Offshore drilling contractor Borr Drilling (NYSE: BORR) fell short of the market’s revenue expectations in Q1 CY2026, but sales rose 14% year on year to $247 million. Its non-GAAP loss of $0.09 per share was significantly below analysts’ consensus estimates.

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Company Overview

Operating one of the world's youngest jack-up fleets with an average age under eight years, Borr Drilling (NYSE: BORR) operates jack-up rigs that drill oil and gas wells in shallow waters up to 400 feet deep for exploration and production companies.

Revenue Growth

Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Luckily, Borr Drilling’s sales grew at an incredible 33.1% compounded annual growth rate over the last five years. Its growth beat the average energy upstream and integrated energy company and shows its offerings resonate with customers.

Energy cycles can be long enough that a single five-year period can still reflect one price environment, which is why an additional, decade-long view can help capture through-cycle performance. Borr Drilling’s annualized revenue growth of 62% over the last eight years is above its five-year trend.

This quarter, Borr Drilling’s revenue grew by 14% year on year to $247 million but fell short of Wall Street’s estimates.

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Adjusted EBITDA Margin

Adjusted EBITDA margin is an important measure of profitability for the sector and accounts for the gross margins and operating costs mentioned previously. Unlike operating margin, it is not distorted by accounting conventions around reserves, drilling costs, and assumptions on commodity consumption from the well or basin. Adjusted EBITDA highlights the economic reality of how much cash the rock produces before the capital structure (debt service) and the drilling budget (capex) are considered.

In Q1, Borr Drilling generated an EBITDA margin profit margin of 35.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable. This adjusted EBITDA fell short of Wall Street’s estimates.

Cash Is King

Adjusted EBITDA shows how profitable a company’s existing wells are before financing and reinvestment decisions, but free cash flow shows how much value remains after paying the cost of replacing those wells. In upstream energy, production naturally declines over time, so companies must continuously reinvest just to stand still. A producer can report strong EBITDA margins yet generate little or no free cash flow if its wells decline quickly or if new drilling is expensive. Free cash flow therefore captures not only how efficiently a company produces hydrocarbons today, but also how costly it is to sustain that production into the future.

While Borr Drilling posted positive free cash flow this quarter, the broader story hasn’t been so clean. Borr Drilling’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 10.9%, meaning it lit $10.86 of cash on fire for every $100 in revenue.

The level of free cash flow is important, but its durability across cycles is just as critical. Consistent margins are far more valuable than volatile swings driven by commodity prices.

Borr Drilling’s ratio of quarterly free cash flow volatility to WTI crude price volatility over the past five years was 22.7 (lower is better), indicating that its cash generation is far more sensitive to commodity-price swings than most peers. This elevated volatility limits its access to capital in downturns and makes it unlikely to act as a consolidator when weaker competitors come under pressure.

You may be asking why we wait until the free cash flow line to perform this stability analysis versus commodity prices. Why not compare revenue or EBITDA to WTI in the case of Borr Drilling? Because what ultimately matters is not how much revenue or profit you earn when prices are high but how much cash you can generate when prices are low. Free cash flow is the superior metric because it includes everything from hedging prowess to growth and maintenance capex to management behavior during good times and bad.

Borr Drilling’s free cash flow clocked in at $47.8 million in Q1, equivalent to a 19.4% margin. The company’s cash profitability regressed as it was 33.1 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

Key Takeaways from Borr Drilling’s Q1 Results

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 6.5% to $5.78 immediately after reporting.

The latest quarter from Borr Drilling’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).