Slb N.V. (SLB) Cash Flow Statement

The wide quarterly swings in OCF/NI, from 0.31 to 3.76, indicate that reported net income is not a reliable proxy for cash generation in any given quarter. The Q1 2024 and Q1 2026 lows (0.31 and 0.65) coincide with large negative working capital changes, suggesting that cash collections lag revenue recognition. Conversely, Q4 2025's 3.76 multiple reflects a massive working capital release, likely from collections on international projects. Investors should focus on trailing twelve-month conversion rather than quarterly figures to gauge underlying earnings quality.

The FCF trajectory shows a clear seasonal pattern, with Q4 quarters consistently delivering the strongest FCF (18.6% to 24.7% margins) due to working capital releases, while Q1 quarters are consistently weak (0.9% to 3.1%). This seasonality is typical for international service companies with long-cycle projects. The Q2 2026 FCF margin of 10.7% is a modest improvement over the prior year's 9.6%, suggesting stable cash generation despite revenue contraction. However, the gap between net income and FCF remains positive, indicating that capital expenditures are consuming a significant portion of operating cash flow.

The capital intensity ratio has remained in a tight 3.7% to 7.2% range, with the higher ratios in Q4 quarters likely reflecting year-end spending on equipment and technology. The Q2 2026 ratio of 5.1% is above the 3.7% seen in Q2 2025, indicating an acceleration in capex spending. This may reflect investments in digital technologies and new energy ventures, which are part of SLB's strategic pivot. However, with revenue growth decelerating, the rising capex intensity could pressure FCF margins if revenue does not recover. The depreciation and amortization expense of $712M in Q2 2026 is roughly 1.5 times capex, suggesting that maintenance capex is well covered, leaving room for growth investments.

The working capital line is the primary driver of quarterly OCF volatility, with Q1 quarters consistently showing large negative changes (e.g., -$1.5B in Q1 2024, -$921M in Q1 2025, -$1.1B in Q1 2026). This pattern suggests that SLB builds working capital in Q1 as it mobilizes for the year's projects, then releases it in Q4. The Q2 2026 outflow of -$238M is relatively small, indicating that the company is managing collections and payables efficiently. However, the persistent Q1 outflows may indicate that SLB is funding customer projects before receiving payments, which is typical for long-cycle international work. Investors should monitor whether the Q4 releases continue to offset the Q1 outflows, as this balance determines annual FCF.

SLB's capital deployment has been aggressive, with buybacks particularly volatile: Q2 2025 and Q1 2025 saw buybacks of $2.3B each, while Q4 2025 saw a net issuance of $2.3B (likely due to employee stock plans or acquisition-related issuance). The Q2 2026 buyback of $797M, combined with $440M in dividends, exceeds the quarter's FCF of $964M. This pattern of returning more cash than generated is not sustainable without drawing down cash reserves or increasing debt. The company also spent $179M on acquisitions in Q2 2026, indicating continued M&A activity. Given the healthy balance sheet (debt/equity of 0.45% is anomalously low), SLB has capacity to fund these returns, but investors should monitor whether the pace of buybacks is maintained if FCF deteriorates.

The cumulative OCF of $14.5B versus net income of $9.4B indicates that operating cash flow has been stronger than earnings, which is a positive sign. However, after accounting for capex of $4.2B, cumulative FCF of $10.3B is only slightly above net income, implying that capital expenditures are consuming a significant portion of cash generation. The gap between net income and OCF is largely explained by D&A (cumulative $6.0B) and working capital changes, which have been net positive over the period. This suggests that SLB's earnings are backed by cash, but the heavy capex requirements limit the free cash flow available for shareholders. The divergence between net income and FCF is not alarming, but it underscores the capital-intensive nature of the business.