Aramco profits down – and worse is to come, say analysts

• 4.6% decline in net income
• Vision 2030 funding pressure
• Capex plans face uncertainty

Saudi Aramco announced a drop in net income for the first three months of the year on Sunday, due to rising oil prices and higher operating costs.

With state and state-affiliated institutions dependent on the national oil company dividends to fund numerous Vision 2030 infrastructure projects, the downturn throws Aramco’s investment plans into doubt.

Oil prices are likely to drop even lower for the rest of the year, which analysts say may force Aramco to readjust its strategy.

Net income in the first quarter dropped 4.6 percent to $26 billion, less than most market predictions. By 11am local time, Aramco’s share price on the Saudi Exchange had increased 0.64 percent to SAR25 ($6.67).

“Global trade dynamics affected energy markets in the first quarter of 2025, with economic uncertainty impacting oil prices,” said CEO and president Amin Nasser in a note accompanying the results.

“In this context, Aramco’s robust financial performance once again demonstrated the company’s unique scale, its reliability and flexibility, the value of its low cost operations, and its emphasis on efficiency and advanced technology.”

Analysts believe that the worst might be yet to come for Aramco, with oil prices having slipped much further since the three months covered by the earnings release.

Oil prices have fallen since the start of the year, with Brent crude averaging $76 a barrel for the first three months, compared with $81 for 2024. It has since slipped further, dropping below $65, and Goldman Sachs forecasts prices averaging $60 for the rest of the year and falling to $56 next year.

In March Aramco doubled down on its plan to spend between $52 billion and $58 billion on capital expenditure investments throughout 2025, largely focused on its natural gas and petrochemical ambitions.

The fall in oil revenue puts increased pressure on this plan. Yet experts suspect that Aramco will continue its historic strategy of maintaining capex investment during times of lower oil prices. 

“Even if prices fall, I don’t think we’re going to see a big drop in their capital expenditures,” said Kate Dourian, a non-resident fellow at the Arab Gulf States Institute in Washington and a board member of the Energy Institute.

Aramco has said it will focus much of its capex investments on natural gas projects, both at home and abroad. It has also prioritised investment in petrochemicals, part of a move to diversify the national economy away from exporting crude oil.

So far, however, its petrochem ambitions have failed to live up to expectations.

• Aramco to post lower profit and may slash dividend
• Saudi Arabia to ‘roll with the punches’ on oil price
• Saudi budget deficit jumps fourfold as oil slumps

As expected, Aramco paid out base dividends of SAR79 billion ($21 billion), a 4.2 percent increase year-on-year, but paid only SAR800 million ($220 million) in performance-related dividends, compared with SAR40 billion ($10.8 billion) in the first quarter of 2024.

The biggest recipients of these dividends are the Saudi Arabian government and the Public Investment Fund, which are currently investing $1.3 billion on Vision 2030 diversification projects.

“At the same time, FDI is coming in a lot less than the target,” said Dourian, referring to the SAR74 billion ($19.8 billion) of inflows last year that fell well short of the $29 billion goal. The 2030 target is $100 billion.

“Now, that puts pressure on Aramco,” said Dourian.

Aramco may find it difficult to raise funds. Its share price on the Saudi Exchange has fallen by more than 11 percent during the past six months, making the prospect of selling more of its capital less attractive. “Otherwise they take on more debt,” said Robin Mills, CEO of Qamar Energy and AGBI columnist.

“That’s fine for now, but eventually it limits their freedom for manoeuvre.”

Saudi Arabia and its Public Investment Fund has already cut budgets across Vision 2030 projects. Analysts say that spending is focused on schemes with hard deadlines, such as preparations for the 2030 Riyadh Expo and the 2034 World Cup.

If budgets continue to be stretched, Aramco may find its own capex plans competing with larger diversification projects.

“If it’s a choice between building your Aramco international LNG business or building a major manufacturing facility in Saudi Arabia that directly diversifies the economy into something completely new and creates jobs, then maybe I’ll go to the manufacturing plant,” Mills said.