Executive Summary / Key Takeaways

• SLB is strategically transforming its business, leveraging digital innovation and an expanded focus on production recovery to build resilience against market volatility and capitalize on new growth vectors.
• The newly established Digital division, with its advanced platforms and AI solutions, is a high-growth, high-margin segment, increasingly decoupling its investment trajectory from traditional upstream spending.
• The recent acquisition of ChampionX significantly bolsters SLB's Production Systems, creating a less cyclical, OPEX-driven growth engine with substantial synergy potential and a broader portfolio for maximizing asset potential.
• Despite a challenging and uncertain market environment, SLB maintains strong financial discipline, demonstrating robust cash flow generation and committing to significant shareholder returns.
• SLB's diversified portfolio, technological leadership, and strategic positioning in international and deepwater markets provide a distinct competitive advantage against its peers.

Setting the Scene: A Century of Energy Innovation

SLB N.V., formerly known Schlumberger Limited, stands as a global energy technology powerhouse with a rich history spanning nearly a century. Founded in 1926, the company has consistently evolved its offerings, providing critical technology across field development, hydrocarbon production, carbon management, and the integration of adjacent energy systems worldwide. SLB's overarching strategy is to harness its extensive global operating footprint, pioneering technology leadership, and deep integration capabilities to deliver differentiated performance for its diverse customer base and generate value for shareholders.

The broader energy industry currently operates within a complex and dynamic landscape. Global upstream investment is projected to remain steady in 2025 compared to 2024, with growth in certain resilient regions and customer segments offsetting decelerations elsewhere. This outlook is underpinned by persistent global economic growth, a heightened focus on energy security, and the burgeoning energy demand stemming from advancements in AI and data centers. In this environment, SLB's diversified portfolio and strategic agility are crucial differentiators against its primary competitors, including Halliburton , Baker Hughes , and Weatherford International , as well as emerging indirect competitors in renewable energy and advanced technology.

Technological Edge: Fueling the Future

SLB's core competitive advantage is deeply rooted in its comprehensive digital platforms and applications, a capability cultivated over four decades of software expertise. These proprietary technologies form the bedrock of its strategic differentiation.

At the forefront are SLB's Platforms and Applications, including cloud technologies such as the Delphi and Lumi platforms, alongside specialized domain-focused applications like Petrel and Techlog. These are delivered through SaaS subscriptions or perpetual licenses, automating complex models, unlocking critical data, and leveraging artificial intelligence (AI) and machine learning to significantly reduce cycle times and enhance workflow efficiency. This directly translates into better and faster decision-making for customers, improving project economics and reservoir performance. The tangible benefits are evident: in the first quarter of 2025, cloud adoption on SLB's platforms consumed 40 million CPU hours, representing a 50% increase year-on-year. Furthermore, nearly 1,000 wells were drilled using the DrillPlan planning applications, showcasing the operational impact of these tools. The Lumi data and AI platform, launched less than a year ago, has already seen adoption by over 50 customers, demonstrating rapid market acceptance.

Beyond software, SLB is actively developing and deploying new hardware-enabled technologies. The company introduced Electris™, a portfolio of digitally enabled electric well completions technologies designed to boost production and recovery while simultaneously reducing the total cost of ownership for assets. Electris completions digitalize control of the entire productive area of the wellbore, providing real-time production intelligence across the reservoir. This innovation allows operators to predict, adapt, and act with confidence in response to dynamic reservoir conditions. The company's commitment to R&D also extends to AI, cloud computing, and digital operations, with automated drilling footage increasing by more than 50% year-on-year in the third quarter of 2025.

For investors, this technological leadership is a critical competitive moat. It drives recurring revenue streams, as evidenced by a 103% net revenue retention rate for Platforms and Applications in Q3 2025. It also expands market opportunities into adjacent sectors like data centers and enables highly accretive margins. This strategic focus positions SLB as an indispensable partner for customers aiming to enhance efficiency and performance across the upstream lifecycle, effectively decoupling digital investment from traditional upstream spending.

Strategic Pillars of Growth: Digital and Production Recovery

SLB's strategic evolution is clearly defined by its dual focus on expanding its Digital capabilities and strengthening its position in the production recovery market. These two pillars are designed to drive resilient growth and enhance shareholder value.

