SLB N.V. (SLB) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today. Before we start, let me briefly step back and review the story you heard so far. We have discussed the pivotal role of digital in our industry and the differentiated position SLB has built over time. You have seen how we are leveraging our platforms and applications across planning and operations workflows. And you have heard about the opportunity to scale across our portfolio to unlock even greater value. What I would like to do now is bring that story together through a financial lens. Over the next few minutes, and we'll focus on 3 areas. First, the digital profile of our digital business, the financial profile of our digital business. Second, the significant market opportunity ahead of us and how we plan to monetize it. And finally, our 2030 financial ambitions. The key takeaway is this. Digital has become a meaningful contributor to SLBs financial performance in the past few years. And we continue to see significant runway ahead with accretive growth and continued margin expansion. Let me begin with where the business stands today. In 2025, digital generated approximately EUR 2.7 billion of revenue. More than EUR 900 million of adjusted EBITDA and an adjusted EBITDA margin of 35%. It also reached approximately EUR 1 billion in annual recurring revenue on a trailing 12-month basis. But what is most important is the quality of this growth. Since 2029 -- 2021, digital revenue has grown at a 16% compound annual growth rate. well above the oilfield services market and SLBs overall growth during the same period. And adjusted EBITDA grew even faster at a 23% CAGR compared with approximately 14% for SLB overall, demonstrating digital strong operating leverage and differentiated earnings power. Also, the margin profile you see here already reflects a meaningful share of the costs required to support growth as the research and engineering spend is directly expensed. That translates into very strong cash generation and effectively makes digital the division with the highest return on capital employed in the company. So what digital brings to SLB is very clear. It has growth, it lifts margins and it delivers very attractive returns. Let me now describe our digital revenue footprint. One of the defining strengths of this business is that it is diversified across geographies, customer types and revenue categories. That matters, because it gives us a broader opportunity set, greater resilience and multiple paths to growth Today, our digital business serves more than 1,500 customers, including more than 90 of the world's top 100 oil and gas producers. That is a strong installed base. and a solid foundation for growth. Geographically, the business has broad exposure across the Middle East and Asia. Europe and Africa, Latin America and North America. And our customer mix is also well balanced across national oil companies, independents and majors. That mix is important. With national oil company and independence, we already see strong digital adoption, particularly in planning workflow. With the majors, we see a meaningful runway. As some customers move away from internally developed systems towards scalable, enterprise-grade platforms that can support broader digital transformation. And finally, from a revenue category perspective, Platform as an application represent approximately 40% of digital revenue, followed by professional services, digital operations and digital exploration. That mix will evolve as digital operations continue to scale. We expect it to become the largest part of the business over time, as I will describe momentarily. Overall, this is a well-balanced business. We have the broadest digital offering in the industry, and it is not dependent on one geography, one customer or one product line. It is also supported by the depth of the broader SLB portfolio and our global reach. taken together, that gives us confidence in both the durability of the business and the opportunity ahead. So next, building on what Rakesh outlined earlier, let me turn to the market opportunity and where we see the strongest growth Recent third-party analysis shows the total addressable market for our digital business growing to approximately EUR 35 billion by 2030. That view aligns closely with SLBs internal analysis. And when we map the market by category, we expect the strongest growth to come from digital operations, where the market is expected to grow at an 11% CAGR through 2030. This is compared with about 8% of the overall digital market. And as highlighted earlier this morning, there is meaningful upside to this outlook. If adoption of AI solution moves faster than currently forecasted, the digital market could expand to as much as EUR 50 billion by 2030, representing a 15% CAGR, taken together these trends along with our differentiated market position, gives us confidence that we can grow digital revenue at a 10% to 15% CAGR through the end of the decade, with the higher end of this range based on accelerated AI adoption. This revenue trajectory without pace both oil and gas upstream investment, as well as the industry's digital spend as we believe we can leverage our digital platforms, customer footprints and AI capabilities to continue growing ahead of the market. Notably, we expect to deliver this level of revenue growth without significant M&A activity, although we will continue to consider bolt-on technology acquisition that can further strengthen our offering. With that as the backdrop, let me now turn to how we will monetize that opportunity. Our digital offerings are monetized through several commercial models, each contributing differently to growth margins and recurring revenue. Platforms and applications are largely recurring. They are sold through software subscriptions or perpetual licenses with annual maintenance. Digital operations has a different model. It is generally sold as an incremental digital line item connected to our core services or equipment. Revenue in this category is repeatable or sometimes recurring and typically delivers high incremental margins. Digital exploration represents our exploration data business, which consists of a differentiated library of seismic service and over subsurface data covering key basins worldwide. This is usually highly profitable, but nonrecurring in nature, with revenue generated primarily through onetime license sales. Our success in producing and selling high-quality data is highly dependent on the use of our platforms and applications enhanced by our domain foundation models. And finally, professional services is more project-based. It includes consulting and technology services required to support our clients' digital transformations. Although this category has lower relative profitability than the other digital categories. It remains strategically important because it helps drive adoption and creates pull-through across the broader portfolio. In short, we have multiple ways to monetize the digital opportunity. More importantly, these various models reinforce one another. And combined, they create a business with growth, resilience and flexibility. Let me now go one level deeper into the two areas with the strongest growth potential, namely platforms and applications and digital operations and explain how we will unlock further growth and value. In platforms and applications, we see 3 key levers for increasing monetization. First, gradually transitioning on-premises customers from perpetual licenses with maintenance to subscription models. This allows for better tiering of our commercial offering based on the features our customers choose to consume. Second, migrating more customers from on-premises offerings to the client. And first, monetizing consumption across the portfolio, as customers expand the usage of our platforms and applications, data environment and AI solutions. As you can see, growth in platforms and applications is not only about adding customers. It is also about shifting the mix towards more recurring subscription and consumption or outcome-based models. This will improve revenue productibility, reduce sales volatility, increased contract lifetime value and improve customer retention. The opportunity in digital operations is of a different nature and scale. Here, we believe we can increase the size of the market. It's not create the market. By scaling connected equipment and autonomous workflows across customer operations, with new AI capabilities further accelerating that trend. Today, with digital services only represent about 15% of our core equipment and services revenue, despite delivering significant results in the field. As customers increasingly recognize the benefits of these solutions, we see the potential for spending in this category to grow at an elevated rate, potentially tripling by 2030, supported by digital add-ons and increased outcome-based pricing. Second together, the evolution of platforms and applications and digital operations are expected to drive the majority of the growth in our digital business. And the value generated from these offerings will continue to compound. As platform usage increases, more data is organized in activity. As more assets and operations become connected, the opportunity to automate workflows expense. And as AI becomes embedded, in those workflows, the value we create for customer increases. All in all, this will support our ability to continue delivering attractive digital growth with margins that are highly accretive to SLB. To make this more explicit, let me now close by sharing our 2030 financial ambitions. Based on market growth and the trends we are seeing in terms of adoption and monetization. We expect to double digital annual revenue -- annual recurring revenue to approximately EUR 2 billion by 2030. This is supported by the assumption I shared earlier that digital revenue will grow at a 10% to 15% CAGR from 2025 through 2020. We also see a path to approximately double our current adjusted EBITDA for digital to between EUR 1.8 billion and EUR 2 billion by 2030, with margins expanding to a range of 38% to 42% towards the end of the decade. Our ability to achieve margins towards the higher end of this range will depend on our success in increasing the share of subscription-based revenue in our mix. The continued expansion of digital operations and the addition of AI-driven capabilities that create incremental value for customers and support better monetization of the outcomes we have been able. In summary, digital is already helping to accelerate SLBs growth with accretive margins and compelling returns. And as adoption continues to expand across platforms, operations, data and AI, we see a clear path to sustain double-digit growth, continued margin expansion and increasing contribution to SLBs return -- overall returns over time. Thank you for your attention. I will now turn it back to Olivier.

