SLB

Good morning. My name is Sarah, and I will be your conference operator today. I would like to welcome everyone to the third quarter SLB earnings call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. You may remove yourself from the queue by pressing star one again. As a reminder, this call is being recorded. I will now turn the call over to James R. McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead.

Thank you, Sarah. Good morning and welcome to the SLB third quarter 2026 earnings conference call. Today's call is being hosted from New York City following our board meeting held earlier this week. Joining us on the call are Olivier Le Peuch, Chief Executive Officer, and Stephane Biguet, Chief Financial Officer. Before we begin, I would like to remind all participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. For more information, please refer to our latest 10-K filing and other SEC filings, which can be found on our website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter earnings press release, which is on our website.

With that, I will turn the call over to Olivier.

Thank you, James, and good morning, ladies and gentlemen. Thank you for joining us. Today, I will begin with our third quarter performance. I will then discuss the evolving macro environment and the fundamentals supporting our outlook as we approach 2027. Finally, I will share our expectations for the fourth quarter. Stephane will then provide additional details on our financial results, and after that, we'll open the line for your questions. Let's begin. The third quarter was marked by broad-based sequential revenue growth across each of our geographical areas and core divisions, with pre-tax segment operating margins expanding across all four divisions. This was driven by the gradual recovery in the Middle East, steady growth in North America, and continued momentum across the international offshore basins, including Latin America, Europe and Africa, and Asia.

Within the Core divisions, Production Systems led the way, supported by higher OneSubsea revenue and strong sales of production chemicals and artificial lift in North America and the Middle East. Notably, ChampionX delivered its highest quarterly revenue since the acquisition, with margins expanding sequentially for the fourth consecutive quarter. Well Construction growth was driven by double-digit increases across Argentina, Guyana, Brazil, and U.S. land, along with a seasonal recovery in Canada, complemented by strong offshore drilling in Asia. Sequential growth was also driven by higher drilling activity and fluids demand in the Middle East. While the near-term pace of recovery in the Middle East remains uncertain, the longer-term outlook continues to strengthen. This is reflected by Saudi Aramco's recent award of four integrated Well Construction contracts to SLB, covering more than 450 wells over an initial three-year term.

These multi-year awards significantly improve our revenue visibility and expand our participation in development activity across the kingdom by bringing together our Digital drilling workflows, automated technologies, and integrated Well Construction portfolio. Reservoir Performance also delivered strong sequential growth, led by increased stimulation and intervention activity alongside an uptick in evaluation. This demonstrates that customers are investing in both restoration and production optimization of existing assets and evaluation of reservoirs to support new development. Our results this quarter continue to demonstrate the benefits of our strategic focus on production and recovery. Our production business, encompassing all Production Systems and some of the offerings in Reservoir Performance, now represents more than 50% of our portfolio, with a leading position across every major basin and a balanced mix of short- and long-cycle activity, including exposure to resilient OpEx spend.

This provides a durable foundation with greater revenue visibility and resilient performance across market cycles. Taken together, growth across all Core divisions reflects the characteristics of an inflecting upcycle, with broad expansion of activity across exploration, development, and intervention as operators ramp up efforts to restore production and bring new capacity online. In Digital, third quarter revenue was steady sequentially, and margins remained strong despite Digital exploration sales declining following exceptional sales in the second quarter. Customers continue to recognize the benefit of AI and Digital operations, and we delivered more than 750,000 automated feet of drilling this quarter, an increase of nearly 50% year-on-year. Additionally, the Hellops predictive analytics, our intelligent real-time monitoring and advisory system, is now monitoring more than 20% of active international rigs, representing year-on-year growth of more than 60%.

As you can see, adoption continues to accelerate, and we are very pleased with the progress of our Digital business. Revenue has grown 11% year to date, and we have clear visibility into higher sales in the fourth quarter. As a result, we anticipate finishing the year with double-digit year-on-year growth and adjusted EBITDA margins exceeding 35%. Finally, Data Center Solutions continued strong growth trajectory, supported by the progression of existing projects and geographic expansion into Asia. During the quarter, we continued to invest in facilities and talent to expand our execution capacity, including a new manufacturing center in Canada to support the Meta data center project that is essential to meet surging customer demands. Upon closing of our recently announced acquisition of Kelvion, the Kelvion portfolio will also benefit greatly from this momentum and will accelerate our ambition to become a leading industrial partner into the AI infrastructure build-out.

In summary, I am extremely proud of our third quarter performance, and I want to thank the entire SLB team for delivering these results. Their focus on execution, innovation, and our customer centricity continues to make the difference. Let me now turn to the macro environment and the fundamentals supporting our outlook as we approach 2027. Ongoing disruptions continue to reinforce the importance of energy security and the need of reliable, geographically diverse source of supply.

