Bloomberg Talks
00:00:02 · S0, S1, Lorenzo Simonelli
[00:00:02] S0: Bloomberg Audio Studios, podcasts, radio, news. [00:00:07] S1: Joining us now is the Baker Hughes CEO, Lorenzo Simonelli. And Lorenzo, the market punishing you, even though these were really large numbers, orders of $ 10. 8 billion, 35% above what analysts were expecting. What we're seeing in your figures, Lorenzo, is this some sort of pull forward, customers rushing to put in orders with a backlog, or are we witnessing right now a genuine step change in the order cycle? [00:00:34] S2: Well, great to be with you and really feel good about the quarter performance and the team delivered. And also, we see this as a continued aspect of incremental activity. As you also saw, we announced that our Horizon 2 IET orders number is up to $ 50 billion. And that is the second increase that we've announced this year. Originally, when we laid out the target between 26 to 28, it was at 40 billion, and now we've taken it up twice, 5 billion each time. And we see continued momentum, not just in 2026, but also in 2027 and beyond into 2028, driven by the overall aspect of power generation needs behind the meter, gas infrastructure, and the infrastructure that's needed, which with our portfolio, we clearly are linked to. [00:01:28] S0: So Lorenzo, we know that AI data centers are driving a lot of those demand. How much of your growth is tied to the AI boom?
00:01:28 · S0, Lorenzo Simonelli, S1
[00:01:28] S0: So Lorenzo, we know that AI data centers are driving a lot of those demand. How much of your growth is tied to the AI boom? [00:01:36] S2: So actually, as you look at our total RPO, less than 20% of our RPO is related to the power systems element. Data center definitely is a meaningful increase that's happened. over the course of this last year. And we see it continuing, but it's still a relatively small part of the total element of Baker Hughes, given our broad portfolio and the opportunities of the different end markets that we serve across GAF infrastructure, pipeline, power generation, offshore. [00:02:09] S1: But we should also just note on the note of AI, you announced yesterday a power generation cooling order for one of the big US tech companies. And Lorenzo, specifically around the gigawatts worth of turbines that you've been selling, I've been trying to wrap my puny little human brain around the figures. So just in this quarter, 1.6 gigawatts worth, which is about equivalent to powering the size of a city like Houston, which is appropriate because I'm in Texas today myself. Given that, and given the huge demand that you're having, how are you digesting that? Are you turning customers away? Are you raising prices? What is the balance that you're striking?
00:02:09 · S1, Lorenzo Simonelli
[00:02:09] S1: But we should also just note on the note of AI, you announced yesterday a power generation cooling order for one of the big US tech companies. And Lorenzo, specifically around the gigawatts worth of turbines that you've been selling, I've been trying to wrap my puny little human brain around the figures. So just in this quarter, 1.6 gigawatts worth, which is about equivalent to powering the size of a city like Houston, which is appropriate because I'm in Texas today myself. Given that, and given the huge demand that you're having, how are you digesting that? Are you turning customers away? Are you raising prices? What is the balance that you're striking? [00:02:49] S2: Well, definitely at this stage, you may have seen that we have increased our capacity and we make those investments based on the long term outlook and the turbine capacity that we need going forward. And 1.1 gigawatts is what we announced yesterday from an auto perspective. Overall, 1.6 for the quarter. And we see that as a continued trend. I would say we're very careful with regards to the selection of the projects as well as the customers that we have in our backlog. And we feel very good with regards to the cycles we've been through in the past of having the right contractual aspects in place, being with strong, well-supported finance customers going forward and feel good about these projects coming to life in the future.
00:02:49 · Lorenzo Simonelli, S0
[00:02:49] S2: Well, definitely at this stage, you may have seen that we have increased our capacity and we make those investments based on the long term outlook and the turbine capacity that we need going forward. And 1.1 gigawatts is what we announced yesterday from an auto perspective. Overall, 1.6 for the quarter. And we see that as a continued trend. I would say we're very careful with regards to the selection of the projects as well as the customers that we have in our backlog. And we feel very good with regards to the cycles we've been through in the past of having the right contractual aspects in place, being with strong, well-supported finance customers going forward and feel good about these projects coming to life in the future. [00:03:35] S0: Lorenzo, we also have geopolitical risks still in our world. How are Middle East tensions changing the way consumers understand our spending and their demand for energy infrastructure?
00:03:35 · S0, Lorenzo Simonelli, S1
[00:03:35] S0: Lorenzo, we also have geopolitical risks still in our world. How are Middle East tensions changing the way consumers understand our spending and their demand for energy infrastructure? [00:03:45] S2: Again, we focus on the Middle East on a daily basis. Obviously, we've got a large population of employees there. Their security is extremely important. and we safeguard also the operations of our customers. And I've been very pleased with the performance in third quarter by our team, and also the moderation and increase in some of the activity. We think at this stage that fourth quarter activity will be similar to the second quarter, and a lot is to be seen how the tension continues to unfold, and also we all hope that there's a de-escalation in the future. And with that comes the opportunity of increased activity and also rebuilding infrastructure and the need for energy infrastructure as we take up production going forward. [00:04:37] S1: Lorenzo, thank you so much for your time this morning. We appreciate it. Lorenzo Simonelli of Baker Hughes.