Thank you, Stephane. Ladies and gentlemen, as we conclude, let me leave view of this. Digital is becoming central to our this industry plans, operates and create value. And what you have heard today a flex leading position SLB has built over many years. It is one that is powered by sands, accelerated by AI and built for the complexity of energy operations. We are the only company that brings together the government expertise, the technology, the partnerships and global execution to redefine what is possible where it matters most. But this is just the beginning. In the age of artificial intelligence, new opportunities are being unlocked across all industries and we are pursuing them not only through the digital offering we discussed today, but also through our data center solutions business. There, we're expanding our work with ascites. The same partners we work with and you collaborate in our digital upstream business to deliver the physical infrastructure required to scale. In that sense, SLB is uniquely positioned to benefit from the secular growth of AI in 2 ways: full platform and digital solution that transforming operations and to the infrastructure that enables AI 2 scale. So it is 1 takeaway. It is this. Our digital leadership is here it is differentiated, and it is creating long-term value for SMB and its shareholders. Thank you for joining us today and for your engagement throughout the session. With that, I would like to invite to their speakers to come with me on stage for the Q&A session.

[Operator Instructions]. As you're thinking about your question, allow me to kick it off by asking Olivier about something we've been hearing a lot lately. Olivier, as we think about SLB digital next phase, what gives you the confidence that this business can evolve into a scale higher multiple engines, distinct from traditional oilfield services and what proof points should investors focus on today?

