SLB Q1 Revenue Drops 7%, EBITDA Margin Collapses 346 Bps While Stock Jumps 40%
CVX•SLB's Q1 revenue excluding a recent acquisition fell 7% year-over-year and adjusted EBITDA margin dropped 346 basis points to 20.3%, generating a $23 million free cash flow deficit. Shares have climbed 43.3% year-to-date as investors bet on multi-year energy investments and rapid digital division growth.
1. Q1 Operational Challenges
SLB’s first quarter saw revenue decline 7% year-over-year excluding its recent acquisition, driven by geopolitical disruptions in the Middle East. Adjusted EBITDA margin fell 346 basis points to 20.3%, and free cash flow came in at a negative $23 million as cash burn intensified.
2. Stock Performance vs Fundamentals
Despite the operational setback, SLB’s shares have rallied 43.3% over the past year compared with a 24% gain in the S&P 500. Investors appear focused on longer-term prospects rather than near-term earnings volatility.
3. Long-Term Investment Thesis
Management argues that global supply fragility will spur renewed investment in deepwater exploration and field revitalization, underpinning a multi-year super-cycle in energy infrastructure. The firm projects a positive outlook extending into 2027 and 2028 as security concerns drive capital spending.
4. New Growth Engines
SLB’s Digital segment delivered 9% revenue growth year-over-year, while its data center solutions business expanded 45% as it taps into AI infrastructure demand. That unit is on track to reach a $1 billion annual run rate by year-end, diversifying SLB’s revenue base.
