NOV Inc. (NOV) Q3 2026 earnings review
NOV raises its profit margin, but its equipment backlog shrinks
NOV's shorter-cycle tool factories lifted profits, while its heavy equipment order book kept shrinking and operations burned cash. The oilfield equipment maker grew third-quarter sales 2% from a year ago, and operating cash profit excluding tariff refunds rose 7% by our math, beating its own plan. Chief executive Jose Bayardo credited higher drill-pipe and composite-pipe shipments, but warned that a fourth-quarter Middle East drilling slowdown will hold fourth-quarter sales roughly flat.
| Revenue | $2.23B +2.3% from a year ago |
|---|---|
| Adjusted EBITDA, excluding tariff refunds | $276M +7.0% from a year ago by our math |
| Energy Equipment order backlog | $3.98B -12.7% from a year ago |
| Fourth-quarter outlook | Flat sales Adjusted EBITDA $260–300M (+5% at middle) |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because genuine margin gains in the factories were offset by a shrinking equipment backlog and another cash drain. The good news: profit excluding tariff refunds rose 14% from last quarter, proving that second-quarter margin gains were not just a one-time refund fluke. The bad news: heavy equipment orders ran below shipments for a fifth quarter in six, and nine-month free cash flow reached -$202 million.
The question now is whether rising profits can turn into cash and fresh equipment orders before the shrinking backlog drags 2027 sales down. One view is that offshore project awards and year-end customer payments will refill both the order book and the bank account; the other is that Middle East budget adjustments will delay both. Fourth-quarter bookings and free cash flow will settle it.
🐂 Bull Case
Drill Pipe and Composite Shipments Carry Growth
Energy Products and Services — the division that sells shorter-lived drilling tools, drill pipe, and composite pipes — is now carrying NOV's top line. Chief executive Jose Bayardo attributed the quarter's gain to "ramping manufacturing throughput against our growing backlog of capital equipment orders in our Energy Products and Services segment." After shrinking in the first half of the year, the division cleared its third-quarter outlook.
- Segment revenue: $1.06 billion, up 8.9% from a year ago against a 5% to 7% plan
- Segment Adjusted EBITDA (operating cash profit excluding one-offs): $153 million, or $150 million excluding a $3 million tariff refund
- Regional and product records: sales in Argentina and the Middle East both grew more than 20% from a year ago, while Digital Services hit record revenue on "growing adoption of our digital completions solutions"
This matters because the oilfield equipment maker needed its shorter-cycle factories to offset a slowdown in big offshore projects. By our math, the fourth-quarter plan of 6% to 8% growth from a year ago keeps segment sales steady at $1.06 billion, proving the third-quarter jump was not a one-off shipment spike.
What to watch: whether the full report shows the drill-pipe order backlog holding near double last year's level. A drop would mean factories are emptying their order books faster than drillers are refilling them.
Cost Cuts and Backlog Mix Lift Margins
Bayardo promised that operational improvements will help NOV "demonstrate materially greater earnings power over the coming years." A skeptic had reason to doubt that after the second quarter, when a $40 million tariff refund inflated profit and management warned that high-margin offshore projects were finishing. The third quarter tested that concern and beat the company's $240 million to $270 million Adjusted EBITDA plan.
Excluding a $5 million tariff refund, Adjusted EBITDA rose 13.6% from last quarter to $276 million, or 12.4% of sales, by our math. Gross margin rose 0.8 percentage points from a year ago as cost of revenue (the cost of making products and running services) fell to 80.3% of sales, while selling and administrative overhead dropped 0.7 percentage points to 13.3%. Subsea flexible pipe grew revenue, profit, and margins from a year ago for a seventh straight quarter.
What to watch: fourth-quarter Adjusted EBITDA against the $260 million to $300 million outlook. Hitting the upper half on flat sales would confirm that plant closures and higher-priced backlog are lifting margins permanently.