Thank you, Jan. So indeed, I think I will say first saying is that we are not building our digital capability anymore. We have booked it. We're able to scale it. And if you look at the proof points of where we stand today, we're already growing at double digits by expanding margins, and we are seeing a mix further moving towards the case recurring and consumption-based revenue. What makes me confident is that we have a clear path forward. The care path forward, it was underground digital operation and AI solution. And the sandbox is the total SLB of footprint. That is unique. The capability we have together, the domain, the platform, including a air-grade stack. The partnership ecosystem have developed [indiscernible], as we said, is unique. When you combine all of this, as we continue to scale, the AR will shift in upwards [indiscernible] on our platform will start to be clear and our margin will resemble softer-like margins. When you put all this together, I believe it would deserve our multiple. And I think it's no more cyclical roof. It is durable growth that will compound and create value for the company.

Thank you, Olivier. Let's take questions now from the audience. We have one right up here up front.

Marc Bianchi with TD Cowen. I'm curious to achieve these targets. I think you talked about $3 billion of R&D spend since 2016. Can you talk about what additional R&D spend is contemplated to get to these targets? And then related to that, how do you see this initiative sort of helping the capital intensity of all business. Do we see a reduction in capital per dollar of revenue, for instance, as time goes on and you are able to implement more of these capabilities.

Thank you, Marc, for the question. Stephane, can I pass that one to you?

Yes, of course. Thank you, Marc. Look, as Olivier mentioned, the foundations are built. I mean we've spent actually decades then an increased R&E in the last in the last few years to get there. So we are not going to stop there. We will always need to enrich the platform that in terms of RNE, you've seen the numbers over the last 10 years. I would expect this, of course, not to increase as fast as the revenue if it ever increases. So you will gain operating leverage from this, but we will continue to enhance the platform and invest into it.

I have a question right here in the middle. Scott?

Yes, Scott from Citigroup. Thanks for the presentation this morning. [indiscernible] I'm curious about the pricing strategy for some of these services, thinking back to the digital operations examples, where autonomous drilling can save 25% to 40% on the drilling time of a well. So if you think about that in the context of a deepwater well, it could be like $25 million, right, which is a huge amount of savings. How do you guys think about what is the fair share of that savings for Schlumberger's SLB -- sorry, [indiscernible] for SLB to capture versus how much you share with the client. Obviously, you want to push the adoption of these services and scale it up, but there's a huge amount of value creation there. How do you think about the pricing strategy with that value creation potential. Rakesh, would you like to kick off the question and perhaps [indiscernible] digital operations, you can have a follow-up.

Sure. Thank you. So I think on different categories of revenues we've reported, the pricing strategies, of course, vary. So for the operations, as you rightly point out, significant value for our customers. And we will, therefore, be in a very strong position to be able to scale. In the operations, as I think Stephane briefly mentioned, we are talking about almost very little new investment for us to be able to provide this value addition because of the fact that we are utilizing the existing hardware already, and we are just bringing new algorithms to be able to bring the value for our customers. Of course, we expect, therefore, the margins to be very, very significantly accretive, as I think mentioned by Stephane. For the other categories, for example, in the platforms and applications, again, I think the fact that we have a very distinctive and a very strong offering, we expect to scale that. And therefore, the additional scaling would not cost us very much and which is why the confidence that we have in terms of even stronger margins in the years ahead. And then, of course, the agent that will bring significant value on top of what we are already charging and that should bring significant margins for us going forward as well. So if I look at those -- each one of those categories has distinct advantages, which will continue to bring more margins for us going forward.

Cecilia, perhaps you want to elaborate on operations?

A couple of points other than what Rakesh said. First of all, many and most of our contracts are performance-based contracts. So when we get this additional digital add-on service, we actually increased revenue, not just from digital, but also from our general operations. Second is many of our digital operations digital operations that we sell actually are agnostic. But as in the completions example, when we merged our -- the digital piece with our innovative hardware, that's when we see a step change in performance. So then it is also an enabler to bring additional pull-through revenue for the locations where we're not having operations there.

James see you right here.

James West. Melius. Question about the changing dynamics that we've seen and how it impacts digital and digital adoption in this space. Energy and Power changed a lot in the last 110 days. And of course, that change with energy security started in '22 as well, but it's become more pronounced. And Olivier, you're having the CEO to CEO conversation. And I'm curious what the feedback is from the customer base about the security of their operations as they move more and more information to the cloud and build more digital than they worry about cybersecurity? Do they worry about hacks, things like that? And does that limit? Or -- have you created a platform where they're very comfortable that you can protect their data?

Olivier would you like to take the first part of the question and then perhaps we can pass it to Shashi for the second part?

