NOV Inc. outlines $100M+ annual cost savings plan as deepwater and international shale demand set to drive future growth

Earnings Call Insights: NOV Inc. (NOV) Q3 2025

MANAGEMENT VIEW

* Clay Williams, Chairman & CEO, emphasized strong execution in the third quarter, noting revenues of $2.2 billion and rising EBITDA margins despite "rising tariff and inflationary headwinds." Williams highlighted robust demand in the Energy Equipment segment, particularly in subsea flexible pipe and gas-focused process systems, stating "these businesses as well as our marine construction and production and midstream units all achieved their highest EBITDA in 5 years, expanding segment year-over-year margins for the 13th consecutive quarter."
* Williams described two major structural shifts supporting NOV’s long-term growth: the globalization of unconventional shale development and the "reemergence of deepwater and offshore development," saying "deepwater broadly has brought marginal costs below North American shales, and it is now winning the marginal cost horse race."
* Rodney Reed, Senior VP & CFO, reported "consolidated revenue was $2.18 billion, down slightly year-over-year and sequentially. Operating profit was $107 million or 4.9% of sales. Net income was $42 million... Adjusted EBITDA totaled $258 million, representing 11.9% of sales." Reed detailed "free cash flow generation remained robust at $245 million," and announced $80 million in share repurchases and $28 million in dividends for the quarter. Reed further stated, "We continue to realign our supply chain and execute strategic sourcing initiatives to reduce tariff impacts. We also remain focused on removing structural costs to improve margins and returns... These programs are on track to deliver over $100 million in annualized cost savings by the end of 2026."
* Jose Bayardo, President, COO & Director, underscored the shift in earnings mix, noting "we expect Energy Equipment’s contribution to EBITDA to rise from 38% in 2023 to approximately 55% in 2025, while Energy Products and Services EBITDA contribution moves to about 45%." Bayardo also detailed ongoing investments in technology and automation, referencing "our ATOM RTX robotic system, which we commercialized in January 2024 on a rig working for an IOC in Canada," and highlighted that "the backlog for our ATOM RTX system is growing at a healthy clip."

OUTLOOK

* Management expects "market conditions to remain soft through the next few quarters," with "tariffs and inflation uncertainty" continuing to pressure margins and "global drilling activity... likely to drift lower."
* Reed guided for Q4 2025 tariff expense of "around $25 million" and anticipated "revenue to decline 2% to 4% year-over-year with EBITDA in the range of $160 million to $180 million" for the Energy Equipment segment. For Energy Products and Services, "revenue to decline 8% to 10% year-over-year with EBITDA between $120 million and $140 million."
* Bayardo maintained a constructive medium-to-long-term view, stating "we expect that we'll deliver about that same amount [of $1 billion in adjusted EBITDA] in each of 2025 and 2026," driven by diversity in NOV's business portfolio and technology leadership.

FINANCIAL RESULTS

* NOV reported Q3 2025 revenues of $2.18 billion and net income of $42 million. Adjusted EBITDA was $258 million, with EBITDA margins improving to 11.9% of sales.
* Free cash flow was $245 million, and the company converted 95% of EBITDA to free cash flow in the quarter.
* Energy Equipment segment revenue reached $1.25 billion, up 2% year-over-year. EBITDA increased to $180 million, with segment margins rising to 14.4% of sales. Capital equipment orders were $951 million, book-to-bill was 141%, and backlog stood at $4.56 billion.
* Energy Products and Services revenue was $971 million, a 3% decrease versus Q3 2024. EBITDA for the segment was $135 million or 13.9% of sales.
* Reed noted ongoing cost control and efficiency programs targeting $100 million+ in annualized savings by end of 2026.

Q&A

* James Rollyson, Raymond James: Questioned sustainability of year-over-year growth in capital equipment and margin outlook given strong backlog. Williams responded that "quicker turn items like aftermarket and spares... people are going to be very circumspect about what they spend in that area. But yes, so far, so good on the capital equipment side," while also anticipating "a pickup in deepwater late in the year" in 2026.
* Rollyson: Asked about margin profile sustainability in 2026. Bayardo replied, "we've had really nice steady improvement in terms of the overall quantity of the backlog, but we've also seen continued improvement in terms of the mix and really embedded pricing and margin within that backlog as well."
* Marc Bianchi, TD Cowen: Inquired on Q4 orders and the $65 million in other items. Williams expects Q4 orders "probably will slip a little bit below 100% book-to-bill right now," while Reed clarified that the inventory charge "doesn't have any impact to margins going forward."
* Arun Jayaram, JPMorgan: Asked for details on international unconventionals build-out. Williams described "a wave of unconventional prospecting underway in places like Algeria and Turkey and Oman and Bahrain... Australia." Bayardo highlighted "steadily increasing demand from our intervention and stimulation equipment business entirely related to demand from overseas unconventionals."
* Doug Becker, Capital One: Sought outlook on free cash flow and CapEx. Reed projected "working capital as a percentage of revenue for the quarter, just a touch under 28%, 27.9%" and "about 50% conversion is sustainable in the future."

SENTIMENT ANALYSIS

* Analysts expressed cautious optimism, focusing on backlog sustainability, margin prospects, and international demand. Recurrent themes included questions on timing and magnitude of recovery and margin durability.
* Management's tone during prepared remarks was confident, highlighting "strong project execution," "robust" cash flow, and a "constructive view regarding the industry's and NOV's outlook." In Q&A, management balanced confidence with caution, often referencing "timing is a little bit uncertain" and "the setup is very good, but the timing is a little bit uncertain."
* Compared to the previous quarter, management remains optimistic on long-term prospects but acknowledges near-term headwinds more explicitly, while analysts continue to probe for evidence of inflection points and margin resilience.

QUARTER-OVER-QUARTER COMPARISON

* Q3 saw continued strength in Energy Equipment, particularly in subsea flexible pipe and process systems, with record backlogs. The company maintained its guidance for near-term softness given persistent macro headwinds, tariffs, and a soft North American market.
* Management’s tone was more focused on long-term strategic positioning and R&D-driven growth in emerging markets and deepwater, compared to the previous quarter’s emphasis on navigating "tough" near-term conditions.
* Key metric changes include slightly lower revenues and net income versus Q2, but improved EBITDA margins and robust free cash flow conversion in Q3.
* Analysts’ focus remained on margin sustainability, backlog quality, and the outlook for international and offshore growth—consistent with the prior quarter.

RISKS AND CONCERNS

* Management cited "tariffs and inflation uncertainty" as ongoing headwinds that will "continue to weigh on margins in the near term."
* Williams warned of "softening oilfield activity" and "the overhang of OPEC barrels" as factors clouding the short-term outlook.
* Reed noted that "tariff expense came in just under $20 million, increasing approximately $6 million sequentially," and forecast further increases.
* Analysts repeatedly questioned the durability of margin improvements and order flow amid market volatility.

FINAL TAKEAWAY

NOV’s third quarter results highlight resilient performance in a challenging market, with robust free cash flow, margin improvements, and a record backlog in Energy Equipment driven by offshore and international demand. Management expects the near-term environment to remain soft, pressured by tariffs, inflation, and commodity price uncertainty, but projects a stronger recovery beyond 2026 as deepwater and international shale development accelerate. Cost control and efficiency programs are on track to deliver over $100 million in annualized savings by the end of 2026, positioning NOV to capitalize on emerging industry trends and deliver long-term value to shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/nov/earnings/transcripts]

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