Breaking Down NOV Inc. (NOV) Financial Health: Key Insights for Investors

If you're an investor looking at NOV Inc. right now, you're defintely seeing a mixed signal that is tough to reconcile: the headline numbers scream caution, but the underlying operational metrics tell a different story about the energy equipment cycle. You saw the third quarter 2025 results, where net income plummeted a staggering 68% year-over-year to just $42 million, reflecting the softening oilfield activity and near-term market caution. But here is the critical distinction for a seasoned analyst: despite that earnings drop, the company generated a robust $245 million in Free Cash Flow, demonstrating exceptional working capital management and cash conversion. That cash strength, plus the record-high Energy Equipment backlog of $4.56 billion, which was fueled by a book-to-bill ratio of 141% in the quarter, shows the long-term capital expenditure commitment from customers is still firmly in place, so your focus should be on how efficiently NOV Inc. translates that massive backlog into future cash, not just the volatile GAAP earnings of today.

Revenue Analysis

You're looking for a clear picture of where NOV Inc. (NOV)'s money is coming from, and the short answer is: it's a balanced, but slightly contracting, portfolio that's pivoting hard toward offshore and international markets. The company's trailing twelve months (TTM) revenue ending September 30, 2025, stood at approximately $8.78 billion, but the near-term trend shows a slight dip, with consolidated revenue declining 1.46% year-over-year. That slowdown is a direct result of softening global drilling activity, but it hides a strategic shift.

NOV's revenue streams are intentionally diversified across two main segments, which helps mitigate risk when one part of the energy market slows down. In the first quarter of 2025, the revenue split was nearly even, showing a healthy balance between equipment sales and the recurring revenue from products and services.

• Energy Equipment: Generated $1.15 billion in Q1 2025, representing 53.6% of total revenue.
• Energy Products and Services: Contributed $992 million in Q1 2025, making up 46.4% of total revenue.

Here's the quick math on how the segments performed through the first three quarters of 2025, showing the recent pressure on the shorter-cycle products business:

The year-over-year revenue decline, while minor, signals the impact of lower global drilling activity, particularly affecting the Energy Products and Services segment. But honestly, the real story is the backlog. The Energy Equipment segment, which focuses on larger, long-cycle projects like subsea flexible pipe and gas-focused process systems, has a record backlog of $4.56 billion as of Q3 2025. This backlog is your future revenue visibility, and its strength suggests a strong multi-year offshore upcycle is gaining momentum, which is defintely a good sign for long-term investors.

On a geographical level, NOV is truly an international player, which gives it resilience against regional downturns. As of Q1 2025, a significant 61% of its revenue came from International markets, with North America contributing the remaining 39%. This global footprint is crucial, especially as industry focus shifts toward offshore production supplanting U.S. unconventional resources as the dominant incremental source of global oil supply. For a deeper dive into who is betting on this pivot, you should check out Exploring NOV Inc. (NOV) Investor Profile: Who's Buying and Why?

Within the Energy Products and Services segment, the revenue is further broken down, confirming the importance of recurring business: 52% comes from Services and Rentals, 30% from Capital Equipment, and 18% from Product Sales, based on Q1 2025 data. This mix means a substantial portion of revenue is less volatile, tied to the ongoing operation and maintenance of existing equipment, not just new rig builds.

Profitability Metrics

You need to know if NOV Inc. (NOV) is making money efficiently, and the 2025 quarterly results show a mixed but improving picture, especially when you look past one-time events. The company's margins are defintely narrower than the broader industry average, but operational improvements are starting to show up in the numbers.

In the first half of 2025, NOV's profitability ratios reflect the challenging, lower-activity market for oilfield services, but also the benefit of executing on higher-margin equipment backlogs. Here's the quick math on the core margins from the first two quarters of 2025:

The Gross Profit Margin for Q1 2025 stood at a solid 21.3%. Your key takeaway here is that while the Gross Margin remains relatively stable-the Trailing Twelve Months (TTM) Gross Margin ending Q3 2025 was 20.49%-the real pressure is further down the income statement, in operating and net profits.

