Cactus's Q2 2025: Navigating Tariff Challenges and Shifting Strategic Focus Amid Contradictory Signals

Impact of tariffs on profitability, strategic focus on international markets, tariff impact and cost recovery, strategic focus on international expansion, and customer response to oil prices are the key contradictions discussed in Cactus's latest 2025Q2 earnings call.



Financial Performance and Cash Flow:
- Cactus reported revenue of $274 million for Q2 2025, with adjusted EBITDA of $87 million and adjusted EBITDA margins of 31.7%. The company increased its cash balance to $405 million.
- The decline in revenue and EBITDA margins compared to Q1 was due to lower revenue in the Pressure Control rental business and higher product costs, particularly from tariffs.

Impact of Tariffs:
- The unexpected doubling of the Section 232 tariff rates in June led to an incremental 70% tariff rate on goods imported from China and Vietnam, straining Cactus' supply chain and profit margins.
- Efforts to neutralize these increased tariffs and diversify the supply chain are underway, with a focus on Vietnam for future imports.

Segment Performance:
- The Pressure Control segment saw revenue of $180 million, down 5.5% sequentially, driven by lower rental revenue and a less favorable product mix. Operating margins decreased by 510 basis points.
- The Spoolable Technologies segment reported revenue of $96 million, up 3.9% sequentially, driven by higher domestic customer activity and increased manufacturing efficiencies.

Strategic Acquisitions:
- The announcement of a transformative acquisition of a controlling interest in Baker Hughes’ Surface Pressure Control business highlights Cactus' strategic focus on expanding its international footprint to mitigate domestic market volatility.
- This acquisition aligns with Cactus' long-term strategy of diversifying its market exposure and enhancing profitability.