The word "transformational" gets thrown around a lot, but in my 25 years of covering the sector, no other company has gone through a transformation quite like Baker Hughes. Since the GE Oil & Gas merger in 2017, we've seen Baker Hughes reshape its portfolio around gas infrastructure, de-emphasizing upstream with a shift towards production and what I consider to be the hardest feat, creating an entirely new culture around execution, consistency, and accountability. The man behind it all is Mr. Lorenzo Simonelli, who's going to give a presentation, and I'll ask a few questions at the end. Please welcome Mr. Simonelli. Thank you.
Good morning. I'd like to extend my appreciation to Barclays and Dave Anderson for inviting Baker Hughes t o speak at this year's event. It's always a privilege to be part of this conference and share the company's story with investors. Today, I'll provide an update to our Three Horizon Strategy. This framework serves as a guide for Baker Hughes 's transformation into a more differentiated energy and industrial technology company, one designed to deliver sustained growth and more durable earnings over time. I will begin with an overview of the significant accomplishments achieved in Horizon One, elements of which were first introduced at this conference in 2022. Thanks, David. I will then outline the strategic vision for Horizons Two and Three, including the financial commitments we are targeting over the next three years.
Finally, I will discuss the positive impact of our recently announced Chart acquisition and how it accelerates our strategic progress. Before I begin, as is customary, please note the disclosure around forward-looking statements on the second slide. As always, you can refer to our latest SEC filings for further details. Let me start on slide four with a high-level overview of the company. Baker Hughes is one of the world's leading energy and industrial companies focused on solving our customers' most complex challenges. Through our OFSE and IET segments, we operate across critical parts of the energy and industrial ecosystem, markets that are becoming increasingly interconnected as we enter into a new era of rapid power demand and the transformative impact of AI.
With our broad technology portfolio, we are delivering differentiated solutions that deliver better customer outcomes across the full lifecycle of a project. Our OFSE portfolio is a global leader in production solutions, with leading franchises in artificial lift and production chemicals. Coupled with our Leucipa digital application, our mature asset solutions are well-positioned to capture the anticipated increase in OpEx-led investments in the years ahead. Over 70% of the OFSE revenue is generated internationally, supported by a strong presence in all major basins worldwide. Importantly, offshore continues to be a major contributor, generating approximately 40% of segment revenue and supporting both near-term growth and long-term earnings visibility. Our IET segment operates at the intersection of energy and industrial markets, with leading compression technology and the broadest range of drivers in the industry.
We are uniquely positioned to provide mission-critical equipment and aftermarket services across LNG, gas infrastructure, data centers, CCUS, hydrogen, geothermal, and clean power, all secular growing markets. Also, by leveraging our expertise across various molecules, we are enabling customers' decarbonization and positioning Baker Hughes to benefit from the expanding opportunities in new energy. Our latest growth area is power generation, where our Nova LT industrial gas turbines are supporting the rapid deployment of distributed power solutions, increasingly being used to meet the rising demands of data centers. These secular tailwinds across multiple markets are accelerating growth in our installed base and driving recurring service revenue, strengthening the durability of Baker Hughes' earnings and cash flow profile. Turning to the next slide, building on our differentiated, more industrial-like portfolio and compelling commercial opportunities, we have delivered sustained operational and financial improvement over the past five years.
During this period, we have nearly doubled EBITDA, supported by the faster-growing IET segment, which is expected to account for 48% of total revenues this year. Since the start of this transformation, we have delivered almost 600 basis points of margin expansion while strengthening our revenue mix, reducing our relative exposure to the more cyclical upstream market. Let me walk through how we see our strategy evolving across our Three Horizons, each shaped by changing market dynamics. Cutting across all horizons are three priorities: continuous operational improvement, commercial success, and portfolio optimization, all with the goal of generating differentiated growth and returns for shareholders. Horizon One, which comes to a close this year, has been about repositioning the company for success after the full separation from GE and following the COVID-driven downturn. During this period, we restructured from four segments to two, creating OFSE and IET.
