XYL earnings analysis
What we found in XYL's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
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.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- 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.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- 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.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $1.11
- Gross margin
- 41.2%
- Operating margin
- 16.7%
- Segment
- Water Infrastructure revenue: $683 million, up 5.1% year over year; organic growth was $17 million (2.6%).
- Segment
- Applied Water revenue: $501 million, up 3.7%; organic growth was $13 million (2.7%).
- Segment
- Measurement and Control Solutions revenue: $508 million, down 5.9%; divestitures reduced revenue by $29 million and organic revenue declined $7 million (1.4%).
- Segment
- Water Solutions and Services revenue: $644 million, up 2.5%; organic growth was $7 million (1.1%).
What they said about what is next.
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.
The filing reads about the same as the one before it.
What came before.
- 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…
- 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. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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