Baker Hughes Signals Softer 2026 Oil & Gas Spending Despite Strong Quarter

Baker Hughes on Monday forecast a modest decline in annual global spending by oil and gas producers for the current year, attributing the slowdown to geopolitical tensions and a cautious approach from customers. Despite the tempered outlook, the company's shares rose after it reported quarterly profits that surpassed analyst estimates.

A Divergent Global Outlook

According to the company, the overall decline in capital expenditure will be driven by lower spending in Europe and the Middle East, where ongoing conflict has prompted producers to adopt a more cautious stance. Baker Hughes noted that this weakness is expected to be partially offset by growth in other key markets.

Key areas of expected growth include:

• Latin America, particularly Brazil and Mexico
• Offshore Africa
• North America land operations

CEO Lorenzo Simonelli said in a conference call that “customers remain focused on maximizing production from existing assets while preserving flexibility to respond to evolving market conditions.”

Record Orders Tempered by Guidance

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Baker Hughes's cautious forecast came as it reported strong quarterly performance, which sent its shares up by more than 6%. The company's Industrial and Energy Technology (IET) segment saw orders double year-over-year to a record $7.1 billion.

However, the company warned that ongoing disruptions from the Middle East conflict are expected to reduce the IET segment's revenue by 1%-2%. Baker Hughes forecast third-quarter revenue for the division between $3.17 billion and $3.47 billion, falling short of the $3.79 billion consensus estimate from analysts compiled by LSEG.

Navigating Market Volatility

CFO Ahmed Moghal stated that while the company anticipates “some increase in logistics and inflationary pressures” in the third quarter, the impact should be offset by strength in regions outside the Middle East. The company sees a continued seasonal recovery in North America as a contributing factor.

To cushion against volatility in oil markets, Baker Hughes is also focusing on resilient growth areas such as LNG infrastructure and power grid upgrades. The company plans to expand its gas turbine and generator capacity, which it projects could support nearly $5 billion in annual power systems revenue by 2029.