Xylem Reports Third Quarter 2026 Results and Announces
Xylem Inc. (XYL) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Xylem Inc. 301 Water Street SE, Suite 200 Washington, DC 20003 Tel +1.202.869.9150 Contacts: Media Investors Press Office Greg Giometti +1 (978) 704-5149 Michael Travers PressOffice@xylem.com Investor.Relations@xylem.com Xylem Reports Third Quarter 2026 Results and A
How this was made
The 30-second read
Why it matters
The mixed results and guidance cut suggest near‑term downside risk, but the strategic divestitures could be positive for long‑term growth.
Market read
First‑report earnings and guidance update for a mid‑cap industrial stock; likely to move the ticker today.
What to watch
Divestiture of Applied Water International may improve long‑term margins.
Xylem Reports Third Quarter 2026 Results and Announces Strategic Actions to Accelerate Growth
Third-quarter orders increased 7% on a reported basis and 10% organically, while adjusted EBITDA margin expanded 70 basis points and reported diluted EPS increased 34%. Revenue declined 3% on a reported basis and the company reduced its full-year revenue, adjusted EPS and free-cash-flow-margin outlooks amid project timing and more cautious spending decisions.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q3 2026 ordersGAAP | $2.3B | – | up 7% on a reported basis and 10% organically |
| Q3 2026 revenue from productsGAAP | $1.81B | – | – |
| Q3 2026 revenue from servicesGAAP | $394M | – | – |
| Q3 2026 revenueGAAP | $2.20B | – | (3) % |
| Q3 2026 organic revenuenon-GAAP | $2.20B | – | — % |
| Q3 2026 cost of revenue from productsGAAP | $1.03B | – | – |
| Q3 2026 cost of revenue from servicesGAAP | $268M | – | – |
| Q3 2026 cost of revenueGAAP | $1.29B | – | – |
| Q3 2026 gross profitGAAP | $907M | – | – |
| Q3 2026 selling, general and administrative expensesGAAP | $458M | – | – |
| Q3 2026 research and development expensesGAAP | $56M | – | – |
| Q3 2026 restructuring and asset impairment chargesGAAP | $8M | – | – |
| Q3 2026 operating incomeGAAP | $385M | – | – |
| Q3 2026 operating marginGAAP | 17.5 % | – | – |
| Q3 2026 adjusted operating incomenon-GAAP | $428M | – | – |
| Q3 2026 adjusted operating marginnon-GAAP | 19.4 % | – | – |
| Q3 2026 interest expenseGAAP | −$21M | – | – |
| Q3 2026 other non-operating income, netGAAP | $6M | – | – |
| Q3 2026 loss on sale of businessesGAAP | −$5M | – | – |
| Q3 2026 income before taxesGAAP | $365M | – | – |
| Q3 2026 income tax expenseGAAP | −$77M | – | – |
| Q3 2026 net incomeGAAP | $288M | – | – |
| Q3 2026 net income attributable to XylemGAAP | $291M | – | – |
| Q3 2026 net income marginGAAP | 13.2 % | – | increased 320 basis points |
| Q3 2026 basic EPSGAAP | $1.25 | – | – |
| Q3 2026 diluted EPSGAAP | $1.25 | – | up 34% |
| Q3 2026 adjusted net income attributable to Xylemnon-GAAP | $336M | – | – |
| Q3 2026 adjusted diluted EPSnon-GAAP | $1.44 | – | up 5% |
| Q3 2026 EBITDAnon-GAAP | $520M | – | – |
| Q3 2026 EBITDA marginnon-GAAP | 23.6 % | – | – |
| Q3 2026 adjusted EBITDAnon-GAAP | $527M | – | – |
| Q3 2026 adjusted EBITDA marginnon-GAAP | 23.9 % | – | year-over-year increase of 70 basis points |
| Nine Months 2026 revenueGAAP | $6.66B | – | — % |
| Nine Months 2026 gross profitGAAP | $2.67B | – | – |
| Nine Months 2026 operating incomeGAAP | $1.02B | – | – |
| Nine Months 2026 net income attributable to XylemGAAP | $747M | – | – |
| Nine Months 2026 diluted EPSGAAP | $3.14 | – | – |
| Nine Months 2026 adjusted EBITDAnon-GAAP | $1.51B | – | – |
| Nine Months 2026 adjusted EBITDA marginnon-GAAP | 22.6 % | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Water InfrastructureOrganic revenue change was (1) %; orders were $675 million, with organic orders change of (1) %. | $645M | – | (2) % |
| Applied WaterOrganic revenue change was 9 %; orders were $502 million, with organic orders change of 15 %. | $489M | – | 7 % |
