TechnipFMC’s Margins Rise as Subsea Backlog Hits $16.6 Billion

Date of Call: Feb 19, 2026

Financials Results

• Revenue: Full year revenue grew 9% to $9.9 billion. Q4 revenue was $2.5 billion, down 5% sequentially in Subsea segment.
• EPS: Not explicitly provided. Adjusted EBITDA was $1.8 billion for the full year, up 33% YOY.
• Gross Margin: Not explicitly provided.
• Operating Margin: Subsea adjusted EBITDA margin was 18.9% in Q4, up 340 basis points for the full year to 20.1%. Surface Technologies adjusted EBITDA margin improved 170 basis points to 16.7% for the full year.

Guidance:

• Subsea revenue for full year 2026 expected to be $9.4 billion with adjusted EBITDA margin of 21.5% at midpoint, implying 16% growth in adjusted EBITDA vs 2025.
• Q1 Subsea revenue expected to increase low single digits sequentially; Q1 adjusted EBITDA margin expected to improve ~50 bps from 18.9%.
• Surface Technologies full year revenue guided just over $1.2 billion with adjusted EBITDA margin of 17.25% at midpoint.
• Q1 Surface Technologies revenue expected to decline ~10% sequentially; Q1 adjusted EBITDA margin expected to be ~16.5%.
• Corporate expense for full year 2026 guided to $120 million, with ~$40 million expected in Q1.
• Full year 2026 free cash flow expected in range of $1.3B to $1.45B, implying ~65% conversion at midpoint.
• Expect to return at least 70% of free cash flow to shareholders in 2026 via dividends and buybacks.
• Total company adjusted EBITDA for 2026 expected to exceed $2.1B at midpoint, representing 15% growth vs 2025 excluding FX.

Business Commentary:

Strong Financial Performance:

• TechnipFMC reported a full-year revenue of $9.9 billion, up 9% from the previous year, with an adjusted EBITDA of $1.8 billion, a 33% increase when compared to the prior year.
• The growth was driven by strong operational momentum, with a total company inbound of $11.2 billion, leading to a substantial increase in backlog and free cash flow.

Subsea Segment Growth:

• The Subsea segment reported orders of $2.3 billion in the quarter, contributing to a full-year inbound of $10.1 billion, with iEPCI projects being the largest contributor.
• This growth was supported by a change in customer behavior towards a portfolio approach to offshore development and the widespread adoption of TechnipFMC's differentiated offerings.

Backlog and Order Trends:

• The company ended the year with a backlog of $16.6 billion, a 15% increase from the prior year, driven by high-quality inbound orders.
• The backlog growth was supported by continued momentum in new opportunities and a focus on iEPCI and Subsea 2.0 configure-to-order offerings.

Surface Technologies Margin Improvement:

• Surface Technologies reported a sequential increase in adjusted EBITDA of 8%, with an adjusted EBITDA margin of 18%, up 160 basis points from the third quarter.
• This improvement was attributed to higher services activity in the Middle East and operational efficiencies from business transformation initiatives.

Outlook and Strategic Focus:

• TechnipFMC anticipates $10 billion of Subsea inbound for the current year, expecting further growth in backlog and margin expansion.
• The company is focused on advancing integrated execution, expanding configure-to-order offerings, and achieving greater operating leverage.

Sentiment Analysis:

Overall Tone: Positive

• "I am very proud to report our strong quarterly and full year results as we closed 2025 with solid operational momentum." "Our financial results and operating momentum remains strong, but we know we can achieve even more." "We are confident that considerable upside remains." "We expect a greater share of capital spending to move offshore... we are seeing the impact of this change on our Subsea Opportunities list, with the latest update reflecting the sixth consecutive quarterly increase in value."

Q&A:

• Question from Arun Jayaram (JPMorgan Securities): Could you elaborate on margin expansion potential from industrializing the SURF process to drive margins higher?
  Response: Management is focused on expanding configure-to-order applications to the SURF/water column, seeing opportunities as substantial as the current Subsea 2.0 architecture.