At the same time, the industry continues to face the structural challenge of offsetting natural decline and replacing reserves following several years of limited exploration. Collectively, these conditions are supporting a broader and increasingly diversified international opportunity. In the near term, this will support production intervention and overall short-cycle activity. Longer term, this is providing a strong foundation for the progression of offshore developments, renewed exploration, and new areas of investment emerging across several markets.

Let me briefly discuss how these long-cycle dynamics are evolving. Deepwater represents one of the industry's most advantage source of new supply, combining attractive project economics, material resource development, and long-duration production. We continue to see this opportunity broaden across Latin America, Africa, the Eastern Mediterranean, and Asia, with FID expected to increase more than 30% year-on-year in 2026 and many projects advancing from sanction into execution. For SLB, this momentum is reflected in the continued flow of OneSubsea awards, further strengthening our backlog and increasing visibility into 2027 and beyond. One example is our recent award in Mozambique, where OneSubsea was selected to deliver subsea Production Systems for the first phase of ExxonMobil deepwater Rovuma LNG development. This project will contribute to an important new source of global gas supply and further demonstrates the progression of large, long-cycle deepwater development into execution.

In addition, fundamentals for exploration are improving as operators seek to replace reserves and diversify supply following several years of restrained investment. We see this materializing through new licensing activity in Brazil, the Eastern Mediterranean, and West Africa. Growing interest in frontier basins such as Namibe and preparations for future campaigns across deepwater markets, including Guyana and Suriname. As exploration assumes a greater role in our customer portfolio, SLB's leading position across exploration data, subsurface modeling, and evaluation technologies position us to capture this growing opportunity. So far this year, SLB has participated in the evaluation of approximately 80% of completed high-impact exploration wells globally, many of which are concentrated in frontier and deepwater basins. Beyond deepwater and exploration, international markets are offering new pathways for growth, with opportunities broadening across conventional and unconventional resource in the Middle East, as well as key emerging markets.

In this context, Venezuela represent a particularly significant growth driver for SLB. Following more than a decade of limited investment, activity in the country is accelerating, led by international oil companies. For SLB, this is already translating into revenue growth. Our revenue in Venezuela is on track to more than double this year, with strong momentum among U.S. and European E&Ps, supporting the potential for multifold growth in 2027. At the same time, major U.S. shale operators are expanding internationally, entering new countries and partnering with NOCs. This trend further broaden the addressable market, particularly in exploration deepwater developments across Africa, Latin America, and Asia, as well as in conventional and unconventional resources in the Middle East. Looking across these dynamics, long cycle offshore developments, renewed exploration, Digital adoption, and U.S. operators expanding globally all confirm a durable multiyear international investment cycle with clear visibility into 2027.

With market-leading position across our core divisions, recently established leadership position in global production, differentiated Digital capabilities, and an unmatched global footprint, SLB is uniquely positioned to capture this upside. Now let me conclude with our expectations for the fourth quarter and our first view of the 2027 market outlook. Over the past several weeks, the Middle East has continued to experience heightened tensions. Given the ongoing uncertainty, our fourth quarter outlook assumes Middle East revenue remains flat sequentially at approximately $1.9 billion, representing about 83% of revenue generated in the first quarter of 2025. Based on this assumption and supported by continued deepwater momentum as well as the typical year-end strength in Digital and product sales, we expect overall fourth quarter revenue to reach approximately $10 billion, representing an increase of 5%-7% sequentially.

As a result, when excluding the Middle East, global fourth quarter revenue is expected to grow in the high single digits year-on-year. We also expect adjusted EBITDA margins to expand 100-150 basis points. At the division level, we anticipate combined revenue from the core division to sequentially increase by low single digits, led by high single-digit growth in Production Systems and with Well Construction Reservoir Performance essentially flat. In Digital, revenue is expected to increase in line with fourth quarter historical trends, led by significant uptake in typical year-end Digital exploration sales. This outlook provides clear evidence that the next phase of life cycle is underway. While our near-term outlook remains dependent on geopolitical developments, an eventual resolution of regional disruption in Middle East would unlock deferred activity and serve as a powerful catalyst for accelerated growth in 2027.

Looking ahead to 2027, assuming Middle East activity remains at second half 2026 levels and that the conflict doesn't materially escalate, we expect global OFS market activity to grow in the mid-single digits with normalization of activity in the Middle East providing further upside. Against this backdrop, we expect our core divisions to visibly outperform the market, reflecting our differentiated exposure to the strongest area of activities, including long cycle offshore developments, renewed exploration activity, production recovery investments, and the reactivation of Venezuela. Beyond the core, we expect Digital to continue its established growth trajectory, while our Data Center Solutions business will continue to accelerate as a meaningful growth engine for the company. I will now turn the call over to Stephane to discuss our financial results in more detail.

