All figures are presented in USD (millions); large items are also stated in billions of dollars.
Baker Hughes posted Q2 2026 revenue of $6.74 billion, down 2.4% year on year, but on a first-half basis net income surged 44.6% to $1.61 billion, driven by a $697 million gain on business divestitures. The quarter's headline, however, is not earnings but balance-sheet restructuring: the company raised $9.9 billion in USD and euro bonds in March, lifting cash and equivalents more than fourfold from $3.7 billion to $15.7 billion, and used those proceeds to close the Chart Industries acquisition on July 16. Long-term debt nearly tripled, to $15.5 billion from $5.4 billion.
1. Consolidated Balance Sheet Analysis
1-1. Key Asset Items
| Item | Dec 31, 2025 ($M) | Jun 30, 2026 ($M) | Change | Commentary |
|---|---|---|---|---|
| Cash and cash equivalents | 3,715 | 15,727 | +323.3% | Bond proceeds raised to fund Chart acquisition |
| Trade receivables, net | 6,641 | 6,654 | +0.2% | In line with stagnant revenue |
| Inventories, net | 4,954 | 4,961 | +0.1% | Inventory turnover stable |
| Property, plant & equipment, net | 5,326 | 5,540 | +4.0% | Reflects $636M in capex |
| Intangible assets, net | 4,097 | 3,997 | -2.4% | Amortization and pending Waygate divestiture |
| Goodwill | 6,068 | 5,566 | -8.3% | $492M reclassified to held-for-sale ahead of Waygate sale |
| Total assets | 40,881 | 52,620 | +28.7% | Driven by cash build from bond issuance |
Total assets expanded by $11.7 billion in six months. The cash increase of $12.0 billion more than accounts for the entire asset expansion — non-cash assets declined on net — sourced from $6.5 billion in USD bonds and €3.0 billion in euro bonds (approximately $3.4 billion) completed March 11. The $502 million decline in goodwill reflects an accounting reclassification of Waygate Technologies to held-for-sale — no impairment charge was recorded.
1-2. Liability Structure — Financial Debt vs. Operating Liabilities
Financial debt (total $16.25 billion, +167% vs. $6.09 billion) - Short-term borrowings: $689M → $774M - Long-term debt: $5,398M → $15,479M (+186.8%)
Long-term debt maturities are spread across 2027–2056. Notable new issuances include $1,974M at 5.85% (30-year), $1,979M at 5.00% (10-year), and $1,240M at 4.35% (5-year). The Bridge Facility — originally sized at $14.9 billion in July 2025, later reduced to $11.0 billion through DDTL draws and voluntary reductions — was terminated upon completion of the bond offering, resulting in a $43 million charge for unamortized fees recognized as Q1 interest expense.
Operating liabilities (total $12.066 billion) - Accounts payable: $4,579M → $4,509M - Progress collections and deferred revenue: $5,904M → $6,598M (+11.8%) - Pension and post-retirement obligations: $1,066M → $959M
The $694 million increase in progress collections (cash inflow basis: $803 million) signals robust long-cycle LNG and gas-turbine order activity in the IET segment. Remaining performance obligations (RPO) stand at $40.1 billion, with 53% expected to be recognized within two years and 76% within five years.
1-3. Equity Structure
- Additional paid-in capital: $24,738M → $24,330M (-$408M, dividends and other)
- Retained deficit: -$3,252M → -$1,641M (deficit cut roughly in half)
- Accumulated other comprehensive loss: -$2,652M → -$2,781M (primary driver: cash-flow hedge losses of -$92M; translation losses of -$37M)
The retained deficit narrowed by $1.61 billion in six months, directly matching H1 net income of $1.611 billion. Dividends paid totaled $456 million ($0.23 per share × 2 quarters = $0.46), while share repurchases were nil in H1 2026 (vs. $384 million in H1 2025) — a clear indication that cash conservation ahead of the Chart acquisition took priority.
2. Consolidated Income Statement Analysis
2-1. Key Profitability Metrics (Q2)
| Item | Q2 2025 ($M) | Q2 2026 ($M) | Change |
|---|---|---|---|
| Revenue | 6,910 | 6,742 | -2.4% |
| Operating income (est. EBIT) | 887 | 854 | -3.7% |
| Operating margin (%) | 12.8% | 12.7% | -0.2pp |
| Pre-tax income | 967 | 892 | -7.8% |
| Net income | 711 | 682 | -4.1% |
| Net income attributable to BKR | 701 | 681 | -2.9% |
| Net margin (%) | 10.3% | 10.1% | -0.2pp |
| Diluted EPS ($) | 0.71 | 0.68 | -4.2% |
Stark segment divergence: OFSE (Oilfield Services & Equipment) posted revenue down 4.6% and EBITDA down 10.6% to $605 million, while IET (Industrial & Energy Technology) held revenue nearly flat (-0.1%) and grew EBITDA 15.9% to $678 million. Geographically, OFSE revenue in the Middle East/Asia fell from $1,398M to $1,218M (-12.9%), reflecting reduced rig activity at Saudi Aramco and other key customers. IET Gas Technology Services, by contrast, rose from $752M to $831M (+10.5%) as LNG aftermarket services offset a 6.2% decline in new equipment sales.