Effective the third quarter of 2025, SLB restructured its reporting segments, establishing Digital as a standalone division. This move aims to increase transparency and underscore the strategic importance of this high-growth area. The Digital division encompasses Platforms and Applications, Digital Operations, Digital Exploration, and Professional Services. In the third quarter of 2025, Digital revenue increased 11% sequentially to $658 million, achieving an adjusted EBITDA margin of 32.7%. The Annual Recurring Revenue (ARR) for Digital stood at $926 million at the end of Q3 2025, reflecting a 7% year-on-year growth. Management anticipates the full-year 2025 Digital EBITDA margin to reach 35%, driven by seasonally higher sales in the fourth quarter. The company projects Digital revenue to grow at a rate that "visibly outperforms global upstream spending" and "exceeds the growth rate of our core business by double digits," while consistently delivering "highly accretive margins."

A pivotal strategic move to bolster SLB's production recovery market leadership was the acquisition of ChampionX Corporation, which was completed on July 16, 2025. This all-stock transaction integrated ChampionX's strengths in production chemicals and artificial lift into SLB's existing portfolio, creating a more resilient, OPEX-driven business less susceptible to short-term commodity price fluctuations. The integration is progressing well, with positive customer feedback and examples of combined technologies, such as an ESP string using a ChampionX pump with an SLB induction motor, improving performance for unconventional wells. In the third quarter of 2025, ChampionX contributed $575 million in revenue (representing two months of activity) to the Production Systems division, which saw an 18% sequential revenue increase. SLB expects to generate $400 million in annual pretax synergies from the ChampionX acquisition within three years, with 70-80% of these synergies realized within the first 24 months. These synergies are primarily derived from supply chain and operational cost savings. The transaction is projected to be accretive to both margins and earnings per share on a full-year basis in 2026. This expanded offering, complemented by recent strategic investments in Resman Energy Technology and Stimline Digital, provides the industry's broadest portfolio of lift, intervention, and chemical technologies, integrated with digital capabilities to optimize production and maximize recovery from maturing assets.

Financial Performance and Robust Capital Allocation

SLB's financial performance in 2025 reflects a mixed but resilient picture amidst evolving market dynamics. For the third quarter of 2025, total revenue reached $8.93 billion, marking a 4% sequential increase. This growth was partly attributed to the two-month contribution from ChampionX. However, net income attributable to SLB for the quarter was $739 million, a 27% sequential decrease, with income before taxes declining 22% sequentially to $1 billion. The adjusted EBITDA margin for Q3 2025 stood at 23.1%, a sequential decrease of 92 basis points. This decline was negatively impacted by a pipeline disruption in Ecuador, which affected APS revenue by approximately $100 million and reduced EBITDA margin by roughly 60 basis points, and the absence of revenue from the Palliser APS project divestiture, which accounted for another 30 basis points reduction.

Looking at the first six months of 2025, total revenue was $17.04 billion, a 5% year-on-year decrease, while net income attributable to SLB was $1.81 billion, down from $2.18 billion in the comparable prior year period. Despite these headwinds, SLB's liquidity position remains strong. As of June 30, 2025, the company held $3.24 billion in cash and $511 million in short-term investments. Cash flow from operations for the first six months of 2025 was $1.80 billion, generating $725 million in free cash flow. Management anticipates a significant increase in free cash flow during the fourth quarter, driven by lower inventory levels resulting from year-end product sales and higher customer collections.

SLB's commitment to shareholder returns remains robust. The company has pledged to return a minimum of $4 billion to shareholders in 2025. This commitment is supported by a 3.6% increase in its quarterly dividend to $0.28 per share, effective April 2025, and a $2.30 billion accelerated share repurchase (ASR) program. Under the ASR, SLB repurchased 56.80 million shares at an average price of $40.51. The company's net debt stood at $9.95 billion at June 30, 2025. Capital investments for the full year 2025 are projected at approximately $2.40 billion, inclusive of the ChampionX acquisition.

Competitive Positioning: A Differentiated Approach

SLB operates within a highly competitive global energy technology sector, directly contending with major oilfield service providers such as Halliburton , Baker Hughes , and Weatherford International . SLB's strategic positioning emphasizes a differentiated approach, leveraging its technological leadership, broad portfolio, and integrated solutions.

Against Halliburton (HAL), SLB's Digital division, with its comprehensive data processing and AI tools, offers a potentially more versatile approach for multi-phase projects compared to HAL's more specialized drilling focus. SLB's broader portfolio, which now includes carbon management and adjacent energy systems, provides a more diversified market positioning. While HAL is recognized for certain drilling innovations, SLB's integrated services and strong global brand tend to foster stronger customer loyalty and recurring revenue streams. SLB often demonstrates more robust cash flow generation due to its diversified segments, whereas HAL may show stronger operating margins in core drilling services.

