NOV Inc. Balances Resilience And Headwinds In Q1

NOV Inc. ((NOV)) has held its Q1 earnings call. Read on for the main highlights of the call.

NOV Inc.’s latest earnings call painted a picture of a resilient industrial player navigating heavy macro headwinds while leaning on strong operational execution. Management highlighted record safety, robust bookings and subsea and process systems outperformance, yet acknowledged pressure from Middle East disruptions, tariffs and logistics that weighed on margins and near-term growth.

Consolidated Revenue and EBITDA

NOV reported Q1 2026 consolidated revenue of $2.05 billion, down 2% year over year, with adjusted EBITDA of $177 million, or 9% of sales. Despite geopolitical and supply chain disruptions, management emphasized that the business remains solidly cash generative, supporting ongoing investment and shareholder returns.

Record Safety Performance

The company delivered its lowest ever total recordable incident rate and lost time incident rate, underscoring a strong health, safety and environmental culture. Management framed this as a competitive advantage that supports high-quality execution on complex projects and reinforces customer confidence across its global footprint.

Energy Equipment Segment Growth

Energy Equipment revenue rose 4% year over year to $1.19 billion, with segment EBITDA of $131 million, representing 11% of sales. Capital equipment sales were a standout, accounting for 63% of segment revenue and growing about 16% year over year, reflecting healthy demand in key offshore and production markets.

Strong Orders and Backlog

Bookings in Energy Equipment reached $520 million in Q1, yielding a book-to-bill ratio of 80% and marking the strongest first-quarter intake since 2019. The segment ended the quarter with a sizable $4.23 billion backlog, providing multi-quarter revenue visibility despite near-term shipping and project timing challenges.

Subsea Flexible Pipe Outperformance

NOV’s subsea flexible pipe business posted record quarterly EBITDA for the third consecutive quarter, with book-to-bill above 100%. The unit’s backlog now extends into 2028, signaling durable demand from offshore developments and establishing it as a key growth engine within the portfolio.

Process Systems Momentum

Process Systems revenue jumped more than 50% year over year and delivered record quarterly EBITDA, driven by offshore production projects and strong onshore international gas demand. Management suggested this business is benefiting from broader global energy security trends and growing investment in production infrastructure.

Energy Products & Services Market Share Gains

Within Energy Products & Services, NOV’s ReedHycalog drill bit revenue grew 8% in the U.S., even as U.S. rig count declined 7% since Q1 2025, implying market share gains. Drill pipe bookings also exceeded the three-year quarterly average, pushing backlog to its highest level in two and a half years.

Fiberglass and Drill Pipe Bookings

The fiberglass business achieved record quarterly bookings, with backlog at a ten-quarter high, signaling sustained demand for corrosion-resistant solutions. Strong drill pipe orders further support management’s expectation for healthy backlog conversion in Q2, cushioning revenue against pockets of regional softness.

Capital Allocation and Shareholder Returns

NOV continued to return capital aggressively, repurchasing 3.5 million shares for $67 million and paying $33 million in dividends, including a 20% increase in the quarterly payout. Over the past eight quarters, the company has returned more than $900 million to investors and plans a supplemental dividend in Q2 to fulfill prior commitments.

Cost Reduction and Efficiency Measures

Since 2025, NOV has cut global headcount by 8%, exited more than 40 facilities and opened a global service center in Kochi, India, while increasing IT investments. Management expects these actions to increasingly offset tariffs and inflation starting in 2026, improving structural margins and competitiveness over time.

Targeted Growth Investment

To meet rising offshore demand, NOV approved a $200 million expansion of subsea flexible pipe manufacturing capacity in Brazil, targeting emerging supply constraints. This move aligns capital deployment with one of its highest-returning businesses and positions the company to capture future project awards.

Revenue Decline and Compressed Net Income

Despite the operational bright spots, consolidated revenue dipped 2% year over year and net income fell to $19 million, or $0.05 per diluted share. Management cited margin pressure and one-time items as key drivers, highlighting the gap between adjusted earnings power and reported GAAP profits.

Impact of Middle East Conflict

The conflict in the Middle East weighed heavily on Q1, reducing revenue by an estimated $54 million and EBITDA by about $32 million. The company faced delayed shipments, suspended projects and limited customer access in the region, turning what would have been a stronger quarter into a more muted result.

Supply Chain and Logistics Disruption

Significant supply chain constraints and unpredictable logistics in March forced NOV to slow manufacturing throughput, leading to lower cost absorption and higher unit costs. Freight expenses spiked to as much as three to four times normal levels at points in the quarter, materially increasing operating costs and eroding margins.

Tariffs and Input Cost Pressures

First-quarter margins were also hit by roughly $30 million in incremental tariff costs versus last year, with similar levels expected going forward. Material inflation remains acute, including a roughly 400% increase in tungsten carbide since 2025, pressuring profitability in drill bits and downhole tools.

Energy Products & Services Revenue Decline

Energy Products & Services revenue declined 10% year over year to $897 million, with adjusted EBITDA of $96 million, or 10.7% of sales. Lower volumes, higher tariffs and absorption issues drove more severe decrementals, underscoring the segment’s sensitivity to both activity levels and cost shocks.

Aftermarket Weakness

Aftermarket revenue in Energy Equipment fell about 12% year over year, with drilling equipment aftermarket down by the mid-teens and 12% sequentially. The completion of large 2025 reactivation projects and regional disruptions shifted the mix away from higher-margin aftermarket work, putting additional pressure on segment margins.

Segment-Specific Declines

Drilling capital equipment revenue dropped roughly 10% year over year, while intervention and stimulation capital equipment revenue slid about 20%. Energy Products & Services product sales were down by the mid-teens, reflecting a mix of timing issues, regional slowdowns and delayed deliveries rather than broad-based demand destruction.

One-Time and Non-Cash Charges

Operating profit for the quarter was $47 million and included $37 million in other items, primarily non-cash stock compensation, severance and facility closure costs. These charges weighed on reported results but were tied to the company’s ongoing restructuring and efficiency initiatives.

Uncertain Timing of Demand Recovery

Management stressed that conditions remain extremely fluid, particularly around ceasefire assumptions and shipping lane closures. While many issues are viewed as timing-related, with deliveries delayed rather than canceled, there is uncertainty about when operations will fully normalize and whether some Middle East demand may be permanently lost.

Forward-Looking Guidance and Outlook

NOV’s guidance assumes current Middle East conditions persist into Q2, with Energy Equipment revenue expected to fall 2–4% year over year and Energy Products & Services down 6–8%. For 2026, the company plans capital spending of $340–$370 million and aims to convert 40–50% of EBITDA into free cash flow as tariff headwinds, logistics and backlog conversion progressively improve.

NOV’s earnings call revealed a company balancing strong franchises and cash generation with tough near-term external shocks. Investors heard a cautiously optimistic tone, with management betting on subsea, process systems and a growing backlog to drive an eventual recovery while using cost cuts and disciplined capital allocation to defend earnings along the way.