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NOV Inc. (NOV)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue modest beat but EPS essentially in-line: Q2 revenue was $2.19B (+4% q/q, -1% y/y) vs S&P consensus $2.15B*, while diluted EPS was $0.29 vs $0.295*; Adjusted EBITDA was $252M (11.5% margin) with mix pressure from lower aftermarket and consumables .
  • Segment divergence: Energy Equipment delivered 5% q/q revenue growth and 12th straight y/y margin expansion, offset by a sharp decline in aftermarket demand; Energy Products & Services (EPS segment) grew 3% q/q but faced tariffs, inflation, and Latin America charges .
  • Orders/book-to-bill slowed: Energy Equipment orders were $420M (vs $977M y/y); book-to-bill 66%; backlog stood at $4.30B (slightly down y/y), reflecting slower FIDs and deferred decisions, not cancellations .
  • Q3 guidance implies softer earnings near term: management guides Q3 revenue down 1–3% y/y and Adjusted EBITDA of $230–$250M; segment guides: EPS $130–$150M, EE $145–$160M; tariff headwinds expected to rise to $20–$25M in Q3 and $25–$30M in Q4 .
  • Capital returns and balance sheet remain supportive: $176M returned in Q2 (buybacks + regular and supplemental dividends); cash $1.08B, total debt $1.73B; free cash flow $108M in Q2 .

Values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Energy Equipment execution: 5% sequential revenue growth; 12th straight quarter of y/y margin expansion on higher‑margin backlog, despite an unfavorable mix from weaker aftermarket .
  • Strong production-oriented businesses: Subsea flexible pipe and process systems hit record or near‑record revenues with robust margin flow‑through; tight capacity and solid tendering backdrop support outlook .
  • Digital and automation traction: Multi‑year instrumentation/digital services award in U.S. land; 4 offshore automation packages commissioned including robotic systems; growing uptake of NOVOS/MMC and Kaizen; digital revenue +25% y/y .

What Went Wrong

  • Aftermarket slowdown and consumables: Sharp drop in aftermarket parts (especially drilling) and lower consumable demand in North America, Saudi Arabia, and Latin America compressed margins; segment mix shifted away from higher‑margin aftermarket .
  • Orders decelerated: Energy Equipment orders fell to $420M vs $977M y/y; book‑to‑bill of 66% as customers delayed decisions amid macro/geopolitical uncertainty and tariff issues; backlog edged down to $4.30B .
  • Tariff and inflation headwinds: ~$11M tariff expense in Q2; expected step-up to $20–$25M in Q3 and $25–$30M in Q4; mix pressure and certain Latin America charges weighed on EPS segment profitability .

Financial Results

Consolidated results vs prior periods and vs estimates

MetricQ2 2024Q1 2025Q2 2025 (Actual)S&P Cons. (Q2 2025)
Revenue ($B)$2.216 $2.103 $2.188 $2.146*
Diluted EPS ($)$0.57 $0.19 $0.29 $0.295*
Operating Profit ($M)$152 $295 (six months) $143 —
Operating Margin (%)7.2% 6.9% (six months) 6.5% —
Adjusted EBITDA ($M)$252 $281 $252 $262.6*
Adjusted EBITDA Margin (%)12.0% 12.7% 11.5% —

Values marked with * are retrieved from S&P Global.

Notes:

  • Company cited +4% q/q and -1% y/y revenue change; $252M Adjusted EBITDA, 11.5% margin .
  • EPS decline y/y largely due to a ~$130M pre-tax gain on a 2024 divestiture that benefited the prior-year quarter .

Segment breakdown (Q2 2025)

SegmentRevenue ($M)y/y %q/q %Operating Profit ($M)Op MarginAdj. EBITDA ($M)Adj. EBITDA Margin
Energy Products & Services1,025 -2% +3% 83 8.1% 146 14.2%
Energy Equipment1,207 0% +5% 122 10.1% 158 13.1%

Additional segment order/backlog metrics:

  • Energy Equipment new orders: $420M; book‑to‑bill 66%; backlog: $4.30B (down ~$31M y/y) .

KPIs and cash/returns

KPIQ2 2025
Cash from Operations ($M)191
Free Cash Flow ($M)108
Capital Expenditures ($M)83
Share Repurchases~5.5M shares; $69M
Dividends$0.21 supplemental + $0.075 regular per share in Q2
Tariff Expense~$11M in Q2; expected $20–$25M in Q3, $25–$30M in Q4
Total Debt ($B)$1.73
Cash & Equivalents ($B)$1.08

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated RevenueQ3 2025Not previously provided (Q2 call)Down 1%–3% y/y New
Adjusted EBITDAQ3 2025Not previously provided (Q2 call)$230M–$250M New
Energy Products & Services Adj. EBITDAQ3 2025Not previously provided (Q2 call)$130M–$150M New
Energy Equipment Adj. EBITDAQ3 2025Not previously provided (Q2 call)$145M–$160M New
Tax RateFY 202526%–28% (reiterated) 26%–28% Maintained
Eliminations & Corporate CostsQ3 2025—“In line with Q2 2025” Qualitative
Regular DividendNext Payment—$0.075/share declared Aug 14, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24)Previous Mentions (Q1’25)Current Period (Q2’25)Trend
Tariffs/TradePreparing for tariff risks; supply chain optionality Mitigation plan; ~$8–$10M Q2 impact expected; rising thereafter $11M Q2; rising to $20–$25M in Q3 and $25–$30M in Q4; $100M+ cost-out by 2026 underway Headwind intensifying
Offshore cycle/FIDsWhite space in 2025; stronger 2026; strong deepwater economics Strong FPSO pipeline; 12 potential FPSO-related awards; flexibles/process systems strength Orders lumpy; flexibles/process systems at record revenues; 2026 acceleration expected; no cancellations seen Near-term delays, longer-term constructive
North America activitySubdued, likely flat at best in 2025 Rig count declines; consumables soft; gas-directed drilling offsetting oil Oil-directed declines; aftermarket cannibalization; potential replacement cycle ahead Soft near-term
International unconventionalsMiddle East/LatAm opportunities Growth in ME/Argentina; BHA/drilling tech adoption Surface automation awards; dual Agitator deployments in Vaca Muerta Positive adoption
Digital/Automation/AIBuilding MAX platform; automation upgrades Ongoing digital solutions investment 220 NOVOS sold; 134 installed; 4 robotic systems active; digital rev +25% y/y Expanding
Aftermarket (Drilling)Down mid‑ to upper‑single digits in 2025 expected Spare parts bookings volatile Sharply lower spare parts bookings; partial rebound expected H2’25 Weak near-term

