Baker Hughes tops estimates on record cash flow, backlog
Oilfield services giant posts record $2.7bn annual free cash flow as IET segment drives growth
Baker Hughes beat Wall Street expectations in the fourth quarter of 2025, driven by record free cash flow generation and a burgeoning order book that underscores the company's strategic shift toward industrial and energy technology. The oilfield services giant reported adjusted earnings per share of 78 cents, topping analyst estimates of 67 cents, while revenue of $7.39 billion exceeded consensus forecasts by approximately $300 million.
The results, released Sunday after market close, highlighted Baker Hughes' growing dependence on its Industrial & Energy Technology (IET) segment, which delivered year-over-year revenue growth that offset declining performance in the traditional Oilfield Services & Equipment (OFSE) business. The IET unit generated $4 billion in orders during the quarter, contributing to a record $32.4 billion backlog, while total company orders reached $7.9 billion and the overall backlog climbed to $35.9 billion.
Perhaps most notably for investors, the company generated $1.34 billion in free cash flow during the fourth quarter, bringing full-year 2025 free cash flow to a record $2.73 billion. The cash flow performance demonstrates Baker Hughes' ability to convert its substantial order book into cash despite challenging market conditions in traditional oilfield services.
"The company delivered strong operational execution in the fourth quarter, with robust orders contributing to a record year-end backlog," according to analysis by AInvest. The research firm noted that the stock had rallied 19.3% in the 20 days leading up to the earnings release, reflecting investor optimism about the company's order momentum.
Looking ahead, Baker Hughes guided for mid-single digit organic growth in adjusted EBITDA for 2026, with the IET segment expected to expand margins toward a 20% target. The IET unit reported an EBITDA margin of 17.8% in the second quarter of 2025, suggesting steady progress toward that goal. The OFSE segment, meanwhile, is expected to remain flat, reflecting the company's deliberate portfolio rebalancing toward higher-margin industrial technology businesses.
The guidance reflects Baker Hughes' strategic evolution from a traditional oilfield services provider into a broader industrial technology company positioned to benefit from the energy transition. The company has been emphasizing sustainability and innovative practices as it seeks to capitalize on growth opportunities beyond conventional oil and gas operations.
Analysts maintain a moderate buy rating on the stock, with an average price target of $54.04, representing approximately 3% upside from current levels. The consensus includes 5 strong buy ratings, 12 buy ratings, 5 hold ratings, and 1 sell rating, according to MarketBeat data.
The company's market capitalization stands at $53.2 billion, with shares currently trading at $53.80. The stock is down 1.4% in Monday morning trading, suggesting some profit-taking after the strong pre-earnings rally. Baker Hughes currently trades at a price-to-earnings ratio of 18.59 and offers a dividend yield of 1.65%.
The quarter's performance demonstrates Baker Hughes' progress in executing its strategic transformation, with the IET segment's growth trajectory and expanding margins providing a counterweight to cyclical pressures in traditional oilfield services. The record backlog provides visibility into future revenue streams, though investors will be watching closely for signs of sustained margin expansion in the quarters ahead.