# How Baker Hughes makes money

CXProWealth Business Lens · Baker Hughes (BKR) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-28 with the SEC (accession 0001701605-26-000035): https://www.sec.gov/Archives/edgar/data/1701605/000170160526000035/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $8.0B (+14.5% on the year)
- Operating income: — (operating margin —)
- Net income: $411.0M (net margin 5.1%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $734.0M (9.1% of revenue)
- Cash conversion (operating cash flow / net income): 2.45x
- Capital expenditure: 3.4% of revenue

## Where the money goes (Q3 FY2026)

- Sales of goods → Total revenue: $5.4B
- Sales of services → Total revenue: $2.6B
- Total revenue → Cost of goods and services sold: $6.1B
- Total revenue → Gross profit: $1.9B
- Gross profit → Selling, general and administrative: $732.0M
- Gross profit → Research and development costs: $150.0M
- Gross profit → Amortization of acquired intangible assets: $165.0M
- Gross profit → Restructuring: $28.0M
- Gross profit → Other (income) expense, net: $157.0M
- Gross profit → Interest expense, net: $177.0M
- Gross profit → Income before income taxes: $519.0M
- Income before income taxes → Provision for income taxes: $97.0M
- Income before income taxes → Net income: $422.0M
- Net income → Less: Net income attributable to noncontrolling interests: $11.0M
- Net income → Net income attributable to Baker Hughes Company: $411.0M

## Where the revenue comes from

### Products and services (Condensed Consolidated Statements of Income)

| Member | Value | Share |
|---|---:|---:|
| Sales of goods | $5.4B | 67.2% |
| Sales of services | $2.6B | 32.8% |

The members sum to total revenue.

### Segments (REVENUE RELATED TO CONTRACTS WITH CUSTOMERS - Schedule of Disaggregated Segment Revenue (Details))

| Member | Value | Share |
|---|---:|---:|
| Ofse | $3.7B | 45.6% |
| IET | $3.5B | 43.3% |
| Chart | $888.0M | 11.1% |

The members sum to total revenue.

### Regions (REVENUE RELATED TO CONTRACTS WITH CUSTOMERS - Schedule of Disaggregated Segment Revenue (Details))

| Member | Value | Share |
|---|---:|---:|
| Middle East/Asia | $1.3B | 15.7% |
| North America | $955.0M | 11.9% |
| Europe/CIS/Sub-Saharan Africa | $770.0M | 9.6% |
| Latin America | $674.0M | 8.4% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Total revenue | $8.0B | 100% |
|   Sales of goods | $5.4B | 67.2% |
|   Sales of services | $2.6B | 32.8% |
| Sales of goods | $4.2B | 52.2% |
| Sales of services | $1.9B | 23.8% |
| Selling, general and administrative | $732.0M | 9.1% |
| Research and development costs | $150.0M | 1.9% |
| Amortization of acquired intangible assets | $165.0M | 2.1% |
| Restructuring | $28.0M | 0.3% |
| Other (income) expense, net | (-$157.0M) | 2.0% |
| Interest expense, net | (-$177.0M) | 2.2% |
| **Income before income taxes** | $519.0M | 6.5% |
| Provision for income taxes | ($97.0M) | 1.2% |
| **Net income** | $422.0M | 5.3% |
| Less: Net income attributable to noncontrolling interests | $11.0M | 0.1% |
| **Net income attributable to Baker Hughes Company** | $411.0M | 5.1% |
| Class A Common Stock | $0 | 0.0% |
| Class A Common Stock | $0 | 0.0% |
| Class A Common Stock | $0 | 0.0% |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2015 | $16.7B | -$138.0M | $0 | $1.3B | $607.0M | $670.0M |
| FY2016 | $13.1B | $457.0M | $0 | $262.0M | $424.0M | -$162.0M |
| FY2017 | $17.2B | -$284.0M | -$103.0M | -$799.0M | $665.0M | -$1.5B |
| FY2018 | $22.9B | $701.0M | $195.0M | $1.8B | $995.0M | $767.0M |
| FY2019 | $23.8B | $1.1B | $128.0M | $2.1B | $1.2B | $886.0M |
| FY2020 | $20.7B | -$16.0B | -$9.9B | $1.3B | $974.0M | $330.0M |
| FY2021 | $20.5B | $1.3B | -$219.0M | $2.4B | $856.0M | $1.5B |
| FY2022 | $21.2B | $1.2B | -$601.0M | $1.9B | $989.0M | $899.0M |
| FY2023 | $25.5B | $2.3B | $1.9B | $3.1B | $1.2B | $1.8B |
| FY2024 | $27.8B | $3.1B | $3.0B | $3.3B | $1.3B | $2.1B |
| FY2025 | $27.7B | — | $2.6B | $3.8B | $1.3B | $2.5B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: -0.3% (year before +9.1%): slowing
- Operating income: +33.0% (year before +95.5%): slowing
- Net income: -13.1% (year before +53.3%): slowing
- Free cash flow: +23.5% (year before +11.8%): accelerating

