Executive Summary / Key Takeaways

• Strategic Transformation Driving Resilience: SLB is fundamentally reshaping its business beyond traditional oilfield services, emphasizing digital technologies, production optimization, and new energy solutions. This strategic pivot, exemplified by the ChampionX (CHX) acquisition and robust digital growth, is enhancing financial resilience against a volatile upstream market.
• Digital Leadership as a Core Moat: The company's Digital & Integration segment, soon to be a standalone digital division, is a high-growth, high-margin engine, with revenue growing 20% in 2024 and targeted for high-teens growth in 2025. Its advanced platforms like Delfi and Lumi, coupled with AI capabilities, are decoupling digital investment from upstream spending, offering a unique competitive advantage.
• Production & Recovery as a Growth Catalyst: The acquisition of ChampionX significantly bolsters SLB's position in the less cyclical, OPEX-driven production and recovery market. This segment, encompassing artificial lift, production chemicals, and intervention services, is expected to drive future growth and margin accretion, with $400 million in annual pretax synergies targeted within three years.
• Robust Financial Health and Shareholder Returns: Despite a challenging macro environment, SLB generated $4 billion in free cash flow in 2024 and is committed to returning a minimum of $4 billion to shareholders in 2025 through dividends and accelerated share repurchases. This capital discipline and strong cash generation underscore management's confidence in future performance.
• Balanced Outlook Amidst Uncertainty: While global upstream spending is expected to be flat to slightly down in 2025, SLB anticipates sequential revenue growth in the second half of 2025, driven by ChampionX consolidation and digital/product sales, offsetting declines in short-cycle markets. The company's diversified international exposure and focus on long-cycle projects provide a buffer against regional headwinds.

The Evolution of an Energy Titan: From Wellbore to Digital Frontier

Schlumberger Limited, founded in 1926, has long been a foundational pillar of the global energy industry, providing technology and services across the entire oil and gas lifecycle. From its origins as Socie´te´ de Prospection E´lectrique, the company has consistently adapted to market dynamics, evolving from a traditional oilfield services provider into a diversified energy technology leader. This historical journey has shaped its current strategic responses to market volatility, emphasizing technological differentiation, operational efficiency, and portfolio diversification.

The broader energy landscape is currently characterized by a complex interplay of supply-demand imbalances, geopolitical tensions, and an accelerating energy transition. Global upstream investment is expected to be flat to slightly down in 2025 compared to 2024, with regional disparities. The Middle East and Asia are anticipated to show more resilience due to commitments to oil capacity expansion and gas development, while North America and Latin America face greater downside risk from short-cycle spending. This backdrop underscores the critical importance of SLB's strategic shifts and technological prowess.

SLB operates across four primary divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems. These segments collectively offer a comprehensive suite of solutions, from subsurface interpretation and drilling to production optimization and carbon management. The company's strategic focus is on leveraging its global reach, unmatched talent pool, and technological leadership to unlock value for customers and shareholders.

Technological Edge: The Digital and Production Revolution

SLB's core differentiated technology lies in its advanced digital platforms and AI-driven solutions, which are fundamentally transforming upstream operations. The Delfi™ digital platform, a cornerstone of this strategy, has seen remarkable adoption, boasting over 7,800 users by Q2 2025, representing double-digit year-on-year growth. This platform provides customers with cloud computing at scale, enabling new workflows and significantly enhancing efficiency in planning and operations. The tangible benefits include reduced cycle times, improved performance, lower costs, and a smaller carbon footprint.

Further expanding its technological moat, SLB launched the Lumi data and AI platform in Q3 2024. Lumi is designed to accelerate advanced data and generative AI capabilities, allowing customers to connect unstructured data and leverage a toolbox of AI capabilities. This platform offers approximately 150 AI and machine learning capabilities across SLB's products and solutions. The strategic intent behind Lumi is to unlock new insights and create new performance levels by enabling customers to play with their data using SLB's domain-engineered AI. Early feedback indicates strong interest and a high number of pilots, suggesting significant future growth potential.

In the Well Construction segment, SLB is deploying AI-enabled drilling capabilities, such as the Neuro™ autonomous geosteering system. This technology improves operational efficiency and well quality, particularly in complex ultra-deepwater projects like Woodside Energy (WDS)'s Trion development offshore Mexico, where SLB will oversee 18 wells. These advancements provide tangible benefits by automating operations and optimizing performance, directly impacting the cost of ownership and operational workflows for customers.