2-2. Fixed vs. Variable Cost Analysis
Fixed costs (Q2): R&D $143M (-11.2%); SG&A $569M (+0.4%); depreciation and amortization $333M (+13.7%); restructuring $11M (new) Variable costs: Product cost of revenue ratio 77.2% (prior year: 79.8%); service cost of revenue ratio 75.5% (prior year: 70.7%)
Service margin deteriorated 4.8 percentage points — service revenue rose 2.3% while cost of services surged 9.3%, driven by ramp-up labor and material costs tied to IET Gas Technology Services expansion. H1 depreciation and amortization of $687 million rose 18.7% from $579 million in the prior-year period, as newly capitalized assets from the $636 million capex program began flowing through.
3. Cash Flow Analysis (H1, Six Months)
| Item | H1 2025 ($M) | H1 2026 ($M) | Change |
|---|---|---|---|
| Operating cash flow | 1,219 | 1,845 | +51.4% |
| Investing cash flow | -596 | +874 | +1,470 |
| Financing cash flow | -945 | +9,287 | +10,232 |
| Closing cash | 3,087 | 15,727 | +409.5% |
The $626 million improvement in operating cash flow reflects higher net income (+$500 million), expanded progress collection inflows (+$694 million), and higher depreciation and amortization (+$108 million). Income taxes paid of $381 million declined from $418 million a year earlier.
Free cash flow = operating CF $1,845M − capex $636M = $1,209 million, a solid result, but after H1 dividends of $456 million, discretionary cash is approximately $750 million. With the Chart acquisition (enterprise value approximately $13.6 billion) now closed, the pace at which this FCF services the incremental debt is the key metric to watch. At an estimated weighted-average coupon of approximately 5.2% on the new bonds, annual interest expense rises by roughly $510 million — a trajectory already visible in the H1 net interest expense of $151 million, up from $105 million a year earlier.
4. Additional Analysis: Points That Cannot Be Overlooked
① Chart Industries acquisition closed July 16, 2026, at $210 per share (enterprise value approximately $13.6 billion) — Chart is the global leader in LNG cold boxes, hydrogen, and industrial gas processing equipment. The deal materially expands IET's LNG and low-carbon footprint, with consolidation beginning in H2 2026 results. Funding mix: $9.9 billion in bonds + $2.0 billion in new term loans (July 15, 2026: two $1.0 billion tranches, 2-year maturity) + cash on hand.
② Waygate Technologies divestiture pending — The industrial non-destructive testing equipment business. $492 million of goodwill has been reclassified to held-for-sale. This follows the January 2026 close of the PSI divestiture (proceeds approximately $1.2 billion, gain of $697 million), extending the company's pattern of shedding non-core assets.
③ $697 million divestiture gain recognized — Virtually all of the $697 million in "Other income" in H1 (vs. -$6 million in the prior-year period) is this one-time item. On a Q2-only basis the gain is already absorbed; from H2 2026 onward, results will reflect operating performance alone.
④ OFSE Middle East/Asia revenue down 12.9% — Driven by Saudi rig count reductions and spending rebalancing in Iraq and the UAE. Latin America, by contrast, grew from $639M to $732M (+14.6%), reflecting deepwater project restarts in Brazil and Argentina.
⑤ $91 million interest rate swap hedge loss — Baker Hughes terminated $2.5 billion of interest rate swaps concurrent with the March bond offering, crystallizing an AOCI loss to be amortized into interest expense over 10–30 years ($12M over 10 years; $79M over 30 years).
5. Key Takeaways and Outlook
Bull case: Chart consolidation drives step-change growth in IET revenue and EBITDA from 2027. If the LNG cycle accelerates (Qatar, Mozambique, U.S. Gulf Coast), the $40.1 billion RPO backlog — a substantial portion attributable to IET — converts to revenue on a rolling basis. The pace of retained-deficit recovery (-$1.61 billion in six months) points to capital normalization by 2027 if the trend holds.
Risks: (1) The $15.5 billion long-term debt load will likely delay share-buyback resumption and pressure credit ratings. (2) Continued OFSE Middle East revenue erosion would compress segment EBITDA margins. (3) Chart integration costs or synergy shortfalls could weigh on 2027 operating margins. (4) Interest expense, already up 44% in H1, will continue to rise in H2 as two full quarters of new debt are reflected.
Relevance for Korean investors: Baker Hughes' LNG equipment order cycle is closely correlated with LNG carrier and floating-facility orders at HD Hyundai Heavy Industries and Samsung Heavy Industries. Chart's integration into BKR strengthens the company's grip on the LNG value chain, a medium-to-long-term positive signal for Korean shipbuilders' order pipeline. Near-term BKR share price volatility is likely as markets digest the enlarged debt load.
Disclaimer
This report is prepared for informational purposes based on Baker Hughes Company's Q2 2026 Form 10-Q filed with the SEC and does not constitute investment advice.