Halliburton’s Q2 FY2026 operating income increased $51M to $778M, but included $95M of net credits—accounting items that increased profit—from investments, a government recovery and other items. Excluding that category, operating profit fell 6.1% to $683M from $727M despite higher sales. For this oilfield services supplier, sales growth varied by region, while completion-service pricing remained under pressure. Source: 10-Q, statements of operations, Note 2 and Q2 discussion, pp. 1, 5, 21–22.
1. Receivables Absorbed Cash While Debt Stayed Nearly Flat
1-1. Customer Balances Grew Faster Than Inventory
More money remained tied up in customer invoices at June 30.
Receivables are amounts customers owe. The table compares balances at two dates, rather than cash generated during either period. Dollar amounts throughout this report are in U.S. dollars; M means million and B means billion.
| Item ($M) | Dec. 31, 2025 | June 30, 2026 | Change |
|---|---|---|---|
| Cash and equivalents | 2,206 | 2,048 | −7.2% |
| Net receivables | 4,942 | 5,325 | +7.7% |
| Inventories | 2,976 | 3,056 | +2.7% |
| Net property and equipment | 5,261 | 5,173 | −1.7% |
| Goodwill | 2,938 | 3,020 | +2.8% |
| Total assets | 25,010 | 25,828 | +3.3% |
| Total liabilities | 14,505 | 14,776 | +1.9% |
| Total equity | 10,505 | 11,052 | +5.2% |
Goodwill represents acquisition value above identifiable net assets; other intangible assets are not separately presented here. The filing does not fully reconcile each asset movement. Inventory uses weighted-average cost, which averages purchase costs when valuing inventory. Sources: 10-Q, p. 3; 2025 10-K, accounting policies, p. 49. Annual filing.
1-2. Near-Term Repayments Remained Small
Debt was $7,161M at June 30, versus $7,158M at year-end, while supplier payables rose to $3,456M from $3,133M. Higher payables helped finance operations by leaving more supplier bills unpaid, but those bills remain payment obligations. Operating lease assets—the recognized right to use leased property and equipment—were $1,019M, and related liabilities totaled $1,038M. Source: 10-Q, p. 3 and Note 11.
The disclosed maturity schedule puts $90M, approximately 1.3% of total debt at June 30, due in February 2027, with no further scheduled maturities through 2029. The listed bonds’ balance-weighted coupon is approximately 5.2%, calculated from the annual debt table and excluding other debt and issuance adjustments. This averages the bonds’ stated interest rates according to their balances; it is not an estimate of the cost of new borrowing. Available revolving credit—a bank facility the company can draw on—was $3.5B, providing additional liquidity. Sources: 2025 10-K, Note 10, pp. 60–61; 10-Q, p. 17. Quarterly filing.
1-3. Retained Earnings Supported Equity Growth
Retained earnings, or accumulated profits after distributions and other adjustments, rose from $15,036M to $15,722M after profit, dividends and stock-plan adjustments. Paid-in capital, including common stock, fell from $2,771M to $2,662M. Treasury shares—shares repurchased and held by the company—reduced equity by $7,031M, versus $6,983M; share reissuance partly offset repurchases. Accumulated other comprehensive losses, which capture certain accounting changes outside net income, narrowed from $363M to $343M. Source: 10-Q, Note 8, pp. 11–12.
2. Higher Sales Did Not Produce Stronger Margins Excluding Credits
2-1. Special Credits Reversed an Operating Profit Decline
Removing the disclosed net credits changes the direction of Q2 profit growth.
The table separates reported profit under U.S. generally accepted accounting principles, or GAAP, from this report’s calculation excluding only the specified credits. The latter is a non-GAAP measure because it adjusts the reported accounting result.
| Q2 measure ($M except per-share amounts and margins) | 2025 | 2026 |
|---|---|---|
| Revenue | 5,510 | 5,714 |
| GAAP operating income | 727 | 778 |
| Operating margin | 13.2% | 13.6% |
| Net credits in impairment/other category | — | 95 |
| Operating income excluding that category, non-GAAP | 727 | 683 |
| Margin excluding that category | 13.2% | 12.0% |
| Net income attributable to Halliburton | 472 | 534 |
| Attributable net income / revenue | 8.6% | 9.3% |
| Diluted earnings per share | $0.55 | $0.64 |
The $95M comprises $64M of investment gains plus $48M of net other credits, less a $17M business-sale loss. Thus $778M − $95M = $683M, down 6.1% from $727M. This calculation retains software-upgrade expenses and is not a complete estimate of recurring earnings. Source: 10-Q, pp. 1, 5.