SLB's commitment to innovation extends to its Production Systems, where it recently launched Electris™, a portfolio of digitally enabled electric well completions technologies. Electris aims to boost production and recovery while reducing the total cost of ownership of an asset. By digitalizing control of the entire productive area of the wellbore, it provides real-time production intelligence, enabling operators to predict, adapt, and act with confidence. This technological integration enhances SLB's competitive positioning by offering superior asset performance and efficiency.

For investors, this technological differentiation translates into a robust competitive moat. SLB's digital and AI capabilities are increasingly decoupling its revenue growth from traditional upstream spending cycles, offering a high-margin, accretive growth pathway. The company's R&D investment, while substantial, is strategically focused on solutions that deliver quantifiable value to customers, leading to stronger market share capture and improved profitability. This focus on innovation positions SLB as a key partner for customers seeking to enhance efficiency and performance in an increasingly complex energy landscape.

Financial Performance and Strategic Initiatives

SLB's financial performance in the first half of 2025 reflects a resilient business model adapting to market shifts. For the second quarter of 2025, total revenue was $8.55 billion, a 1% sequential increase, primarily driven by 2% growth in international markets. This international strength, particularly in the Middle East, Asia, and North Africa, effectively offset a 4% sequential decline in North America, impacted by lower Asset Performance Solutions (APS) revenue and seasonal factors. For the six months ended June 30, 2025, revenue decreased 5% year-on-year to $17.04 billion, largely due to activity reductions in Saudi Arabia, Mexico, and certain offshore markets. Despite this, North America revenue increased 4% year-on-year, primarily due to growth in data center infrastructure solutions.

Profitability metrics underscore SLB's focus on margin expansion. The company-wide adjusted EBITDA margin for Q2 2025 reached 24%, a sequential increase of 21 basis points. Pretax segment operating margins expanded by 20 basis points sequentially to 18.5%. Digital & Integration led the way, with its pretax operating margin expanding 240 basis points sequentially to 32.8% in Q2 2025, driven by digital adoption and efficiency gains. Production Systems also saw its pretax operating margin increase by 28 basis points sequentially to 16.4%, benefiting from a favorable activity mix. For the six months ended June 30, 2025, Production Systems' pretax operating margin expanded 136 basis points year-on-year to 16%, while Digital & Integration's margin increased 272 basis points year-on-year to 32%.

SLB's liquidity and cash flow generation remain robust. Net cash provided by operating activities for the first six months of 2025 was $1.80 billion, up from $1.76 billion in the prior year. Free cash flow for the same period was $725 million, an increase from $554 million. This strong cash generation supports the company's commitment to shareholder returns. In January 2025, SLB increased its quarterly cash dividend by 3.6% to $0.28 per share. Furthermore, the company completed a $2.30 billion accelerated share repurchase (ASR) agreement in April 2025, repurchasing 56.80 million shares at an average price of $40.51. This aggressive buyback program reflects management's belief that the stock is undervalued and aims to offset dilution from the ChampionX acquisition.

Strategic initiatives are reshaping SLB's portfolio. The acquisition of ChampionX Corporation, completed on July 16, 2025, is a pivotal move to strengthen SLB's leadership in the production and recovery market. ChampionX's expertise in production chemicals and artificial lift enhances SLB's offerings in these fast-growing, less cyclical segments. The integration is expected to generate $400 million in annual pretax synergies within three years, with 75% from cost savings (half from supply chain optimization) and 25% from revenue synergies. ChampionX's activities will be consolidated under the Production Systems division, with its digital components moving to the new Digital division, which will be reported separately starting in Q3 2025. This transaction is projected to be accretive to both margins and earnings per share on a full-year basis in 2026.

Complementing this acquisition, SLB divested its interest in the Palliser APS project in Canada by the end of Q2 2025, generating $338 million in net cash proceeds and removing approximately $280 million in discounted asset retirement obligations. This divestiture reduces exposure to commodity price volatility and lowers capital intensity, aligning with SLB's strategy to optimize its portfolio.

Competitive Landscape and Strategic Positioning

SLB operates in a highly competitive global market, primarily contending with major oilfield service providers such as Halliburton (HAL), Baker Hughes (BKR), TechnipFMC (FTI), and Weatherford (WFRD). SLB's competitive positioning is anchored in its superior technological integration, global scale, and diversified portfolio.

Compared to Halliburton, SLB generally offers a more comprehensive suite of digital and reservoir performance solutions, providing greater operational efficiency through its software and consulting services. SLB's emphasis on end-to-end integrated project delivery, particularly in well construction and production systems, often leads to greater efficiency. While Halliburton may exhibit stronger cost leadership in certain drilling services, SLB differentiates itself through a pronounced focus on technological innovation and sustainability, leading in areas like AI-driven analytics and digital twins. Financially, SLB's diversified portfolio tends to yield stronger cash flow generation, whereas Halliburton's focus on high-volume drilling can result in higher margins during cyclical upswings.

