SLB N.V. (NYSE:SLB)

The financial performance, as measured by economic profit, exhibits significant fluctuations over the five-year period. Net operating profit after taxes (NOPAT) demonstrates an increasing trend from 2021 to 2023, followed by a slight increase in 2024 and a substantial decline in 2025. Simultaneously, the cost of capital remains relatively stable, with a minor increase in 2022, a slight decrease in 2024, and a return to a level similar to 2022 by 2025. Invested capital consistently increases throughout the period, indicating ongoing investment in the business.

Economic Profit Trend

Economic profit transitions from a substantial loss in 2021 to a significantly reduced loss in 2022. This improvement continues into 2023, nearly reaching profitability, before achieving positive economic profit in 2024. However, economic profit reverts to a substantial loss in 2025, despite the increase in NOPAT from 2021 to 2023.

NOPAT Analysis

NOPAT increases from US$2,298 million in 2021 to US$4,641 million in 2023, representing a considerable improvement in operational profitability. The subsequent increase to US$4,815 million in 2024 is modest. The decline to US$3,544 million in 2025 suggests a weakening of operational performance despite continued investment.

Cost of Capital and Invested Capital Relationship

The cost of capital remains within a narrow range of 11.40% to 12.47% throughout the period. The consistent increase in invested capital, coupled with a relatively stable cost of capital, suggests a growing capital base requiring a consistent level of return. The negative economic profit in 2021, 2022, and 2025 indicates that returns generated from the invested capital were insufficient to cover the cost of that capital during those years.

The shift to positive economic profit in 2024 is notable, but the subsequent reversal in 2025 warrants further investigation. The increasing invested capital base, combined with the decline in NOPAT in 2025, appears to be the primary driver of the return to negative economic profit. The company’s ability to generate returns commensurate with its cost of capital appears sensitive to changes in NOPAT.

Net income attributable to SLB and net operating profit after taxes (NOPAT) both demonstrate positive performance over the analyzed period, though with differing trajectories. NOPAT consistently exceeds net income attributable to SLB across all reported years. Both metrics experienced growth from 2021 to 2023, followed by a leveling off and subsequent decline in the most recent year.

NOPAT Trend

NOPAT increased from US$2,298 million in 2021 to US$3,801 million in 2022, representing a substantial growth of approximately 65.7%. This upward trend continued into 2023, with NOPAT reaching US$4,641 million. Further incremental growth was observed in 2024, reaching US$4,815 million. However, 2025 saw a decrease in NOPAT to US$3,544 million, indicating a decline of approximately 26.3% from the peak in 2024.

Net Income Trend

Net income attributable to SLB increased from US$1,881 million in 2021 to US$3,441 million in 2022, a growth of approximately 82.9%. The growth continued in 2023, reaching US$4,203 million, and then to US$4,461 million in 2024. Similar to NOPAT, net income decreased in 2025, falling to US$3,374 million, a decline of approximately 24.4% from the 2024 high.

Relationship between NOPAT and Net Income

The difference between NOPAT and net income attributable to SLB remains consistently positive throughout the period. This suggests that factors such as interest expense and non-operating items are reducing reported net income relative to core operational profitability as measured by NOPAT. The magnitude of this difference does not exhibit a significant trend over the period, remaining relatively stable in absolute terms.

The observed decline in both NOPAT and net income in 2025 warrants further investigation to determine the underlying causes. Potential factors could include changes in revenue, operating costs, tax rates, or non-operating expenses.

The reported tax expense and cash operating taxes demonstrate increasing values from 2021 through 2024, followed by a decrease in 2025. Both metrics exhibit a consistent pattern of growth before the final year’s decline.

Tax Expense

Tax expense increased from US$446 million in 2021 to US$1,093 million in 2024, representing a significant rise over the period. This increase suggests potentially higher profitability or changes in applicable tax rates. However, tax expense decreased to US$840 million in 2025, indicating a possible reduction in taxable income or the benefit of tax planning strategies.

Cash Operating Taxes

Cash operating taxes followed a similar trajectory to tax expense, rising from US$579 million in 2021 to US$1,211 million in 2024. This indicates an increasing cash outflow related to tax obligations. The value then decreased slightly to US$1,215 million in 2025. The consistency between the 2024 and 2025 values suggests the decrease may not be substantial.

Relationship between Tax Expense and Cash Operating Taxes

Cash operating taxes consistently exceeded tax expense across all reported years. This difference could be attributed to timing differences between the recognition of tax expense under accounting standards and the actual cash payments made for taxes. The gap between the two metrics remained relatively stable throughout the period, suggesting a consistent pattern in these timing differences.