Yes. The first thing I would say is common that what is happening today with energy security, the need for super [indiscernible] they need to secure and accelerate [indiscernible] is all playing to the strength of the impact of digital in our industry. [indiscernible], I'm hearing from customers the same way we heard back in 2020 is that digital is becoming more critical, more essential to unlock the performance efficiency to fast track the cycle of first gas and to improve recovery for the market for the assets that can be deployed security in a word. So this is the trend that we see is only accelerating. It's a secular trend that we believe that this crisis is only reinforcing the role of digital going forward, will be a shift and critical transition for the industry. So that is happening. And I think this is only accelerating that the feedback wagering. And we are seeing it in adoption. We're seeing a pilot. And if any mention of the impact, actually, our business -- digital business in test has been extremely resilient against this backdrop of crisis.

Let me add two points here. I think when we talk about customers and their concerns around their assets, I would put them into one aspect, which is around data. So we implemented our digital platforms in a way that we can meet their customers where they are for those customers that are comfortable with a traditional SaaS offering, great. We have -- we support all the 3 scalers. But then there are customers for whom we have implemented what we call private SaaS, which means deployed solutions onto their tenant, which means it is managed by their own IT and security organizations. So that's one fact. And of course, then there is a set of customers that want everything on-prem. So we cover that entire spectrum to say, wherever the customer is and their data are, we can deliver a solution there. The second angle I would say is from a cybersecurity point of view. So we run one of the largest cybersec operations across the industry. And we work very closely with leading hyperscalers, but also security companies like Palo Alto Networks, et cetera, on those, right? We are adopting and using the latest frontier models to test to validate our implementations or any kind of new holes that might be existing. And then, of course, you are very hand-in-hand with our customers' own IT and security organizations as well. So at the end of the day, for our customers to use our stack, they need to be comfortable that the implementations that we have meet their standards, and that's what we go with.

Thank you, Shashi. Right here in second row in the middle. Dave, please?

David Anderson, Barclays. Stephane, just a real quick point of clarification. On your 2030 targets, was that based on the $50 billion TAM or the $35 billion TAM?

SP1 David, it's a range. So it -- this is why we have a range of EBITDA as well. The revenue itself is between 10% and 15% CAGR through that period, right? So the market overall, if you take the low end of the TAM, we've given you the EUR 45 billion, that would be 8% CAGR. The EUR 50 billion would be 15% CAGR. So it's based on the entire range, [indiscernible].

Understood. So Olivier, -- some SLB has made a big point today about your mode in digital. You're really the only OFS company doing this. You've been doing this longer than anybody, the foundational models, the domain expertise. It gives you all a head start or a lead in AI. But your customers are also adopting AI. They're adopting AI Agents platforms as well. So where is that line today? And are you concerned about that line moving? In other words, your customers are going to be adopting some of this in-house, you're going to be providing other things. But is there a concern that, that line could shift and what is the concern that some of them are going to be started adopting what you're doing?

SP1 As you heard before, we meet our customers in there where they are in their digital journey. And I think if you look back at the history of digital, 3 years ago, most of our simulators were owned and developed by our customers. And some of the basic interpretation was done the same way. Over time, the measures of platform, industrial-grade platform has replaced those development. Nowadays, some customers are willing to enter the development of AI model, if not no agent TKI using model. And what we offer is an open platform. We offer [indiscernible], the data open platform and Tea as an agent framework that our customers can use to extend their Argentinean connected our Agent workflow, collect to their third-party application. And also embed our the main formation model or retrain our domain formation model to their own deficits. That's what is happening in a pilot we have with several customers, and they see a huge benefit of because they have a selling base, that is a step change from what they can do by themselves. As we said, the relationship with [indiscernible] the guarantee that you have performance on the -- we have designed from the government, not using the existing Frontier model, where busily using our sales, our technology from the group with the garden that we intake for many there from other provider into it. So the starting point is very strong. The framework we have, give them the freedom to extend, and that's what is attractive into our offering to the customer today.

Yes, right back here. Right here in the middle. Someone pass the microphone.

Yes. Sebastian Erskine from Rothschild and Co. Just a question on the -- one of the presentations you mentioned about the performance-based contract in Libya and actually trying to buy in a bit to the efficiencies that kind of customers can gain. Obviously, that's Interesting to me when we look at U.S. land, one of the big stories was the deflation services, the fact that E&Ps could do more with less. So how much as a percentage of these performance-based contracts or pricing based outcome-based models do you see and a scope for that in digital operations going forward?

Cecilia, I think you answered part of that question earlier, maybe you can take it.

Yes. We have -- it's a large percentage of our contracts are performance-based contracts. I believe you were asking specifically on the U.S. market. In U.S. market, we have a very flexible go-to-market approach. We rent and sell our equipment as well as do the services. Many of our services are performance-based and then the rental and the sale of our equipment is through a third-party competitor.

Yes, right back here. Thanks.

