SLB Q3 Beat Points to Earnings Recovery, But Caution Remains

What happened

SLB's Q3 results delivered double beats on revenue and EPS, with all four divisions expanding margins sequentially and strong performance outside the Middle East. Management guided Q4 revenue to approximately $10 billion despite flat Middle East activity, signaling resilience in other regions. The company projects 2027 EPS growth of 30% year over year, driven by ongoing recovery and mix shift. Seeking Alpha upgraded the stock from neutral to buy, arguing the earnings decline has ended and momentum is building. This comes after a cautious period where Q1 showed organic revenue decline and margin pressure, but the Q3 evidence supports a turn.

Implication

Investors should note that SLB's Q3 results exceeded expectations with sequential margin expansion across all divisions, and the Q4 revenue guide of ~$10 billion suggests stability even with Middle East flatness. The projected 30% EPS growth for 2027, if realized, supports a higher valuation, but we remain cautious until we see actual margin recovery above 21.5% adjusted EBITDA and sequential growth in Middle East & Asia. The stock may have already re-rated on the news, so entry points below $50 would be more attractive, while above $54 we would trim. We will monitor the next quarters for confirmation that the recovery is sustainable and not just a one-quarter bounce.

Thesis delta

Our previous wait stance was contingent on Q3 evidence of margin recovery and Middle East stabilization. The Q3 results showing double beats and sequential margin expansion across divisions challenge the bear case and shift us to a more constructive view. We now see the earnings recovery taking shape, but we still need confirmation of sustained margin improvement and Middle East & Asia sequential growth before full conviction.