The observed trends suggest a period of increasing tax obligations followed by a potential stabilization or slight reduction in 2025. Further investigation into the underlying drivers of these changes, such as profitability, tax rate fluctuations, and tax planning initiatives, would be necessary for a more comprehensive understanding.

The reported invested capital demonstrates a consistent upward trend over the five-year period. Simultaneously, changes are observed in the components contributing to this figure, namely total reported debt & leases and total stockholders’ equity.

Invested Capital Trend

Invested capital increased from US$32,896 million in 2021 to US$44,371 million in 2025. This represents a cumulative increase of approximately 35% over the period. The growth appears to be accelerating, with larger absolute increases observed in the later years of the period (2023-2025) compared to the earlier years (2021-2023).

Debt & Leases

Total reported debt & leases decreased from US$15,009 million in 2021 to US$12,541 million in 2025. The largest decrease occurred between 2021 and 2022, followed by a period of relative stability with minor fluctuations between 2022 and 2024. A further decrease is noted in 2025.

Stockholders’ Equity

Total stockholders’ equity exhibited a consistent increase throughout the period, rising from US$15,004 million in 2021 to US$26,109 million in 2025. This represents a cumulative increase of approximately 73%. The rate of increase in stockholders’ equity also appears to be accelerating, mirroring the trend observed in invested capital.

The increase in invested capital, coupled with the decrease in debt and the substantial increase in stockholders’ equity, suggests a shift in the company’s capital structure. The company appears to be relying more on equity financing and less on debt financing. The accelerating growth in both invested capital and stockholders’ equity in the later years of the period may indicate increased investment in operations or acquisitions, funded primarily by equity.

The economic spread ratio exhibited considerable fluctuation over the five-year period. Initially negative, the ratio improved significantly before declining sharply again. Economic profit demonstrated a similar pattern, moving from substantial losses to a modest profit and then back to a significant loss.

Economic Spread Ratio

The economic spread ratio began at -4.41% in 2021, indicating that the company’s return on invested capital was below its weighted average cost of capital. A notable improvement occurred in 2022, with the ratio increasing to -1.26%, suggesting a narrowing gap between returns and costs. This positive trend continued into 2023, reaching -0.05%, nearly achieving a break-even point. However, in 2024, the ratio briefly turned positive at 0.23%, signifying a period where returns exceeded costs. The final year, 2025, saw a substantial decline, returning to -4.40%, mirroring the initial level and indicating a renewed underperformance relative to the cost of capital.

Economic Profit

Economic profit mirrored the trend of the economic spread ratio. Starting with a loss of US$1,452 million in 2021, the losses diminished to US$429 million in 2022 and further to US$18 million in 2023. A profit of US$89 million was recorded in 2024, but this was followed by a significant loss of US$1,951 million in 2025, exceeding the initial loss from 2021.

Invested Capital

Invested capital consistently increased throughout the period, rising from US$32,896 million in 2021 to US$44,371 million in 2025. This growth in invested capital occurred alongside the fluctuating economic spread ratio and economic profit, suggesting that increased investment did not consistently translate into improved economic returns.

The divergence between the increasing invested capital and the volatile economic spread ratio and economic profit suggests a potential issue with capital allocation efficiency. While the company continued to invest, its ability to generate returns exceeding its cost of capital was inconsistent, culminating in a substantial loss in the final year.

The economic profit margin exhibited significant fluctuation over the five-year period. Initially negative, the margin improved substantially before declining again to a negative value.

Economic Profit Margin Trend

In 2021, the economic profit margin stood at -6.33%. A marked improvement was observed in 2022, with the margin increasing to -1.53%. This positive trend continued into 2023, reaching -0.06%, indicating near break-even performance from an economic profit perspective. The margin then turned positive in 2024, reaching 0.24%, before experiencing a substantial decline to -5.46% in 2025.

The economic profit margin’s movement closely mirrors that of the economic profit itself. The negative economic profit in 2021 and 2022 directly contributed to the negative margins. The near-zero economic profit in 2023 resulted in a margin approaching zero, and the positive economic profit in 2024 drove the margin into positive territory. Finally, the significant negative economic profit in 2025 led to a substantial decline in the margin.

Relationship to Revenue

Revenue demonstrated a generally increasing trend from 2021 to 2024, rising from US$22,929 million to US$36,289 million. However, revenue decreased slightly in 2025 to US$35,708 million. Despite the overall revenue growth, the economic profit margin did not consistently benefit, suggesting that increases in costs or capital charges offset the revenue gains in certain periods, particularly 2021, 2025, and to a lesser extent, 2022.

The volatility in the economic profit margin suggests potential challenges in consistently generating returns exceeding the cost of capital. The decline in 2025, despite relatively stable revenue, warrants further investigation into the underlying factors impacting profitability.