[ Heath Terry ], Citi. I really appreciate you taking the time on all of this, particularly the level of detail around some of your technology partnerships. The reliance that you have on the cloud providers, they've obviously been very vocal about the issues that they're dealing with from a supply perspective and the constraints with demand increasing the way that it is. That's showing up in pricing, it's showing up in this whole issue around token costs going up as we started referring to as token maxing I'm curious if you're seeing sort of any of those kind of issues showing up in your relationships, either with the hyperscalers or with your customers as those costs -- those underlying costs start to go up and how you're planning longer term against the constraints that seem like they're going to be around for a while in this space?

Trygve, you explain to the audience, the digital advantage and the partnership model. Why don't we pass this question to you.

Yes. We -- as you said, we have a close relationship with all the hyperscalers, all the major cloud providers. And we, of course, secure ourselves with -- for direct expenses, we secure ourselves with long-term contracts with these providers to ensure that we have cost competitive access to the technologies. And we also work very actively with them, particularly on securing capacity where we have a well-established playbook for securing that we have the right capacity as our workloads will be sometimes having -- demanding the same type of capacity they use for other workloads to make sure that we can continue providing continuity to our customers in operating.

Rakesh, would you like to elaborate further?

Yes. Keith, actually, you do make a good point. There is clearly a transition happening. And the industry is getting used to the changes that are happening. So I'll say there is a very interesting trend that is happening right now. So instead of going from cloud first, many of our customers are going to what they call hybrid cloud for elasticity. They want to keep on-prem for consistency and then they go on the edge for the media. So they are moving in a direction where they will actually have infrastructure, which encompasses all of them so that they are able to benefit, take the benefit of what the cloud compute brings as well, but they are also prepared so that they are able to get the maximum benefit from what they have in-house already and also from the edge operations where it is required.

Olivier?

Yes. And what is important to this is that to offer our customers the ability to navigate through this tenant hybrid cloud for elasticity of cloud compute and edge at the same time, doesn't come in a corner. It has taken us years of top of selling of testing and validation and certification of our customer. So we tried ourselves to be the only one that can do this complex environment at scale industry grade complex architectures that combine the benefits that you heard about that allow our customers to use the cloud when and how necessary and remain indebted where they believe it's more secure and they have the capacity they can to develop their [indiscernible].

Stephen Gengaro, Stifel. When we think about digital and we think about maybe the last few years and then now through 2030, how do you think that impacts your growth versus history in the core business?

Stephane, let me go ahead and pass this one to you. Did you hear the question?

Yes. Actually, if you don't mind rephrasing?

Yes, very good Stephane.

So maybe relative -- unless you want to tell us what you think the market does for the next 5 years. But relative to the market, through 2030, how do you think digital impacts the growth in your core operations versus the peer group?

Okay. Got it. Sorry for that. So look, first, the growth we are portraying here for digital, and we've said this before, we believe is at least partially decorrelated from the growth of our core services and equipment, which, as you know, are more cyclical. So if we are confident to give that 10% to 15% CAGR there for digital only is that we think this is really secular, structural and trigger more recently by the acceleration of AI. So that gives us confidence that there is this spot of digital, if you want, that can go a bit regardless of what can happen in the rest of the E&P upstream sector, particularly because it remains a very small percentage of the total spend as you've seen. So now can that can that influence the size of the overall E&P spend. Yes, it can. That's what it can do, at least for us, is that it can bring more first, more digital. But then because as Cecilia highlighted, it's not just about the software and the platforms by the connection with the hardware is that, that more digital is going to pull through more core services as well. So our clients may -- we want them to gain in efficiencies and generate cost savings but this is not going to happen in the core services and equipment we provide. To the contrary, we are going to have a boost from the advent of more digital operations.

Thank you, Stephane. Yes, Doug we'll get you a microphone right now. Thank you.

Doug Becker with Capital One. Just curious about as autonomous operations really start to scale, how are you thinking about risk management, just what safeguards are in place from a suboptimal decision made operation or maybe in an extreme example, a well control incent that was really triggered by an autonomous decision.

Thanks, Doug. Want to pass that one to Cecilia.

So just like self-driving car like Tesla, if the system can go into many mode at any time, and the user can decide whether to go autonomous or if the recommendation needs to be approved by the user. So it's a very easy on/off. And ultimately, there's always going to be a user that makes the final call, which is going to be our customer.

Thank you, Cecilia. Saurabh, did you have your hand up? Right up here in the front, please.

Saurabh Pant, Bank of America. One thing, Olivier, when you took over as the CEO back in 2019, you were talking about the Fix-basin at that point of time. I think I heard the word [indiscernible] in Shashi's remarks. How do you think about it for basin from a digital perspective? I know you talked about 7, I think innovation factories across the globe. Maybe talk to how are you thinking about that? What are you doing differently in different parts of the world?

Olivier why don't you go ahead and take the question?

