Xylem Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third quarter revenue was $2.2 billion, down 3% reported and flat organically compared to the prior year period.
• Net income attributable to Xylem was $291 million, or $1.25 per share, representing a 34% increase year-over-year.
• Adjusted net income attributable to Xylem was $336 million, or $1.44 per share, up 5% year-over-year.
• Net income margin increased 320 basis points to 13.2 percent.
• Third quarter adjusted EBITDA margin was 23.9 percent, an increase of 70 basis points year-over-year.
• Full-year 2026 revenue is forecast at approximately $8.95 billion, down 1% reported and flat organically.
• Full-year 2026 adjusted EBITDA margin is expected to be approximately 23.2 percent.
• Full-year 2026 adjusted earnings per share guidance is $5.40 to $5.45.
• Full-year 2026 free cash flow margin is expected to be approximately 10.2 percent.
• Nine-month 2026 revenue was $6.662 billion.
• Nine-month 2026 net income attributable to Xylem was $747 million.
• Nine-month 2026 adjusted EBITDA was $1,508 million.
• Cash and cash equivalents were $708 million as of September 30, 2026.
• Long-term debt was $2.365 billion as of September 30, 2026.
• Goodwill was $8.524 billion as of September 30, 2026.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance was lowered from up 2% reported to down 1% reported, and from up 2-3% organic to flat organic.
• Full-year 2026 adjusted EPS guidance was lowered from $5.55-$5.70 to $5.40-$5.45.
• Full-year 2026 free cash flow margin guidance was lowered from 10.2-11.0 percent to approximately 10.2 percent.
• The company expects to see momentum in high-growth industry verticals, specifically data centers and microelectronics.

Business Segments and Product Lines:

• Orders for the third quarter were $2.3 billion, up 7% reported and 10% organically.
• Nine-month orders were $7.645 billion, up 17% reported and 17% organically.
• Beginning January 1, 2027, the company will align its business into three segments: Treatment and Services, Flow Solutions, and Measurement and Analytics.
• The company announced its intent to divest Applied Water International and Specialty Flow Control.
• Treatment and Services will be led by Rodney Aulick; Flow Solutions by Joe Johnston; and Measurement and Analytics by Meredith Emmerich.
• Nine-month revenue by segment: Water Infrastructure ($1.931 billion), Applied Water ($1.438 billion), Measurement and Control Solutions ($1.452 billion), and Water Solutions and Services ($1.841 billion).

Market and Competitive Landscape:

• The operating environment was described as mixed, with revenue impacted by project timing and more cautious spending decisions.
• Strong order activity and earnings performance demonstrated business resilience despite the cautious spending environment.
• Margin expansion was driven by productivity savings and strong price realization, exceeding the impact of inflation, lower volumes, and mix.

Risks and Challenges:

• Risks include overall industry and general economic conditions, industrial and governmental demand, interest rates, and customer spending timing.
• Geopolitical matters, nationalism, protectionism, and trade protection measures are identified as potential risks.
• Manufacturing and operating cost increases due to inflation, supply chain shortages, and labor shortages are noted.
• Risks related to cybersecurity incidents, data breaches, and supply chain disruptions for key components like semiconductors are highlighted.
• Uncertainty around productivity, simplification, restructuring, and realignment actions and related costs and savings is noted.
• Risks include volatility in foreign currency exchange rates and the strength of real estate markets.

Management Commentary and Tone:

• Matthew Pine, President and CEO, stated the company is moving with urgency to shape Xylem around markets where capabilities can deliver the greatest customer value and strongest long-term growth.
• Management noted that the resilience built this quarter allows for deliberate choices from a position of strength.
• The tone reflected confidence in the company's transformation strategy and operational excellence despite a dynamic backdrop.

Other Key Points:

• The company repurchased $1.58 billion of common stock during the nine months ended September 30, 2026.
• Dividends paid were $307 million for the nine months ended September 30, 2026.
• Long-term debt issued, net, was $990 million for the nine months ended September 30, 2026.
• Acquisition of businesses, net of cash acquired, was $425 million for the nine months ended September 30, 2026.
• Special charges for the quarter included $10 million of acquisition, divestiture, and integration costs, offset by $33 million of IEEPA tariff refunds.
• Restructuring and realignment costs for the quarter were $14 million.
• The company has 22,000 employees.
• 2025 revenue was $9 billion.