🐻 Bear Case
Heavy Equipment Backlog Drops Below $4 Billion
In Energy Equipment — the division that builds large offshore production gear and drilling rigs — NOV is pitching a multi-year offshore boom, estimating $100 million to $700 million of potential work per floating production vessel. Yet the division's actual revenue fell 2.2% from a year ago to $1.22 billion, because the "completion of certain offshore production related projects that were not fully offset by increased demand for the segment’s other products and services" dragged sales down.
- New equipment orders: $577 million, up 21.7% from last quarter but down 39.3% from a year ago (including two offshore wind vessel designs)
- Book-to-bill ratio (new orders divided by shipments out of the backlog): 91%, below the 100% needed to keep the order book flat for a fifth quarter in six
- Ending capital equipment backlog: $3.98 billion, down $102 million from last quarter and down 12.7% from a year ago by our math
This cuts against the early-recovery story because a shrinking order book leads to lower future revenue, which is why management expects fourth-quarter segment sales to fall 4% to 6% from a year ago. What to watch: fourth-quarter equipment orders. By our math, NOV needs roughly $688 million in fourth-quarter bookings just to reach the bottom of its 90% to 100% full-year book-to-bill target.
Working Capital Drains Cash for a Third Quarter
NOV pledges to return at least half of its excess free cash flow to shareholders, and last quarter management stood by its goal of turning 40% to 50% of full-year Adjusted EBITDA into free cash flow. Instead, cash generation stayed negative in the third quarter as the Houston-based group tied up more money in working capital.
- Third-quarter free cash flow: -$47 million ($41 million of operating cash flow minus $88 million of capital spending), down from +$245 million a year ago
- Nine-month free cash flow: -$202 million, against +$404 million in the first nine months of 2025
- Balance sheet build since year-end: contract assets (work done but not yet billed to customers) rose 23.5% to $736 million, and inventory rose 8.7% to $1.96 billion by our math
Because operations burned cash, NOV has paid its $274 million of nine-month dividends and buybacks out of its cash pile. What to watch: fourth-quarter free cash flow. By our math, the business must generate about $661 million of free cash flow in the fourth quarter — more than the $472 million it produced in the fourth quarter of 2025 — to reach the middle of its full-year cash conversion goal.
Middle East Slowdown Stops the Top-Line Recovery
Sales in the Middle East grew more than 20% from both last quarter and a year ago, helping total revenue rise 2.3% from a year ago — NOV's first yearly top-line increase since 2024. That rebound will pause immediately. Bayardo warned of a "moderation in Middle East activity during the fourth quarter as certain customers adjust their drilling programs" alongside ongoing geopolitical disruptions.
Because the region is one of the oilfield supplier's main international growth engines, this customer pause pulls the fourth-quarter consolidated revenue outlook back to roughly flat from a year ago. Management also noted that its outlook assumes regional conditions do not worsen beyond that planned drilling slowdown.
What to watch: first-quarter 2027 revenue outlook on the next release. It will show whether Middle East national oil companies are merely trimming fourth-quarter budgets or cutting 2027 drilling plans.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no new numbers in the third-quarter earnings release or presentation.
- Disputed royalty receivable: no update on the $140 million net receivable tied to a Federal Circuit appeal; the quarterly filing's legal footnote will show if reserves changed.
- Tariff costs and raw materials: the release noted a $5 million tariff refund benefit, but did not update the roughly $30 million quarterly tariff expense, tungsten carbide inflation, or uncollected refund receivables.
- Drilling aftermarket sales: aftermarket stayed at 37% of Energy Equipment revenue, but the release did not state whether drilling spare-parts revenue stopped falling from a year ago.
- Unconsolidated affiliate losses: equity losses widened to $7 million from $5 million last quarter; the quarterly filing will show if casing-pipe pricing fell further.
💲 Other KPIs
Diluted shares fell 3.0% from 371 million a year ago by our math, lifting per-share profit growth above net income growth. However, NOV slowed its stock buybacks sharply to $15 million (0.8 million shares) in the third quarter, down from $63 million in the second quarter and $67 million in the first quarter as cash flow stayed negative.
