SLB Earnings: Benefits From Strong International and Offshore Activity Will Persist Through Year-End

SLB posted strong second-quarter results, setting the stage for similar performance in the second half of the year. Total revenue jumped 5% quarter over quarter, while the firmwide adjusted EBITDA margin expanded 114 basis points to 24%. Accelerated onshore and offshore activity in international markets—composing about 80% of SLB’s overall business—drove quarterly gains. About half of SLB’s international markets posted year-over-year growth exceeding 30%, led by the Middle East and Asia. We expect SLB will continue to benefit from elevated demand and favorable operating dynamics through at least year-end. We’ll incorporate the firm’s full financial results shortly, but after this first look, we maintain our $56 fair value estimate and narrow moat rating.

The firm remains on track to significantly expand profitability this year: management reiterated guidance for adjusted EBITDA growth of mid-20% year over year. Favorable pricing dynamics owing to high capacity utilization are one key contributor. The pool of projects approaching final investment decision remains robust through at least 2025, likely maintaining market tightness over the near to medium term. SLB’s margin expansions also reflect a less cost-intensive revenue mix as adoption of its technological solutions progresses at a rapid clip. The total number of users on SLB’s DELFI platform expanded over 60% year over year, while connected assets doubled. This reflects an industrywide trend in leveraging data analytics and artificial intelligence to optimize performance of existing projects as well as new developments. SLB continues to prioritize technological innovations and aims to double the size of its digital and integration segment by 2025 (compared with 2021). We are thus optimistic SLB will continue to improve profitability as strong customer adoption facilitates a transition to a more asset-light product portfolio over the next five years.