10-K: Halliburton's 2025 Revenue Dips 3% Amid Market Headwinds

Halliburton Company reports a 3% revenue decrease in 2025, driven by North American softness and international declines, while maintaining strong operating margins and capital returns.

Summary

• Total revenue decreased 3% to $22.2 billion in 2025 from $22.9 billion in 2024.
• International revenue decreased 2% and North America revenue decreased 6% in 2025 compared to 2024.
• The Completion and Production (C&P) segment revenue decreased 4% to $12.8 billion, and the Drilling and Evaluation (D&E) segment revenue decreased 3% to $9.4 billion.
• Total operating income was $2.3 billion in 2025, a 41% decrease from $3.8 billion in 2024, including $831 million in impairments and other charges.
• C&P and D&E operating segments finished the year with 17% and 15% operating margins, respectively.
• Generated $2.9 billion of cash flows from operations and retired $382 million of 3.8% notes due November 2025.
• Returned $1.6 billion of capital to shareholders through dividends and share repurchases.
• Capital expenditures were $1.3 billion, approximately 6% of revenue, matching the company's target.
• The SAP S4 migration expense was $154 million in 2025, up from $124 million in 2024, with an expected total cost of approximately $45 million per quarter going forward due to a project extension.
• Recorded a $125 million additional valuation allowance against Foreign Tax Credit (FTC) deferred tax assets due to the One Big Beautiful Bill Act (OBBBA).
• An ongoing IRS audit for the 2016 tax return includes a Notice of Proposed Adjustment (NOPA) regarding a $3.5 billion termination fee reclassification, potentially leading to $640 million in cash taxes plus interest.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a moderately negative report due to significant declines in revenue and operating income, coupled with substantial impairment charges and increased tax liabilities. While capital returns to shareholders and strong operating margins in segments are positive, the overall financial performance and increased expenses for the SAP S4 migration indicate headwinds.

Positives

• Maintained strong operating margins: Completion and Production at 17% and Drilling and Evaluation at 15%.
• Generated $2.9 billion of cash flows from operations.
• Retired $382 million of 3.8% notes due November 2025, strengthening the balance sheet.
• Returned $1.6 billion of capital to shareholders through dividends and share repurchases, consistent with the capital returns framework.
• Achieved capital efficiency target, keeping capital expenditures at approximately 6% of revenue ($1.3 billion).
• Transitioned 50% of the North American fracturing fleet to Zeus electric pumps, demonstrating sustainability progress.
• Secured manufacturing capacity for 400 megawatts of modular natural gas power systems for delivery in 2028 through strategic collaboration with VoltaGrid, supporting data center development.
• 93% of responding employees would recommend Halliburton as a great place to work, with an 84% response rate, indicating high employee engagement.
• Outperformed industry group HSE indicators in 2025, with total recordable incident rates of 0.24 and lost-time incident rates of 0.07.
• A new $3.5 billion five-year revolving credit facility was established, expiring August 16, 2030, with no financial covenants or material adverse change provisions.
• Credit ratings remain stable: BBB+ (S&P) and A3 (Moody's) for long-term debt.

Negatives

• Total revenue decreased 3% in 2025 compared to 2024, reaching $22.2 billion.
• North America revenue decreased 6% in 2025, primarily due to lower activity in U.S. Land and reduced completion tool sales in the Gulf of America.
• International revenue decreased 2% in 2025, driven by declines in Mexico and Saudi Arabia.
• Total operating income decreased significantly by 41% to $2.3 billion in 2025 from $3.8 billion in 2024.
• Impairments and other charges increased substantially to $831 million in 2025 from $116 million in 2024, including severance costs, asset impairments, and environmental remediation cost increases.
• SAP S4 upgrade expense increased to $154 million in 2025 from $124 million in 2024, with an expected extension of the project and ongoing costs of $45 million per quarter.
• Recorded a $23 million loss on an investment impairment in Argentina in 2025.
• Incurred a $9 million pre-tax loss on Blue Chip Swap transactions in Argentina in 2025.
• The effective tax rate increased to 27.0% in 2025 from 22.2% in 2024, partly due to a $125 million additional valuation allowance against FTC deferred tax assets from the One Big Beautiful Bill Act.
• An ongoing IRS audit for the 2016 tax return with a NOPA proposes reclassification of a $3.5 billion termination fee, potentially leading to $640 million in cash taxes plus interest.
• Cash and equivalents decreased to $2.2 billion at December 31, 2025, from $2.6 billion at December 31, 2024.
• Expected moderate softness in North America for 2026, with revenue projected to decline year over year.