Thank you, Olivier, and good morning, ladies and gentlemen. Third quarter earnings per share, excluding charges and credits, was $0.64. This represents an increase of $0.09 sequentially and a decrease of $0.05 when compared to the third quarter of last year. During the quarter, we recorded $0.03 of merger and integration charges related to the ChampionX transaction, as well as a $0.12 or $187 million non-cash pension settlement charge. This was the result of offering a lump sum payment to certain former employees in one of our pension plans. This transaction, which was funded directly by assets of the plan, allowed us to de-risk our largest pension plan by reducing both our pension obligations and plan assets by almost $900 million. This will help us lower potential volatility as well as manage future pension costs. Importantly, the plan remains very well-funded.

Overall, our third quarter revenue of $9.45 billion increased 5% sequentially. This performance was driven by the Middle East, growth in North America land, and strong international deepwater activity, including upside in OneSubsea. In the Middle East, we experienced a gradual recovery as third quarter revenue of $1.9 billion increased 13% from the previous quarter. Sequentially, our pre-tax segment operating margin increased 104 basis points, with margin expansion across all four divisions. Company-wide adjusted EBITDA margin for the third quarter was 21.9%, representing a sequential increase of 71 basis points. Let me now go through the third quarter results for each division. Third quarter Digital revenue of $693 million was essentially flat sequentially as strong platforms and application sales and higher revenue from digital operations and professional services was offset by lower digital exploration revenue following a very strong second quarter.

Digital pre-tax operating margin of 28% increased 27 basis points as improved profitability in digital operations and platforms and applications more than offsets the effects of lower sales of exploration data licenses and transfer fees. We expect digital exploration revenue to increase significantly in the fourth quarter, which will result in strong year-on-year growth for the Digital division and adjusted EBITDA margin exceeding 35% for the full year. Reservoir Performance revenue of $1.6 billion increased 5% sequentially, while pre-tax operating margin of 16.3% increased 140 basis points. These increases were primarily driven by the gradual recovery in the Middle East. Well Construction revenue of $2.9 billion increased 5% sequentially, primarily driven by higher drilling activity in the Middle East. Pre-tax operating margin of 16.4% improved 122 basis points, mostly due to the Middle East activity rebound.

Production Systems revenue of $4 billion increased 6% sequentially, driven by the recovery of Middle East activity, increased sales in North America, and strong OneSubsea activity. OneSubsea also recorded a steady flow of new contract awards, increasing backlog and further enhancing Subsea revenue visibility into 2027. Production Systems' pre-tax operating margin of 16.1% increased 60 basis points with broad-based growth in OneSubsea, artificial lift, completions, and production chemicals. Notably, the acquired ChampionX businesses delivered their highest quarterly revenue and margin since joining SLB. Finally, in the All Other category, revenue increased 8% sequentially, driven by strong growth in Data Center Solutions, while pre-tax operating income decreased slightly as a result of ramp-up costs associated with new data center projects. With regard to our previously announced agreement to acquire Kelvion, things are progressing quite well.

A dedicated integration team has been put in place that has kicked off its various work streams, and we are in the process of making all necessary filings in the relevant jurisdictions. We are very excited about the opportunities that this transaction will bring, and we remain on track for closing in the first half of 2027. Now, turning to our liquidity. We ended the quarter with net debt of $9.2 billion, the same level as the first quarter of last year. We generated $1.5 billion of cash flow from operations and $828 million of free cash flow. Looking ahead, consistent with our historical pattern, we expect a meaningful step-up in free cash flow in the fourth quarter, supported by lower inventory following year-end product sales and higher customer collections.

The magnitude of the sequential increase in free cash flow will largely depend on the timing of collections in certain countries. Capital investments, inclusive of CapEx and investments in APS projects and exploration data, were $682 million in the third quarter. For the full year, we still expect capital investments to be approximately $2.5 billion. During the quarter, we repurchased $656 million of our stock and are on track to repurchase approximately $2.4 billion for the full year, in line with 2025 levels. This will bring our total returns to shareholders for 2026 slightly above $4 billion, in line with the commitment we made earlier this year. I will now turn the call back to Olivier.

Thank you, Stephane. I believe, Sarah, that you are ready for taking questions.

Thank you. We will now begin the Q&A session. If you would like to ask a question, please press star, followed by the number one on your telephone keypad. Your first question comes from the line of James West with Melius Research. Your line is open.

Hey, good morning, Olivier, Stephane.

Morning.

Morning.

Olivier, I think in your prepared remarks, it seems like almost every part of your business, whether product line or region, ex the Middle East, of course, which still has uncertainty, is inflecting higher. I am curious if you could parse that out a little bit further and let us know kind of which areas or maybe which products, product lines, or service lines you think will grow faster than others.

No, thank you, James. We believe indeed that the cycle has started, and I think it has the characteristics that are very probable to our footprint and to the composition of our business line. Indeed, I think we are seeing that the combination of deepwater exploration rebounds for a long cycle. We see the investment flowing into production recovery to improve the production on our improved recovery assets. We see the development of new geographical areas that are attracting investments such as Venezuela, Argentina, and all this without the catalyst of a resolution in the Middle East that will add growth. I believe that indeed we are set for all division and all basin to benefit from growth in 2027 and beyond.