We deployed the Baker Hughes Business System, driving over 300 basis points of margin expansion and booked over $40 billion of IET orders, including $3.8 billion in new energy. We also announced the transformational Chart acquisition and advanced several targeted portfolio and technology investments. As a result, Baker Hughes has never been stronger, with enhanced resilience and a business model that continues to deliver through varying external market challenges. Horizon Two, covering 2026- 2028, marks the next phase of our journey, a period where we will scale profitability, deepen our industrial footprint, and position Baker Hughes for more durable growth. Our goals are clear: achieve 20% IET margins in 2026, close the OFSE margin gap with peers, and continue scaling the Baker Hughes Business System. We will also leverage AI and digital technologies to drive efficiency and strengthen our solutions offering, delivering enhanced outcomes for customers.
Finally, we are committed to delivering on the target we set for the Chart acquisition and subsequent deleveraging. Lastly, Horizon Three advances our evolution into a differentiated energy and industrial company with industry-leading margins, driven by further expansion of digital and aftermarket recurring revenue. We will also continue our portfolio optimization efforts to broaden our solutions offering, creating clear differentiation and enhanced customer value. With stronger growth, higher profitability, and increased free cash flow, we will reinvest in targeted growth areas while continuing to return substantial capital, compounding value for shareholders over time. Before we move on to focus on the path forward in Horizon Two and Three, I wanted to spend a moment to emphasize the progress we have made as we close out Horizon One in both IET and OFSE. Notably, we have delivered solid margin improvement in both segments despite several challenging macro events.
In OFSE, we have meaningfully closed the margin gap with our peers, driving margins higher by more than 300 basis points in Horizon One. This improvement reflects simplification of our operating structure and solid commercial success. IET margins have continued to expand despite a less favorable mix, with almost 70% of gas tech revenue coming from equipment this year. Even so, we expect IET margins to be above 18% in 2025, also more than 300 basis points higher since the start of Horizon One, despite significant mix headwinds over this period. On the next slide, I wanted to highlight the Baker Hughes Business System, now in its third year. This disciplined operating model, rooted in lean and Kaizen principles, is driving performance management, strategy deployment, and continuous improvement across the enterprise. It equips us to simplify workflows, eliminate waste, and improve execution, directly supporting progress toward our margin targets.
The system has been instrumental in driving productivity, efficiency, and strategic breakthroughs, while enabling us to deliver differentiated products and services that create greater value for customers and shareholders. Its impact is clear. In IET, gas technology equipment margins are up more than 9 percentage points since the start of Horizon One, with unit production from our existing footprint rising by 40%. In OFSE, the deployment of these principles has supported more than a 13 percentage point improvement in SSPS margin since 2022, aided by restructuring, capacity optimization, and a stronger market backdrop. As we move into Horizon Two, the business system will remain central to our strategy, further streamlining our structure, simplifying processes, and embedding greater operational rigor to accelerate decision-making and enhance customer outcomes.
Just as importantly, it will be a key enabler in integrating recent acquisitions, including Chart, allowing us to capture cost and commercial synergies more quickly and effectively. Let me turn the focus now on how we are creating new opportunities through our commercial excellence platform. To further accelerate demand generation and capture enterprise-wide opportunities, we launched the Growth & Experience team led by Maria Claudia Borras. By harnessing the full breadth of our portfolio, GX is designed to unlock larger, more integrated solutions for customers. As energy and industrial markets become increasingly interconnected, this capability is critical to driving our next phase of growth. It is also a powerful differentiator and will be a critical enabler of revenue synergies as we integrate Chart solutions and capabilities into the Baker Hughes portfolio. What is often underappreciated is the unique role Baker Hughes plays across the full lifecycle of customer projects.
We don't just sell equipment; we partner with customers from solution design and permitting through world-class execution in the build phase and into long-term operations. This lifecycle approach creates durable multi-project relationships, expands our installed base, and drives higher margin recurring revenue growth. Here, on the next page, we highlight a strong example of leveraging our new commercial platform. Our GX team worked hand in hand with Frontier Infrastructure to design an integrated solution that addresses two critical needs: reliable power for their data centers and carbon capture solutions for their storage projects. This is a clear demonstration of Baker Hughes's enterprise solutions in action. By bringing together capabilities from both IET and OFSE, we are able to create differentiated value for customers, expand our commercial opportunities, and strengthen our position across multiple high-growth markets. Turning now to the portfolio.