I think this -- digital brings us one thing, it's ability to customize to tailor and to fit our digital offering to the basin challenge that we are facing. And I think the concept we have put together with the innovation factory, and we have 7 of them in the world where to provide the digital backbone, the digital domain expert, the digital close to our customer to collaborate on what could be done locally, do you make it technology, digital technology solution. Now with the advance of digital operation, the amount of agent we are going to the next level. The next table of putting together, stitching together OFS operation with digital capability and creating unique set of fit operation with a fit domain formation, a fit set of workflows that are stitched together to Agentic AI fit set of equipment or services provide back to back. Best example actually happening today that we can refer to. It's what you heard about ADNOC, referring to that AI, PSO and the IPO is production optimization using AI. We are coleopteran we are fitting this agent to work on the specific assets of ADNOC and we are lifting and announcing the production performance to this fit application of air accountability, tailored to the OEM equipment that they use. They also do other work charts that they have using [indiscernible] platform to make it work together. That's principle, and that's what you want to extend that we want to repeat from basin to basin.

And Tryvge, did you wish to add any additional color?

Just there's one more color to fit for basin as well that is increasingly being important now and which is underpinned by our platform investment over the last few years, and that is the technology sovereignty. A lot of operators around the world are increasingly concerned about their sovereignty, their ability to operate their digital environment. And we have -- this is exactly what our platform has been built for and enabled for the last few years. And I would say we are uniquely positioned to be able to guarantee our customers this type of as well. So that's the additional thing in addition to the particular operation and geological challenges they have as well.

And Cecilia.

I want to add a different angle to the whole -- to the question. Every geography is going to be different. And the system needs to learn what are the parameters for those -- for that geography. So for example, our deepwater operation is directional drilling is going to look completely different than U.S. land. And what the customer wants is going to be completely different. So in deepwater, it's about landing the operation per the plan in the sweet spot with a minimal amount of risk. In the U.S., it's about drilling as fast as possible as long as you're in the tunnel, you're fine. So each the system learns and gets smarter depending on which geography and what type of operations you're running. Hence, why it's very important to have this wide footprint that we have at SLB.

In the very back. Yes, please keep your hand raised. Thank you.

[indiscernible] from Goldman Sachs. I wanted to connect with your thoughts. So I think, Shashi, you mentioned generic ALMs are challenging to do. Olivier you mentioned at the beginning that it's important to know what to build. We've been hearing customers trying to build their own applications. Where are we in that evolution of that dynamic? And I'm curious how that evolution is factored into or affects the sensitivity on your 2030 guidance?

Shashi, would you like to take the first part of the question?

Yes. So I think we talked about LMs because they are very, very powerful tools, but they're very statistical in nature. And they build and they predict the next. They generate the next response based on the context you provide. We cannot take that risk when we are talking about technical workflows where customers are making high-value decisions or high-risk decisions, right? So what we want to do is to say we will leverage the last language models where they bring value, which is converting the context into an outcome. But then the context is said by us by providing the domain. So that means when we are working with a well-off foundation model or a seismic foundation model, that absorbs the knowledge that comes from that domain, and then there's a handoff between the foundation model in the large language model to then aggregate the information and serve it out, right? So that way, we don't ask the large language model to figure out how to work with seismic data. It has no clue, but we do. So we work with that balance of us providing the domain context and informing everything based on the domain and then use the large language model for where it is best suited, which is to aggregate and summarize and provide the outcome to the user.

Maybe I'll pass it to Rakesh.

Yes. So I think I want to also bring in Dave's point that you -- I think you were alluding to. Many of our customers have actually tried and absolutely, they will continue to try to go down that are as well. But they are realizing more and more that the changes are happening at such a rapid pace that unless you really have the expertise and you're engaged in it on a regular basis, this is not a pace that you will be able to keep up with. So more and more, we are seeing that the customers are actually aligning with partners that they realize are going to be in this for the long game. The other comment I want to make, we're talking about LMs a little bit. LN are based only on text. The data that we have in our industry is in very other different formats. [indiscernible] formats has nothing to do with tax. Logs are completely different. And therefore, the models, the domain foundation models Naturally, the LMM cannot do anything with the data that we have in our industry. So the Domain foundation model have a very distinct application that will continue to bring value to our industry specifically and only companies who can handle that kind of data will be able to benefit from it as well. So I just wanted to give you those 2 colors.

Thank you for that, Rakesh. Right here. Dan?

So I just wanted to ask a question on labor and kind of talent retention the catalyst. So the question was, I noticed one of your -- in one of the earlier partner testimonials. It was someone who had actually been at SLB for a couple of decades and then most recently was at one of your biggest competitors. But yes, can you just talk about -- to what extent attracting talent, retaining talent is a bottleneck or any type of impediment to growth for SLB. And also if it's something when you speak with your customers, if training and attracting the right talent is a bottleneck for their digital adoption as well.

Olivier, why don't you?

