Halliburton's Q4 Earnings Resilience Masks Persistent Cyclical and Execution Risks

What happened

Halliburton's Q4 2025 results showed resilient earnings, with international strength and strong cash flow offsetting softer North America performance, as highlighted in recent coverage. However, the DeepValue report notes that 2025 revenue declined 3% year-over-year, with both North America and international segments down, indicating underlying cyclical pressures beyond the quarterly beat. Management's guidance for 2026 calls it a 'rebalancing' year, with high-single-digit North America declines and flat-to-modest international growth, reliant on $400 million in cost savings amidst SAP migration expenses. Market narratives overstate near-term optionality from Venezuela and data-center projects, which lack quantified earnings contributions, while filings reveal impairments and cautious capex cuts limiting growth acceleration. Thus, the Q4 strength is a temporary buffer against a broader reset, with valuation at ~22x P/E already pricing in a mid-cycle recovery.

Implication

The Q4 results underscore Halliburton's cash-generative model but do not mitigate the guided declines in North America and flat international growth for 2026, requiring flawless execution of $400 million annual cost savings to protect margins. Investors must monitor free cash flow trends closely, as any drop below the $1.9 billion level could trigger multiple compression and reduce capital returns. International revenue stability is critical to offset North America softness, and deviations from 'flat to modestly up' guidance would signal deeper cycle risks. Entry near the attractive price of $27 provides better risk/reward, while current levels around $33-34 reflect optimistic assumptions about cost savings and cycle timing. Therefore, maintaining a 'WAIT' stance is justified until evidence of durable FCF or a pullback aligns with the base case valuation of $35.

Thesis delta

The new article confirms Halliburton's operational resilience in Q4, but it does not shift the DeepValue thesis, which remains cautious due to guided revenue declines, execution risks on cost savings, and premium valuation. The thesis still advocates waiting for a pullback to ~$27 or proof that free cash flow can sustainably exceed $1.9 billion, as near-term growth drivers are limited.