Drilling services company Nabors Industries (NYSE: NBR) beat Wall Street’s revenue expectations in Q1 CY2026, with sales up 6.4% year on year to $783.5 million. Its non-GAAP loss of $1.54 per share was 24.1% above analysts’ consensus estimates.

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StockStory’s Take

Nabors Industries delivered a first quarter that was met with a positive market reaction, as revenue and adjusted earnings both surpassed Wall Street expectations. Management attributed the outperformance to expanding activity in international markets and the continued recovery of its U.S. rig fleet. CEO Tony Petrello highlighted operational momentum in the Lower 48, noting, “This performance reflects our high-spec rigs, advanced technology, experienced crews, and strong field performance.” Additionally, the company maintained steady operations across the Middle East despite geopolitical disruptions, helping stabilize results.

Looking forward, management believes that disciplined capital allocation and further rig deployments in key markets will underpin growth for the rest of the year. The company expects incremental gains from its newbuild rig program in Saudi Arabia and stable demand for high-spec rigs in the U.S. Management remains cautious regarding ongoing logistics challenges in the Middle East but sees upside as operators prioritize efficiency and larger drilling projects. CFO Miguel Rodriguez emphasized, “We are well positioned to exceed our full-year guidance, driven by improved activity and strong capital discipline.”

Key Insights from Management’s Remarks

Management pointed to a combination of international expansion, new rig deployments, and operational discipline as key drivers behind this quarter’s performance and the company’s improved outlook.

• International rig count expansion: Nabors grew its international rig count by 16% since 2023, despite industry-wide stagnation and the wind-down of operations in certain countries. This growth was enabled by its diversified presence in the Middle East, Asia Pacific, and Latin America, positioning the company ahead of peers in global drilling activity.

• U.S. rig recovery and pricing: The company added four rigs in the Lower 48 during the quarter, bringing the total to 66, mainly from public operators across several basins. Management highlighted that these additions were achieved while maintaining pricing discipline and that they expect rig pricing to trend higher through 2026 and into 2027 due to tightening supply and increased operator demand for advanced drilling capabilities.

• Saudi Arabia newbuild progress: The SANAD joint venture in Saudi Arabia deployed its fifteenth newbuild rig during the quarter, with four additional rigs scheduled for deployment in 2026. Discussions are also underway for a fifth tranche of newbuild rigs, which could further expand the company’s long-term earnings potential in the region.

• Technology and high-spec rigs: Nabors emphasized the success of its PaceX Ultra high-spec rigs, equipped with advanced automation and high-pressure systems, which are in high demand for more technically challenging wells in the U.S. Management reported strong customer interest and higher daily revenue rates for these rigs, supporting future margin improvement.

• Operational resilience in challenging environments: Despite the Middle East conflict causing logistical and supply chain disruptions, Nabors maintained operational continuity across its regional portfolio. Management credited workforce adaptability and customer support, particularly from Saudi Aramco, as critical in navigating these challenges and sustaining planned activity levels.

Drivers of Future Performance

Nabors Industries’ outlook is shaped by continued rig deployments, technology-driven offerings, and disciplined capital management, with geopolitical and market uncertainties remaining key variables.

• Incremental U.S. rig activity: Management expects continued gains in the Lower 48 rig count, with plans to maintain around 69 active rigs through the year. The company’s high-specification rigs and integrated drilling solutions are expected to capture incremental demand, particularly as operators shift to more complex, efficiency-focused drilling programs.

• Saudi newbuild program and international growth: The SANAD joint venture in Saudi Arabia is set to deploy additional newbuild rigs, and discussions for further expansion are ongoing. This program, combined with opportunities in Latin America and Asia Pacific, is expected to drive international segment growth, though the timing may be influenced by the evolving situation in the Middle East.

• Capital discipline and free cash flow: Nabors intends to continue prioritizing debt reduction, with free cash flow performance benefiting from improved working capital and restrained capital expenditures. Management cautioned that logistical headwinds and potential volatility in global oil and gas markets could impact execution but expressed optimism about exceeding full-year free cash flow guidance.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace of rig deployments and pricing trends in the U.S. Lower 48, (2) the execution and timing of additional newbuild rig deliveries and contract wins in Saudi Arabia, and (3) the company’s ability to maintain operational continuity in the Middle East despite ongoing logistical disruptions. Progress on debt reduction and free cash flow generation will also be central to tracking Nabors’ execution against its strategic objectives.

Nabors Industries currently trades at $100.79, up from $93.79 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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