Xylem Inc.

What they do

Xylem designs, manufactures and services engineered products and solutions used across the water cycle, from drinking water delivery, measurement and use to wastewater collection, testing, analysis and treatment and the return of water to the environment. The company reports through four segments: Water Infrastructure, Applied Water, Measurement and Control Solutions, and Water Solutions and Services. Sales reach customers through direct sales forces, independent distributors and channel partners, supported by a large installed base that generates recurring parts, replacement and service revenue.

Revenue drivers

• Water Infrastructure — Sells pump systems that transport water from aquifers, lakes, rivers and seas, plus filtration, ultraviolet, ozone, mixing, biological treatment and monitoring and control systems for municipal and industrial water and wastewater treatment; products reach customers through channel partners, distributors, direct sales and service.
• Applied Water — Provides water pressure boosting systems for HVAC and fire protection in residential and commercial buildings, plus pumps, heat exchangers and controls for power plants, manufacturing cooling, food and beverage processing and agricultural irrigation; the majority of sales go through long-standing independent distributor relationships.
• Measurement and Control Solutions — Delivers communications, smart metering, measurement and control technologies for water, electricity and natural gas distribution networks, analytical instrumentation for water quality, flow and level, and software and services including the Xylem Vue cloud analytics platform; sold via distributors, dedicated channel partners and direct sales.
• Water Solutions and Services — Provides tailored and outsourced services including on-demand and outsourced water, recycle/reuse, pipeline assessment, specialty dewatering, emergency response, industrial equipment systems, operations and maintenance outsourcing and municipal services such as leak detection and asset management, using global service branch networks and a rental fleet.

Recent performance

For second-quarter 2026, Xylem reported orders of $3.1 billion, up 42% on a reported basis and 41% organically, and revenue of $2.3 billion, up 2% reported and 1% organically. Net income attributable to Xylem was $263 million, or $1.11 per share, with net income margin up 150 basis points to 11.3%. Adjusted net income was $345 million, or $1.46 per share, up 16%, excluding purchase accounting intangible amortization, loss on sale of businesses, restructuring and realignment costs, and special charges. Adjusted EBITDA margin was 23.3%, up 150 basis points year over year, on productivity savings, price realization and mix. Full-year 2025 revenue was $9.04 billion with net income of $957 million and diluted EPS of $3.92.

Strategy

Management frames water as increasingly strategic for utilities and industrial customers and says several years of positioning the company for that demand is now creating new opportunities. The company cites growing AI infrastructure as increasing water's importance across semiconductors, power generation, mining and other critical industries, alongside demand in food and beverage and life sciences. Xylem describes a resilient municipal foundation, increasing exposure to industrial markets and a more focused portfolio. It continues to fund organic and inorganic growth initiatives while returning capital to shareholders, including a dividend that rose from $1.44 in 2024 to $1.60 in 2025.

Risks

• Macroeconomic and customer spending — Sales in approximately 150 countries expose Xylem to overall industry and economic conditions, interest rates, customer funding availability, inflation and real estate market strength.
• Supply chain and input costs — Manufacturing and operating costs can rise due to inflation, energy supply, supply chain shortages, logistics, labor shortages, trade agreements and tariffs, and delays in receiving semiconductors or other key components.
• Geopolitical and trade exposure — The company flags nationalism, protectionism and anti-global sentiment, volatility involving the U.S. and other governments, international conflicts, and regulatory and trade protection risks tied to its global sales and operations.
• Project execution and product liability — Failure to successfully execute large projects, including performance guarantees and customer budget, timeline and safety requirements, and defects, warranty, liability claims or recalls could materially affect results.

Outlook

Xylem forecasts full-year 2026 revenue of approximately $9.2 billion, up approximately 2% on a reported basis and approximately 2% to 3% organically, versus prior guidance of 2% to 3% reported and 2% to 4% organic. Full-year 2026 adjusted EBITDA margin is expected at approximately 23.1% to 23.5%, an increase of 90 to 130 basis points from 2025 adjusted results. That yields full-year adjusted EPS guidance of $5.55 to $5.70, raised from $5.35 to $5.60. Full-year free cash flow margin is still expected at approximately 10.2% to 11.0%.