SLB Stock: 10% Pop on a Beat — But Earnings Are Still DOWN. Time to Chase? (Schlumberger Q2 2026)

SLB (Schlumberger) (SLB) Q2 2026 — SLB (Schlumberger) reported Q2 2026 and the stock jumped ~10-11%: adjusted EPS of $0.55 beat the ~$0.51 estimate on revenue of $8.97B (+5% YoY, +3% sequentially), with broad-based international offshore growth (Latin America, Europe & Africa, Asia) more than offsetting a 13% sequential drop in the disrupted Middle East. But this was a beat on a DOWN year: adjusted EPS still fell ~26% YoY, adjusted EBITDA margin compressed ~284 bps to 21.2%, net income slipped to $786M, and stripping out the ChampionX acquisition revenue actually fell ~5% YoY. The bright spot is Digital — up 18% YoY at a 35% EBITDA margin, now including a new Data Center Solutions business selling infrastructure to AI hyperscalers. Free cash flow was $716M ($4.5B TTM, ~5.8% yield); net debt ~$8.7B (~1.1x EBITDA); dividend ~2.2%. After a ~66% run off the low to ~$52 (near the 52-week high ~$59), our owner-earnings / DCF pegs fair value near $49 — a touch below the price. Our call: HOLD, 3/5, and we are MORE CAUTIOUS than the Street's ~$61 Buy target. SLB — the company formerly known as Schlumberger — is the world's largest oilfield services firm, the technology backbone the entire energy industry runs on across ~100 countries. Q2 2026 sent the stock up ~10%: adjusted EPS of $0.55 beat the ~$0.51 estimate on $8.97B of revenue (+5% YoY, +3% sequentially), as broad-based international offshore activity offset a 13% sequential slump in the conflict-disrupted Middle East. But read the fine print — this was a beat on a DOWN year: adjusted EPS still fell ~26% YoY, EBITDA margin compressed to 21.2%, and net income slipped; strip out the ChampionX acquisition and revenue actually fell ~5%. The exciting piece is Digital: +18% YoY at a 35% EBITDA margin, now including a new Data Center Solutions business pointing SLB at the AI data-center boom. Cash is solid — $716M FCF in the quarter, ~$4.5B TTM (~5.8% yield), a ~2.2% dividend plus buybacks, ~$8.7B net debt (~1.1x EBITDA). Management sees a foundation for growth into 2027 on offshore, Digital, and a Middle East recovery. The catch: it's a cyclical business whose earnings peaked in 2024, and after a ~66% run off the low to ~$52 (near the ~$59 high) it trades ~23x forward earnings with no obvious margin of safety. Our owner-earnings / DCF lands fair value near $49 — a touch below the price. Our call: HOLD, 3/5 — best-in-class, but fully priced after the pop, and we are more cautious than the Street's ~$61 Buy. Not financial advice. THE CALL: HOLD (3/5, BEST-IN-CLASS, BUT FULLY PRICED AFTER THE POP — A BEAT ON A DOWN YEAR) — base-case value ~$49 vs ~$52 today. KEY METRICS: - Adjusted EPS $0.55 beat ~$0.51 estimate; GAAP EPS $0.52 (+4% seq, -30% YoY); adjusted EPS -26% YoY - Revenue $8.97B (+5% YoY, +3% sequentially); ex-ChampionX revenue -5% YoY - Adjusted EBITDA $1.90B; adjusted EBITDA margin 21.2% (-284 bps YoY, +83 bps seq) - Net income $786M (+5% seq, -22% YoY); stock popped ~10-11% on the print - Digital revenue $697M (+18% YoY) at a 34.7% EBITDA margin; new Data Center Solutions for AI hyperscalers - Production Systems $3.77B (+29% YoY, ChampionX); Well Construction $2.74B (-7%); Reservoir Performance $1.56B (-8%) - International $6.67B (+3% seq, -3% YoY); North America $2.24B (+4% seq); Middle East -13% sequentially on conflict disruption - Free cash flow $716M in Q2; ~$4.5B TTM (~5.8% FCF yield); ChampionX added ~$870M of revenue - Net debt ~$8.7B (~1.1x trailing EBITDA); dividend yield ~2.2% plus buybacks - Valuation: ~23x forward earnings, ~66% run off the ~$32 low to ~$52 (52-wk high ~$59); earnings still below 2024 peak What to watch: a durable, multi-year up-cycle would justify chasing it toward the Street's target: a Middle East recovery, firmer oil prices lifting customer budgets, more offshore/deepwater sanctioning, and Digital plus Data Center Solutions scaling into real numbers; the risk to respect is the cycle rolling over — falling oil prices and customer capex cuts, which at a full ~23x multiple with earnings already declining could re-rate the stock quickly, so watch oil, the Middle East, and the Digital growth rate every quarter Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.