## Operating figures stated in the filing

- Employees: 65,600 employees (as of 2026-09-30). "We conduct business in more than 120 countrie s and employ approximately 65,600 employees." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Remaining performance obligations: $46.4B (as of 2026-09-30). "As of September 30, 2026, RPO totaled $46.4 billion, of which IET totaled $39.4 billion, Chart totaled $3.6 billion, and OFSE totaled $3.4 billion." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Remaining performance obligations: Industrial & Energy Technology: $39.4B (as of 2026-09-30). "As of September 30, 2026, RPO totaled $46.4 billion, of which IET totaled $39.4 billion, Chart totaled $3.6 billion, and OFSE totaled $3.4 billion." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Remaining performance obligations: Chart: $3.6B (as of 2026-09-30). "As of September 30, 2026, RPO totaled $46.4 billion, of which IET totaled $39.4 billion, Chart totaled $3.6 billion, and OFSE totaled $3.4 billion." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Remaining performance obligations: Oilfield Services & Equipment: $3.4B (as of 2026-09-30). "As of September 30, 2026, RPO totaled $46.4 billion, of which IET totaled $39.4 billion, Chart totaled $3.6 billion, and OFSE totaled $3.4 billion." (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Worldwide rig count (quarterly average): 1,901 rigs (as of 2026-09-30). "Worldwide 1,901 1,798 6 % 1,831 1,825 - %" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)
- Worldwide rig count (quarterly average): 1,798 rigs (as of 2025-09-30). "Worldwide 1,901 1,798 6 % 1,831 1,825 - %" (Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS)

## Key insights

### Chart supplied almost all of the revenue growth

Chart's $888M equals 12.7% of last year's quarterly revenue, against total growth of 14.5%, so the businesses already owned added little.

Revenue rose to $8,025M from $7,010M, an increase of 14.5%. Chart, bought in July, contributed $888M from the closing date to quarter-end, 11.1% of the quarter's revenue. Measured against last year's base, Chart's $888M equals 12.7% of the $7,010M, most of the 14.5% growth. _(from the filing)_
The filing describes the rest: IET grew on climate technology solutions and gas technology services, partly offset by lower gas technology equipment and the sale of the precision sensors business, while OFSE revenue "was broadly flat year-over-year." _(from the filing)_
Analysis: the quarter reads as a step change from an acquisition rather than a rise in underlying demand. The base also shrank, because the precision sensors and surface pressure control businesses left earlier in the year, so like-for-like growth in the businesses kept is somewhat higher than the small remainder suggests. Until the first anniversary of the closing, year-on-year comparisons include Chart as added revenue. _(analysis)_

### Acquisition charges cut pretax income as sales rose

Amortization rose to $165M from $10M and net interest to $177M from $56M, pulling income before taxes down to $519M from $821M.

Amortization of acquired intangible assets rose to $165M from $10M, which the filing ties primarily to the intangible assets acquired with Chart. Net interest expense rose to $177M from $56M, driven by the senior notes and term loans raised for the deal. Other expense rose to $157M from $71M, mostly Chart transaction costs. Restructuring added $28M against none a year earlier. _(from the filing)_
Income before income taxes fell to $519M from $821M. Amortization alone equals 31.8% of this quarter's pretax income, and net interest 34.1%. Net income attributable to the company was $411M, a 5.1% net margin, against $609M on $7,010M of revenue a year earlier, an 8.7% margin. _(from the filing)_
A lower tax charge softened the fall: $97M against $204M. The filing attributes the difference in part to the discrete recognition of additional U.S. tax attributes, an item tied to this period rather than to the running business. _(from the filing)_
Analysis: the charges differ in how long they last. Transaction costs belong to the closing, and the inventory step-up the filing records through cost of goods sold unwinds as acquired inventory is sold. Part of the acquired intangibles is backlog, amortized over a single year. The rest of the amortization, on customer relationships and trade names, and the interest on the new debt recur each quarter. _(analysis)_

### Operating cash ran 2.45 times reported profit

Operating cash flow of $1,005M was 2.45 times net income of $411M, because amortization costs no cash and customers pay ahead for work.

