Equipment Is the Second Act
When most people picture the oil business, they picture services: rigs drilling, crews fracking, trucks hauling. But behind that activity sits a quieter layer, the equipment makers who build the hardware the whole industry runs on. That layer is the part of Baker Hughes (BKR) the “The #1 Oil Income Play of 2026” pitch really cares about, and it deserves its own look.
Baker Hughes runs two segments after a 2022 reorganization. The first is oilfield services and equipment, the drilling and completion work it shares with Halliburton and Schlumberger. The second is industrial and energy technology, or IET, and that is where the equipment story lives.
What the Equipment Makers Actually Build
The IET segment makes turbines, compressors, pumps, valves, and testing and monitoring services. These are not consumer products; they are the heavy machinery that moves, compresses, and controls the flow of oil and gas through LNG plants, refineries, and pipelines. A single compressor can weigh hundreds of tons and run for decades, which is why equipment sales come with long service contracts attached.
The crucial crossover is the gas turbine. The same turbines Baker Hughes builds for LNG plants and refineries are now being ordered for electricity generation, and the company is winning orders tied to AI-driven data-center demand. That crossover is the entire reason the pitch can call an oilfield services company an AI power play.
Equipment Versus Services
It helps to separate equipment from services, because the two businesses behave differently. Services are cyclical: when operators cut spending, drilling and completion work dries up quickly, and the revenue follows within a quarter or two. Equipment has longer lead times and a longer tail, with multi-year service agreements that smooth out the swings.
That smoothing is part of why the market pays up for Baker Hughes relative to its peers. The company trades around 22 times forward earnings, versus roughly 13 times for Halliburton and 18 times for Schlumberger, even though all three carry similar analyst growth forecasts. The equipment and technology segment is what justifies part of that premium.
Why It Matters Now
Orders across Baker Hughes jumped 29 percent in the second quarter of 2026, and management raised its revenue target to almost $7 billion. The equipment side, and specifically the turbines, is where much of that strength is coming from, as utilities and data-center operators scramble for new power capacity. Our oilfield services equipment piece draws the line between the two hardware businesses more precisely, and our natural gas stocks explainer covers the fuel that feeds the turbines.
The Long Tail of Equipment
One reason equipment makers differ from pure services companies is the long tail of aftermarket revenue. A turbine, compressor, or valve sold today generates service and parts revenue for decades, because the hardware is too valuable and too specialized to replace quickly. That aftermarket income is stickier than drilling work, and it smooths the company’s results through commodity downturns.
Baker Hughes leans on this in a way a pure driller cannot. Its industrial and energy technology segment carries multi-year service agreements attached to the equipment it sells, which means a turbine order today creates a revenue stream that outlasts the current cycle. That is a real structural advantage, and it is part of what the market is paying for at 22 times forward earnings.
Why the Turbines Crossed Over
The crossover from oil and gas to power generation is not a coincidence; it is a matter of shared engineering. A gas turbine that compresses and moves natural gas through an LNG plant is, in its fundamentals, the same kind of machine that burns that gas to spin a generator. The engineering expertise transfers almost directly, which is why Baker Hughes could pivot its turbine franchise toward electricity generation without building a new business from scratch.
That crossover is what connects the promo to the AI story. Data centers need power fast, gas turbines deliver power faster than new plants or grid upgrades, and Baker Hughes already had the turbine capability in house. The pitch is not wrong that this is happening, and the 29 percent jump in second-quarter orders shows the demand is showing up in the actual numbers. Where the pitch gets ahead of itself is in calling the resulting stock an “oil income play,” when the driver is a growth theme with a yield near 1.5 percent.
The Bottom Line
Oil and gas equipment is the underappreciated half of Baker Hughes, the part of the business that turns a services cycle into a broader energy-technology story. It is real, and it is growing, but it also sits at the center of the valuation premium the promo never quite acknowledges.
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