Halliburton (HAL) Q3 2026 earnings review
Halliburton's international sales grow fast, but North America shrinks
Halliburton's international business is carrying the company while North America shrinks and its margin promise slips. Revenue of $5.7 billion beat the company's July plan because Middle East work returned and the drilling division grew instead of declining. Chief executive Jeff Miller set an early 2027 outlook: mid-single-digit growth, margins near 15%.
| Revenue | $5,703M +2% from a year ago; above what the July plan pointed to |
|---|---|
| International revenue outside the Middle East | $2,138M +17% from a year ago, by our math |
| Completion and Production operating margin | 14.8% flat from last quarter; the plan called for +1.25 to +1.75 points |
| 2027 outlook | New mid-single-digit growth, operating margin about 15% |
⚖️ Verdict: ⚪ Neutral
The story is unchanged, because the international engine got stronger while the margin promise got no closer. Latin America, Europe and Africa grew 17% from a year ago and the Middle East rebounded. The bad news: the completion division's margin stayed flat against a plan to rise, Halliburton booked $107 million of severance, and the 2027 outlook assumes no North American recovery.
The question now is whether the margin target is reachable when the completion division has missed its own plan twice running. Either staff cuts and the Middle East recovery lift margins, or start-up costs and weaker US fracturing keep absorbing them. The fourth-quarter completion margin will tell.
🐂 Bull Case
Drilling Division Grew Against a Plan for Decline
Halliburton planned for its Drilling and Evaluation division, which drills and measures wells, to shrink: in July it told investors to expect revenue down 3% to 5% from the second quarter, with a margin gain of less than a point.
Instead revenue rose 4% from the second quarter and 10% from a year ago, on "improved activity across multiple product service lines in the Middle East and Latin America", the company said. Operating income rose 16%. The margin reached 15.0%, up 1.5 points, so the standing worry that new contracts carry start-up costs ahead of revenue did not show here. New deepwater drilling awards off Cyprus and Brazil add to the pipeline, though the release gives no values.
What to watch: fourth-quarter Drilling and Evaluation revenue against the outlook on the call. A second quarter above its own plan would mean the Middle East recovery, not a one-off rig move, drives the division.
Middle East Sales Climb Back Near Last Year
The Middle East and Asia region, Halliburton's largest outside North America, had lost ground for five quarters, most recently because of the conflict in the region, and in July the oilfield services group planned the third quarter without a recovery there. The standing risk is that renewed fighting removes the work again.
This quarter the region's revenue rose 8% from the second quarter, on "higher activity across multiple product service lines in Saudi Arabia and Kuwait", Halliburton said. It now sits within 1% of a year ago, which matters because the Aramco contracts won in July need activity in the kingdom to turn into revenue.
- Middle East/Asia revenue: $1,405 million, up from $1,298 million last quarter
- Share of total revenue: 25%, up from 23%
- New award: a multiyear Kuwait Oil Company agreement for the Ahmadi Innovation Valley research centre
What to watch: Middle East/Asia revenue next quarter against the fourth-quarter outlook. A further gain would mean the July awards are turning into revenue and that the plan, not the demand, was cautious; one quarter does not settle the conflict risk.
Growth Outside the Middle East Holds at 17%
Latin America plus Europe, Africa and the former Soviet states are the regions Halliburton has pointed to as its growth engine, and in July it said it expected international revenue outside the Middle East to grow by a low-double-digit percentage this year. The other side of the case is that this plan implies a second-half slowdown nobody has explained.
By our math the two regions brought in $2.1 billion this quarter, up 17% from a year ago, close to last quarter's pace. The split, from the release's own regional commentary:
- Europe/Africa/CIS: $1,016 million, up 23% from a year ago, as Nigeria offset lower well construction in Namibia
- Latin America: $1,122 million, up 13%, as Mexico offset lower stimulation work in Argentina
- Nine months: up 18% from a year ago, by our math
The full-year plan now looks far too low, because nine-month growth of 18% leaves, by our math, a fourth quarter between 10% below and level with last year. Either Halliburton set the plan with a lot of caution, or it sees a fourth-quarter drop it has not described; the release does not restate the plan.
What to watch: the two regions' fourth-quarter revenue, and whether management lifts the full-year target on the call. A figure near this quarter's level would mean the plan was cautious, and the question moves to whether the 2027 outlook is cautious too.
🐻 Bear Case
Completion Margin Flat Against a Plan to Rise
"Our revenue exceeded our expectations, and we took important steps towards improving our margins," chief executive Jeff Miller said. The step was job cuts: Halliburton booked $107 million of severance for the "rationalization of our global headcount", its fourth round of cuts since the start of 2025.
The margin test was Completion and Production, the division that fractures and completes wells. In July the plan called for its margin to rise 1.25 to 1.75 points on slightly lower revenue. Revenue fell 4% from the second quarter on "lower stimulation activity in the Western Hemisphere". Operating income fell by the same share, so the margin stayed at 14.8%.
That is the second quarter running below the division's own margin plan, after a gain of about 0.2 points in the second quarter against a plan for at least 0.5. The plan rested on price and mix because volume was falling, and neither showed up. Management blamed start-up costs on new international contracts in July and still has not sized them.
What to watch: the division's fourth-quarter margin, and any quarterly savings figure attached to the severance. A third quarter below plan would mean the 2027 margin target rests on costs the division has not yet taken out.
North America Shrank 9%, With No Recovery Planned
Three months ago Halliburton called North America a recovery story and expected improvement through the year. Instead the region's revenue fell 5% from the second quarter, "primarily driven by lower pressure pumping services in U.S. Land", the company said, and now sits 9% below a year ago.