Operating cash flow was $1,005M against $929M a year earlier, while net income attributable to the company fell to $411M from $609M. Free cash flow rose to $734M from $634M, a 9.1% margin on revenue, as capital spending eased to $271M from $295M, 3.4% of revenue. _(from the filing)_
Two features of the business open the gap. Amortization, $165M this quarter, is an accounting charge with no cash outflow. And the filing names payments from customers, "including advance payments or progress collections for work to be performed," as its largest source of operating cash; for the nine months it attributes working capital cash generation mainly to progress collections. _(from the filing)_
Caveat: quarterly cash is lumpy. In the first quarter of this year operating cash flow was $500M against net income of $930M, the reverse pattern, partly because that quarter's profit included gains on business disposals that brought no operating cash. One quarter's ratio says little on its own; the direction of the progress collections balance says more about whether cash comes from the business or from timing. _(analysis)_

### OFSE brings 45.6% of revenue, 7.3% of backlog

OFSE's $3.4B backlog equals 92.9% of one quarter's segment revenue, so its sales rest on orders won as customers set drilling budgets.

Of $46.4B in remaining performance obligations, IET holds $39.4B (84.9%), Chart $3.6B and OFSE $3.4B (7.3%). OFSE brought in $3,660M this quarter, so its entire backlog equals 92.9% of a single quarter's revenue. IET's backlog stands against quarterly revenue of $3,477M. _(from the filing)_
The filing ties OFSE demand to customers' spending on exploration, development and production, which follows their oil and gas price expectations. The worldwide rig count averaged 1,901 against 1,798 a year earlier, yet OFSE revenue was "broadly flat," with North America at $955M, lower than a year earlier. _(from the filing)_
Analysis: the company runs on two clocks. IET's revenue for years ahead is largely contracted, while OFSE resets with each budget cycle. That is why the filing frames its OFSE outlook around upstream spending and oil prices, and its IET outlook around LNG and gas infrastructure demand. _(analysis)_

### Competitive edge

- **Installed machines keep earning after the sale** Services brought $2,629M, 32.8% of revenue, from parts, upgrades, monitoring and repairs on equipment the company has already supplied.
- **IET's backlog books years of revenue ahead** IET holds $39.4B of contracted, undelivered work, 84.9% of the company's $46.4B backlog, while bringing 43.3% of quarterly revenue.

### What to watch

- **Middle East/Asia carries 34.5% of OFSE revenue** Middle East/Asia brought $1,261M, 15.7% of company revenue, from the region where management expects upstream spending to decline this year.
- **Net interest equals 34.1% of pretax income** Net interest of $177M equals 34.1% of income before taxes, against 6.8% a year earlier, a cost that does not fall when activity does.
- **Supply chain sets the pace of backlog conversion** The company flags tight aeroderivative supply and extended lead times, which govern how fast IET's $39.4B backlog turns into revenue.

## Investor view

**Chart added $888M of revenue in its first partial quarter, and the cost of buying it cut net income**

### How it makes money

Baker Hughes sells equipment and services to oil, gas and industrial customers through three segments. Oilfield Services & Equipment, which drills, completes and keeps wells producing, brought in $3,660M this quarter, 45.6% of revenue. Industrial & Energy Technology, the gas turbine, compressor and LNG equipment business, brought in $3,477M, 43.3%. Chart, the cryogenic and gas-handling equipment maker bought in July, added $888M, 11.1%. _(from the filing)_
Of $8,025M in revenue, $5,396M (67.2%) was sales of goods and $2,629M (32.8%) sales of services. The company manages its business on a different split: it counts sales under product service agreements, "including sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance, and repairs)," as services. So part of the work it runs as recurring service sits inside the goods line. _(from the filing)_
Revenue follows customer budgets. The filing says it is "dependent on spending by our customers for oil and natural gas exploration, field development, and production," and that this spending tracks customers' price expectations, measured by Brent outside North America. The worldwide rig count the company publishes averaged 1,901 this quarter, against 1,798 a year earlier. _(from the filing)_
Much of the revenue is booked years ahead. Remaining performance obligations, work contracted but not yet delivered, stood at $46.4B at the end of September: IET held $39.4B of it (84.9%), Chart $3.6B and OFSE $3.4B. On long equipment contracts customers pay progress collections before delivery, and the filing names payments from customers, "including advance payments or progress collections for work to be performed," as its largest source of operating cash. _(from the filing)_