| Measurement and Control SolutionsOrganic revenue change was (5) %; orders were $504 million, with organic orders change of 30 %. | $436M | – | (16) % |
| Water Solutions and ServicesOrganic revenue change was (2) %; orders were $650 million, with organic orders change of 6 %. | $631M | – | — % |
Full-year 2026 outlook
- Revenueapproximately $8.95 billion, down 1 percent year over year on a reported basis; flat on an organic basis
- NoteAdjusted EBITDA margin: approximately 23.2 percent, an increase of 100 basis points versus Xylem’s 2025 adjusted results
- NoteAdjusted earnings per share: $5.40 to $5.45
- NoteFree cash flow margin: approximately 10.2 percent
Capital returns
- Repurchase of common stock: $(1,580) million for the periods ended June 30, 2026, as labeled in the cash flow statement; $(14) million in 2025.
- Dividends paid: $(307) million for the periods ended June 30, 2026, as labeled in the cash flow statement; $(293) million in 2025.
What drove it
- Orders were $2.3 billion, up 7% on a reported basis and 10% organically.
- Productivity savings and strong price realization drove adjusted EBITDA margin expansion, exceeding the impact of inflation, lower volumes and mix.
- Reported net income results were primarily driven by strong operational performance and lower loss on sale of businesses.
- The company cited momentum in high-growth industry verticals including data centers and microelectronics.
- Xylem intends to divest Applied Water International and Specialty Flow Control and move from four segments to three segments beginning January 1, 2027.
Concerns
- Revenue was impacted by project timing and more cautious spending decisions.
- Reported Q3 revenue declined 3%, while organic revenue was flat.
- Measurement and Control Solutions revenue declined 16% on a reported basis and 5% organically.
- Increased interest and income tax expense partially offset strong operational performance and lower loss on sale of businesses.
- Full-year revenue guidance was reduced to approximately $8.95 billion from prior guidance of up 2 percent, and adjusted EPS guidance was reduced to $5.40 to $5.45 from $5.55 to $5.70.
What to watch
- Whether the $2.3 billion of third-quarter orders and 10% organic order growth translate into revenue amid project timing and cautious customer spending.
- Execution of the intended divestitures of Applied Water International and Specialty Flow Control.
- Implementation of the three-segment structure beginning January 1, 2027: Treatment and Services, Flow Solutions, and Measurement and Analytics.
- Delivery against full-year adjusted EBITDA margin guidance of approximately 23.2 percent and free cash flow margin guidance of approximately 10.2 percent.
- Progress in data centers and microelectronics, which the company identified as high-growth industry verticals.
Balance sheet and cash flow
- Cash and cash equivalents: $708 million at September 30, 2026; $1,479 million at December 31, 2025.
- Short-term borrowings and current maturities of long-term debt: $530 million at September 30, 2026; $534 million at December 31, 2025.
- Long-term debt: $2,365 million at September 30, 2026; $1,408 million at December 31, 2025.
- Net Cash – Operating activities: $729 million for the periods ended June 30, 2026, as labeled in the cash flow statement; $698 million in 2025.
- Capital expenditures: $(268) million for the periods ended June 30, 2026, as labeled in the cash flow statement; $(248) million in 2025.
- Net Cash – Investing activities: $(554) million for the periods ended June 30, 2026, as labeled in the cash flow statement; $(329) million in 2025.
- Net Cash – Financing activities: $(935) million for the periods ended June 30, 2026, as labeled in the cash flow statement; $(382) million in 2025.