We believe that, again, growth from Digital to production recovery, from deepwater to unconventional, and with exploration being certainly an uptick that will match very well our footprint and match very well our portfolio of technology. Yes, it is, I would say, boldly an inflection that is characteristic of an upcycle with long duration.

Great. That is very helpful. Then on the exploration side, I happened to speak to a group of explorationists recently and spend some time with the heads at many of the major oil companies, and then, of course, one of your senior people as well. Capital is definitely flowing there. For the first time in maybe a decade, they were happy about capital. Where are you seeing the most exciting exploration at this point?

I think what is very good in this exploration cycle, I think it's a mix of infrastructure-led exploration in very well-known mature basins that still have pocket of oil or gas to be unlocked and to be connected to, and with opportunity for sizable development in those. I think that relates to the West Africa mature basin as well as North Sea on both sides of the sector, and then obviously Gulf of America. There is a lot of frontier basins and a lot of areas that are expanding, and I think this is partly true in Americas and Brazil. I think the Pelotas Basin is attracting a lot of attention as well as the Atlantic margin or the Equatorial Margin, I think, which is along with continued investment into Suriname and Guyana, I think are clearly a spotlight for this.

The same as in Namibia, in further the Namibe Basin in Angola, as of a part of Africa and East Med, and then I could keep going east to East India, Indonesia, that has attracted a lot of investment due to gas reserves and potential there, and two large discoveries has been made and entering a subsea development going forward. So it all combined is an exciting cycle for exploration. I think the combination of energy security heightened priority as well as depleting reserves and the pressure of declining production are adding and fueling this investment in exploration.

Great. Thanks, Olivier.

Thank you, James.

Your next question comes from Scott Gruber with Citigroup. Your line is open.

Thanks, and good morning, Olivier and Stephane.

Morning, Scott.

Morning.

A number of growth drivers into 2027 as you outlined, but I'm curious because this is a question we often get from investors. Should we see resolution in the Middle East in the not too distant future and crude moderates back to $65 or $70, similar to what we saw back in June, how resilient do you think the growth drivers would prove to be? Obviously, the Middle East would improve, but do you see much risk to the mid-single digit growth outlook excluding the Middle East at more mid-cycle crude prices? Or would the secular elements at play here sustain a healthy growth rate?

No, Scott, I believe that we should keep in mind that a lot of barrels have been lost to this crisis. A lot of pull on the strategic reserves and commercial inventory has depleted inventory to the point that I think it is clear that additional investment needs to be flowing through activity into supply in the future. Additionally, I think the realization that energy security is vital to the future of economic growth is also adding a diversity of supply. This is creating the condition that the command I made earlier on exploration to create the conditions that are not here for one year or for six months.

The upcycle is adding strong legs both on long cycle, including exploration deepwater, on short cycle, including a production recovery activity that is naturalizing costs and that is very well illustrated into the growth that we are enjoying and that will be the base for the 2027 outlook. So we believe that the market is set for mid-single digits global activity growth, assuming Middle East being flat on the 2026. This means that we will visibly outperform this and the Middle East catalyst will become a catalyst on the peace deals going forward.

No, I appreciate that. I wanted to turn to Venezuela. The opportunity here certainly appears to be materializing more quickly than many anticipated initially. Can you provide some more color on what you're seeing in the market? You mentioned that Venezuela could double this year with multiple growth in 2027. How large could Venezuela become for SLB in two to three years' time? I know you guys said $1 billion back at peak, but curious kind of in a ballpark where you think the market could grow to here in the next two to three years.

No, we remain very excited about Venezuela. Every time we looked into it, I think we are realizing that the activity is set to increase further. I think we are getting several catalysts for this. We are getting, first and foremost, in lockstep with our customer that we have been working on with for the last two years. We are seeing activity increase currently and in the near future, and they have made an announcement for furthering increment of CapEx into the region. So we'll be fully participating to this upside. Additionally, several of our international operators have committed, have come to agreements in country, and we have benefited from this. By signing contracts, we have already started with another large contract execution this quarter. So we expect this to only continue going forward.

So how big it can become, I think we have mentioned that the potential is for multiple-fold next year. I think we see this trajectory to certainly continue going forward. I think we have mentioned before the historical level of $1 billion growth in the long term. So we do not see why not this as a ceiling or there is no ceiling. Why not as a target, as an ambition going forward? So we are well prepared. We are adding resource, adding equipment, and are getting the trust because we have a unique capacity on the ground and ability to deliver.

Well, great. I appreciate the color. Thank you.

Thank you.

Your next question comes from Saurabh Pant with Bank of America. Your line is open.

Hi. Good morning, Olivier and Stephane.

Morning.

Morning, Saurabh.

