Rising Global Energy Demand Will Drive Digital And Low-Carbon Expansion

Key Takeaways

• Strong international demand, digital transformation, and focus on production optimization drive resilient, high-margin revenue growth across core and emerging business segments.
  
• Diversification into low-carbon solutions and integration of new capabilities reduce portfolio cyclicality and position for long-term growth in evolving energy markets.
  
• Exposure to market cyclicality, integration risks, and energy transition pressures threatens revenue, margin expansion, and long-term growth unless strategic diversification and synergy capture accelerate.

Catalysts

Engages in the provision of technology for the energy industry worldwide.

• Global energy consumption-particularly in emerging markets-and the continued critical role of hydrocarbons even in energy transition scenarios are supporting robust international spending, especially in the Middle East and Asia, thereby providing a long-term underpinning for revenue growth despite near-term market volatility.
  
• Persistent industry demand for digital transformation, automation, and efficiency-driven by operator focus on production optimization and recovery-has led to strong adoption and double-digit year-over-year growth in SLB's digital business (notably the DELFI platform), which bolsters net margins and creates a more stable, higher-margin recurring revenue stream.
  
• The integration of ChampionX expands SLB's capabilities in production optimization, chemicals, and digital production technology, unlocking new revenue synergies through cross-selling and international expansion, while also driving significant cost synergies ($400 million targeted), all of which are expected to increase EBITDA margins and earnings per share, notably in 2026 and beyond.
  
• Growing operator focus on maximizing recovery and extending asset life-shifting spending from purely exploration and development toward integrated, production-oriented solutions-reduces cyclicality in SLB's portfolio and increases exposure to less capex-sensitive, more OPEX-driven business areas, supporting more resilient revenue and margin trajectories.
  
• Expansion and early traction in low-carbon solutions such as carbon capture and storage (CCS), where SLB now covers the full value chain, positions the company to tap into new and potentially large, long-duration revenue pools, thus diversifying long-term growth prospects and reducing exposure to traditional oilfield service cyclicality.

Schlumberger Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Schlumberger's revenue will grow by 2.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.5% today to 12.8% in 3 years time.
• Analysts expect earnings to reach $4.9 billion (and earnings per share of $3.64) by about September 2028, up from $4.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.1x on those 2028 earnings, up from 13.1x today. This future PE is greater than the current PE for the US Energy Services industry at 15.0x.
• Analysts expect the number of shares outstanding to decline by 4.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.01%, as per the Simply Wall St company report.

Schlumberger Future Earnings Per Share Growth

Risks

• Global upstream spending is set to decline in 2025 versus 2024, particularly in North America and Mexico due to restructuring and short-cycle activity reductions, which poses a risk to SLB's organic revenue growth and heightens overall revenue cyclicality.
  
• The integration of ChampionX, while positioned as a growth driver, relies heavily on cost synergies and supply chain savings; failure to realize these or delays in capturing revenue synergies could result in higher integration costs or muted net margin expansion in the medium term.
  
• Ongoing macro uncertainty-including OPEC+ supply additions, commodity price volatility, and geopolitical risk-could trigger further operator spending cuts, especially in short-cycle markets, exposing SLB to earnings volatility and potentially compressing EBITDA margins.
  
• There is continued risk of overexposure to markets with structural or political instability (e.g., Mexico with PEMEX restructuring and accounts receivable risks, and international regions prone to disruptions) that could lead to project delays, contract losses, or asset write-downs, negatively impacting both revenue and net income.
  
• Secular long-term trends such as the accelerating energy transition, stricter global climate regulation, and capital reallocation toward low-carbon solutions may structurally erode demand for oilfield services, putting pressure on SLB's future top-line growth and long-term cash flows unless diversification into digital and low-carbon segments outpaces this decline.

Valuation

• The analysts have a consensus price target of $45.429 for Schlumberger based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $63.0, and the most bearish reporting a price target of just $36.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $38.7 billion, earnings will come to $4.9 billion, and it would be trading on a PE ratio of 15.1x, assuming you use a discount rate of 8.0%.
• Given the current share price of $35.78, the analyst price target of $45.43 is 21.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.