The company’s earnings release also reports adjusted operating income of $683M. After the associated tax effects, its adjusted net income was $461M, or $0.55 per diluted share, compared with reported net income of $534M, or $0.64 per share. The $95M operating credit is a pretax amount, so it should not be subtracted directly from after-tax net income. Source: Halliburton Q2 2026 earnings release.
Operating margin means the share of sales left as operating profit. Excluding the credits, Halliburton retained about $12 per $100 of sales, down from $13.20—a decline of approximately 1.2 percentage points. Reported operating profit grew 7.0%, versus revenue growth of 3.7%, but excluding the credits reverses the profit comparison. Higher reported profit therefore does not show that the additional sales generated stronger margins. Source: calculations from 10-Q, p. 1.
Profit attributable to Halliburton shareholders rose 13.1%, from $472M to $534M. The weighted-average diluted share count, which includes potentially dilutive stock awards, fell from 857M to 838M. Spreading profit across fewer shares added approximately 2.3% to per-share earnings relative to an unchanged share count. Taxes also helped: tax expense as a share of pretax income declined from 21.4% to 19.0%. Source: 10-Q, p. 1 and Notes 7 and 10.
2-2. Completion Services Lost Pricing Strength
Completion and Production’s weaker returns outweighed better drilling results. Completion services help prepare wells for production and sustain their output; Drilling and Evaluation helps customers locate resources and drill wells.
Look at each division’s profit relative to its sales, rather than adding division profits without corporate costs.
| Q2 segment ($M) | Revenue 2025 | Revenue 2026 | Operating profit 2025 | Operating profit 2026 | Margin 2025 → 2026 |
|---|---|---|---|---|---|
| Completion and Production | 3,171 | 3,202 | 513 | 474 | 16.2% → 14.8% |
| Drilling and Evaluation | 2,339 | 2,512 | 312 | 338 | 13.3% → 13.5% |
Management attributed completion pressure partly to lower stimulation pricing in U.S. land markets and Latin America. Stimulation services help oil and gas flow from reservoirs into wells. Combined segment profit of $812M becomes $778M after subtracting $83M of corporate costs and $46M of software-upgrade expense, then adding $95M of credits. Source: 10-Q, Note 3 and Q2 discussion, pp. 6, 21–23.
Completion and Production’s $39M profit decline exceeded Drilling and Evaluation’s $26M improvement, reducing combined segment profit by $13M. Corporate costs increased another $17M, while software-upgrade expense rose $14M, from $32M to $46M. Together, those changes explain the $44M decline in operating profit excluding the credits. Costs are not fully separated into fixed costs and those that change with activity, preventing a reliable estimate of how much additional sales would lift profit. Source: 10-Q, pp. 21–23.
3. Lower Equipment Spending Lifted Free Cash Flow Despite a Receivables Cash Drain
First-half free cash flow improved because equipment spending fell more than operating cash generation.
H1 refers to the six months ended June 30. Free cash flow here means operating cash flow less capital expenditure, or spending on property and equipment.
| H1 cash measure ($M) | 2025 | 2026 | Change ($M) |
|---|---|---|---|
| Operating cash flow | 1,273 | 1,097 | −176 |
| Investing cash flow | −1,040 | −626 | +414 |
| Financing cash flow | −811 | −619 | +192 |
| Ending cash | 2,038 | 2,048 | +10 |
| Capital expenditure | 656 | 427 | −229 |
| Free cash flow: operating cash less capital expenditure | 617 | 670 | +53 |
Receivables used $429M of cash, versus releasing $140M a year earlier. Inventory used $85M and payables supplied $327M, leaving a $187M combined cash drain. These cash-flow movements need not equal the changes between balance-sheet dates, which can also reflect acquisitions and other adjustments.
Depreciation and similar noncash expenses were added back by $591M when reconciling profit to operating cash, while the $95M net credits were deducted. Operating cash divided by consolidated net income fell from 1.86 ($1,273M/$683M) to 1.09 ($1,097M/$1,002M). In other words, operating cash generated per dollar of consolidated profit declined; neither ratio alone establishes earnings reliability. Source: 10-Q, p. 4.
Capital expenditure was 3.8% of H1 sales ($427M/$11,116M). Management maintained approximately $1.1B of annual spending plans, including international technology expansion; it did not separate spending needed to maintain existing operations from spending intended to expand them. Buybacks and dividends used $593M ($308M + $285M), within the $670M free cash flow calculated here. That left $77M before acquisitions and equity investments, which used another $208M ($107M + $101M). These uses exceeded free cash flow by $131M before other cash movements, helping explain why cash still declined from year-end. The table’s increase in ending cash compares June with the previous June, rather than with December. Source: 10-Q, pp. 4, 17.