Olivier, maybe I want to dig in on the Middle East topic a little bit more, because we saw you delivered strong 13% increase in the Middle East revenue, and that was despite some late quarter disruptions. Right? That kind of tells me you were running ahead of expectations, perhaps before the disruptions hit. Can you maybe share some more color on the disruptions and if these disruptions are continuing right now? What was driving this, I guess, stronger than maybe anticipated recovery before these disruptions hit? I know you talked about already some contracts, including those integrated drilling contracts. Maybe some color on all of that.

Yeah. First, I think indeed several countries did participate to the uplift of activities in the third quarter as the security situation started to ease off in several country. I think this included the UAE, Kuwait to a lesser extent, Qatar and to a lesser extent, Saudi, that the beginning of the quarter clearly had an increase of activity. This was consolidated on some intervention activity, stimulation, and drilling activity across the region. Iraq, by contrast, was necessarily getting the same uplift of activity, but Oman was steady. That's the situation that turned out to be slightly ahead of expectation indeed as a run rate as well at mid-quarter. Now at the end of the quarter, some adjustment of activity were done, and I think this has been fairly publicized, and I want to come back on this. We're seeing things stabilizing, though.

Our expectation is that the fourth quarter will be upturn level of disruption, I would say. Without further escalation of the conflict going into a worst case scenario, we are seeing that the fourth quarter will be in line with the third quarter, and that's our assumption. This is the hypothesis we have made on our guidance for 2027 market outlook as well. That's in a sense where we stand. Now we relate in relation with the integrated contract. We are very pleased with these awards that touch both gas and oil assets. This is an activity that is definitively going forward and for which we are mobilizing in the fourth quarter and will come to full capacity in 2027, going forward.

I think that's untouched and certainly a committed contract for which we are indeed getting resource and getting increased activity going forward.

Got it. No, thank you. That's very useful color, Olivier. For my follow-up, maybe I'll stick to the Middle East and focus on the margin side of things a little bit. I know there are lots of cross currents, lots of uncertainty, but just given everything that we have heard about disruptions and cost inflation and then some pricing pressure on larger tenders, how should we think about where margins can go in maybe 2027? I'm just thinking more broadly, if revenue is normalized in the Middle East to, let's say, the pre-conflict level, can margins normalize to that level immediately, or would it take more time because of everything that's going on on the pricing and cost side of things?

Saurabh, Stephane here. Yes, you are using the Middle East as a swing factor to margins, and it's clearly a significant negative effect this year. If you look at the year-on-year performance, as we have indicated earlier, we have actually decided intentionally to address only partially the resources in the Middle East, not to hamper our capacity to address the activity rebound. So we are keeping some resources in place. When the conflict is resolved and activity rebounds as a result, we'll have very strong operating leverage, very few additional costs to bring in. So that will increase margin. Now the overall level of margins of the company, it's not just the Middle East that will be a booster. We will have likely less inflation effects going into 2027 because this is already kind of baked in, if you want.

We also hope that pricing pressure we have experienced in some of our Core divisions will also abate and are also baked into the current margins. When you have all the mix of the divisions, Digital is a booster, obviously on margins. Data Center Solutions on its own, as it grows very fast, is, as you know, not accretive to the overall SLB margin. It's a big equation, which we are not going to give you the answer today. We will provide more color on our 2027 margins in January. Overall, yes, the Middle East will be a catalyst for margin expansion for sure.

Right. No, thanks, Stephane. That equation is on us to solve in the meantime, but thank you. Thanks for all the moving pieces. Olivier, thank you. I'll turn it back.

Thank you.

Your next question comes from Arun Jayaram with JPMorgan. Your line is open.

Yeah, good morning. Olivier, I was wondering if you could comment on some of the trends you're seeing at ChampionX. On a year-over-year basis, obviously partial quarter data from last year, but looks like revenues were up in the mid-teens, and margins are now pushing in the mid-20s. So just wanted to talk a little bit about some of the trends here, and how is the ability of SLB to scale that business internationally versus when you bought it?

No, as you have seen, we are very, very pleased with the performance of ChampionX. I think the result of the success of the integration team, having landed this business to be having a very resilient and as well as very successful in innovation and customer centricity, which were attributes of ChampionX in North America. You have seen that the quarter was remarkable in term of top line growth and further margin expansion for the fourth consecutive quarter, based on the both production chemical success and growth and also the artificial lift both in North America and with more potential internationally. I think internationally, as we mentioned through the prepared remark, I think it would have been even better without the conflict in Middle East, as we have optionality for expanding the ChampionX portfolio internationally, particularly in the Middle East and across several offshore basins.

This is progressing, and I think this will be certainly an upside into the ChampionX growth trajectory in 2027, both internationally, offshore, and as the conflict is getting to an end, we'll have a further catalyst for the ChampionX success. But yes, we are very pleased. I think it reflects again the ability we have to integrate and to leverage their technology and to leverage our global footprint and our customer engagement to make it successful. I think very pleased with the performance. Congratulations to all the ChampionX employees and to the integration team into the Production Systems portfolio. I think the combination is attractive for our customers, and all the feedback we're receiving from customers both in North America and abroad is that they like the combination, they like the power of production recovery.

