HAL — Q3 2026 Financial Report Analysis

Halliburton's third-quarter 2026 revenue was $5,703 million, up 1.8% from a year earlier and flat against Q2. Reported earnings jumped to $0.50 per share from $0.02, but almost all of that jump comes from a messy prior-year quarter that carried $392 million of write-downs and a $125 million tax charge. The better measure here is adjusted EPS, which strips out one-time items: it rose from $0.58 to $0.60. Underneath, the business shifted further away from North America. US fracking work shrank again, while Latin America, Europe/Africa and a recovering Middle East kept international revenue growing. Management also gave an early 2027 outlook that does not depend on any North American recovery.

This report is based on the earnings release (Form 8-K Exhibit 99.1, October 20, 2026). The full 10-Q has not been filed yet, so detail the release leaves out (rig counts, oil prices, segment drivers broken out by product line, receivables by customer) is not available yet.

Q3 2026 results at a glance

"Adjusted" figures are Halliburton's own non-GAAP measures. They exclude the "impairments and other charges (credits)" line: $107 million of net charges this quarter, versus $392 million a year ago. Adjusted EBITDA is earnings before interest, tax, depreciation and amortization, also excluding those items. International revenue is total revenue minus North America. The release gives free cash flow only year-to-date for 2025, not for Q3 2025 alone.

Takeaway: Adjusted EPS rose $0.02, but not because the business made more money. Adjusted pre-tax profit actually fell about 2% from a year ago (to $620 million from $634 million). The per-share gain came from a lower tax rate and 2% fewer shares after buybacks. What matters is the direction of the business mix: Halliburton is replacing shrinking US fracking revenue with international work, and management now projects 2027 margins of about 15% without assuming any North American recovery.

Segments: drilling carried the quarter, completions slipped

Halliburton reports two segments. Completion and Production (C&P) covers getting a drilled well ready to produce and keeping it producing: hydraulic fracturing (also called "stimulation" or "pressure pumping"), cementing, artificial lift and completion tools. Drilling and Evaluation (D&E) covers drilling services, drilling fluids, wireline logging (measuring the rock around a well) and software.

• C&P revenue fell $113 million (4%) from Q2 and operating income fell $17 million. The company says this was "primarily driven by lower stimulation activity in the Western Hemisphere," partly offset by more work across several product lines in the Middle East. Compared with a year ago, C&P operating income is down $57 million, which is more than the $17 million fall in total adjusted operating income. D&E's gains made up most of the difference.
• D&E revenue rose $102 million (4%) from Q2 and operating income rose $53 million (16%), on more activity in the Middle East and Latin America and more drilling-related services in the Western Hemisphere. Lower international testing services partly offset the gains. D&E's 15.0% margin is now above C&P's 14.8%, the reverse of a year ago.

Regions: the Middle East came back, North America kept shrinking

• Middle East/Asia rose 8% from Q2, driven by "higher activity across multiple product service lines in Saudi Arabia and Kuwait." That brings it back to roughly where it was a year ago ($1,405 million vs $1,412 million), after the conflict-related dip that hit Q2.
• Latin America was flat from Q2. Less fracking in Argentina was offset by more work in Mexico. It is still up 12.7% from a year ago.
• Europe/Africa/CIS was also flat from Q2. Less well-construction work in Namibia was offset by gains in Nigeria. It remains the fastest grower from a year ago at +22.7%.
• North America is $204 million below a year ago, which offsets about two-thirds of the $307 million gained internationally.

