SLB's Data Center Business Is Growing Fast But Dilutes Margins, CFO Says
The CFO said the unit is "not accretive" to margin, while the CEO targets a $2 billion exit rate for 2027.
SLB's fast-growing data center business is "not accretive to the overall SLB margin," Chief Financial Officer Stephane Biguet told analysts on the company's third-quarter earnings call, even as CEO Olivier Le Peuch said it is on track to pass a $1 billion run rate by the end of this year.
Growth targets, margin drag
SLB, which provides technology, equipment and services to oil and gas producers, is building a data center equipment line alongside its core oilfield divisions. Le Peuch said the business is on track to surpass $2 billion in exit rate for 2027, after topping $1 billion as a run rate by year-end.
Biguet was asked how margins might evolve in 2027. He called it "a big equation" and said SLB will provide more color on 2027 margins in January. Digital, he said, is a margin booster, while the Middle East would be a catalyst for expansion once the conflict is resolved.
SLB kept some Middle East resources in place on purpose, Biguet said, so a rebound would bring "very strong operating leverage." He also expects less inflation and hopes pricing pressure in some core divisions abates.
The accounts show the drag: revenue in the all-other category, which includes data center solutions, rose 8% from the second quarter, but its pre-tax operating income dipped on ramp-up costs for new data center projects.
Expansion and the Kelvion deal
Le Peuch said SLB is opening a new manufacturing center in Canada to support the Meta data center project and has expanded into Asia. Asked by an analyst at TD Cowen about more M&A, he said the company will concentrate on closing and delivering on Kelvion. Biguet said the deal remains on track to close in the first half of 2027.
Third-quarter revenue was $9.45 billion, up 5% from the second quarter, and adjusted earnings were $0.64 a share. Middle East revenue of $1.9 billion rose 13%.
Buybacks and the fourth-quarter view
SLB repurchased $656 million of stock in the quarter and is on track for about $2.4 billion for the full year. It expects fourth-quarter revenue of about $10 billion, up 5% to 7% from the third quarter, assuming flat Middle East revenue near $1.9 billion.
Le Peuch said the 2027 market should grow at a mid-single-digit rate if Middle East activity holds at second-half 2026 levels, and that SLB expects to outperform it.
The 2027 margin outlook arrives in January, when SLB will show how much the data center ramp offsets a Middle East recovery.
Sources
- SLB’s (NYSE:SLB) Q3 2026: beats on revenue — Yahoo Finance
- Earnings Snapshot: SLB reports Q3 growth across all regions, led by Middle East recovery (SLB:NYSE) | Seeking Alpha — seekingalpha.com
- SLB in charts: Q3 signals momentum as Middle East recovery and core divisions drive sequential revenue growth | Seeking Alpha — seekingalpha.com
- SLB Q3 Earnings & Revenues Beat Estimates on Production Systems Growth — Yahoo Finance
- SLB (SLB) Q3 Earnings and Revenues Surpass Estimates — Yahoo Finance