• Question from Arun Jayaram (JPMorgan Securities): With legacy backlog at 10%, how much visibility do you have on further margin expansion Subsea vs your 2026 guide of 21.5% EBITDA margin?
  Response: Inbound is accretive to backlog margin; focus is on relentless cycle time reduction and project certainty, which creates economic value for clients and the company.

• Question from Scott Gruber (Citigroup): How widespread is renewed interest in greenfield developments across your customer base and geographies?
  Response: Interest is global, includes both new greenfields with existing exploration and new exploration in basins like Brazil and Colombia; projects are being accelerated.

• Question from Scott Gruber (Citigroup): Where do you stand on SURF standardization, and how much more is there to go?
  Response: Work has been ongoing; more to come, with updates to be shared, but they want to ensure it is done right.

• Question from Mark Wilson (Jefferies): Considering $10B inbound in 2026 and growing opportunity list, how much volume capacity exists within existing setup? Is $10B a magic number?
  Response: $10B is not a magic number; Subsea Opportunity list is growing and accelerating, expected to drive inbound growth in 2027 and beyond.

• Question from Derek Podhaizer (Piper Sandler): Can you provide tangible examples of how portfolio approach (e.g., bp Tiber/Kaskida) drives down cost and increases efficiency, impacting earnings power and margins?
  Response: Portfolio approach enables standardization, repeatability, and continuity in engineering/manufacturing/supply chain, benefiting both client and company without disclosing specific dollar savings.

• Question from Derek Podhaizer (Piper Sandler): What are expectations for Subsea Services growth in 2026?
  Response: Subsea Services revenue expected to grow in line with top line, approximately $2 billion for the year.

• Question from Victoria McCulloch (RBC): How does the recent Surface Technologies margin increase compare to expectations, and how much more is achievable?
  Response: Margin improvement due to high-grading portfolio, focusing on quality over quantity; business now 65% international, benefiting from local content investments; outlook remains difficult due to North America.

• Question from Victoria McCulloch (RBC): How are customer discussions in a choppy macro environment, given greater CapEx is moving offshore? Does this benefit pricing?
  Response: Offshore projects have smooth denominator due to prolific reserves; customers have regained confidence in execution certainty, leading to more direct awards and early seat at the table, conversations focus on improving project returns, not price.

• Question from Dave Anderson (Barclays) [via Eddie]: Does portfolio approach result in more content? Will more companies adopt it?
  Response: Being the architect/builder creates opportunities; portfolio approach applicable where clients have multiple greenfield assets, but not all have such a base.

• Question from Dave Anderson (Barclays) [via Eddie]: What inning are operators in regarding shifting capital to offshore?
  Response: Operators are in early stages with long runway ahead, based on their behavior.

• Question from Caitlin Donohue (Goldman Sachs): What are long-term expectations for iEPCI and Subsea 2.0 adoption and margin expansion?
  Response: iEPCI/2.0 have no technical/commercial limits; company aims for 100% where possible, but some legacy projects may use other methods; will continue to grow as default approach.

• Question from Caitlin Donohue (Goldman Sachs): What drives the Q1 Subsea revenue guide for low single-digit sequential increase?
  Response: Primarily related to seasonality, with vessels in drydock/maintenance, no major structural changes; underlying business strong.

• Question from Marc Bianchi (TD Cowen): Can you quantify how much of sales funnel and future orders will come from portfolio approach?
  Response: Hard to put a number; depends on client/portfolio, but it's a smaller portion currently; customers are responding well and applying it to their own lists.

• Question from Marc Bianchi (TD Cowen): What proportion of revenue is from direct awarded projects in 2025/2026/2027?
  Response: Direct awarded projects have increased from 50% to 80% recently; given project cycle of 2-3 years, this progression provides a roadmap for future benefits.

• Question from Saurabh Pant (Bank of America): How does gas vs oil projects impact revenue intensity and margin complexity?
  Response: Gas trees are more complex/higher unit cost due to corrosive environment, which is better for differentiation; overall, company welcomes both.

• Question from Saurabh Pant (Bank of America): With orders inflecting, will free cash flow conversion be higher than the 55% neutral long-term average for 2-3 years?
  Response: 2026 will see improved working capital and strong conversion (~65%); but caution against assuming perpetual improvement, as mix of orders creates variability; low capital intensity supports strong through-cycle cash flow.