What the headline numbers hide

• The headline EPS growth is almost all a weak comparison. Q3 2025 carried $392 million of pre-tax charges (severance, asset write-offs, an impairment of assets held for sale), a $23 million impairment of an Argentine investment, and a $125 million tax charge on US foreign tax credits linked to the "One Big Beautiful Bill Act." That is why reported EPS was $0.02 a year ago. The 2,400% increase reflects that comparison, not underlying performance.
• This quarter has its own one-offs, in both directions. The $107 million of net charges are made up of $107 million of severance "associated with the rationalization of our global headcount," $25 million of inventory write-downs and $14 million of asset write-offs, partly offset by a $36 million gain from selling part of an equity stake and $3 million of other credits. Q2 went the other way, with a $95 million net credit, mostly investment gains and a government refund. That is why GAAP EPS fell from $0.64 to $0.50 between quarters while adjusted EPS rose from $0.55 to $0.60.
• Tax and buybacks, not operations, produced the adjusted EPS gain. Adding back the excluded items, adjusted pre-tax income was about $620 million against about $634 million a year ago (our arithmetic from the release's reconciliation tables). The adjusted tax rate fell from roughly 21.5% to roughly 18.9%, worth about $16 million, or about $0.02 a share. Weighted diluted shares fell 2.1% to 832 million. Adjusted net income itself rose only 1% ($501 million vs $496 million).
• One recurring cost stays inside the adjusted numbers. The SAP S4 software migration cost $42 million this quarter and $130 million year-to-date. Halliburton reports it on its own line but does not exclude it from adjusted operating income. That is the conservative treatment, and it means adjusted margins should get a lift once the project ends.
• Cash conversion was weak this quarter. Operating cash flow was $368 million against $419 million of net income, so cash came in below reported profit. Working capital absorbed $330 million in the quarter and $517 million year-to-date, versus $111 million in the first nine months of 2025. Receivables (money customers owe) reached $5,515 million, up 11.6% since December. Inventories were $3,265 million, up 9.7%. Both grew faster than revenue, which was up 1.8% year-to-date. Year-to-date operating cash flow was $1,465 million, down from $1,761 million. Free cash flow held up better ($947 million vs $982 million) only because capital spending fell to $693 million from $917 million. Mexico, which the Q2 10-Q flagged for "payment delays" by its main customer, is the obvious thing to check when the 10-Q lands.
• Shareholder payouts exceeded free cash flow. In Q3, buybacks ($250 million) plus dividends ($141 million) totalled $391 million, against $156 million of free cash flow. Cash fell $205 million in the quarter to $1,843 million. Year-to-date, payouts of $984 million are about 104% of free cash flow, above the "at least 50%" framework floor. That is affordable for now, but it is being funded partly from the cash balance.

Did last time's read hold up?

Our Q2 2026 report said results hinged on "how fast the Middle East comes back, and whether fracking prices in US Land hold." It expected adjusted margins to recover "toward the prior-year 13% level but probably not beyond it." It also named one test for Q3: whether adjusted EPS could move above the $0.55 it posted in both Q1 and Q2.

Mostly, yes. Adjusted EPS came in at $0.60, Middle East/Asia revenue rose 8% from Q2, and the adjusted operating margin reached 12.8%, close to but below last year's 13.4%. The US side did not improve: North America fell 5% from Q2 on lower pressure pumping. The Q2 10-Q's estimate of about $45 million for Q3 SAP costs was close to the $42 million actually spent.

Outlook

The release gives no numerical guidance for Q4 2026. It does include an early 2027 outlook from CEO Jeff Miller:

• 2027: "mid-single digit revenue growth and operating margins of about 15%, an approximately 200 basis point improvement" (200 basis points = 2 percentage points). The outlook "assumes a flat North America market and does not require any recovery in North America hydraulic fracturing," which Miller calls "purely upside." The release does not say whether the 15% is a GAAP or adjusted margin. For reference, both measured 12.4% for the first nine months of 2026.
• Demand: Miller says "we are another three months into one of the largest energy disruptions in history," and expects work to "restore production, rebuild inventories and strengthen energy security" to drive "multi-year demand growth for oilfield services." The release's risk factors refer to "the current conflict in Iran."
• Contracts named in the release: integrated well construction and completions for Eni's Cronos ultra-deepwater gas development offshore Cyprus, an integrated drilling contract for bp's Bumerangue appraisal campaign offshore Brazil, a multiyear agreement with Kuwait Oil Company, a digital agreement with Pampa Energía in Argentina's Vaca Muerta shale, and memorandums of understanding covering Venezuela. MOUs are not contracts and should not be read as revenue.

Our read: The 2027 target looks more reachable from cost actions than from pricing. This quarter's $107 million of severance points to a smaller cost base next year. The SAP migration, which the Q2 10-Q said would finish in Q4 2026, has been running at roughly 0.8% of revenue, so its end alone could cover around 0.8 of the 2 points (our arithmetic, assuming it ends on schedule). The rest has to come from international growth, which is already happening at about 9-10% a year. The risks sit in North America and in cash. A flat North American market is the stated assumption, but that region has shrunk 8.6% over the past year, so "flat" would itself be an improvement. Working capital is also absorbing cash faster than revenue is growing. Two things to watch in Q4: whether North America revenue stops falling from quarter to quarter, and whether operating cash flow catches back up with net income.