They like the potential of unlocking further recovery and production performance for both production chemicals and artificial lift technology, including Digital. Very, very, very pleased with the performance so far.

As to the margins level, Arun, yes, you are right. ChampionX touched now the mid-20s on EBITDA, which is clearly accretive to the overall company. This is despite inflation pressures, particularly on chemicals. The synergies, including in G&A, have been higher than we expected and have mostly offset with inflationary pressure to the point where margin continues to expand quarter after quarter. Clearly we are going to achieve our interim synergy target of about $200 million after 18 months post-acquisition, which is basically the end of this year, and we are not going to stop there. We are quite happy with the margins the businesses are generating.

Okay. My follow-up, I was wondering if you could just elaborate on OneSubsea visibility as we think about 2027. Obviously, you announced the Exxon Rovuma LNG award in Mozambique. Are you seeing 2027 as a year where there is going to be a lot of greenfield activity in terms of larger awards? Maybe just speak to the visibility you are seeing as we extend into this deepwater cycle.

No, thank you, Arun. I think I will not restrict this to 2027. OneSubsea awards typically are multi-year revenue generation, so I think whatever is earned in bookings in 2025 and 2026 reach out to 2027 to 2029, typically. I think directionally, I think the success we have had in recent months and the booking projection that we are anticipating, I think we believe that we will surpass the $9 billion target booking that we have set across the two years. I believe this will translate into visible growth on revenue in 2027 and 2028 and beyond.

As we believe that the technology portfolio we have, the deliverability of our capacity to the market, the multiple alliance we have created with joint feed study with customers to secure FID and to participate the best economics and best recovery solution for the customer, all combining to make it very attractive, including the subsea processing technology, we are uniquely positioned to unlock a recovery solution for mature basins. All in, we are quite confident into the outlook for subsea that is aligned with the deepwater cycle that has started, and we believe that we will benefit from it and OneSubsea will be a growth driver for the company going forward.

Great. Thank you.

Thank you, Arun.

Your next question comes from Sebastian Erskine with Rothschild & Co Redburn. Your line is open.

Good morning, Olivier and Stephane.

Morning.

Morning.

Congratulations on a strong North America quarter. Obviously, 7% sequential growth. Maybe you can talk about some of the building blocks of that performance. How much of it came from that production-linked revenues, obviously the ChampionX side and artificial lift rather than activity linked work? And what are your expectations for North America next year outside of Data Center Solutions in the Core business?

No, we are indeed very pleased with the North America sequential growth. I think beat sequentially on year-on-year. I think we believe we have been ahead of the market, and we believe that the factor that supports this as a combination of our market position in North American lands, not only ChampionX and the production recovery portfolio we have there, a combination of production chemicals and artificial lift solution, but also our drilling technology and our Digital portfolio that includes now the S&P Global Energy. I think all factor that will continue to support our performance in North American lands, including Canada and U.S.

Conversely, North America offshore and some of the activity we have in Alaska or in North America offshore in the Gulf of America, will continue to also support North America growth and with performance with digital exploration and compact across Well Construction and Reservoir Performance that will continue to give us growth. And finally, as you know Data Center Solutions will serve as a new leg of growth in North America, growing at the rate that you have seen, very impressive. And we are well on track for surpassing $1 billion by the end of this year as a run rate. And we are still on track and very well on track to surpass $2 billion in exit rate for 2027. So you combine all this differentiated portfolio and technology in North America lands, continued differentiation in North America offshore, including Alaska and Digital.

Then an uptick and a new growth vector of growth with Data Center Solutions. And you get the North America market that is poised to future growth despite the market condition that will qualify it as a low growth environment going forward.

Appreciate the color, Olivier. Just turning to Data Center Solutions, I noticed in the release you've expanded into Asia this quarter. I'm curious how large could the opportunity outside the U.S. become for your business and also how is the customer base kind of broadening beyond your sort of initial hyperscaler contracts?

I think we have potential to grow and replicate the setup we have put in Americas internationally. Now it's early days and I think we are leveraging the hyperscaler contract we have and delivering for end use, we say, for data center construction or data center development into Asia at this point. Then replicating to some extent some of the capability we have developed with our manufacturing hub in Louisiana and expanding it with some satellite capability of manufacturing integration that we have deported into Asia and then delivering our end customer into Asia market. So this we believe will continue to happen. But I think the potential we see as you have heard from the Meta contract in Canada and as we develop further hyperscaler contract in North America will still be centered in the short term with North America growth.

We continue to diversify our customer base and I think we'll be in a position next year to more develop and deploy and inform you about this. But this is certainly multiple customer contracts that are being deployed and being logged in our backlog and that will give us the support to growth. Additionally, obviously, the acquisition announcement we have made on Kelvion will only add to this. The feedback we are getting from our existing and prospective customer in this domain is that they love the combination of our manufacturing engineering technology capability and the Kelvion technology portfolio that supports thermal management and heat management in the data center space.