• Question from Paul Redman (BNP Paribas): What are the risks of competitors replicating iEPCI or Subsea 2.0, and is it copyable?
  Response: It is difficult for others to replicate due to extensive detailed engineering required; company chose integration path while others chose consolidation; they will stick to their strategy.

Contradiction Point 1

SURF Standardization Process Timeline and Status

Contradiction on the timeline and status of the SURF standardization process, shifting from an active industrialization opportunity post-merger to an uncertain future announcement.

What are your key takeaways from the earnings report? - Scott Gruber (Citigroup)

20260219-2025 Q4: Work is ongoing. The company is being patient to ensure it is done correctly but expects to share more news in the future. - Douglas Pferdehirt(CEO)

What is the current status and remaining work for the SURF standardization process? - Derek Podhaizer (Piper Sandler & Co.)

2025Q3: There is a significant opportunity to industrialize the full iEPCI scope across the entire portfolio, leveraging the single-entity advantage post-merger. - Douglas Pferdehirt(CEO)

Contradiction Point 2

Subsea Business Growth Capacity and $10B Annual Run Rate

Contradiction on the characterization of the $10B annual inbound order target, shifting from a strategic target to a non-binding "magic number."

What are your thoughts on the recent earnings performance? - Mark Wilson (Jefferies)

20260219-2025 Q4: The $10B is not a magic number. The Subsea Opportunity list is growing and accelerating, and this is expected to be reflected in inbound order growth in 2027 and beyond... - Douglas Pferdehirt(CEO)

With current inbound and capacity constraints (CapEx at 3% of revenue), what volume capacity exists beyond the $10B annual Subsea inbound level? - John Anderson (Barclays Bank PLC)

2025Q3: The company is the only one providing 2026 guidance, a result of unique visibility and client confidence. Backlog coverage is strong, and the focus is on growing revenue and margins in line... - Douglas Pferdehirt(CEO)

Contradiction Point 3

Outlook for Subsea Order Book and Inbound Targets

Contradictory signals on confidence in reaching and exceeding the $10B annual Subsea inbound order target.

What are your key takeaways from the latest earnings report? - Mark Wilson (Jefferies)

20260219-2025 Q4: The $10B is not a magic number. The Subsea Opportunity list is growing and accelerating, and this is expected to be reflected in inbound order growth in 2027 and beyond... - Douglas Pferdehirt(CEO)

Considering capacity constraints (3% CapEx of revenue), what is the volume capacity beyond $10B annual Subsea inbound? - John Anderson (Barclays Bank)

2025Q2: Another strong Subsea order book this quarter. Clearly, you're confident in beating the $10 billion target this year. - John Anderson(Barclays Bank)

Contradiction Point 4

Nature of the Subsea Services Business

Contradiction on whether services growth is a new strategic trend or a continuation of the traditional book-and-ship model.

Arun Jayaram (JPMorgan Securities)? - Arun Jayaram (JPMorgan Securities)

20260219-2025 Q4: The strength in Subsea services is not a one-off but a new trend driven by the company's strategy of winning direct awards, which creates a large and growing installed base. - Douglas Pferdehirt(CEO)

How might industrializing the SURF process and advancements in integrated project execution impact margin expansion potential? - Marc Bianchi (TD Cowen)

2025Q2: Yes, strong inbound services orders typically translate to strong services revenue, as it is largely a book-and-ship business with a growing backlog. - Douglas Pferdehirt(CEO)

Contradiction Point 5

Order Outlook for 2026

Guidance for 2026 orders shifts from a specific $10B target to a more open-ended, growth-focused expectation.

What are your expectations for revenue growth in the next quarter? - Mark Wilson (Jefferies)

20260219-2025 Q4: The $10B is not a magic number. The Subsea Opportunity list is growing and accelerating, and this is expected to be reflected in inbound order growth in 2027 and beyond... - Douglas Pferdehirt(CEO)

What is the capacity limit beyond $10B in annual Subsea revenue, considering the 3% CapEx constraint? - Arun Jayaram (JPMorgan Securities)

2025Q1: The 2026 order outlook remains unchanged and is expected to be in the $10 billion range. - Douglas Pferdehirt(CEO)