Halliburton Earnings Call: Strong 2025, Cautious 2026

Halliburton Company ((HAL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Halliburton Balances Strong 2025 Execution With Cautious 2026 Outlook

Halliburton’s latest earnings call struck a nuanced tone: management highlighted a year of strong execution on margins, cash generation, technology deployment, and capital returns, yet paired that with notably cautious near‑term guidance. International operations and new technology platforms are emerging as the company’s main growth engines, while North America faces a cyclical reset and margins are set to compress in the first half of 2026. Overall, the call conveyed confidence in Halliburton’s longer‑term positioning, but investors must navigate a softer near‑term operating environment.

Robust 2025 Revenue Base and Margin Performance

Halliburton closed 2025 with total revenue of $22.2 billion and an adjusted operating margin of 14% for the year, underscoring disciplined execution despite a mixed market backdrop. Fourth‑quarter revenue came in at $5.7 billion, essentially flat sequentially, but profitability improved, with Q4 adjusted operating margin at 15% and adjusted operating income of $829 million. Management framed these results as evidence that the company can sustain double‑digit margins even as certain regions and segments soften, laying a foundation for future cycles.

Cash Machine With Shareholder Payouts Front and Center

Cash generation was a major bright spot. Halliburton produced $2.9 billion of cash flow from operations and $1.9 billion of free cash flow in 2025, enabling aggressive capital returns. The company repurchased $1.0 billion of common stock across the year, including $250 million in Q4 alone, and returned roughly 85% of free cash flow to shareholders. In total, Halliburton bought back about 42 million shares at an average price of $23.80, signaling management’s conviction in the stock’s value and its commitment to a shareholder‑friendly framework.

International Resilience Outpaces a Weak Rig Backdrop

International operations remain the key stabilizer in Halliburton’s portfolio. International revenue of $13.1 billion declined just 2% year over year, far better than the 7% drop in international rig count. Excluding notable headwinds in Saudi Arabia and Mexico, the rest of the international business grew approximately 7%. Fourth‑quarter international revenue rose 7% sequentially, illustrating how Halliburton is gaining share and deepening its presence in key markets even as global activity moderates.

Record Momentum in International Product Lines

The company’s product lines are scaling internationally at a record pace. Artificial lift delivered record quarterly international revenue and is now active in 15 countries, highlighting growing demand for production optimization technologies. Halliburton’s unconventionals toolkit—spanning simulfrac, continuous pumping, auto frac, and sensory systems—is now deployed in seven countries. This broadening footprint supports management’s view that international technology adoption will be a long‑term growth driver, helping offset regional softness elsewhere.

Technology, Automation, and Operational Breakthroughs

Halliburton emphasized a series of technology and automation achievements that it believes will underpin future margin expansion. The company completed its first fully autonomous geosteering run in the Caribbean, demonstrating its capabilities in digital drilling automation. Customer adoption of ZEUS IQ, sensory systems, and auto frac increased 8% during the quarter, indicating growing traction for its advanced completions suite. Notably, drilling services revenue grew meaningfully despite a 6% decline in North American rig count, supported by adoption of iCruise and Logix automation platforms, which enhance efficiency and well performance.

Scaling the Power Opportunity Through VoltaGrid

Halliburton also spotlighted growing momentum in its power solutions collaboration with VoltaGrid. The partnership has secured manufacturing capacity for 400 megawatts of modular power systems, giving Halliburton a platform to serve customers seeking lower‑emissions, more efficient power solutions at the wellsite and beyond. Management highlighted an expanding international pipeline for this offering, positioning VoltaGrid as a potentially sizable long‑term business line that could diversify revenue and support energy transition themes.

Segment Profitability Trends Remain Favorable

Both major business segments delivered improved profitability in Q4. Completion & Production reported operating income of $570 million, up 11% sequentially, with margins reaching 17%. Drilling & Evaluation generated operating income of $367 million, up 5% sequentially, at a 15% margin. These gains were driven by a favorable activity mix and strong year‑end software and completion tool sales. Management underscored that these segment results demonstrate the earnings power of the portfolio when supported by higher‑value technology and software contributions.

Free Cash Flow Strength Continues in Q4

Fourth‑quarter cash metrics reinforced the company’s free‑cash‑flow narrative. Cash flow from operations in Q4 was $1.2 billion, and free cash flow reached $875 million. This robust cash generation underpins Halliburton’s continued share buybacks and supports ongoing efforts to delever the balance sheet. The company’s ability to fund both investment and capital returns from internal cash remains a key part of its investment case.

