Oilfield equipment manufacturer NOV (NYSE: NOV) met Wall Street’s revenue expectations in Q1 CY2026, but sales fell by 2.4% year on year to $2.05 billion. Its GAAP profit of $0.05 per share was 64.7% below analysts’ consensus estimates.

Is now the time to buy NOV? Find out by accessing our full research report, it’s free.

“The conflict in the Middle East created significant operational disruptions during the first quarter, but also reinforced and accelerated market trends that we believe will drive a meaningfully more constructive environment for NOV,” said Jose Bayardo, Chairman, President and CEO.

Company Overview

With roots stretching back to 1862 when it began making equipment for early oil fields, NOV (NYSE: NOV) manufactures drilling rigs, drill bits, pumps, and other equipment used to drill oil and gas wells.

Revenue Growth

Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Over the last five years, NOV grew its sales at a mediocre 9.8% compounded annual growth rate. This was below our standard for the energy upstream and integrated energy sector and is a tough starting point for our analysis.

Within Energy, a singular timeframe, even if it’s quite long-term, only sheds light on how well a company rode the last commodity cycle. To better assess whether a company compounds through cycles, we validate our view with an even longer, ten-year view. NOV’s performance shows it grew in the past five-year but relinquished its gains over the last ten years, as its revenue fell by 3.3% annually.

While looking at revenue is important, it can also introduce noise around commodity prices and M&A. Analyzing production, on the other hand, highlights what is happening inside the asset base and whether the economic footprint of a company is expanding. Over the last two years, NOV’s other production averaged 3.7% year-on-year growth.

This quarter, NOV reported a rather uninspiring 2.4% year-on-year revenue decline to $2.05 billion of revenue, in line with Wall Street’s estimates. This quarter, NOV reported year-on-year Other production growth of 19%.

ALSO WORTH WATCHING: Nvidia’s Quiet Partner. Nvidia’s chips cost a hundred grand. The connectors that make them work cost even more. One company makes them all.

Every AI server needs specialized infrastructure the chip companies don’t make. High-speed cables. Power connectors. Thermal sensors. This 90-year-old company built a monopoly on it. The AI boom just started. This stock is still flying under the radar. Claim The Stock Ticker Here for FREE.

Adjusted EBITDA Margin

Adjusted EBITDA margin strips out accounting distortions tied to depletion and historical drilling spend, providing a clearer view of the cash-generating power of the underlying asset base before financing and reinvestment decisions.

NOV was profitable over the last five years but held back by its large cost base. Its average EBITDA margin of 10.6% was among the worst in the energy upstream and integrated energy sector.

On the plus side, NOV’s EBITDA margin rose by 5.3 percentage points over the last year.

In Q1, NOV generated an EBITDA margin profit margin of 8.6%, down 3.4 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue. This adjusted EBITDA is in-line with Wall Street’s estimates.

Cash Is King

As mentioned above, adjusted EBITDA ignores capital structure and drilling expenditure decisions. These are two huge aspects of an Energy producer, so in order to understand a comprehensive picture of business quality, an investor needs to account for these. Said differently, adjusted EBITDA margins could be solid but free cash flow is abysmal because decline rates of the asset are extreme and the drilling is expensive. Free cash flow tells you about not only the economics of the production that has happened but how much it costs to stay in business as well (further drilling or extraction).

NOV has shown weak cash profitability relative to peers over the last five years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 3.4%, below what we’d expect for an upstream and integrated energy business.

The level of free cash flow is important, but its durability across cycles is just as critical. Consistent margins are far more valuable than volatile swings driven by commodity prices.

NOV’s ratio of quarterly free cash flow volatility to WTI crude price volatility over the past five years was 21.7 (lower is better), indicating that its cash generation is far more sensitive to commodity-price swings than most peers. This elevated volatility limits its access to capital in downturns and makes it unlikely to act as a consolidator when weaker competitors come under pressure.

You may be asking why we wait until the free cash flow line to perform this stability analysis versus commodity prices. Why not compare revenue or EBITDA to WTI in the case of NOV? Because what ultimately matters is not how much revenue or profit you earn when prices are high but how much cash you can generate when prices are low. Free cash flow is the superior metric because it includes everything from hedging prowess to growth and maintenance capex to management behavior during good times and bad.

NOV burned through $91 million of cash in Q1, equivalent to a negative 4.4% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Key Takeaways from NOV’s Q1 Results

We struggled to find many positives in these results. Its EPS missed and its revenue was in line with Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 5.4% to $19.71 immediately following the results.

NOV underperformed this quarter, but does that create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).