The trend shows some volatility. Operating Profit Margin dipped from 7.2% in Q1 2025 to 6.5% in Q2 2025. But, Net Income actually increased sequentially from $73 million in Q1 to $108 million in Q2, pushing the Net Profit Margin up from approximately 3.48% to 4.93%. The year-over-year comparison for Q2 is tricky because last year's figure included a large one-time gain of about $130 million from a business sale, which makes the reported 52% decline in net income look worse than the underlying operational performance.

When you stack NOV Inc. (NOV) against the industry, the difference is stark. While NOV's Q1 2025 Operating Margin was 7.2%, the median Operating Margin for the broader Oil and Gas Extraction industry in 2024 was a much higher 21.4%. Similarly, the 2024 median Gross Margin was 37.8%, significantly above NOV's Q1 21.3%. What this estimate hides is that NOV is in the oilfield equipment and services sector, which typically has lower margins than the 'Extraction' companies, but the gap still highlights a need for margin expansion.

Operational efficiency is the lever NOV is pulling right now. Management has pointed to 'continued improvements to operational efficiencies' and 'strong execution on higher-margin backlog' as key drivers. This is a crucial point for investors: the company is focused on internal cost management and executing on its profitable, long-cycle Energy Equipment backlog, which is helping offset lower demand in shorter-cycle consumable products. You can read more about the capital flows in Exploring NOV Inc. (NOV) Investor Profile: Who's Buying and Why?

• Gross Margin: Stable around 21%, suggesting consistent production cost control.
• Operating Margin: Under pressure, dropping from 7.2% to 6.5% sequentially.
• Net Income: Sequentially up, showing underlying operational strength post-Q2 2024 one-time gain.

Action: Look for sustained operating margin growth above 7.0% in the second half of 2025 to confirm the efficiency gains are truly sticking.

Debt vs. Equity Structure

You're looking at NOV Inc. (NOV) to understand how it pays for its massive, capital-intensive operations, and the quick answer is: the company relies far more on shareholder equity than debt. This is a strong signal of financial conservatism in a cyclical industry.

As of the third quarter of 2025, NOV Inc.'s total debt stood at approximately $2.36 billion, which is a manageable figure for a company of this size. The majority of this is long-term debt, which gives the company predictable, extended repayment schedules. Short-term debt, which represents obligations due within a year, is a small fraction of the total picture.

• Short-Term Debt (Q3 2025): $135 million
• Long-Term Debt (Q3 2025): $2.22 billion

Here's the quick math on how that debt stacks up against ownership (equity).

The company's debt-to-equity (D/E) ratio-a core measure of financial leverage-was a low 0.36 for the quarter ending September 2025. To be fair, the average D/E ratio for the Oil & Gas Equipment & Services industry is around 0.57 as of November 2025. NOV Inc. is operating with significantly less leverage than its peers, meaning its balance sheet is less exposed to interest rate hikes or a sudden market downturn.

This low leverage is defintely a strategic choice. NOV Inc. uses debt financing selectively and maintains a strong investment-grade credit rating. For example, S&P Global Ratings affirmed the company's long-term credit rating at 'BBB' with a stable outlook in March 2025. An investment-grade rating keeps borrowing costs low, but the company isn't racing to issue new debt.

Instead of relying heavily on debt, NOV Inc. has been actively returning capital to shareholders, which is the flip side of the equity coin. In the second quarter of 2025 alone, the company returned a total of $176 million to shareholders through dividends and opportunistic share repurchases. This includes buying back approximately 5.5 million shares for $69 million. This shows a clear preference for using strong operating cash flow to reward owners and reduce the share count, rather than funding growth primarily through new borrowing. You can learn more about this in Exploring NOV Inc. (NOV) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You're looking at NOV Inc. (NOV)'s balance sheet to gauge its ability to cover near-term obligations, and the picture is solid. The company's liquidity position as of mid-2025 is strong, reflecting a healthy cushion of current assets over liabilities. This means NOV Inc. (NOV) is defintely not struggling to pay its bills.