Yes. I think we all compete for the same talent pool, but I think we have demonstrated for the last decades that I think we have still the formation the culture, the training framework to digital talent, [indiscernible] technical experts, engineered talents that we train, we call training AI and in data science as well as in [indiscernible] or in domain. And we have been able to attract from every region, top talent across the best university because when we compete with those hyperscalers, we compete with some other player. And I think the talent we have in our team has allowed us to build what you have seen today to build the teller infrastructure to build the [indiscernible]. And I think it's big bull to the talent we have that ashes Ling and our team is leading. So I'm very proud of what we have in the talent pool in our team. I'm convinced we'll continue to attract I think this event and what we are publishing every day and the path to autonomy is what is exciting, the most new and future employees and prospects that are joining us and they love where they can see when they enter the company. They see that we are becoming a digital-first company. And I think that's very attractive. And I think that is like we are putting for digital talent throughout the next few years. So I'm not concerned. I'm excited about if you can give us with this talent pool we are attracting. Thank you, Olivier.

Keith [ Sukman ] from Pickering Energy Partners. It sounds like M&A is probably not a key way to grow. You guys got a lot of internal things going on. But on that front, there anything within the digital portfolio that you think you're missing? And maybe what are some of the key characteristics you're looking for when evaluating potential opportunities?

Thank you, Keith, for your question. I pass that to Rakesh.

So Keith, clearly, we are always on the lookout for bolt-on technology that will bring value. We've announced a couple, I think, over the last few months that I'm sure you are aware of. I'm not going to sit here and tell you this is the weakness we have in our system. But we are always on the lookout for technologies, which will complement what we have for bolt-ons that we decide, we will not develop in that particular domain or that particular part of the technology. So I think both extending our partnerships with companies that have complementary skills that we will either integrate or we have decided not to compete. But then occasionally, where we see that it is a good fit into our own organization as we have done, we will continue to look out for opportunities.

Thank you, Rakesh. I think S&P Global and [indiscernible] are good examples of that. Derek, right here, please.

Dark Podhaizer, Piper Sandler. About an interesting when you split about split apart the customer type for digital, I think you have 37% NOC, 37% independents, 21% for the majors. Maybe can you talk about the opportunities to capture more share with the majors or on the flip side, some of the limitations and headwinds to continue to drive adoption with the majors.

I think you have seen 3 statements from ENI from Chevron from Total energy and from Shell for about sharing the statement, they're very, very clear of the benefit they're seeing partnering with us. We will collaborate with personally define scope and is in digital provision, trying to get the most of autonomy for during operation. Chevron is the historical partner that has helped us develop and accelerate our platform scale with Microsoft. And more Shell and Total Energy have entered a collaboration agreement with us to develop fit subsurface and adapt their workflows to the benefits of the organization. So I don't see any limitation on this. I see organization on the customer side that are keen and eager to leverage and to work side-by-side with us so that they can leverage anti AI on balance, they can leverage the power of our platform so that they can deploy it to the complex environment they always want to deploy to match security requirements they have even when operated in certain countries and leverage of their own IP, which our platform allows us to plug in. So I don't see a cycle. I see a big runway with all the major and the ones that we mentioned into this, we continue to work with them for adoption at scale.

Very good. Right here.

Phil Jungwirth with BMO. Can you talk about the drivers behind the margin improvement by 2030, 38% of 42% is quite a bit higher than 35% and 25%, and I think you guided to a similar level here in 26 despite growth. Is it mainly just mix shift with platforms and applications, digital operations growing more? Or is there more behind it? If so, could you please expand upon that?

Stephane, I'm going to pass this one right to you.

And look, first, I'm quite confident we can reach that range towards the end of the decade, if not earlier, I think actually margins will increase year after year into 2030 to reach these levels. The key driver is -- it's a few things. So first, you have simple operating leverage. We've mentioned R&E before. R&E, if you want, is the biggest cost to grow. But again, the heavy lifting is done and if we increase R&E little bit, it's not going to increase for sure as much as the revenue growth. So you get margin expansion from there. And then you have that shift in pricing model. Some of it is enabled by -- we believe we will be able to increase the subscription-based revenue, which is -- which allows us to tier better, if you want, the levels of pricing depending on the features which customers use and then more consumption based, more outcome-based pricing should help us lift the margins as well. So it's the combination of all this that really gives us the confidence that 3% to 4%, the midpoint of 40%, if you want, it's quite a good ambition, I think we can reach here.

Allow me to come back to this side of the audience Yes, right here.

[indiscernible] from Goldman Sachs. I have another question on the mix. If we look at the 60% or so of revenues that's recurring and repeating, just wondering how weighted it is to pure SaaS. And do you plan to increase SaaS mix over time? And how do you plan to do that?

Yes. So I'll pass it back to Stephane.

