Schlumberger Limited (SLB) reports Q2 2026 revenue of $9B, up 3% sequentially, but down 6% YoY, impacted by Middle East disruptions. Digital revenue grows 9%.
Schlumberger Limited reported Q2 2026 revenue of $9 billion, a 3% increase sequentially but a decline of 6% year-over-year, missing the $9.2 billion consensus. The revenue growth was largely driven by international activities and a rebound in North America, offsetting a significant downturn in Middle East operations due to ongoing geopolitical issues.
Key Takeaways
- Revenue reached $9 billion, up 3% sequentially but down 6% YoY, with Middle East revenue declining 13% to $1.66 billion due to conflict disruptions.
- Adjusted EBITDA margin improved by 83 basis points sequentially, reaching approximately 24%, despite pressures in the Middle East segment.
- Digital revenue rose 9% sequentially to $697 million, with adjusted EBITDA margins expanding 860 basis points, driven by higher exploration data licenses and sales.
- Production Systems revenue increased 7% sequentially to $3.8 billion, buoyed by stronger subsea activity and sales of production chemicals.
- Data Center Solutions saw a remarkable 80% year-over-year growth, with revenue hitting $800 million, and the division is on track for an exit run rate exceeding $2 billion by 2027.
Revenue Impacted by Middle East Disruptions
Despite a solid sequential revenue growth of 3%, Schlumberger's overall performance was hindered by a significant 13% revenue drop in the Middle East, which brought in $1.66 billion for the quarter. The company attributed the decline to ongoing geopolitical tensions and operational disruptions, although they noted that engagement levels with customers have been increasing recently.
| Metric | Q2 2026 | YoY | QoQ |
|---|---|---|---|
| Revenue | $9B | -6% | +3% |
| Middle East Revenue | $1.66B | - | -13% |
| Adjusted EBITDA Margin | 24% | - | +0.83% |
| Digital Revenue | $697M | +9% | +9% |
| Production Systems Revenue | $3.8B | +7% | +7% |
| Data Center Solutions Revenue | $800M | +80% | +33% |
Growth in Digital and Production Systems
The company reported a strong performance in its Digital and Production Systems divisions. Digital revenue rose to $697 million, with adjusted EBITDA margins reaching approximately 35%. This growth was propelled by increased sales of exploration data licenses, which were particularly strong in Brazil and Indonesia. Production Systems also had a notable quarter, with revenue hitting $3.8 billion, led by a boost in subsea activity and the integration of ChampionX's production chemicals and artificial lift businesses.
“This was a solid quarter for SLB marked by broad-based international growth and a rebound in North America,” said Olivier Lapouche, CEO.
Guidance and Outlook for Q3 and Q4
Looking ahead, Schlumberger provided a cautiously optimistic outlook for Q3, expecting sequential revenue growth of between 3% and 4%. The company anticipates that Middle East activity will gradually recover, although it has prepared for a downside scenario where geopolitical tensions could inhibit progress. For Q4, management estimates that Middle East revenue could reach between $2.1 billion and $2.2 billion, representing a recovery to approximately 95% of last year’s levels.
“The market is beginning to exhibit the characteristics of an upcycle,” Lapouche noted, emphasizing the need for increased upstream investment to replenish inventories and develop domestic resources.
Analyst Q&A Highlights
During the Q&A session, analysts pressed management on the recovery timeline for the Middle East and the durability of the exploration cycle. Management acknowledged that while some countries like the UAE and Qatar are seeing improved engagement, restoring full production levels will take time due to ongoing security challenges in Iraq. They anticipate that higher service intensity and demand for technology innovation will be crucial in facilitating recovery in the region.
Analysts also inquired about the future of the company’s offshore business, with many noting that the final investment decisions (FIDs) for long-cycle projects are expected to increase by about 30% year-over-year in 2026. Management confirmed that they expect double-digit growth in offshore activities as more FIDs are executed and the market strengthens.
Frequently Asked Questions
Did Schlumberger Limited beat earnings estimates in Q2 2026?
No, Schlumberger reported earnings per share of $0.55, which was below the consensus estimate of $0.58, marking a miss of $0.03.
What is Schlumberger's revenue outlook for Q3 2026?
The company expects Q3 revenue growth of 3% to 4%, with potential Middle East revenue ranging between $1.5 billion and $1.66 billion depending on geopolitical developments.
How did the Digital segment perform in Q2 2026?
Digital revenue reached $697 million, representing a 9% sequential increase, and adjusted EBITDA margins improved significantly, driven by higher sales and strong operational performance.
What are the expected margins for the Data Center Solutions segment?
While current margins for the Data Center Solutions segment are lower than the company average, it is expected to generate strong free cash flow and significant top-line growth, targeting an exit run rate exceeding $2 billion by 2027.
In summary, while Schlumberger faced challenges from geopolitical disruptions in the Middle East, it showcased resilience through strong digital growth and production systems performance. The coming quarters will be critical as the company navigates recovery in the region and capitalizes on rising international and offshore demand.
This analysis is based on public earnings call materials and is not investment advice.
