Detailed performance report for XYLEM covering Q2 2026. Gain clarity on earnings, revenue trends, and AI-enhanced strategic analysis.
Summary of Financial Performance: Xylem delivered solid second-quarter 2026 results with revenue up 1% year over year to roughly $9.2 billion full-year expected revenue, supported by healthy demand and backlog. Adjusted EBITDA margin improved to 23.3%, up 150 bps, driven by productivity, price, and mix. EPS reached a record $1.46, up 16%. Free cash flow was strong, net debt/adjusted EBITDA was 0.8x, and the company continued share repurchases.
Company Outlook & Strategy: Management narrowed full-year organic revenue guidance to 2%–3% from 2%–4% due to electric metering project delays, but raised EPS guidance to $5.55–$5.70 from $5.35–$5.60 on stronger margins and buybacks. EBITDA margin guidance was raised to 23.1%–23.5%. Third-quarter guidance calls for flat reported revenue, about 3% organic growth, and EPS of $1.42–$1.47. Strategy remains focused on strengthening the portfolio, expanding in high-growth industrial markets, and capturing demand tied to water resilience, AI infrastructure, and services-led recurring revenue.
Key Industry Trends: Demand for comprehensive water solutions remains strong across municipal and industrial customers. AI infrastructure is becoming a major theme, with data centers, semiconductors, power, and mining increasing water demand. Customers are prioritizing resilience, efficiency, and simplified integrated solutions. Municipal infrastructure spending remained healthy, while China remained weak.
Operational Highlights: Orders rose 41% overall, with backlog at $5.3 billion and book-to-bill above 1. Water Infrastructure margin expanded 480 bps. Applied Water orders grew 9%, with data center orders up over 300% and revenue up 3%. Water Solutions & Services had major momentum from the largest order in company history, an approximately $850 million 23-year outsourced water project tied to Dow. TriOS was recently acquired, WaterFleet was signed to acquire, and both add to sensing, mobile treatment, and AI-related infrastructure capabilities.
Challenges & Risks: The main near-term issue is project delays in electric metering, which led to a lower MCS outlook. China remained a significant headwind across segments, especially Water Infrastructure. Management also cited affordability concerns, cautious customer capex ahead of elections, inflation, tariff uncertainty, Middle East conflict, and lower water utility softness in some areas.
Key Analyst Questions & Responses: Analysts focused on Applied Water growth, data center demand, and outsourced contract opportunities. Management said Applied Water strength was mainly data-center-driven, with commercial building services also contributing, and expects data center exposure to rise to about 2% of revenue by year-end. On outsourced contracts, management highlighted a growing pipeline beyond Dow, including build-own-operate opportunities in lithium battery wastewater treatment and a Pennsylvania data center water treatment project. On MCS, management said electric demand remains healthy long term, but near-term investment is delayed by affordability and election-related caution; water-side demand remains stronger heading into the second half.
Access the official earnings call transcript for XYLEM 2026 Q2. It provides valuable insights into management commentary, performance drivers, and forward-looking guidance directly from the company.