Current and Quick Ratios

The core liquidity metrics-the Current Ratio and the Quick Ratio (Acid-Test Ratio)-show that NOV Inc. (NOV) has ample resources to meet its obligations. As of the end of the first quarter of 2025, the company's Current Ratio stood at approximately 2.65. This ratio tells us that for every dollar of current liabilities, NOV Inc. (NOV) has $2.65 in current assets to cover it.

More critically, the Quick Ratio, which strips out inventory-often the least liquid current asset-was a robust 1.76. This is a strong indicator, especially in the energy equipment sector where inventory can be significant. It shows the company can cover its short-term debt even without immediately selling off its entire stock of equipment and parts.

• Current Ratio: 2.65 (Q1 2025).
• Quick Ratio: 1.76 (Q1 2025).
• Cash and equivalents (Q2 2025): $1.08 billion.

Working Capital and Cash Flow Trends

NOV Inc. (NOV)'s working capital-the difference between current assets and current liabilities-was approximately $3.602 billion in the first quarter of 2025. The trend shows management is focused on improving efficiency here, which directly strengthens cash flow. Good progress on working capital efficiency was a factor that strengthened cash flow year-over-year in Q1 2025.

Looking at the cash flow statement for the first half of 2025 gives us a clearer action map:

The company is generating solid operating cash flow (OCF), which improved from $135 million in Q1 to $191 million in Q2 2025. This is the money coming from the core business. The jump in Free Cash Flow (FCF) from $51 million to $108 million is particularly encouraging, showing more cash is left over after capital expenditures to return to shareholders or pay down debt. NOV Inc. (NOV) is actively returning capital, totaling $176 million in Q2 2025 alone through dividends and share repurchases, a clear sign of financial confidence.

Liquidity Strengths and Near-Term Actions

The primary strength is the sheer depth of liquid assets relative to short-term debt, backed by a significant cash reserve of $1.08 billion as of June 30, 2025. Plus, the company has $1.50 billion available on its primary revolving credit facility, giving it substantial immediate borrowing power if needed. Total debt of $1.73 billion is manageable against its equity base.

The near-term risk to watch isn't solvency, but the impact of macroeconomic uncertainty and lower global drilling activity, which management noted in Q2 2025. This could pressure future OCF if the market downturn is prolonged. The clear action for you is to monitor the Q3 2025 OCF and Free Cash Flow to ensure the positive trend continues despite the expected revenue decline of one to three percent for the quarter. For a deeper dive into who is betting on this stability, you should check out Exploring NOV Inc. (NOV) Investor Profile: Who's Buying and Why?

Valuation Analysis

You're looking at NOV Inc. (NOV) and wondering if the market has it right, and honestly, the valuation metrics suggest the stock is trading at a discount to its book value, but the analyst consensus says to hold. The core takeaway is that while the company looks statistically cheap on paper, the market remains cautious about near-term growth, hence the 'Hold' rating.

As of November 2025, the stock is trading near $15.18, which is a slight dip of 1.35% over the last 12 months, though it has seen a recent spike. This price sits comfortably between its 52-week low of $10.84 and its 52-week high of $16.84. The market is clearly undecided on its trajectory.

Is NOV Inc. (NOV) Overvalued or Undervalued?

To determine if NOV Inc. is a value opportunity or a trap, we look at the traditional multiples. For the 2025 fiscal year, the numbers point to a company that is inexpensive relative to its assets, but not necessarily a screaming bargain on earnings.