That is an equation that is difficult to resolve where a lot of efficiency and a lot of upside exists, hence a pool of technology, the pool of integration in which we will play as a partner for this infrastructure build out.

Thank you very much, Olivier. I will turn the call back over now. Thank you.

Thank you.

Your next question comes from Alexa Breno with Goldman Sachs. Your line is open.

Good morning team, and thanks for taking our question. I would love to dig into the 2027 commentary a little more. Can you provide some color on the outlook there from a regional perspective? As you look across your global footprint, where are you seeing meaningful trends in customer spending?

I think I will not go into detail on the guidance for 2027. We provided color on the directional trends, and yet I will reaffirm that we see the market giving us the opportunity to grow in every basin across every division in 2027. Based on, I think, the combination of the portfolio we have, the contracts we have put in our backlog and the differentiated technology portfolio give us an upside in each of the basins. Each of the basins has a combination of deepwater for Latin America, for North America, for Europe and Africa, and for Asia. It is a combination of conventional and unconventional for Middle East and Latin America. All of these basins also have a need and an increased investment in production recovery across all basins.

Now directionally, I believe that, as we commented earlier, exploration will be very visible in Africa and Americas. Deepwater will be very visible in Americas, including North and Latin America, Africa and Asia. Conventional will happen internationally, in Argentina and Middle East region. The conventional part, of course, the controlled development or production recovery will occur in every basin. Again, we believe that all of this provides a tailwind across the entire portfolio and across all divisions, as we expect every basin to benefit.

Thank you. I really appreciate that color. Then maybe just a follow-up. Can you talk a little about the Digital offering and some of the opportunities set there from a customer perspective?

Yeah, I think we are very pleased with progress we are making in Digital. I think as we commented earlier, I think Digital operation particularly, and data and AI are the two vectors of growth that I think we are the most excited about. Additionally, I think Digital exploration is about to benefit from a secular trend coming into exploration markets. So I think these are the three vectors of growth that we see that will certainly support our growth ambition for the next few years. Digital operation, as we commented before, relates to both drilling and production operation. It is a combination of platform application and edge application that allow us to provide automated solutions for our customers. We have been commenting on the success we are getting into drilling automation and drilling optimization. The same, I think, applies to production optimization.

Digital operation clearly will continue to be a factor of growth going forward. Adding to it, digital exploration, as we have seen, is benefiting from a secular trend or new upcycling exploration. Every new frontier basin is getting the benefit of digital exploration to de-risk the development, to de-risk the exploration campaign. I think we are seeing increased interest from our customers to invest into data, to invest into reprocessing, and to invest into digital AI capability to improve the imaging and improve the capability that we can provide to de-risk this exploration and accelerate the success. Finally, data and AI as a new vector of growth, as a new disruptor for the industry.

We believe with our offering, with our Lumi offering, with our AI Theta offering, we are seeing early adoption that I think indicates that this has a potential to disrupt and become a new vector of growth for Digital in our company.

Thank you very much for the color. We'll turn it back.

Thank you very much, Alexa.

Your next question comes from Marc Bianchi with TD Cowen. Your line is open.

Hey, thank you very much. I guess following up on the Digital, I know you didn't want to get into too many specifics on the drivers for 2027, but just given the strong year that seems to be unfolding for that business, do you anticipate that it can continue at double-digit growth in 2027, just given all the exploration visibility that seems to be coming in?

I think are you talking about Digital exploration specifically or Digital at large?

Digital at large.

Yeah. I think Digital at large, the ambition we have is to continue to operate at the level that is double digit or about, or higher. I think we have the attributes, as I said, combination of digital exploration cycle that is favorable as we turn into 2027. Digital operation that has started, as you have seen last year or this year, continue to be on a high growth rate through code, and we believe that we continue to make progress as you have seen the number of automated feet drilled this year to date. I think production digital version and the production domain is where there is the most upside in our opinion. That is the most attractive opportunity that we have going forward. We believe this will play out in 2027 and beyond.

Finally, as I said, AI is a disruptor that I think will play and support as a leg of growth going forward. I think these three, in addition to our resilient platform portfolio, I think should combine to the exploration data, the digital operation, and the data and AI should combine to provide us with the leg of growth that we look for double digit again in 2027 and beyond.

Yep. Very good. Thank you, Olivier. The other question was on the Data Center Solutions business. With Kelvion, you increase your content opportunity. I am curious what your appetite is for further M&A to continue to increase the content opportunity, or is it more likely what we will see here is you increase that on an organic basis?

Oh, we are very pleased what we have managed to get as an acquisition, and I think we will be concentrated on closing this, to concentrate on fulfilling, I think, the ambition, and the strategic opportunity that we have unlocked with this. I think this indeed will give us an opportunity to increase our share of the wallets per gigawatt. I think we have a significant backlog with a large number of an increasing number of customers, including hyperscalers that will give us the ability to put it to work and to participate into optimizing the thermal efficiency and hence to increase the share of the wallet, to increase our participation into this market and to provide not only fit modular manufactured solutions, but also integrate more and more into the engineered thermal end manufactured solution for the market.