- Long-term debt issued, net: $990 million for the periods ended June 30, 2026, as labeled in the cash flow statement; — in 2025.
- Net change in cash and cash equivalents: $(771) million for the periods ended June 30, 2026, as labeled in the cash flow statement; $70 million in 2025.
Analysis
Xylem reported a mixed third quarter. Orders reached $2.3 billion, up 7% on a reported basis and 10% organically, but revenue was $2.2 billion, down 3% on a reported basis and flat organically. The company attributed the revenue outcome to project timing and more cautious spending decisions. Segment revenue was weakest in Measurement and Control Solutions, which declined 16% on a reported basis and 5% organically, while Applied Water increased 7% on a reported basis and 9% organically.
Profitability improved despite the lower revenue base. GAAP operating income was $385 million versus $334 million, reported diluted EPS was $1.25 versus $0.93, and adjusted diluted EPS was $1.44 versus $1.37. Adjusted EBITDA margin was 23.9%, a year-over-year increase of 70 basis points. Xylem said productivity savings and strong price realization more than offset inflation, lower volumes and mix. Net income margin rose 320 basis points to 13.2%, with strong operational performance and a lower loss on sale of businesses cited as primary factors, partly offset by higher interest and income tax expense.
Cash deployment was substantial in the cash flow statement, which is labeled for periods ended June 30. Net cash from operating activities was $729 million and capital expenditures were $(268) million. The company repurchased $(1,580) million of common stock and paid $(307) million of dividends. Cash and cash equivalents were $708 million at September 30, 2026, while long-term debt was $2,365 million, compared with $1,408 million at December 31, 2025.
The outlook reset reflects the revenue pressure. Xylem now forecasts full-year 2026 revenue of approximately $8.95 billion, down 1 percent year over year on a reported basis and flat organically. The company also reduced adjusted EPS guidance to $5.40 to $5.45 and expects free cash flow margin of approximately 10.2 percent. Adjusted EBITDA margin guidance remains approximately 23.2 percent, an increase of 100 basis points versus 2025 adjusted results. Alongside the revised outlook, Xylem announced an intended divestiture of Applied Water International and Specialty Flow Control and a transition to three segments beginning January 1, 2027, directing focus toward Treatment and Services, Flow Solutions, and Measurement and Analytics.
Management, verbatim
“We’re moving with urgency to shape Xylem around the markets where our capabilities can deliver the greatest customer value and strongest long-term growth," said Matthew Pine, president and CEO of Xylem. "The resilience we’ve built, evident this quarter, allows us to make those choices deliberately and from a position of strength.”
Matthew Pine, president and CEO of Xylem
Not in the filing
stated, not guessed- Q3 2026 GAAP gross margin was not printed.
- Q3 2026 free cash flow and free cash flow margin actual results were not printed.
- Q3 2026 operating cash flow was not separately printed; the cash flow statement is labeled for the periods ended June 30, 2026.
- Q3 2026 segment operating income, segment margins and segment profitability were not printed.
- Q3 2026 backlog value was not printed.
- A separate previous outlook document was not provided; therefore, no actual-versus-prior-guidance comparisons are included.
- The filing does not print prior-year comparative figures for Nine Months 2026 adjusted EBITDA and adjusted EBITDA margin in the same table row.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Xylem filed a Form 8‑K announcing Q3 2026 results, a 7% order increase, a 34% rise in reported EPS, and a downward revision to full‑year EPS guidance.
Ticker impact
Xylem reported Q3 2026 results and lowered full-year EPS guidance to $5.40‑$5.45.
likely pressure as the market prices in the lowered guidance
The earnings beat is outweighed by the downward revision to FY EPS, which typically drags the stock in the short term.
Market effects
Water‑solutions sector may see modest re‑rating as Xylem trims guidance.
U.S. investors may adjust exposure to industrial water companies.
Limited; impact confined to Xylem and peers.
Counterpoint
The beat on reported EPS could support a short‑term rally despite the lowered guidance.
Key entities
- companyXylem Inc.
Global water solutions provider.
