Key Highlights

  • Revenue was USD 2.2 billion, flat organically, while orders rose 10% organically to USD 2.3 billion.
  • Adjusted EPS rose 5% to USD 1.44, and GAAP EPS rose 34% to USD 1.25 from USD 0.93.
  • Adjusted EBITDA margin expanded 70 basis points to 23.9%, and backlog rose 13% to USD 5.5 billion.
  • Full-year adjusted EPS guidance moved to USD 5.40 to USD 5.45, lower than before, on reduced sales volumes.

Orders Outpace Revenue

Xylem (NYSE:XYL) reported third quarter 2026 results on Tuesday. Revenue was USD 2,201 million, compared with USD 2,268 million, and flat organically. Management attributed the flat revenue to project timing and a more cautious, deliberate utility spending environment. Orders rose 10% organically to USD 2.3 billion, and backlog rose 13% to USD 5.5 billion.

Gross profit rose to USD 907 million from USD 883 million. Selling, general and administrative expense fell to USD 458 million from USD 474 million. Net income attributable to Xylem was USD 291 million versus USD 227 million, and diluted EPS rose to USD 1.25 from USD 0.93, helped by lower losses on business sales and a diluted share count of 233.0 million versus 244.1 million. Adjusted EPS was USD 1.44, and adjusted EBITDA margin was 23.9%, supported by productivity and price realization.

Segment and Order Trends

On the call, management said Measurement and Control Solutions orders grew 30% on large water and gas metering awards scheduled for late 2027. Applied Water orders grew 15%, with data center orders up over 200% and strength in U.S. commercial buildings. Water Solutions and Services orders grew 6%, led by capital project demand. Chief Executive Matthew Pine noted that certain projects moved more slowly than anticipated and that utility spending decisions took longer to materialize.

For the nine months, revenue was USD 6,662 million versus USD 6,638 million, gross profit rose to USD 2,673 million from USD 2,543 million, and net income attributable to Xylem rose to USD 747 million from USD 622 million. Diluted EPS was USD 3.14 versus USD 2.55. Year-to-date free cash flow was USD 444 million, slightly lower than the prior year because of working capital and investment in outsourced water contracts. Net debt to adjusted EBITDA was 1.1 times after opportunistic share repurchases in the quarter.

Acquisitions and Divestitures

On Aug. 10 the company agreed to acquire the Cornell Pump and Roper Pump businesses from Indicor for about USD 1,460 million, to be included in Water Infrastructure. It plans to finance the deal partly with senior unsecured notes issued on Sept. 29, and the filing cites a close in the fourth quarter of 2026, subject to regulatory approvals. On Sept. 2 it acquired WaterFleet, a provider of mobile water and wastewater utility services.

Management also described planned divestitures, including Applied Water International and Specialty Flow Control, which represent 9% of revenue but less than 5% of EBITDA, and which reduce China exposure from 2% to 1% of revenue. It cited a 34% decrease in injury frequency, a 22% fall in days of inventory and a 40% cut in SKU count under its operating model transformation.

Guidance

Full-year revenue is guided to about USD 8.95 billion, flat organically, on slower project conversion. Adjusted EPS guidance is USD 5.40 to USD 5.45, lower than the prior range. For the fourth quarter, organic revenue is guided down 1% to 2% as more backlog is scheduled to ship later, with adjusted EPS of USD 1.39 to USD 1.44 and an adjusted EBITDA margin of about 24.5%.

Water Technology Markers to Follow

Tracking points include conversion of the USD 5.5 billion backlog into revenue, Measurement and Control orders after 30% growth, and data center demand in Applied Water. Further items are the fourth quarter organic decline guide of 1% to 2%, closing of the Cornell and Roper Pump acquisition, and progress on the planned divestitures.