Q1 Results, NVDA AI Partnership, Buybacks, and Outlook for 2026

On April 25, SLB NYSE: SLB it reported one of its toughest spots in years. Yet that may be the most important thing about the oil services leader, formerly known as Schlumberger.

While organic revenue was down, margins were squeezed, and earnings were down, the company’s digital business was growing, NVIDIA NASDAQ: NVDA expands its partnership, and management buys stock again. The company’s shares are up nearly 40 percent this year.

Short-term and long-term issues may point in opposite directions, but that tension is where the opportunity lies for investors.

SLB’s Core Business Under Pressure

The oilfield services industry tends to be tough. And these days, it’s tougher than usual. Even as oil rose from under $70 a barrel to over $100 in just one month, global tensions were front and center in SLB’s first quarter results.

SLB started the year with Q1 revenue of $8.7 billion, up nearly 3% from last year. But that number can be misleading. ChampionX, a chemical company producing SLB that was acquired in 2025, contributed $838 million in revenue for the quarter and $199 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

Besides, the environmental picture was not good. Even with ChampionX included, the company’s adjusted EBITDA fell 12% year-on-year (YOY), while margin squeezed 346 basis points. That means the company needs to work harder to turn revenue into profit. Without ChampionX, underlying revenue would have declined by 7% YOY.

Income follows a similar pattern. Net income came in at $752 million, with diluted earnings per share of 50 cents, down from 58 cents a year earlier. Even adjusted, earnings per share (EPS) were 52 cents, still about 20 cents below last year’s figure.

More significantly, free cash flow for the quarter also turned negative, though the rare blip was attributed to seasonal patterns and the integration of ChampionX. For the full year 2025, SLB generated approximately $4.1 billion in free cash flow.

Middle East Conflicts Measured by Outcomes

The reason for the big decline, in particular, is the news on the front page. The war in the Middle East led SLB to issue a rare mid-quarter warning in March, indicating that earnings could take a 6-9 per share hit due to disruptions and additional costs.

The company also said first-quarter revenue would come in below expectations as it cut back on work, halted operations, and canceled some projects in the region. Shares reacted quickly, including a 13% daily slide below $45. Results in late April reflected these warnings, and the stock held its base.

SLB Bets Big on Digital Growth

But while the pressures are on the top line numbers, the bottom line is changing dramatically.

SLB’s digital business grew nearly 9% YOY, reaching $640 million in revenue for the quarter. The company also announced in late March that it has expanded its work with NVIDIA to industrialize AI in the energy sector.

With annual recurring revenue from digital crossing $1 billion, this is a major pivot. It has the potential to take SLB beyond its long history of drilling services into high-margin technology as it moves into software, data analytics, and AI-driven water modeling tools that it sells to energy companies.

Instead of a company dependent on volatile well and oil field construction cycles, SLB has the ability to look at the kind of predictable subscription cash flow that can help solve these disruptions.

Company Continues to Reward Shareholders

That would be good news for shareholders. As early as April, the company advised that direct guidance for the current quarter was “challenging” given tensions in the Middle East.

Despite the pressure, SLB continued to return money to shareholders in the first three months of this year.

The company repurchased $451 million in shares during the quarter and increased its dividend to $1.18 for the year, giving it a yield of 2.21%.

In total, SLB is committed to returning more than $4 billion to shareholders by 2026 through stock dividends and buybacks.

Management’s full-year guidance calls for revenue in the range of $36.9 billion to $37.7 billion, with EBITDA margins broadly in line with 2025 levels.

That suggests modest but real growth from a challenging start.

It also reflects expectations that this year’s early softening may be offset by a strong second half, assuming Middle East operations normalize and ChampionX synergies are built.

Wall Street Still Expects More Gains

Analysts broadly agree.

SLB stock currently has a consensus rating of Neutral Buy, with 12-month price targets implying little upside from recent levels. Of the 23 analysts covering the stock, 19 rate it a Buy, three rate it a Hold, and one suggests a Sell.

Overall, the consensus price target is around $60, slightly above the current price. UBS has given SLB stock a $69 price objective.

Investors Pay for Long-Term Quality

Clearly, SLB is not a basement stock. With shares trading at trailing earnings in the mid-20s, investors are paying a premium for a franchise that has historically underperformed for a while.

But the company remains the world’s top oilfield services provider. It has capabilities in deep water drilling, well construction, reservoir operations, and now digital services. Its competitors in the energy sector, including Halliburton NYSE: HAL and Baker Hughes NASDAQ: BKRthey haven’t arrived yet.

Playing the energy sector is always a short-term risk. Investors looking for near-term earnings or deeply discounted prices will likely look elsewhere. But for patient investors willing to weather unexpected events and difficult transitions, SLB is a compelling combination of quality, income, and long-term strategic positioning.

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