Management Commentary

  • “Sales improved four percent sequentially, with an increase in capital equipment revenues more than offsetting a decline in spare part and product sales… market headwinds and a shift in sales mix pressured margins during the quarter.” – Clay Williams, CEO .
  • “For the third quarter, we forecast year-over-year consolidated revenue to decline between 1% and 3%, with adjusted EBITDA to land in the range of $230 million to $250 million.” – Clay Williams .
  • “Our tariff expense for the second quarter was approximately $11 million… we expect the impact of tariffs in the third quarter will rise to between $20 million and $25 million and then to between $25 million and $30 million in the fourth quarter.” – Rodney Reed, CFO .
  • “We’ve identified over $100 million of savings that we expect to capture by the end of 2026… simplifying, standardizing, and centralizing business processes… strategic sourcing… business and facility consolidations… exiting product lines in certain markets.” – Management .

Q&A Highlights

  • Margin trajectory and bottoming: Management acknowledged margin progress was pressured in 1H’25 (tariffs/mix), but expects actions to forestall further declines in 2H’25 and set up recovery in 2026 as offshore activity improves .
  • Orders and flexible pipe timing: Orders are lumpy; flexibles had low Q2 orders but strong pipeline, with >$100M order early in Q3; other production businesses (e.g., APL turrets) saw strong book‑to‑bill .
  • Automation adoption: ~220 NOVOS systems sold (134 installed/commissioned); 4 robotic systems active with 11 in pipeline; digital revenue up 25% y/y, signaling rising efficiency-driven demand .
  • Tariff cadence and cost actions: ~$11M Q2 tariff expense stepping to $20–$25M (Q3) and $25–$30M (Q4); $100M+ annualized cost savings targeted by 2026 with ratable implementation across quarters .
  • Cash conversion/Capex: Working capital improvements drove strong FCF; full-year tax rate 26%–28%; expect >50% EBITDA to FCF conversion dependent on working capital outcomes; Capex broadly consistent with 2024 .

Estimates Context

  • Q2 2025 vs S&P Global consensus: Revenue $2.188B vs $2.146B*; Diluted EPS $0.29 vs $0.295*; Adjusted EBITDA $252M vs EBITDA consensus $262.6M* (note: definitions may differ; company reports Adjusted EBITDA) .
  • Q3 2025 setup: Company guides Adjusted EBITDA $230–$250M vs S&P EBITDA consensus $236.2M* and revenue decline of 1%–3% y/y, implying potential fine‑tuning of EPS/EBITDA estimates near term amid tariff step‑ups and aftermarket softness .
  • FY outlook: S&P EPS consensus FY25 $0.978* and FY26 $1.166*, with revenue ~$8.62B* for both FY25/26; management focuses on 2026 offshore upturn and structural cost reductions .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Mixed quarter: modest revenue beat but near in‑line EPS as mix shifted away from higher‑margin aftermarket and consumables; non‑GAAP Adjusted EBITDA held flat y/y at $252M despite headwinds .
  • Near-term headwinds building: tariffs step up materially through Q4; aftermarket and quick‑turn products remain soft; orders slowed as customers defer decisions—book‑to‑bill of 66% .
  • Structural response underway: $100M+ annualized cost-out targeted by 2026 (process, sourcing, consolidations, exits) to protect margins and position for the next upcycle .
  • 2026 leverage to offshore and gas: record revenues in flexibles/process systems and tight capacity point to strong multi‑year cycle once FIDs move forward; management sees acceleration in 2026 .
  • Capital returns intact: $176M returned in Q2, ongoing buybacks, and regular dividend maintained; balance sheet remains strong with $1.08B cash and $1.73B debt .
  • Watchlist for 2H’25: trajectory of aftermarket orders, tariff pass‑through/mitigation, progress on $100M cost saves, and Q3 delivery vs $230–$250M Adjusted EBITDA guide .

Supporting Details

Additional Notable Items from Press Release

  • Energy Equipment: Orders shipped from backlog $632M; orders booked $420M; backlog $4.30B; profitability supported by higher‑margin backlog execution .
  • Significant achievements: multi‑year U.S. land digital services award; MEG recovery system (Eastern Mediterranean); FLNG SSY system in Argentina; Middle East surface automation packages (NOVOS + Kaizen); offshore wind vessel/jacking system wins .
  • Product/technology highlights: MAX platform rollouts; AgitatorX2 deployment in Vaca Muerta; TK‑Drakon thermal insulating drill pipe coating adoption; record drilling/ROP achievements .

All figures and statements are sourced from NOV’s Q2 2025 Form 8‑K/press release and earnings call transcript unless otherwise marked as S&P Global consensus.