Cactus, Inc.'s Earnings Call Contradictions: Middle East, Vietnam Certification, and U.S. Drilling Outlooks Diverge

Date of Call: Feb 26, 2026

Financials Results

• Revenue: $261 million, lower 1% sequentially
• EPS: $0.65 per share (adjusted), down from $0.67 in Q3 2025
• Operating Margin: Adjusted EBITDA margin 32.7%, compared to 32.9% in Q3 2025

Guidance:

• Pressure Control revenue expected to be $295M-$305M in Q1 2026.
• Pressure Control adjusted EBITDA margins expected to be 23%-25% in Q1 2026.
• Spoolable Technologies revenue expected to be down mid-single digits sequentially in Q1 2026.
• Spoolable Technologies adjusted EBITDA margins expected to be 33%-35% in Q1 2026.
• Full year 2026 revenue and adjusted EBITDA expected to be more in line with 2024 results for Cactus International.
• Anticipate increased order activity in H2 2026 and into 2027 for Cactus International.
• Full year 2026 net CapEx expected to be $40M-$50M.

Business Commentary:

Strong Financial Performance in Q4 2025:

• Cactus, Inc. reported revenue of $261 million for Q4 2025, with an adjusted EBITDA of $85 million and margins of 32.7%.
• The strong performance in the Pressure Control segment, with revenues up 5.8% sequentially, was driven by higher product sales per rig and improved rental revenues due to increased customer activity.

Acquisition and Integration of Cactus International:

• The company closed the acquisition of the majority interest of Baker Hughes Surface Pressure Control business, now referred to as Cactus International, on January 1, 2026.
• This strategic move aims to leverage Cactus's U.S. conventional expertise in the Mid-East market, with expectations of increased order activity in the second half of 2026 and into 2027.

Challenges and Outlook for Spoolable Technologies:

• Revenues for the Spoolable Technologies segment declined by 11.6% sequentially to $84 million, with adjusted EBITDA margins declining by 90 basis points.
• The decline was due to lower U.S. customer activity levels and seasonally slow quarters, with expectations for continued North American seasonality affecting Q1 2026 revenue.

Tariff Environment and Vietnam Facility:

• Section 301 and 232 tariffs on goods imported from China remain at 75%, while tariffs on goods from Vietnam are at 50%.
• The Vietnam facility is ramping up with API certification expected early in Q2 2026, aiming to displace shipments from China to the U.S. later in the year, which is anticipated to boost margins.

Dividend and Cash Position:

• Cactus paid a quarterly dividend of $0.14 per share, resulting in a cash outflow of approximately $11 million, and ended the quarter with a cash balance of $495 million.
• The strong cash position facilitated the closure of the Baker SPC acquisition and reflects the company's financial stability amid macroeconomic challenges.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed optimism regarding the Cactus International acquisition, stating it is 'transformational' and that they are 'very pleased' with the decision. They noted the U.S. Pressure Control business is 'performing at its highest level' and are 'energized' by the new joint venture, despite acknowledging near-term softness in markets.

Q&A:

• Question from Stephen Gengaro (Stifel): On Cactus International, any guidance on margin progression over the next 3-5 quarters?
  Response: Meaningful supply chain savings will enhance margins substantially in 2027, but not until then due to order timing; management is optimistic about exceeding projected synergies.

• Question from Stephen Gengaro (Stifel): What is your view on U.S. rig count progression and activity evolution?
  Response: Expects the 2026 rig count exit rate to be around $490 million, concerned about geopolitical price support and potential consolidation impacts.

• Question from Scott Gruber (Citigroup): What are the growth prospects for the International segment over the next 3 years?
  Response: Sees far greater growth prospects in the Middle East than in the U.S., expects 2027 to be considerably better than 2026 due to new rigs and expanding sales efforts.

• Question from Scott Gruber (Citigroup): What are the thoughts on share capture strategy in the Middle East?
  Response: Sees a huge opportunity in Saudi Arabia to gain market share, which is currently well below potential, and intends to pursue opportunities previously not prioritized.

• Question from Derek Podhaizer (Piper Sandler): What is the outlook for the aftermarket services piece of Cactus International?
  Response: Focus is on leveraging the large installed base, especially in West Africa and the Far East, which has been ignored and represents substantial, high-margin opportunities.

• Question from Derek Podhaizer (Piper Sandler): How does the ramp back to 2025 levels look for 2027?
  Response: 2027 is expected to be north of the midpoint between 2025 and 2026, with substantial EBITDA improvement from supply chain initiatives.