Risks

• Trends in oil and natural gas prices affect the level of exploration, development, and production activity of customers and the demand for services and products.
• Reductions in capital spending by customers, influenced by commodity prices, access to capital, shifts to renewable energy, infrastructure limitations, and consolidation, could reduce demand for services and products.
• Liabilities arising out of products and services, such as well blowouts, equipment failures, personal injuries, property damage, and pollution, could have a material adverse effect, especially if contractual indemnities or insurance coverage are insufficient.
• Severe or unseasonable weather conditions, particularly in Canada, the Gulf of America, and the North Sea, can disrupt operations, damage facilities, delay deliveries, and impact demand.
• Failure to protect proprietary information and any successful intellectual property challenges or infringement proceedings against the company could materially and adversely affect its competitive position.
• Inability to design, develop, and produce commercially competitive products and implement competitive services in a timely manner in response to market changes, customer requirements, competitive pressures, climate change concerns, and technology trends (including artificial intelligence and machine learning) could adversely affect business.
• Integrated project management services in the form of long-term, fixed-price contracts may require the company to assume additional risks associated with cost over-runs, operating cost inflation, labor availability and productivity, supplier and contractor pricing and performance, and potential claims for liquidated damages.
• Constraints in the supply of, prices for, and availability of transportation of raw materials (e.g., sand, chemicals, metals, electronic components) and electric power could have a material adverse effect on business and consolidated results of operations.
• Inability to attract, employ, and retain technical personnel at a competitive cost could increase the cost structure, decrease margins, and impair growth potential.
• Operations outside the United States require compliance with numerous U.S. and international regulations (e.g., Foreign Corrupt Practices Act, trade laws, economic sanctions), violations of which could lead to severe penalties.
• Exposure to various legal, social, economic, and political issues in countries and regions of operation, including instability, inflation, currency fluctuations, and governmental actions (expropriation, confiscatory taxation, sanctions), could materially affect business.
• The adoption of any future federal, state, or local laws or implementing regulations imposing reporting obligations on, or limiting or banning, the hydraulic fracturing process could make it more difficult to complete natural gas and oil wells.
• Liability for cleanup costs, natural resource damages, and other damages arising as a result of environmental laws and regulations could be substantial, as these laws often impose strict liability.
• Failure to comply with, and the costs of compliance with, applicable health, safety, and environmental requirements could have a material adverse effect.
• Existing or future laws, regulations, treaties, or international agreements related to greenhouse gases, climate change, or alternative energy sources could negatively impact demand for services and products and result in additional compliance obligations.
• Changes in tax rates, the adoption of new tax legislation (e.g., the One Big Beautiful Bill Act), tax audits (e.g., IRS NOPA), or exposure to additional tax liabilities could have a material adverse effect.
• Operations are subject to cyberattacks that could lead to loss of intellectual property, business interruption, reputational harm, and increased costs, with AI-driven threats heightening these risks.
• The ability to declare and pay dividends and repurchase shares is discretionary and not guaranteed, potentially impacting expected returns on an investment.
• Exposure to foreign currency exchange risks and limitations on the ability to reinvest earnings from operations in one country to fund capital needs in others or to repatriate assets from some countries.
• The loss of one or more significant customers or delays/failures in payment of outstanding receivables could have a material adverse effect.
• Acquisitions, dispositions, and investments may not result in anticipated benefits and may present risks not originally contemplated.
• Actions of and disputes with joint venture partners could have a material adverse effect on the business and results of operations of joint ventures and, in turn, the company's business.
• The loss or unavailability of any executive officers or other key employees could have a material adverse effect on business.

Future Outlook

Halliburton expects the global energy market to remain dynamic in 2026, with modest oil demand growth but global supply projected to outpace demand, leading to price pressure and inventory builds. Natural gas demand is forecasted to strengthen due to LNG capacity expansion and increased consumption. International activity is anticipated to be stable year over year, with revenue flat to up modestly, led by Latin America. Moderate softness is expected in North America, with revenue projected to decline year over year compared to 2025, influenced by reduced customer activity in land operations, stacking of uneconomic fleets, and timing of Gulf of America programs. The company believes long-cycle international investments and emerging structural demand for natural gas (driven by data centers, electrification, and power reliability) position the business for growth opportunities over the medium and long term. Halliburton plans to grow its business in Venezuela once commercial and legal terms, including payment certainty, are resolved.

Management Comments

• "Our total revenue decreased 3% in 2025 as compared to 2024. Our International revenue decreased 2% and our North America revenue decreased 6% in 2025 compared to 2024."
• "Overall, our Completion and Production and Drilling and Evaluation operating segments finished the year with 17% and 15% operating margins, respectively."
• "We generated $2.9 billion of cash flows from operations and retired $382 million of our 3.8% notes due November 2025."
• "We returned $1.6 billion of capital to shareholders through dividends and share repurchases, which is consistent with our capital returns framework."
• "We developed technologies and made strategic choices that kept our capital expenditures at approximately 6% of revenue, which matched our target."
• "We continued progress toward a sustainable energy future by maintaining Halliburton Labs 38 participant and alumni organizations, and achieving the milestone of 50% of our North American fracturing fleet transitioned to Zeus electric pumps."
• "We expect the global energy market to remain dynamic, with oil demand continuing to grow modestly while global supply is projected to outpace demand in the near term, contributing to price pressure and inventory builds."
• "Despite the market conditions described above, we believe the combination of long-cycle international investments and emerging structural demand for natural gas, driven by data centers, electrification, and power reliability, positions our business for growth opportunities over the medium and long term."
• "We strongly disagree with the proposed adjustment on both a factual and legal basis, and we plan to vigorously contest it." (Regarding the IRS NOPA)
• "We believe our cash on hand, cash flows generated from operations, and our available credit facility will provide sufficient liquidity to address the challenges and opportunities of the current market and our expected global cash needs..."