Yes. So we -- definitely, we do, yes. it's part of the driver is indeed the SaaS mix. Again, we are not betting everything on the cloud, right, because as we mentioned before, we need the customers where they are -- but still, we are seeing that shift. Is it going as fast as we want -- it could be maybe not, but it is going. And so today, we have, if you want a bit less than 50% on the cloud, and we could very much go to 75% at 1 stage of SaaS and cloud. So it's part of it. even -- the over element is the consumption model as part of the sign. And I think the use of AI and use a agent, as you have seen a demo as well as shown by Shahi earlier today. You can imagine the compounding effect of deploying agents that can then run autonomously, part of our engines, either in the cloud or on the talent and consumption is a on the frequency and intensity of use of this application. So that's this compounding effect that we believe will drive the way forward.

Do we have any further questions from the audience?

Keith MacKey with RBC. The digital operations TAM expansion is certainly key to the growth metrics here. Can you just talk about what some of the key customer impediments to adopting digital operations has been? And how do you mitigate that to drive the further adoption going forward?

Thank you, Keith, for the question. Cecilia.

Sure. Thanks for the question. Excellent question, in fact. What we see is that customers like to pilot and test the system. First, you really understand the value it brings and to ensure that it's a safe operations and it fits everything that they would like to see out of the tool. And just to give you an idea, the last 6 months, we've done as much autonomous feeds drilled than the last first 2.5 years. So it's taken us quite some time to get those pilots to get our customers to feel comfortable with it. But now we're starting to see quite a lot of uptake and an acceleration of uptake. The second thing is that a lot of customers are waiting to see who is going to go first. But now we have enough pilots that we're actually seeing customers almost not wanting to be left behind, and they're starting to be very, very interested in what we have to offer.

We have time for one final question.

Thank you. Heath Barry again from Citi. You obviously have operated for a very long time in some of the most geopolitically sensitive parts of the world. this past weekend, we've got a bit of a wake-up call with the U.S. government's decision to effectively ban access to one of the large language models. How is that potentially, how does that potentially impact the way that you and your customers are operating around this, does it lead you to want to use more open source? Does it lead you one to have sort of more distributed systems in terms of where your own technology or where your customer technology is sitting?

Final question, Shashi, why don't you go ahead and take the question, and then we'll leave it to Olivier for closing remarks.

Yes. It's a very good question. I think when we started this journey, the LLM providers was view and select. But now the level of capabilities that we will need from an LLM to integrate into our technical solutions is getting to a point that you can get it from LAM providers. And what we have done is that we -- while we leave this choice of a specific LLM to a customer because they may have an internal enterprise level choice, we also make sure that we implement our technology stack from the point of view of supporting open models. So we partner with NVIDIA. So we have NVIDIA's [indiscernible] models as the models that we can deploy ourselves. So we can -- we don't have to wait for a CSP to provide it in a particular area. It can be deployed on-prem or within a customer's environment. Similarly, we have models from Mistras. So we have several options. We keep that option open. Even our own domain foundation models are -- start from a base model that is open source so that we have not tied down to a particular provider and get our hands in a bind at some point in time.

And it matters to our customer. They realize when they are working with us through and this core a way. We have built this model, we have factored open source or open protocol into our [indiscernible] framework into Lumi, into our actually reinforce the attractiveness and the confidence they can bet on this technology platform for the future. So just to conclude, I think we had run through for the last more than 2 hours. I hope to convince you that I think we have a unique moat as a digital year in our industry. We are building it on 4 clearly distinct combined capabilities, deep domain expertise that is rate 100 years ago, platform approach that includes an array stack an ecosystem with partners that you have heard about a unique and are willing to and making a effort to work with us. And finally, ability to scale. Although it's scale but to scaling histone operation and to scale and use the full put footprint and sandbox of our oilfield services and equipment potential to reach all of our customers and to then help transform this industry to be digital first. And that's the way we are willing to lead the future. I recognize as digital first company that help transform and unlock the level of efficiency, performance and value for this industry. I believe we are there to lead this to create this shift that industry needs for energy, security, for energy, affordability and to the future of growth in our societies. So that's where we believe we have all to play, and that's why we wanted to share with you today. So again, thank you for joining us. I hope that you got enough information to help you model the future and recognize what we believe will be an elevated multiple for the company going forward. Thank you very much.

Thank you, everyone. That completes the formal portion of our program today. On behalf of the entire team, we thank you for your time, your thoughtful questions and your continued engagement. We hope today's session clearly demonstrated not just the current strength of our digital business, but the distinct competitive advantages that will drive our next phase of growth. We are incredibly excited about the opportunities ahead and our ability to deliver long-term value for our shareholders. With that, we will conclude today's live stream. Now please join our leadership team and today's presenters for a standing lunch in the Vault ballroom. Feel free to engage and continue the conversation. Thank you again for your time today. Safe travels and have a great afternoon.