North America Revenue Under Pressure and a Softer 2026

The main drag in the story is North America. Full‑year North America revenue fell 6% year over year to $9.1 billion, and management expects another high‑single‑digit revenue decline in 2026. Drivers include reduced land activity, stacked frac fleets, and the timing of Gulf of Mexico programs. Halliburton clearly framed 2026 as a down year for the region, reflecting both customer budget discipline and a competitive environment that is pressuring pricing and utilization.

Q1 2026: Clear Warning on Revenue and Margin Compression

Near‑term guidance calls for a noticeable step down in Q1. Completion & Production revenue is expected to decline 7%–9% sequentially, with margins compressing by about 300 basis points. Drilling & Evaluation revenue is forecast to fall 2%–4%, with margins down by 25–75 basis points. Management tied this to seasonal and cyclical factors, including lower activity and normalization following a particularly strong Q4, and signaled that the first half of 2026 will be weaker than the second half.

International Weak Spots: Saudi Arabia and Mexico

Despite overall resilience, Halliburton flagged pockets of weakness in key international markets. Declines in Saudi Arabia and Mexico were a significant contributor to the modest international revenue contraction in 2025. While management remains constructive on the long‑term potential in these regions, they were cautious on the timing and pace of a Saudi recovery, underscoring the risk that international growth may be uneven across markets in the near term.

Navigating a Challenging Commodity Environment

Management framed 2026 as a “rebalancing” year for the oil and gas market. With OPEC spare capacity still available and non‑OPEC production rising, the company does not expect a sharp upward move in commodity prices absent major geopolitical disruptions. This implies a softer demand backdrop, particularly in North America, as customers remain disciplined on spending. Halliburton’s strategy is to ride out this period by leaning on international growth, technology differentiation, and cost discipline until the cycle turns more supportive.

SAP Migration: Costly Now, Savings Later

One of the more significant near‑term headwinds is Halliburton’s SAP migration project. The company spent $42 million on SAP in Q4 and expects to spend $40–45 million per quarter through completion in Q4 2026, later than previously guided. These expenses will weigh on reported earnings and margins over the next several quarters. However, management expects about $100 million in annual run‑rate savings once the implementation is complete, suggesting a meaningful long‑term efficiency gain even as investors absorb the interim cost drag.

Q4 Tailwinds Turn Into Q1 Headwinds

Halliburton called out an unusually large year‑end boost from completion tool sales in Q4 as a key factor behind the guided margin drop into Q1. These sales were roughly three times higher than in prior years, creating a tough comparison and accounting for more than half of the expected margin decline. As these high‑margin sales roll off, Q1 profitability will look weaker even if underlying activity trends are not deteriorating at the same pace, a nuance investors will need to consider when assessing early‑2026 results.

Venezuela: Optional Upside With Unclear Timing

Management also addressed the potential opportunity in Venezuela, describing it as a meaningful but uncertain upside. The company’s reentry hinges on resolving commercial and legal terms, including securing reliable payment mechanisms. While Halliburton could mobilize quickly once these issues are settled, the timing remains entirely dependent on external negotiations and conditions. Importantly, any capital related to Venezuela is not included in the company’s current capex guidance, leaving it as a potential incremental growth lever rather than a baseline assumption.

Forward Guidance: A Rebalancing Year With Stronger Second Half

Looking ahead, Halliburton’s guidance frames 2026 as a transitional year marked by near‑term pressure but ultimately improving conditions. North America revenue is expected to decline by high single digits, while international revenue is projected to be flat to modestly up, implying that global operations will carry more of the growth burden. For Q1, the company is guiding to the previously outlined revenue and margin declines in both segments and expects the second half of the year to be stronger than the first. Capital expenditures are pegged at about $1.1 billion for 2026, with Q4 capex at $337 million serving as a reference point. The effective tax rate is expected to be around 21% for both Q1 and the full year, with modest increases in corporate expense and net interest expense in Q1 and other net expense of about $35 million. SAP spending is set at $40–45 million per quarter through the project’s completion in Q4, after which Halliburton anticipates roughly $100 million in annual savings. Management highlighted the company’s 2025 baseline—$22.2 billion in revenue, $2.9 billion in cash from operations, $1.9 billion in free cash flow, and $1.0 billion in share repurchases—as evidence that it can continue to fund both investment and shareholder returns through this rebalancing period.

In summary, Halliburton’s earnings call showcased a company executing well operationally, generating strong cash, and investing in technology and international growth while candidly acknowledging a tougher near‑term setup. North America softness, Q1 margin compression, and SAP‑related costs will weigh on results in the first half of 2026, but resilient international performance and structurally higher technology content provide a supportive long‑term narrative. For investors, the message is clear: the next few quarters may be choppy, yet Halliburton is positioning itself to emerge from this rebalancing phase with a stronger, more efficient, and more globally diversified business model.