• Question from Jeffrey LeBlanc (TPH): How are you thinking about continued U.S. drilling efficiencies?
  Response: Sees greater drilling efficiencies continuing, translating into more wells per rig, and is bullish on the trend as technology spreads.

• Question from Donald Crist (Johnson Rice): What is the margin impact and timeline for API certification in Vietnam?
  Response: Vietnam tariffs are about 25 percentage points lower than China's, which will substantially boost effective margins in 2027; API certification is in process, with monogram expected in 30-60 days.

• Question from Donald Crist (Johnson Rice): Do you have an installed base in North Africa that could grow meaningfully?
  Response: Yes, the acquisition provides an installed base in North Africa that could grow over the next few years.

Contradiction Point 1

International Market Outlook and 2026 Forecast

Contradiction on the strength of international markets, especially the Middle East, in 2026.

Scott Gruber (Citigroup Inc.) - Scott Gruber (Citigroup Inc.)

2025Q4: Growth prospects are stronger in the Middle East than in the U.S.... optimism for 2027 being considerably better than 2026. - [Scott Bender](CFO)

How do you view the growth prospects for the International segment, particularly in the Middle East, over the next 3 years, and what strategies are in place to capture market share there? - Arun Jayaram (JPMorgan Chase & Co)

2025Q3: Expects the international market, including the Middle East, to be relatively weaker in 2026 due to typical 12-month lag following a U.S. slowdown. - [Scott Bender](CFO)

Contradiction Point 2

Vietnam API Certification Timeline

Contradiction on the timeline for achieving full API certification in Vietnam.

Donald Crist (Johnson Rice & Company, L.L.C.) - Donald Crist (Johnson Rice & Company, L.L.C.)

2025Q4: Full certification (monogram) is expected in 30–60 days. - [Joel Bender](CFO)

Can you provide an update on Vietnam’s API certification timeline and its potential margin impact, as well as discuss the installed base in North Africa (e.g., Algeria, Egypt) and its potential for meaningful growth? - Arun Jayaram (JPMorgan Chase & Co)

2025Q3: API certification audit is expected within ~90 days... - [Joel Bender](CFO)

Contradiction Point 3

U.S. Drilling Activity and Rig Count Outlook

Outlook for U.S. rig count evolution became notably more pessimistic.

Stephen Gengaro (Stifel, Nicolaus & Company, Incorporated) - Stephen Gengaro (Stifel, Nicolaus & Company, Incorporated)

2025Q4: Most analysts predict a decline to ~$500–$510 million by the end of 2026 (from ~$530 million currently). Scott’s personal view is more cautious, expecting a range of approximately $490 million. - [Scott Bender](CEO)

"Regarding the Cactus International acquisition, what is the expected margin progression over the next 3–4–5 quarters, and what is your view on how U.S. drilling activity will evolve?" - Stephen Gengaro (Stifel)

2025Q2: Significant response to oil prices is not anticipated. - [Scott Bender](CEO)

Contradiction Point 4

Vietnam API Certification Timeline and Margin Impact

Timeline for full API certification and associated margin benefits shifted significantly.

Donald Crist (Johnson Rice & Company, L.L.C.) - Donald Crist (Johnson Rice & Company, L.L.C.)

2025Q4: Full certification (monogram) is expected in 30–60 days. Once certified, products can be moved into the U.S., benefiting from lower tariffs (~25% less than China) and inherently lower costs, which should boost effective margins. - [Scott Bender](CEO)

What is the current status of Vietnam's API certification and its impact on margins? - Scott Gruber (Citigroup)

2025Q2: The company believes Vietnam will be in a position to fully take on the former Chinese import model by the coming summer. - [Scott Bender](CEO)

Contradiction Point 5

U.S. Rig Count and Drilling Activity Outlook

Conflicting forecasts for the near-term U.S. drilling activity trend.

Stephen Gengaro (Stifel, Nicolaus & Company, Incorporated) - Stephen Gengaro (Stifel, Nicolaus & Company, Incorporated)

2025Q4: Most analysts predict a decline to ~$500–$510 million by the end of 2026... Scott’s personal view is more cautious, expecting a range of approximately $490 million. - [Scott Bender](CEO)

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2025Q1: The behavior is expected to be similar to past cycles. Major customers are sticking with Cactus due to its quality and the sustainability of its supply chain. - [Scott Bender](CEO)