4. Regional Sales Diverged Without Establishing a Broad Recovery
Halliburton’s results show higher quarterly sales, but do not establish a sustained industry recovery or a broad improvement in profitability.
The annual figures show why one improved quarter cannot establish the cycle’s direction. Compound annual growth rate, or CAGR, expresses the average yearly rate of change between the starting and ending values.
| Annual measure ($M except ratios) | 2023 | 2024 | 2025 | Three-year CAGR, 2022–2025 |
|---|---|---|---|---|
| Revenue | 23,018 | 22,944 | 22,184 | +3.0% |
| Operating income | 4,083 | 3,822 | 2,260 | −5.8% |
| Operating margin | 17.7% | 16.7% | 10.2% | — |
| Attributable net income | 2,638 | 2,501 | 1,283 | −6.5% |
| Attributable net margin | 11.5% | 10.9% | 5.8% | — |
| Operating cash / consolidated net income | 3,458/2,662 = 1.30 | 3,865/2,516 = 1.54 | 2,926/1,292 = 2.26 | — |
Compound annual growth uses three intervals: (2025 value / 2022 value)^(1/3) − 1. The 2022 bases are revenue $20,297M, operating income $2,707M and attributable profit $1,572M. Annual ratios are not directly comparable with seasonal H1 ratios. Sources: 2025 10-K, pp. 44, 47; 2023 annual report, financial highlights. Historical report.
Annual revenue averaged $20,747.6M over 2021–2025, using $15,295M, $20,297M, $23,018M, $22,944M and $22,184M. The first year was the low within this five-year window, not a claim about the entire industry cycle. Recent annual sales remain above that average, while annual profitability weakened after 2023. Sources: historical and annual filings. 2025 10-K.
Geographic results illustrate the uneven sales performance. Q2 Middle East/Asia revenue fell from $1,454M in 2025 to $1,298M in 2026 as conflict disrupted activity. Over the same period, Latin America rose from $977M to $1,123M, and Europe/Africa/CIS rose from $820M to $1,017M. CIS refers to the Commonwealth of Independent States region. These shifts show why regional activity and completion margins matter alongside oil prices when assessing Halliburton’s results. Source: 10-Q, pp. 21–22.
Customer credit and taxes remain separate risks. A primary Mexican customer represented approximately 7% of receivables, and related credit-default contracts exposed Halliburton to $217M of underlying customer debt. These contracts can require Halliburton to make payments if specified customer credit events occur; the $217M is the contracts’ reference amount, not a recorded loss. Source: 10-Q, Notes 4 and 11, and p. 18.
The Internal Revenue Service proposes reclassifying approximately 95% of the $3.5B Baker Hughes merger termination fee from an ordinary expense deduction to a capital loss, which would change its tax treatment. The $3.5B is not the potential tax bill. Halliburton estimates that an unfavorable resolution could require approximately $640M in cash taxes, plus interest on amounts due for prior years, based on current tax law and its assumptions about available tax benefits. The company disputes the adjustment, and no additional tax payment is currently required. Source: 10-Q, p. 23.
Separately, Note 9’s discussion of legal proceedings provides no quantified reasonably possible loss range; management’s expectation of no material adverse effect does not eliminate legal risk. Source: 10-Q, Note 9.
5. Sustained Improvement Requires Better Pricing and Collections
Drilling profit grew year over year, but company-wide sales growth did not translate into stronger operating margins excluding credits or higher H1 operating cash flow. The Sekal acquisition adds drilling-automation capabilities, although the announcement does not establish its future profit contribution. Sources: 10-Q, pp. 1, 4, 21; company acquisition announcement. Sekal announcement.
H1 free cash flow covered buybacks and dividends, but the remaining $77M did not cover the additional $208M spent on acquisitions and equity investments. Cash declined from year-end while management retained its annual capital-spending plan. Better completion pricing and faster collections would strengthen that balance. Continued regional disruption or customer payment delays would leave less room for shareholder returns without drawing down liquidity. Source: 10-Q, pp. 3–4, 17–18.
This analysis is based on filings submitted to the U.S. Securities and Exchange Commission and is provided for informational purposes only. It is not investment advice. Source: SEC 10-Q, filed July 24, 2026. Consolidated interim statements are unaudited. Accession: 0000045012-26-000061.