Key points
- Baker Hughes reported $10.8bn in orders, 35% above analyst expectations, yet its shares were punished despite the strong numbers.
- Lorenzo Simonelli says Baker Hughes raised its Horizon 2 IET orders target to $50bn, a second $5bn increase this year, and expects momentum through 2028.
- Simonelli says less than 20% of Baker Hughes' remaining performance obligations tie to power systems, so data center demand remains a small share of the business.
Baker Hughes says record orders are a lasting trend, not hype
Baker Hughes argues its record orders are a durable trend rather than a pull-forward, and that the market is misreading the story as an AI data center bet. Most of its backlog sits in gas infrastructure, power generation and other energy markets, and careful customer selection with contractual protection is meant to keep that backlog convertible. The Middle East is the main uncertainty.
Takeaways
- Strong orders reflect a continuing trend, not a rush. Third-quarter orders of $10.8bn ran 35% above analyst expectations, yet shares fell. Simonelli frames the result as incremental, continuing activity rather than customers pulling forward orders, and expects momentum through 2026, 2027 and 2028.
- Orders target raised to $50bn. Baker Hughes lifted its Horizon 2 IET orders target to $50bn, the second $5bn increase this year, from an original $40bn for 2026 to 2028. Drivers are behind-the-meter power, gas infrastructure and related infrastructure.
- Data centers are still a small share of the business. Data center demand has grown meaningfully over the past year, but less than 20% of total remaining performance obligations relates to the power systems business. Gas infrastructure, pipelines, power generation and offshore markets make up the rest of the company.
- Turbine bookings are growing and capacity is expanding. Baker Hughes booked 1.6 gigawatts of turbine orders in the quarter, including 1.1 gigawatts announced the day before alongside a power generation cooling order for a large US tech company. It has added capacity based on its long-term outlook.
- Backlog quality is protected by selective customers. Rather than raising prices or turning customers away, Simonelli says the company is careful choosing projects and customers. It relies on contractual protections and well-supported finance customers, and expects backlog projects to come to life.
- Middle East activity is steady, with upside from calm. Fourth-quarter activity is expected to resemble the second quarter, and it remains to be seen how tensions unfold. De-escalation would bring more activity and rebuilding of energy infrastructure as production rises. Employee security there is a daily focus.