Saudi Aramco Q1 2025 earnings: Profit falls 4.6% as oil prices dip, but dividend commitment holds firm

Why Did Saudi Aramco’s Profit Fall in Q1 2025 Despite Higher Revenues?

Saudi Arabian Oil Company (TADAWUL: 2222), or Saudi Aramco, reported a 4.6% year-on-year decline in net profit for the first quarter of 2025, with earnings falling to SAR 97.54 billion ($26.01 billion) from SAR 102.27 billion ($27.28 billion) in Q1 2024. The dip came despite a modest increase in revenue to SAR 405.65 billion ($108.17 billion), up 0.9% year-on-year. The earnings erosion, the company indicated, was driven by a combination of lower realised crude prices, increased operating costs, and reduced other income.

While Aramco marginally expanded its sales volume in gas, refined products, and chemicals, the average price realisation for crude oil fell in line with global benchmarks. Brent crude futures, which peaked at $82.03 per barrel in January 2025, steadily declined to $63.91 by the end of March, weakening Aramco’s pricing power across key export markets. Meanwhile, inflationary pressures on logistics and input costs weighed on operating margin, trimming profitability.

This downturn reflects broader weakness in energy market conditions in early 2025, amid sluggish industrial activity in China and Europe, monetary tightening by the U.S. Federal Reserve, and ongoing volatility stemming from geopolitical tensions in the Middle East and Eastern Europe.

How Do Aramco’s Revenues and Cash Flows Compare to Previous Quarters?

Despite the headline earnings decline, Aramco posted resilient top-line growth, with total revenue reaching SAR 405.65 billion ($108.17 billion) in Q1 2025, up from SAR 402.04 billion ($107.21 billion) in the same quarter last year. This was largely attributed to an increase in traded volumes of crude oil, refined products, and chemicals, even as average selling prices trended lower.

However, Aramco’s free cash flow dropped 15.8% to $19.2 billion compared to $22.8 billion in Q1 2024. The fall in free cash generation is significant given its role in funding both capital expenditure and dividends. Capital spending jumped to $12.5 billion during the quarter, marking a 42% increase from $8.8 billion in the prior-year quarter, as the company accelerated investments in upstream expansion, downstream upgrades, and low-carbon initiatives under the Saudi Vision 2030 program.

While earnings before interest and taxes (EBIT) remained strong in absolute terms, margin pressure was evident across the upstream segment. The downstream and chemicals divisions showed more resilience, supported by stable refining margins and improving petrochemical spreads. Notably, the chemicals segment benefited from recovery in Asian demand, especially for polymers and fertilisers.

How Did Saudi Aramco’s Dividend Strategy Evolve in Q1 2025?

Saudi Aramco declared a total dividend of $21.36 billion for Q1 2025, including a base dividend of $19.5 billion and a performance-linked dividend of $1.86 billion. This marks a sharp 98% reduction in the performance-linked component compared to the $10.8 billion distributed in Q4 2024. The total payout, however, remains one of the largest globally and reflects Aramco’s strategic intent to maintain yield stability for investors.

The subdued payout of variable dividends reflects the company’s cautious stance amid lower free cash flows, yet also signals a baseline commitment to return value consistently. Analysts interpret this approach as a risk-managed recalibration of payout priorities without undermining shareholder confidence. The performance-linked dividend framework, which ties incremental payouts to free cash flow and leverage metrics, offers Aramco flexibility to adjust distributions based on prevailing conditions.

In its earnings commentary, Aramco reaffirmed its dividend outlook, stating that future payouts will continue to balance investment needs and capital return obligations. The base dividend is expected to remain consistent across quarters, barring significant macroeconomic deterioration.

How Has Saudi Aramco’s Stock Performed and What Are Investors Indicating?

Saudi Aramco shares closed at SAR 25.00 on May 9, 2025, up 0.64% from the previous session. Year-to-date, however, the stock has declined roughly 6.4%, underperforming regional indices such as the TASI (Tadawul All Share Index), which remained relatively flat. Over a 12-month period, Aramco stock is down over 18%, reflecting pressure from weak oil prices and broader investor rotation into diversified energy plays and defensives.

The company’s market capitalisation currently stands at approximately $1.62 trillion, maintaining its position as one of the world’s most valuable publicly traded entities. Institutional flows have remained stable, with state-linked ownership exceeding 97%. Foreign institutional investors have adopted a more cautious approach, awaiting clearer signals on oil price recovery and dividend growth.

Analyst sentiment on Aramco remains neutral to mildly bullish. Most brokerages have maintained “Hold” or “Accumulate” recommendations, with consensus target prices in the SAR 26.50–29.00 range. JPMorgan and HSBC have flagged upside potential tied to recovery in Chinese crude imports and higher refining throughput in Asia during H2 2025. However, they also note that geopolitical instability and accelerated energy transition policies in Europe remain key downside risks.

What Role Does Aramco Play in Saudi Arabia’s Economic Strategy?

Saudi Aramco is not just the world’s largest oil producer—it is the financial engine of the Kingdom of Saudi Arabia. With more than 90% of national revenue historically tied to hydrocarbon exports, Aramco’s quarterly results are a de facto gauge of fiscal space and strategic planning capacity for the Saudi government.

In Q1 2025, the International Monetary Fund (IMF) reaffirmed that the Kingdom would require oil prices above $92.30 per barrel to balance its budget. Given Brent’s trading range below $70 for most of the quarter, this deficit scenario puts increased pressure on Aramco to deliver stable dividends and support budget financing through extraordinary measures, such as secondary public offerings or debt issuance.

A follow-on offering of Aramco shares is reportedly under government consideration in 2025, with market sources suggesting a target raise of over $10 billion. Such an offering would support capital reallocation toward diversification pillars under Vision 2030, including tourism, technology, and clean energy infrastructure.

What Is Aramco’s Forward-Looking Strategy Amid Market Uncertainty?

Looking ahead, Saudi Aramco plans to continue allocating capital towards long-cycle oil projects, gas development, and carbon capture initiatives. The company is actively expanding capacity at its Jafurah gas field and deploying capital to scale up hydrogen production for export markets in East Asia and Europe.

The outlook for Q2 and Q3 2025 depends significantly on oil market dynamics. OPEC+ decisions around supply discipline, inventory drawdowns in OECD markets, and demand resurgence in China will be pivotal. If Brent crude can sustain a recovery above $75 per barrel, Aramco’s margin profile and performance-linked dividend potential could see meaningful upside in the second half of the year.

From an operational standpoint, Aramco is targeting a gradual increase in upstream production capacity from the current 12 million barrels per day to 13 million by 2027. In parallel, refining capacity enhancements in the Yanbu and Jazan complexes are expected to improve product flexibility and downstream cash flow resilience.

Saudi Aramco’s Q1 2025 performance reflects the dual reality of external macroeconomic headwinds and internal capital resilience. Even as profits dipped 4.6% and free cash flows declined sharply, the company maintained its commitment to base dividend payments and continued investing in long-term strategic assets. While oil price volatility remains the principal determinant of near-term earnings trajectory, Aramco’s diversified capital program and downstream stability provide a layer of insulation against cyclical shocks. As investors look to H2 2025, sustained recovery in crude benchmarks, combined with fiscal clarity from Riyadh, will be critical to determining Aramco’s valuation and capital allocation strategy.