### What shifted

Revenue rose 14.5% to $8,025M from $7,010M, and Chart's $888M accounts for most of the increase. The filing explains the rest: IET grew on climate technology solutions and gas technology services, partly offset by lower gas technology equipment and the sale of the precision sensors business, while OFSE revenue "was broadly flat year-over-year." _(from the filing)_
Profit fell below the revenue line. Amortization of acquired intangible assets rose to $165M from $10M, net interest expense to $177M from $56M, and other expense to $157M from $71M, which the filing ties mainly to Chart transaction costs. Restructuring added $28M against none a year earlier. Income before income taxes fell to $519M from $821M, and net income attributable to the company to $411M from $609M, a 5.1% net margin. _(from the filing)_
The mix tilted toward equipment. Sales of goods grew 17.0% and sales of services 9.7%, so goods rose to 67.2% of revenue, up 1.43 points from a year earlier. Chart's first-quarter revenue is mostly original equipment rather than aftermarket, which accounts for much of the tilt. _(from the filing)_
Cash held up better than earnings. Operating cash flow was $1,005M against $929M a year earlier, well above net income attributable to the company of $411M, and free cash flow was $734M against $634M, a 9.1% free cash flow margin. Capital spending fell to $271M from $295M, 3.4% of revenue. The tax charge was $97M against $204M, which the filing attributes in part to the discrete recognition of additional U.S. tax attributes. _(from the filing)_
Inside OFSE the regional mix moved. Middle East/Asia brought in $1,261M, 34.5% of the segment, and the filing says it declined because of the surface pressure control disposition. Europe/CIS/Sub-Saharan Africa at $770M and Latin America at $674M grew. North America was $955M, lower than a year earlier, even though the North American rig count rose. _(from the filing)_

### Risks in the filing

The company says disruption in the Middle East, including supply constraints through the Strait of Hormuz, is expected to add risk across the business, with possible effects on customer spending, project timing and supply chain visibility. It now calls this uncertainty "a structural feature of oil and gas markets." _(from the filing)_
Revenue rests on oil and gas customers' budgets, which follow their price expectations. The filing warns that a significant fall in oil and gas prices, geopolitical events or a pandemic could cut revenue or raise costs, weaken cash flow and liquidity, and lead rating agencies to lower its credit ratings, which would raise the cost of borrowing under its credit facility. _(from the filing)_
Collection is a named risk. The company bills some services in arrears and says customers with weaker cash flow or credit access may pay late, and it singles out its primary customer in Mexico while noting no material losses so far. It also says cash held outside the U.S. may be hard to use quickly because of exchange or cash controls. _(from the filing)_
Project structures carry their own exposure. In joint and several liability consortiums, a partner's failure to perform could leave the company with extra costs, liquidated damages or contract disputes. The Chart purchase price allocation is preliminary and may be revised. The company also names tightness in the aeroderivative supply chain as a factor to monitor and manage. _(from the filing)_
Two of these risks already show in the quarter. The Middle East is the one OFSE region the filing says shrank, and the debt raised for Chart has lifted interest expense. The collection and credit-rating risks do not appear in these figures: operating cash flow rose from a year earlier. _(analysis)_

## Founder view: mechanisms

### An equipment sale opens a service stream

IET and Chart sell long-lived machines such as gas turbines, compressors and cryogenic equipment, then earn on spare parts, upgrades, monitoring and repairs for the life of the asset. The first sale is contested on price; the aftermarket is where the installed base pays, because the original maker holds the designs, the field data and the qualifications customers need to keep a critical machine running. _(analysis)_

### Customers fund the work in advance

On long equipment contracts, customers pay progress collections before the machine is delivered. The company records the cash as an obligation, builds over months or years, and recognizes revenue as the work is done. The backlog becomes a source of financing: the customer's money pays for materials and labor before the revenue appears. _(analysis)_

### Buying growth front-loads the costs

Baker Hughes bought Chart largely with borrowed money. Acquisition accounting writes up the target's intangible assets and inventory, which then run through the income statement as amortization and higher cost of goods, and the new debt adds interest from the first day. Revenue arrives at once; the earnings case rests on synergies that take years to deliver. _(analysis)_

### Reweight toward less cyclical markets

The company is shifting weight from oilfield services, which rise and fall with drilling budgets, toward gas infrastructure, LNG and industrial equipment sold on long contracts. It sells pieces that do not fit, such as the precision sensors unit and the surface pressure control business, and buys ones that do, such as Chart. _(analysis)_

## Member research

Signed-in members read, on the page: what Baker Hughes's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Baker Hughes 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/1701605/000170160526000035/ (2026-10-28)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02