The flip comes from the outlook, not the quarter. Miller's early view of 2027 "assumes a flat North America market and does not require any recovery in North America hydraulic fracturing", and he called any recovery "purely upside". North America is still 38% of revenue, so a flat market there caps total growth at what the international regions add.
What to watch: fourth-quarter North America revenue and the region's assumption in the formal 2027 outlook. A further sequential decline would mean the region is losing fracturing work, not pausing it.
Cash Fell as Receivables Grew Faster Than Sales
Halliburton's profit held up, but its cash did not. Cash from operations fell 25% from a year ago to $368 million. The reason is working capital. Receivables and inventories absorbed $330 million, so free cash flow, what remains after capital spending, came to $156 million.
- Receivables: $5.5 billion, up 12% since December, against revenue up 2% over nine months
- Cash on hand: $1.8 billion, down $205 million in the quarter
- Paid to shareholders: $391 million in buybacks and dividends, 2.5 times free cash flow
Halliburton's filings had flagged one Mexican customer paying late, and the release gives no customer split, so that risk is not readable yet. Net debt rose about $200 million by our math, because payouts ran well ahead of the cash the business produced.
What to watch: fourth-quarter free cash flow, which carried nearly half of last year's total. A weaker fourth quarter than last year's would mean the working-capital build is a cost of international growth, not timing.
Risks this quarter didn't answer
Five standing concerns got no decisive reading in the release, which is all Halliburton has published so far for the quarter; the call transcript and the quarterly filing may fill some of them.
- Tax dispute with the IRS over the 2016 Baker Hughes termination fee, about $640 million of potential cash tax: not mentioned; the filing's contingencies note will show any change.
- VoltaGrid power venture: absent from the release for a second quarter after headlining three calls; only a committed-capacity or capital figure would move this.
- SAP S4 migration: $42 million spent this quarter and $130 million over nine months, below the plan of about $45 million; whether the fourth-quarter completion date holds is not stated.
- Oil prices and customer budgets: the release gives no reading; Miller's claim of multi-year demand growth is the only statement on the market.
- Integration of four acquisitions in eighteen months: no update; the filing's goodwill note is where any change appears.
👓 Other Themes
Halliburton Wins Deepwater Work in Cyprus and Brazil
Halliburton won an integrated well construction and completions contract from Eni for the Cronos ultra-deepwater field off Cyprus, and a bp contract to "fast-track the appraisal campaign" at the Bumerangue discovery off Brazil. It also signed memorandums of understanding with Eneva and WESCA to "support energy development opportunities in Venezuela", a market absent from the last two calls. The release gives no contract values or start dates.
Miller Expects Multi-Year Demand From Energy Disruption
Miller said Halliburton is "another three months into one of the largest energy disruptions in history" and expects the work to restore production and rebuild inventories to "drive multi-year demand growth for oilfield services". The quarter supports only part of that claim: international revenue rose 9% from a year ago by our math, while North America, the most price-sensitive market, fell 9%.
💲 Other KPIs
Capital spending rose for a second quarter, to $266 million, or 4.7% of revenue. That is below the long-term range of 5% to 6% Halliburton has set. Nine-month spending totals $693 million against the roughly $1.1 billion full-year plan given in July. By our math the fourth quarter would need about $407 million, the most since the fourth quarter of 2024.
The share count fell 2% from a year ago. Halliburton repurchased $250 million of stock in the quarter, its usual pace. Nine-month repurchases are $558 million, below last year's, because the oilfield services group cut buying to $100 million in the first quarter. The dividend stayed at $0.17 per share.
Earnings before interest, tax, depreciation and one-off charges came to $1.0 billion, level with a year ago. That is up 5% from the second quarter. The margin was 17.5%, down 0.5 points from a year ago, because the completion division earned less on lower North American work.
🔮 Guidance
New. Miller's early view has revenue growing by a mid-single-digit percentage next year, against 2% growth this quarter and about 2% over nine months. The outlook "assumes a flat North America market". So by our math the growth must come from the international regions, which would need to grow about 8% if North America, at 38% of sales, stays level. The release gives no fourth-quarter outlook.
New. Miller expects "operating margins of about 15%, an approximately 200 basis point improvement". That puts this year's base near 13%. Halliburton's adjusted operating margin over nine months is 12.4%, so by our math the fourth quarter would need about 14.6% for the year to reach that base, if revenue holds at this quarter's level. Which margin he means is a question for the call.
❓ Key Questions
Which margin is the 2027 target of 15% measured against?
Miller's 2-point improvement implies a 2026 base near 13%, above the 12.4% adjusted operating margin of the first nine months. If the base is a different measure, the target means something else.
How large is the start-up cost drag in Completion and Production?
The division has landed below its margin plan two quarters running, and in July management blamed mobilisation costs on new contracts without sizing them. Until the number is given, the 2027 margin step cannot be tested.
What will the $107 million of severance save each quarter?
The 2025 cuts came with a savings figure of about $100 million per quarter. This round has none in the release, so investors cannot tell how much of the 2027 margin plan it funds.
What drove the $330 million working-capital outflow this quarter?
Receivables are up 12% since December against revenue up 2%. Whether the build is timing on new international contracts or slower payment from the Mexican customer flagged in prior filings decides whether free cash flow recovers in the fourth quarter.
Does the full-year international target still stand?
Nine-month growth in Latin America, Europe and Africa is about 18% by our math, so a low-double-digit full-year figure would need a fourth-quarter decline. The release does not restate the target.