Since the merger in 2017, Baker Hughes has remained focused on shaping the portfolio to drive sustainable long-term growth while enhancing the durability of our earnings and free cash flow. We have established clear strategic and financial criteria that prioritize strategic fit, accretive margins and returns, and lifecycle-based business models. We are executing this framework with discipline, sharpening our focus on strategic growth in critical applications across industrial markets, gas and energy infrastructure, new energy, and OpEx-driven upstream activity. The Chart acquisition directly supports this strategy by broadening our exposure across many of these core structural growth markets. Importantly, our ability to integrate acquisitions is enabled by the Baker Hughes Business System, which provides the structure, rigor, and repeatability to execute with speed, accelerate synergy capture, and drive faster value creation. Turning the page, I'd like to highlight the progress we've made on portfolio optimization.
For Baker Hughes , portfolio optimization has always been about shaping the company for higher profitability and returns, as well as more durable long-term growth. Since the merger in 2017, we have generated more than $2.5 billion in cash proceeds from a series of strategic actions, including the $1.5 billion expected from the PSI and SPC transactions announced in the second quarter. We also announced the acquisitions of Chart and CDC in 2025. CDC is a leader in safety-critical pressure management solutions that complement our valves and gears portfolio. With approximately 80% recurring revenue and accretive margins, CDC fully meets both our financial and strategic objectives. Other notable investments along the way include Quest Integrity, which expanded our inspection capabilities into unpickable pipes, BRUSH Electric Motors, which broadened IET's driver and power generation offering, and Altus Intervention, which strengthened our mature asset solutions portfolio.
These moves helped to reshape Baker Hughes into a more balanced, more resilient, and higher return company. Turning to the next slide, I wanted to outline the key objectives and financial commitments of our Horizon Two strategy, which centers on accelerating operational improvement, delivering continued commercial success, and advancing portfolio optimization. Let's first discuss operational improvement. Our immediate focus is in driving IET margins to 20% by 2026 and closing the OFSE margin gap with peers. Beyond that, we are targeting total Baker Hughes margins of 20% by 2028, an increase of nearly 300 basis points from our 2025 implied guidance for the company. These targets do not yet reflect the contribution from Chart , which we expect will be accretive to our 2028 financial commitments.
Key operational initiatives include expanding deployment of the Baker Hughes Business System, leveraging AI and digital technologies to drive efficiencies, and integrating recent acquisitions. This includes delivering at least $325 million of cost synergies from integration of Chart. Turning to commercial success, we are targeting at least $40 billion of IET orders over the next three years, underscoring our strong visibility and the depth of our technology portfolio. Tailwinds include LNG, gas infrastructure, FPSO, distributed power solutions, and new energy opportunities. Chart will further expand our order pipeline and accelerate revenue growth, helped by significant commercial synergy opportunities. The Growth & Experience team will play a key role in driving enterprise-wide demand generation and broader adoption of our judicial solutions.
Lastly, on portfolio optimization, our near-term focus is to raise at least $1 billion from non-core asset sales, which will help us achieve our leverage target of less than 1.5x within 24 months of closing Chart . At the same time, we will continue to increase our exposure to industrial markets while reducing our exposure to more cyclical drilling and completion upstream markets. This will further enhance the durability of our earnings and cash flow that will drive additional value for our shareholders. Taken together, these objectives set Baker Hughes on a path to drive greater shareholder value throughout Horizon Two. Turning page and touching on the Chart acquisition, the Chart acquisition accelerates our Horizon Two strategic vision. This transaction transforms IET by significantly expanding our capabilities to serve a broader range of energy and industrial applications.
Together, we will sharpen our focus on the most attractive and resilient markets, combining highly complementary product and technology portfolios to deliver more value-added solutions for customers. This not only expands our total addressable market in both existing and new segments, but also deepens our penetration across multiple value chains with enhanced solutions. We also see meaningful opportunity to accelerate aftermarket growth, increasing attachment rates across Chart's installed base and deploying our digital capabilities, including AI-enabled Cordant Solutions and iCenter to deepen digital penetration across their serviceable installed base and unlock additional higher margin recurring revenue streams. Overall, adding Chart to the Baker Hughes portfolio strengthens our growth runway and supports higher margin across the combined IET portfolio.