• Price-to-Earnings (P/E): The trailing P/E ratio is 15.37, and the forward P/E is 14.49. These figures are generally lower than the broader market average, suggesting the stock is not expensive based on its current and expected earnings.
• Price-to-Book (P/B): The P/B ratio is around 0.75x (as of October 2025). A P/B ratio below 1.0 is a classic indicator that the stock is trading for less than the net book value of its tangible assets, which often signals a potential undervaluation.
• Enterprise Value-to-EBITDA (EV/EBITDA): The trailing EV/EBITDA is approximately 6.11x. This is a very reasonable multiple for a capital-intensive industrial company in the energy sector, suggesting a fair, if not cheap, valuation relative to its core operating profit (Earnings Before Interest, Taxes, Depreciation, and Amortization).

Here's the quick math: A P/B of 0.75 means for every dollar of assets on the balance sheet, you're only paying 75 cents. That's defintely something to watch.

Dividend and Analyst Sentiment

For income-focused investors, NOV Inc. offers a modest but sustainable payout. The company has an annual dividend of $0.30 per share, which translates to a dividend yield of about 2.82% as of November 2025. The payout ratio is around 51.18%, meaning roughly half of the company's earnings are returned to shareholders, leaving the other half for reinvestment or debt reduction.

The Wall Street consensus on the stock is a firm 'Hold.' Out of 17 analysts covering the stock in the last year, 9 recommend a Hold, 5 recommend a Buy, and 3 recommend a Sell. The average 12-month price target is $15.54, which offers a minimal upside of just 1.39% from its recent trading price.

The Hold consensus reflects the mixed signals: the attractive P/B and EV/EBITDA multiples point to value, but the modest expected price appreciation suggests analysts aren't anticipating a major catalyst in the near-term. You can review the company's long-term strategy here: Mission Statement, Vision, & Core Values of NOV Inc. (NOV).

What this estimate hides is the volatility inherent in the oil and gas equipment sector. While the valuation is low, the stock's performance is tied to global energy capital expenditure, which can swing wildly. Your next step should be to look at their backlog and customer commitments to see where that revenue is truly coming from.

Risk Factors

You're looking for the clear-eyed view on NOV Inc. (NOV), and the near-term reality is a tough market environment is putting pressure on the core business. The biggest risks are external-softening demand in key regions and persistent cost inflation-which are directly impacting profitability and margin. The company is defintely managing these headwinds, but the next few quarters will remain challenging.

External and Market Headwinds

NOV Inc. (NOV) operates in a highly cyclical industry, so its financial health is acutely sensitive to global energy prices and geopolitical stability. The stock's beta of 1.2 confirms this higher volatility compared to the broader market, meaning your investment will see larger price swings. The primary external risk is a significant slowdown in drilling activity, with global drilling activity declining by 8% year-over-year in a recent reporting period.

The softening North American market is a specific drag. Management anticipates North American shale activity will drift lower through year-end 2025. This, combined with macroeconomic uncertainty and changes in OPEC+ production quotas, has led to customer caution, deferred orders, and a decline in the higher-margin aftermarket business. For the full year 2025, NOV expects its aftermarket revenues to see a mid-teen decline.

• Energy price volatility: Directly impacts customer spending on new equipment.
• Geopolitical tensions: Affects international project sanctioning and execution.
• Global activity decline: Overall rig count is down, reducing demand for consumables.

Operational and Financial Pressures

The external risks translate directly into financial and operational challenges, particularly margin compression from inflation and trade tariffs. The company is grappling with significant tariff-related costs, which are expected to rise from $11 million in the second quarter to between $25 million and $30 million in the fourth quarter of 2025 alone.

We've also seen a clear drop in net income through 2025. Net income for Q1 2025 was $73 million, and Q3 2025 was just $42 million (or $0.11 per diluted share), missing analyst expectations. What this estimate hides is the operational clean-up: Q3 2025 included $65 million in 'Other Items,' which were mainly asset write-downs and severance charges from facility consolidations and restructuring activities. That's a necessary cost, but it hits the bottom line hard.