Total debt of $1.71 billion minus $1.06 billion of cash leaves $649 million of net debt by our math, up from $542 million last quarter and $166 million at the end of 2025. The cash balance has dropped by $494 million this year to fund working capital, capital spending, and shareholder payouts, though net debt remains below management's 1x earnings ceiling.
The company excluded $28 million of severance, inventory write-downs, and "costs associated with streamlining our business operations" plus $18 million of net fixed-asset write-downs from its adjusted profit measures. Those combined charges rose from a net $3 million credit in the second quarter (when asset sale gains offset restructuring), keeping reported operating margin 2.0 percentage points below the adjusted figure.
🔮 Guidance
Cut from an earlier qualitative view that fourth-quarter results would improve over last year. The plan now calls for revenue near last year's $2.28 billion, slowing from 2.3% growth in the third quarter. By our math, that still implies a 2.3% seasonal rise from the third quarter, held back by slower Middle East drilling. Across the last four quarters, revenue has beaten the middle of the plan by 1.3% on average.
New. The middle of the range ($280 million) is up 4.9% from $267 million a year ago and up 1.4% from the third quarter's $276 million profit excluding tariff refunds, by our math. Management has beaten the top of its quarterly profit range in five of the last six quarters; if the 5.5% four-quarter average beat holds, profit would land near $295 million.
New. The plan has segment sales falling 5% at the middle of the range from last year's $1.33 billion, a steeper drop than the third quarter's 2.2% decline as completed offshore production projects roll off. By our math, that points to about $1.27 billion in fourth-quarter revenue, which is still up 3.9% from the third quarter on year-end equipment deliveries.
New. At the $190 million middle of the range, segment profit rises 5.6% from $180 million a year ago and 1.6% from the third quarter, by our math. Even though segment revenue is planned to fall 5% from a year ago, higher-margin contracts in the backlog lift the implied segment margin to 15.0% against 13.5% in the fourth quarter of 2025.
New. The plan calls for 7% growth at the middle of the range over last year's $989 million, slightly below the third quarter's 8.9% pace. By our math, that implies about $1.06 billion of fourth-quarter revenue, unchanged from the third quarter as higher factory shipments of drill pipe and composite pipe offset the Middle East drilling moderation.
New. The $150 million middle of the range is up 7.1% from $140 million a year ago by our math, and matches the third quarter's $150 million profit excluding tariff refunds. Cost cuts and factory volume keep the implied segment margin at 14.2%, matching both the third quarter's clean margin and the fourth quarter of 2025.
Trimmed by $10 million at the top end, moving the middle of the full-year capital spending plan down $5 million to $350 million (down 6.7% from $375 million in 2025). With $234 million spent in the first nine months, the outlook leaves $106 million to $126 million for the fourth quarter by our math, up 14.9% at the middle from $101 million a year ago as the Brazil pipe plant expansion continues.
❓ Key Questions
Can fourth-quarter collections still save the full-year cash flow target?
Free cash flow is -$202 million through nine months after another -$251 million working-capital drain. Hitting the prior 40% to 50% EBITDA conversion goal requires over $600 million of fourth-quarter free cash flow; did management keep that target on the call?
Will fourth-quarter equipment orders reach the 90% book-to-bill floor?
Energy Equipment book-to-bill sits at 82% through nine months by our math, and the backlog fell below $4 billion. How much in floating production vessel or Middle East orders does NOV expect to book in the fourth quarter?
How large is the fourth-quarter Middle East revenue headwind?
Middle East sales grew more than 20% in the third quarter, but customers are now adjusting fourth-quarter drilling programs. Which countries and product lines are slowing, and when do customers expect activity to resume?
Have drilling spare-parts sales stopped falling from a year ago?
Aftermarket stayed at 37% of Energy Equipment revenue, and rising offshore rig contracting was supposed to lift spare-parts shipments in the second half. Did drilling aftermarket revenue grow from a year ago in the third quarter?
How much of the $40 million tariff refund is collected?
NOV booked another $5 million tariff refund in the third quarter after $40 million in the second quarter, when $23 million remained in receivables. How much cash has arrived, and what is the status of the $140 million royalty appeal?