Shares of Shell (LON:SHEL) declined on Friday, trading 1.3% lower at 3,299.5 pence as of 13:48 BST, even as analyst projections pointed to a sharp increase in second-quarter profit. The broader FTSE 100 index rose 0.4% during the session, highlighting the stock's underperformance relative to the market.
According to preliminary consensus estimates compiled on July 22 from 20 analysts, Shell's adjusted earnings for the second quarter are expected to reach $8.92 billion, representing a 109% year-over-year increase from $4.264 billion in Q2 2025. The chemicals and products segment, which includes refining and oil trading operations, is forecast to contribute approximately 48% of the anticipated profit growth, with earnings jumping by $2.221 billion to $2.339 billion.
Upstream earnings are also projected to rise significantly, adding $1.780 billion to reach $3.512 billion. Together, chemicals, products, and upstream account for roughly 86% of the total expected profit increase. However, the market's focus has shifted toward cash flow generation, with operating cash flow estimated at $21.218 billion, up 78% from $11.937 billion in the same period last year.
Analysts are forecasting a working-capital inflow of $3.536 billion, a dramatic turnaround from the $11.2 billion outflow recorded in the first quarter. Shell's July trading update supported this outlook, projecting a working-capital inflow ranging from $1 billion to $6 billion. The company also noted that integrated gas trading performance is expected to be "significantly higher" than in Q1, while chemicals and products trading is anticipated to remain in line with a robust first quarter.
In May, Shell reported adjusted earnings of $6.9 billion, but operating cash flow was constrained by a substantial working-capital outflow. As a result, the firm reduced its quarterly share repurchase program to $3 billion from $3.5 billion. The current $3 billion buyback in London is scheduled to conclude on Friday, with any unfinished purchases to be rolled into subsequent 2026 programs pending board approval.
Industry peers have reinforced the outlook for downstream operations. TotalEnergies (EPA:TTE) posted a 67% increase in adjusted profit to $6 billion on Thursday, with refining and chemicals earnings surging 362% to $1.8 billion. However, TotalEnergies' LNG profits dropped 22% to $807 million, and CEO Patrick Pouyanné described the situation around the Strait of Hormuz as a "battleground," underscoring geopolitical risks.
Key risks for Shell include a sudden drop in oil prices that could reduce upstream profits, trading performance falling short of estimates despite market volatility, and potential outages in Qatar or subdued realized margins that may limit cash generation. Brent crude oil prices slipped 3% to $97.69 on Friday, after briefly touching $102 overnight.
Shell is set to release its official results on July 30. If profits come in around $8.92 billion, they would clear current expectations, and operating cash flow exceeding $20 billion would provide a strong signal to investors regarding the company's ability to sustain shareholder returns and reinvestment.