Here's the quick math on the quarterly net income trend in 2025:

Plus, working capital requirements remain elevated, expected to be between 27-29% of revenues for the full year 2025, which limits the free cash flow that can be converted back to the business or shareholders.

Mitigation and Forward Strategy

To be fair, NOV Inc. (NOV) is not just sitting on its hands. The main mitigation strategy is a decisive pivot toward international and deepwater markets, where the marginal cost of production is now competitive with North American shale. This shift is already visible in the backlog: the capital equipment order backlog for the Energy Equipment segment rose to a strong $4.56 billion by the end of September 2025.

On the cost side, management is taking clear action. They have initiated cost control and efficiency programs that are on track to deliver over $100 million in annualized savings by the end of 2026. Also, they are actively adjusting their global supply chain to offset up to 80% of the tariff impacts. This is a smart move to protect future margins.

If you want to understand the investor base supporting this strategy, check out Exploring NOV Inc. (NOV) Investor Profile: Who's Buying and Why?

Finance: Monitor the Q4 2025 tariff expense against the $25 million guide to gauge the success of supply chain mitigation efforts.

Growth Opportunities

You're looking past the near-term volatility in the oil and gas sector and asking where NOV Inc. (NOV) will find its next gear of growth. That's the right focus. The company's future isn't just tied to the oilfield cycle; it's increasingly about their technology leadership and strategic pivot to new energy markets.

NOV is defintely a trend-aware realist, much like a seasoned investor. They're mapping their core strengths-drilling and completion technology-onto the most resilient global spending pockets, plus they're making a calculated push into the energy transition. The key is their proprietary technology that allows them to be a flexible, independent provider in a fragmented market. That's a strong competitive advantage.

Future Revenue Growth and Earnings Estimates

For the 2025 fiscal year, the analyst consensus suggests a relatively flat revenue environment but with expanding profitability. Here's the quick math: Wall Street analysts project NOV Inc.'s full-year 2025 revenue to be around $8.775 billion. This reflects a modest forecast annual revenue growth rate of only 0.42% for the 2025-2027 period, which is slower than the overall US Oil & Gas Equipment & Services industry average.

Still, the earnings picture is brighter. Analysts forecast full-year 2025 net income to be approximately $354.5 million, with an expected earnings per share (EPS) growth of 17.86%, rising from $1.40 to $1.65 per share in the coming year. This margin expansion is expected to be driven by higher-quality backlog and operational efficiencies, not just top-line growth.

For a clearer view of the scale, here are the key 2025 fiscal year figures:

Key Growth Drivers and Strategic Initiatives

The growth story for NOV Inc. hinges on three core areas, moving beyond the traditional North American land drilling market. This is a deliberate strategy to diversify and capture higher-margin business.

• International Market Expansion: NOV generates 61% of its revenue internationally. They are seeing significant growth in unconventional shale developments in the Middle East and Latin America. This is where their advanced downhole technologies are achieving high adoption rates, like the integrated Bottom Hole Assembly (BHA) solution that recently set a field record in a Middle East unconventional field.
• Product Innovation and Technology Adoption: The company is focused on scaling its proprietary technologies across all three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies. This includes digital solutions like automation and predictive analytics, which open new revenue streams by improving customer efficiency.
• Energy Transition Pivot: This is the long-term play. NOV Inc. is actively expanding its offerings into renewable energy solutions, specifically for wind, geothermal, and carbon capture projects. This strategic move is crucial for navigating the industry's cyclical nature and positioning the company for a more sustainable future. You can read more about their long-term direction here: Mission Statement, Vision, & Core Values of NOV Inc. (NOV).

What this estimate hides is the risk of continued softness in North American drilling, which management expects to be subdued. So, the international and technology-driven growth needs to significantly outperform to move the needle past the 0.42% revenue growth forecast.