Industry Context

StockSavvy.ai notes that Halliburton's performance in 2025 reflects broader industry trends of supply-demand imbalances in global oil markets, leading to price pressure, and a declining rig count in North America despite efficiency gains. The strategic focus on international growth, particularly in directional drilling and unconventionals, aligns with the industry's shift towards more complex and geographically diverse projects. The emphasis on digital and automation technologies, along with the transition to electric fracturing fleets (Zeus electric pumps), positions Halliburton within the industry's evolving landscape towards efficiency and sustainability, while also addressing the growing demand for natural gas, especially for data centers and electrification. The collaboration with VoltaGrid for modular natural gas power systems is a forward-looking move to capitalize on this emerging demand.

Comparison to Industry Standards

• Outperformed industry group HSE indicators in 2025, with total recordable incident rates of 0.24 and lost-time incident rates of 0.07 (incidents per 200,000 hours worked), and preventable recordable vehicle incident rates of 0.07 (incidents per million miles traveled).

Management Changes

Corporate Governance

Legal Proceedings

• A class action complaint was filed on January 12, 2024, challenging the validity of certain advance notice and stockholder nomination provisions of the Company's By-laws. The Company modified the By-laws on May 2, 2024, rendering the claims moot, and agreed to pay plaintiff's counsel $150,000. The action was closed on October 16, 2025.
• An ongoing IRS audit for the 2016 U.S. tax return includes a Notice of Proposed Adjustment (NOPA) proposing to reclassify approximately 95% of a $3.5 billion termination fee paid to Baker Hughes from an ordinary expense deduction to a capital loss. The company strongly disagrees and plans to vigorously contest this, which could result in approximately $640 million in cash taxes plus interest if the IRS position prevails.
• The company is subject to various other legal or governmental proceedings, claims, or investigations, including personal injury, property damage, environmental, intellectual property, commercial, and tax matters, which management believes will not have a material adverse effect on consolidated results of operations or financial position.

Stakeholder Impact

• **Shareholders**: Received $1.6 billion in capital returns (dividends and share repurchases) in 2025. The company aims to return over 50% of annual free cash flow to shareholders in 2026. However, the decrease in revenue and operating income, along with potential tax liabilities from the IRS NOPA, could impact future returns and stock performance.
• **Employees**: Over 46,000 employees worldwide, with high engagement (93% would recommend Halliburton). Subject to severance costs ($299 million in 2025) due to impairments and other charges. Participation in stock-based compensation plans (restricted stock, RSUs, ESPP).
• **Customers**: Demand for services and products is sensitive to customer capital spending and commodity prices. The company aims to maximize asset value for customers and is developing technologies like Zeus IQ electric fracturing and digital solutions for efficiency.
• **Creditors**: Retired $382 million of senior notes. Maintained stable credit ratings (S&P: BBB+, Moody's: A3). A new $3.5 billion revolving credit facility provides liquidity.
• **Suppliers**: Subject to extended payment terms (90 days) through a supplier finance program, with $280 million outstanding as of December 31, 2025. Constraints in raw material supply and price increases could impact relationships.

Next Steps

• Consistently increase international growth in directional drilling, unconventionals, well intervention, and artificial lift businesses in 2026.
• Develop strategic collaboration with VoltaGrid around behind-the-meter power generation in 2026.
• Maximize value in North America by utilizing the Zeus IQ electric fracturing platform, iCruise rotary steerable systems, and LOGIX automation in 2026.
• Continue to drive differentiation and efficiencies through the deployment of digital and automation technologies in 2026.
• Maintain capital expenditures at about $1.1 billion in 2026.
• Return over 50% of annual free cash flow to shareholders through dividends and share repurchases in 2026.
• Continue to develop technologies and solutions to help lower customers' and own emissions intensity, grow the low carbon energy business, and support Halliburton Labs early-stage company participants in 2026.
• Complete the SAP S4 migration in the fourth quarter of 2026.
• Monitor and assess the impact of tariffs on goods imported into the United States.
• Grow business in Venezuela once commercial and legal terms, including payment certainty, are resolved.
• Continue the IRS administrative appeals process regarding the 2016 NOPA.
• Evaluate the effect of ASU 2024-03 (Disaggregation of Income Statement Expenses) on disclosures, effective for annual reporting periods beginning after December 15, 2026.
• Complete the sale of a portion of the chemical business, expected in the first half of 2026.

Key Dates

Recommendation

StockSavvy.ai recommends a "Hold" position. While Halliburton demonstrates strong capital discipline, consistent shareholder returns, and strategic investments in future growth areas like electric fracturing and international expansion, the significant decline in 2025 revenue and operating income, coupled with substantial impairment charges and the ongoing, material IRS tax dispute, present considerable near-term headwinds and uncertainties. The projected moderate softness in North America for 2026 further suggests a cautious outlook, balancing long-term strategic positives against current operational and financial challenges.

Keywords

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