When compared to Baker Hughes (BKR), particularly in shared markets like well construction and production systems, SLB's OneSubsea integrated systems offer materially greater integration capabilities. This can lead to significantly enhanced reliability in deep-water operations compared to BKR's more modular approach. SLB's strategic emphasis on reservoir performance and carbon management provides a differentiated, sustainability-focused market positioning. SLB's end-to-end solutions are designed to cultivate notably stronger customer relationships and command better pricing power.

In competition with Weatherford International (WFRD), SLB's expansive portfolio, encompassing reservoir interpretation and advanced digital tools, provides substantially more comprehensive solutions than WFRD's more focused artificial lift services. While WFRD often competes on cost leadership, SLB's global scale and technological depth translate into stronger innovation in data-driven services, enhancing its unique value proposition for long-term contracts. SLB's financial health across its diversified segments appears superior, although WFRD's cost structures in artificial lift could exert pressure on SLB's pricing in that specific niche.

SLB's key competitive advantages, or moats, include its strong global brand, proprietary technologies, and extensive distribution networks. These factors contribute to enhanced customer loyalty, potentially leading to superior margins in long-term contracts and broader market access. The company's strategic adaptability in emerging areas such as carbon management and data center solutions further strengthens its ability to capture market share. However, SLB remains vulnerable to oil price volatility and supply chain dependencies, which can impact operational costs and margins. The company's diversified activity mix, with approximately 80% of its revenue derived from international markets, and a diversified supply chain network, including in-country manufacturing and local sourcing, partially mitigate the impacts of tariffs.

Outlook and Risks: Adapting to an Evolving Landscape

SLB's management anticipates a sequential step-up in results for the fourth quarter of 2025, projecting "high single-digit top-line growth." This expected uptick is primarily driven by the full-quarter contribution of ChampionX and seasonally higher year-end digital and product sales. For the entire second half of 2025, revenue is expected to fall within the range of $18.2 billion to $18.8 billion. Full-year 2025 capital investments are projected to be approximately $2.40 billion.

The Digital division is a key growth driver, with management expecting "double-digit growth year on year" and an EBITDA margin reaching 35% on a full-year basis. In international markets, many countries are "poised for investment growth" due to long-term capacity expansion plans and energy supply assurance, particularly for gas. Management views OPEC+ production releases as a "positive catalyst for activity in member countries and reinforces the potential for higher activity in 2026." Deepwater markets maintain a "very healthy pipeline with favorable economics," and the current "white space" in deepwater activity is expected to "progressively disappear" as significant Final Investment Decisions (FIDs) are planned for 2026 and early 2027. Conversely, North American operators are expected to continue prioritizing production maintenance, leading to "muted activity in the near to mid-term."

Despite this generally constructive outlook, several risks warrant investor attention. Global economic and geopolitical conditions, including ongoing conflicts and trade concerns, introduce uncertainty that can impact customer spending and commodity prices. The "evolving landscape clearly introduces uncertainty" regarding tariffs, particularly those affecting import/export flows between the US and China, which could potentially cost SLB between 20 to 40 basis points of margin in the second half of 2025. Operational disruptions, such as the pipeline incident in Ecuador that negatively impacted Q3 2025 EBITDA margin by approximately 60 basis points, can also affect revenue and profitability. Furthermore, changes in customer spending, especially in short-cycle markets like US land and certain international regions, remain a persistent risk.

Conclusion

SLB's strategic transformation, underpinned by its digital innovation and an expanded focus on production recovery, is building a more resilient and diversified business model. The company's technological leadership, particularly in AI and cloud-based platforms, provides a distinct competitive advantage, enabling significant efficiency gains for customers and driving accretive growth for SLB. The pivotal acquisition of ChampionX is a game-changer for the production recovery segment, promising substantial synergies and a less cyclical, more stable revenue stream.

Despite near-term market uncertainties and geopolitical risks, SLB's unwavering financial discipline, robust cash flow generation, and commitment to significant shareholder returns underscore its compelling investment appeal. The company's diversified portfolio and strategic positioning in high-growth areas beyond traditional oil and gas, such as data centers and low-carbon solutions, further solidify its long-term growth trajectory and competitive standing in an evolving energy landscape.