We are confident in achieving at least $325 million in cost synergies and are equally excited about deploying the Baker Hughes Business System across Chart, which will further enhance what is already a solid margin profile. Turning page and onto Horizon Three, we highlight Baker Hughes's continued evolution into a differentiated energy and industrial company. Over time, we have steadily shifted our revenue mix toward IET, aligning with major energy and industrial trends to deliver more balanced growth and greater earnings durability. The Chart acquisition accelerates this shift and positions IET to represent the majority of our revenue mix for the first time. As we progress through Horizon Two and into Horizon Three, we will continue to drive Baker Hughes's portfolio weighting beyond the 55% IET revenue mix. We will reach post-close of Chart.
Long-term vision is clear: to be the energy and industrial technology company of choice, with industry-leading margins and integrated solutions that generate significant recurring revenue across multiple mission-critical value chains. Through growth, margin expansion, and stronger free cash flow, we will create durable value while returning meaningful capital to shareholders. To close, I want to reiterate why Baker Hughes represents one of the most compelling investment opportunities in the energy and industrial sectors. Through Horizon One, we delivered significant operational improvement, expanding EBITDA margins by over 300 basis points while achieving tremendous commercial success. We have fundamentally changed the way we operate, and today, Baker Hughes is in the strongest position since the merger nearly a decade ago. As we move into Horizon Two, Baker Hughes is uniquely positioned at the intersection of the energy and industrial ecosystems at a time when their interdependence has never been greater.
The advent of AI is a game-changer, driving both productivity and energy consumption. Combined with the rising demand in emerging economies, this reinforces our conviction that natural gas will play a central role in the energy mix going forward. This is the age of gas, and Baker Hughes is uniquely positioned to benefit. The Chart acquisition further strengthens this runway, enhancing both our revenue growth profile and margin expansion opportunity into the back half of the decade and beyond. We have outlined the significant commercial opportunities ahead, as well as the levers to continue driving margin expansion and ultimately stronger shareholder returns. With that, I want to thank Dave and the Barclays team once again for the opportunity to share the Baker Hughes story. With that, I'll turn it back to you, Dave, for questions.
Thank you, Lorenzo. We have a couple of minutes here, so maybe just focus on that first number, the $40 billion over the next three years. You're essentially saying orders are going to stay relatively flat over the next three years. Help me understand the components. What's going up? What's going down? Where's LNG thrown in? Are you expecting another capacity expansion, data centers? If you could sort of quickly go through how those different components are.
Definitely. Hopefully, it was reflected in the presentation that we have a number of end markets that see growth and have tailwind over the course of the next few years and the next decade. We do see an increasing usage of LNG. We do not think that the cycle is over. We see LNG continuing to grow in the 2030s. Likewise, with the increasing demand of data centers, there is tailwind in the application of distributed power generation. Also, as we look at the continued gas infrastructure, if you think about the growth in LNG and also the growth in energy requirements, you need gas infrastructure. We have a number of end markets that have positive tailwind, which allow us to see that visibility longer term and feel confident about the $40 billion of IET orders going forward.
The other 40 number I want to ask you about is the 40% increase in capacity in GTE with the same footprint. First of all, how did you get there? How did Ganesh be a big part of that? How did you get there? Secondarily, does that continue to increase? Is that part of the 20% margin target?
Again, we've benefited from a great infrastructure that we've had within the company, and also the application of the Baker Hughes Business System. As you said, with the work that's been conducted by Ganesh and the team, being able to do more with the footprint that we have and also managing the economies of scale and being able to be more efficient. We are CapEx light on the industrial side, and we don't see that changing as we go forward. We still have the opportunity to gain more productivity and efficiency. At this stage, unless there's a significant further increase in volume requirement, we think we can manage it within the envelope that we have with the continued progress and the benefits of the Baker Hughes Business System being applied.
Presumably, that's one of the big attractive points of Chart. Is that the expectation as well, to get them more efficient? Is that one of the big drivers for this deal?
Definitely. We see that there's, again, an opportunity to improve the margin outlook also at Chart and again apply the Baker Hughes Business System with regards to the repeatability, the predictability. It's from an operational perspective, the consistency and managing the supply chain, managing the rooftops, and being able to optimize and be predictable as we go forward. That's one of the opportunities, a lot of commercial opportunities as well, as was mentioned from the synergy perspective, but we feel very confident on the cost synergies of the $325 million that we stated.
I could keep you up here for another hour, but I'm not allowed to. Thank you very much for your time.
Thank you very much.