10-Q · April 28, 2026
Xylem reported Q1 2026 revenue of $2,125 million, up 2.7% year-over-year, driven by a $65 million favorable FX impact and slight organic decline of $9 million. Gross margin expanded 70 bps to 37.8% and operating margin…
Earnings analysis · 10-Q
XYL earnings analysis
Filed July 28, 2026 · Our reading of the company's report
The latest report
Xylem delivered modest 1.5% Q2 revenue growth to $2.336 billion but materially improved profitability, with gross margin up 240 bps to 41.2%, operating margin up 340 bps to 16.7%, and GAAP EPS up 19.4% to $1.11. Order…
Read full summary
Xylem delivered modest 1.5% Q2 revenue growth to $2.336 billion but materially improved profitability, with gross margin up 240 bps to 41.2%, operating margin up 340 bps to 16.7%, and GAAP EPS up 19.4% to $1.11. Order intake and backlog were notably strong, led by Water Solutions and Services, while Measurement and Control Solutions declined and faced margin pressure. First-half free cash flow improved to $219 million, but management reduced its 2026 reported revenue-growth outlook to approximately 2% amid an uncertain external environment.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $1.11
What stood out
-
Revenue returned to modest growth
Q2 revenue rose 1.5% year over year to $2.336 billion, with $30 million of organic growth and $29 million of favorable foreign exchange partly offset by a $31 million divestiture impact.
-
Strong margin expansion
Gross margin expanded 240 bps year over year to 41.2%, while operating margin expanded 340 bps to 16.7%. Productivity contributed 230 bps to gross-margin improvement and price realization contributed 180 bps.
-
Earnings grew faster than sales
GAAP EPS increased 19.4% year over year to $1.11; net income attributable to Xylem rose $37 million to $263 million. Adjusted EPS was $1.46, versus $1.26 a year earlier.
-
Orders and backlog strengthened
Orders increased 42.0% to $3.086 billion, including 40.9% organic growth. Backlog reached $5.315 billion, up $700 million, or 15.2%, from December 31, 2025; management expects about 40% to convert to revenue during the remainder of 2026.
-
First-half cash generation improved
First-half operating cash flow increased $60 million year over year to $398 million, and free cash flow increased $50 million to $219 million after $179 million of capital expenditures, equal to 45.0% of operating cash flow.
-
Liquidity remains substantial
Liquidity was approximately $2.3 billion at June 30, comprising $1.3 billion of cash and $1.0 billion of available credit facilities. The company repurchased 5.67 million shares in Q2 at an average $114.30 per share, leaving $453 million authorized.
What to watch
-
Measurement and Control remains pressured
Measurement and Control Solutions Q2 revenue declined 5.9% to $508 million, including a $29 million divestiture impact and a $7 million organic decline, while adjusted operating margin fell 180 bps to 16.3%.
-
Inflation remains a margin headwind
Inflation reduced consolidated Q2 gross-margin performance by 240 bps and operating-margin performance by 270 bps, partially offsetting productivity and pricing benefits.
-
Higher tax rate offsets operating gains
The effective tax rate rose 330 bps year over year to 28.3%, and income-tax expense increased $28 million to $103 million, primarily reflecting the 2026 international metering business divestiture.
-
No formal risk-factor update; outlook caution
Item 1A states there were no material changes to risk factors from the 2025 Annual Report. Nevertheless, management lowered 2026 reported revenue-growth outlook to approximately 2% amid geopolitical, trade, macroeconomic and regulatory uncertainty.
Management's outlook
The 10-Q updates FY2026 reported revenue-growth outlook to approximately 2% and organic revenue growth to 2%-3%, citing geopolitical, trade, macroeconomic and regulatory volatility. No numeric revenue-dollar or EPS range was provided in the filing's MD&A.
Earlier filings 4
10-K · February 25, 2026
Xylem reported record 2025 results with revenue of $9,035 million (up 5.5% vs. 2024) and expanding margins (gross margin 38.5%, operating margin 13.5%). Adjusted operating income rose to $1,612 million (adjusted…
10-Q · July 31, 2025
Xylem reported Q2 2025 revenue of $2,301 million, up 6.1% year-over-year, with gross margin expanding to 38.8% (up 100 bps) and operating margin to 13.3% (up 160 bps). GAAP diluted EPS was $0.93 (up 16.3% YoY); adjusted…
10-K · March 3, 2025
Xylem reported strong 2024 results with revenue of $8,562 million (up 16.3% y/y), operating margin expansion to 11.8% (up 290 bps) and free cash flow of $942 million (up 66% y/y). Growth was driven by acquisitions…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.