Data center power demand growing at 12% CAGR through 2040
• 1 GW slot reservation secured in Q4 for NovaLT data center applications, expected to convert to firm order in 2026

2. LNG Infrastructure Buildout

Baker Hughes expects to exceed their 2024-2026 LNG FID target of 100 MTPA (2024-25 FIDs already at 83 MTPA). Long-term demand underpins continued investment:

• LNG demand increased 7% in 2025, expected to grow 75%+ by 2040
• Global natural gas demand expected to grow ~20% by 2040
• Installed LNG base targets: 800 MTPA by 2030, 950 MTPA by 2035

Key Q4 awards: liquefaction technology for NextDecade's Rio Grande LNG Train 5, long-term service agreements for Cheniere Corpus Christi Trains 8-9, and remote monitoring for NextDecade's Trains 1-3.

3. New Energy Momentum

New Energy orders hit a record $2B in 2025 (vs $1.4-1.6B target), with 2026 target of $2.4-2.6B.

• Geothermal emerging as key opportunity — Fervo Cape Station contract for five ORC power plants delivering 300 MW of baseload power, combining subsurface and surface capabilities
• Blue ammonia projects in the U.S.
• CCUS and flex-fuel power solutions
• Cordant digital software achieved double-digit order growth for third consecutive year

4. Chart Industries Synergies

The pending Chart acquisition positions Baker Hughes as a stronger, more industrialized energy solutions company. Management is "increasingly confident in our ability to achieve the $325 million cost synergy target" with commercial synergies providing "incremental value over time."

5. Venezuela Reopening (Optionality)

Management highlighted significant optionality if Venezuela fully reopens. Baker Hughes generated $500M revenue in Venezuela at its 2012 peak and remains "one of the only American service companies that's maintained ongoing presence" with the largest installed base of oilfield power generation and 1,200+ oil production systems.

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Capital Allocation Priorities

Recently Completed Portfolio Transactions (January 2026):

• Precision Sensors & Instrumentation (PSI) — Sale completed, contributed $374M revenue and $48M EBITDA in FY25
• Surface Pressure Control (SPC) — JV formed with Cactus; Baker Hughes retains 35% equity stake; contributed $627M revenue and $137M EBITDA in FY25
• Combined transactions generated ~$1.5B gross cash proceeds

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Key Financial Trends (8-Quarter History)

Revenue & EBITDA Progression

The margin expansion story is clear — from 14.7% in Q1 2024 to a record 18.1% in Q4 2025, with a clear path to 20% by 2028.

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Risks and Concerns

1. OFSE Weakness — The oilfield services segment saw revenue decline 8% YoY, with global upstream spending expected to fall low-single digits in 2026. Management noted that "further reduction in idled OPEC Plus supply, alongside more constructive oil supply and demand balances, is required before a broad inflection in oil field services activity emerges. That inflection is likely a 2027 catalyst for the sector."

2. Integration Execution — The Chart Industries acquisition adds complexity. While management expressed confidence in the $325M synergy target, "with regulatory reviews still underway in certain jurisdictions, we currently expect closing in the second quarter, understanding that the timing may evolve as those processes progress."

3. Tariff Headwinds — Management flagged tariff-related costs as a headwind carrying into 2026, requiring ongoing productivity actions to offset.

4. Oil Price Sensitivity — While IET provides diversification, ~51% of revenue still comes from OFSE, which remains tied to upstream activity levels.

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Management Tone: Confident on "Demand Decade"

CEO Lorenzo Simonelli struck a notably bullish tone on the earnings call, framing the current environment as a "demand decade" for power infrastructure:

"We believe that we're in a global power demand multiyear growth cycle... Power demand will double by 2040. This really is a critical need that then manifests itself for reliable and scalable energy systems."

On the comprehensive strategic review underway, Lorenzo emphasized patience and discipline:

"Our comprehensive evaluation is a disciplined, ongoing process... The evaluation represents a strategic, operational, and financial assessment through which we are considering a broad range of strategic options."

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Bottom Line

Baker Hughes delivered an exceptional Q4 2025, with beats across all key metrics and record margins and free cash flow. The company's transformation toward higher-margin energy infrastructure (LNG, power systems, data centers) is clearly working, as evidenced by IET hitting the 20% margin milestone a full two years ahead of the corporate target.

Management's "demand decade" framing captures their conviction: power demand doubling to 60,000 TWh by 2040, AI infrastructure spending approaching $1 trillion annually by decade-end, and Baker Hughes' NovaLT capacity already sold out through 2028.

The doubling of the data center order target to $3B signals confidence in the AI-driven power demand thesis. With $32.4B in IET RPO providing visibility and a clear path to 20% consolidated margins by 2028, Baker Hughes appears well-positioned for continued earnings growth.

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Data sources: Baker Hughes Q4 2025 Earnings Presentation, S&P Global, Company filings