Against Baker Hughes, SLB holds an edge in technological capabilities within reservoir performance and digital integration, with its platforms offering notably faster processing and predictive analytics. SLB's strategy of comprehensive, integrated systems provides a unique value proposition in full-field development projects. While Baker Hughes excels in subsea equipment and energy transition partnerships, SLB leads in innovation speed and product performance, such as well construction tools that deliver materially better reliability.

When compared to TechnipFMC, SLB's offerings in production systems and wellhead technologies provide a direct advantage through significantly greater integration capabilities that enhance asset performance. SLB's digital tools for optimization contrast with TechnipFMC's hardware-heavy solutions. SLB leads in operational execution, with technologies delivering materially lower failure rates in subsea production, though TechnipFMC's experience in large-scale engineering projects can offer faster deployment in certain scenarios.

Against Weatherford, SLB's digital and integrated services provide a clear advantage, with platforms offering notably faster innovation cycles and greater efficiency in reservoir management. SLB's end-to-end capabilities contrast with Weatherford's more specialized approach, particularly in artificial lift where Weatherford's offerings might provide lower operating costs. Overall, SLB's broader diversification generally leads to stronger financial health and growth potential.

SLB's competitive advantages, or moats, include its strong brand, proprietary technology, and extensive global network. These translate into enhanced customer loyalty, recurring revenue from long-term contracts, and superior margins. Its proprietary digital platforms offer significantly higher efficiency in data processing, enabling faster innovation cycles and better market share capture. However, SLB faces vulnerabilities from commodity price volatility and customer concentration, which can impact revenue and profitability during downturns. The high capital requirements and regulatory complexities of the oilfield services industry act as significant barriers to entry, further solidifying SLB's established position against new entrants.

Outlook and Risks

SLB's outlook for the second half of 2025 reflects a blend of strategic growth and market realities. The company expects second-half revenue to be between $18.2 billion and $18.8 billion, driven by the consolidation of ChampionX (five months in H2) and steady revenue from legacy SLB businesses, particularly growth in Production Systems and Digital. This growth is anticipated to offset activity declines in the US and certain deployment markets. Revenue is expected to be backloaded in the fourth quarter, benefiting from a full quarter of ChampionX and seasonal year-end digital and product sales.

Second-half adjusted EBITDA margins are projected to be flat compared to Q2 2025, inclusive of ChampionX's contribution and an estimated 20 to 40 basis points impact from tariffs. Management noted that without the tariff impact, adjusted EBITDA margins would have expanded by 20 to 40 basis points. For the full year 2025, capital investments are expected to be approximately $2.4 billion, including ChampionX. Free cash flow is anticipated to be materially higher in the second half of 2025 due to improved earnings, higher customer collections, and lower inventories. SLB remains committed to returning a minimum of $4 billion to shareholders in 2025.

Key risks to this outlook include continued market volatility and geopolitical uncertainties, particularly related to OPEC+ supply releases and lingering tight negotiations, which could pressure commodity prices. The evolving tariff landscape, especially between the US and China, poses a direct cost risk, although SLB is actively pursuing mitigation strategies through supply chain optimization and contractual adjustments. Activity slowdowns in short-cycle markets like US land, Saudi Arabia, and Mexico, along with "white space" in deepwater activity in 2025, could temper growth. However, SLB anticipates deepwater activity to improve in preparation for significant FIDs ramping up in 2026, driven by a cumulative offshore FID exceeding $500 million from 2023-2026.

Conclusion

SLB stands at a pivotal juncture, transforming its core identity to thrive in a dynamic energy landscape. The company's strategic pivot towards digital innovation, production optimization, and new energy solutions is not merely a response to market shifts but a proactive redefinition of its competitive advantage. By leveraging its deep technological expertise, global footprint, and disciplined capital allocation, SLB is building a more resilient and higher-margin business.

The successful integration of ChampionX and the continued expansion of its Digital segment, soon to be a standalone division, are critical drivers for future growth and profitability. These initiatives, coupled with a steadfast commitment to shareholder returns and a proactive approach to cost management, position SLB to deliver consistent financial performance. While external headwinds persist, SLB's diversified portfolio and technological leadership provide a robust foundation, making it a compelling investment for those seeking exposure to the evolving energy sector's long-term opportunities.