I think this is where we will focus in the foreseeable future. Then, depending on how the market develops, we will see what could come next. But this is where we are putting our focus going forward.

Yep. Very good. Thank you. I'll turn it back.

Thank you.

Your last question will come from Derek Podhaizer with Piper Sandler. Your line is open.

Hey, good morning. Just wanted to ask about Production Systems.

Morning, Derek.

Yeah. Morning. You guided our Production Systems up, I think it was high single digits for the fourth quarter. You mentioned throughout the call production chemicals, artificial lift, which obviously ties into the ChampionX acquisition completions. We've talked Venezuela, OneSubsea, a lot of the visibility there. Maybe if you could just talk through the different levers for just fourth quarter specifically seeing that high single digit outperformance and then how we should maybe thinking about this directionally as we work into 2027. I know we'll hear more in January, but just early thoughts, just these different lines within your Production Systems, which is obviously gaining some momentum here.

Yeah, I think we are very pleased with the performance Production System. We're very pleased at large with our strategy. Production recovery is taking shape and I think reflects into the Production System backlog and into the Production System potential going forward. Now, the fourth quarter has an effect of end of year product sales, and includes OneSubsea out benefit. I think as we comment every year, the year-end product sales is a factor that shapes the sequential performance of Production System, no different than any other year. I think in a year that is indicative or characteristic of that cycle, this is magnified. But now going forward in 2027, we will not comment on this point directionally.

But as I commented earlier, we anticipate every division to be expanding growth in 2027, and this one will be led by the combination of the portfolio that you mentioned, ChampionX, OneSubsea, the completion, the OneSubsea. I think clearly a portfolio that will benefit going forward from the deepwater, from the short and long cycle activity outlook that we believe we will participate fully and outperform going forward. So I think Production Systems is resilient short cycle and long cycle and has a durable backlog characterized particularly well on OneSubsea that will give us legs of growth going forward in 2027 and beyond.

Great. That's helpful. Maybe just to wrap up, again, addressing the 2027 outlook. I know it assumes the Middle East stays flat from the second half of 2026. You're calling for market growth in the up mid-single digit range. I guess help us walk through or frame the magnitude of the upside in this market here if we do see a Middle East recovery. I don't know if you want to talk through on a country-by-country level, but just help us understand where that mid-single digit could really ultimately go to if we do see some form of resolution and recovery.

First, I think to clarify, I think we have been commenting on the market outlook that we see at this point and based on our early engagement of customers, also based on and reflecting on some third-party analysis on the 2027 outlook that the combination of North America and international, including and assuming a flat Middle East activity, is set to be in the mid-single digit growth year on year. We believe that we are set to visibly outperform this, and obviously the Middle East resolution will only give a catalyst for additional growth into this. Now, I will come short of giving you exact guidance on this, okay? I think it will be internationally led upcycle going forward, but you have seen the commentary that I provided earlier that we are very pleased with our market position and performance in North America.

So again, we have multiple leg of growth ahead of us in this cycle. You should only consider the Middle East, depending on the resolution of the conflict, as a potential to come back, if not to exceed previous activity pre-conflict as some of the country in the region will not only have to mobilize activity to restore the production capacity, but will also continue to accelerate on their capacity commitments, be it on conventional gas or oil in the region. So going forward, I think this is only serving as a catalyst going forward. But again, 2027 at this point will witness international growth, despite Middle East, and the Middle East being only a catalyst going forward on top of it.

Great. Very encouraging. Thank you, Olivier. I will turn it back.

Thank you.

I will now turn the call over to SLB for closing comments.

Thank you. Ladies and gentlemen, as we conclude today's call, I would like to leave you with the following reflections. First, our third quarter performance demonstrates that momentum is broadening across SLB. Each geography and Core division grows sequentially, with a gradual recovery in the Middle East, complemented by solid growth in North America and continued strength across the international offshore markets. Second, our core portfolio is benefiting from increasing activity across development and production. The strength and resilience of our expanded Production Systems portfolio, together with growth in Well Construction and Reservoir Performance, position us to participate as customer optimize existing assets and develop future activity. Third, the international outlook continues to strengthen. Long cycle deepwater projects are progressing, the foundation for renewed exploration are taking shape, and new opportunities are emerging across several markets.

Combined with the continued progress in Digital and accelerating momentum in Data Center Solutions, where our reach will be further expanded through the acquisition of Kelvion, we are well-positioned to capture attractive growth opportunities across both energy and industrial markets. These dynamics reinforce our confidence in delivering differentiated growth and outperformance as we move into 2027. With this, I will conclude today's call. Thank you all for joining.

This concludes today's conference call. Thank you for joining. You may now disconnect.