Key Highlights

  • Adjusted EPS was $1.44, up 5% from $1.37, against $1.45 as screened; GAAP EPS was $1.25, up 34%.
  • Revenue was $2.201 billion, down 3% reported and flat organically; orders were $2.331 billion, up 10% organically.
  • Adjusted EBITDA margin rose 70 basis points to 23.9%.
  • 2026 adjusted EPS guidance was lowered to $5.40 to $5.45 from $5.55 to $5.70.
  • Fourth-quarter adjusted EPS is guided to $1.39 to $1.44, with organic revenue down 1% to 2%.

Xylem Earnings: Why Did the 2026 Outlook Come Down While Orders Rose?

Xylem (NYSE:XYL) reported third-quarter results on Tuesday, October 27, with adjusted EPS of $1.44, up 5% from $1.37, and GAAP EPS of $1.25, up 34% from $0.93. Revenue of $2.201 billion fell 3% on a reported basis and was flat organically. Organic orders rose 10% to $2.331 billion, and the company lowered full-year guidance.

Adjusted 2026 EPS is now expected at $5.40 to $5.45, down from $5.55 to $5.70. Revenue is guided to about $8.95 billion, down 1% reported, with organic revenue flat versus the prior outlook of 2% to 3% growth.

Xylem Results: How Did Margins Expand on Flat Organic Sales?

Adjusted operating margin was 19.4%, compared with 18.9% a year earlier, and adjusted EBITDA margin rose 70 basis points to 23.9%. Management credited productivity savings and strong price realization, which offset inflation, lower volumes and mix.

Applied Water revenue grew 9% organically to $489 million, with orders up 15%. Water Infrastructure fell 1% to $645 million, Water Solutions and Services fell 2% to $631 million, and Measurement and Control Solutions fell 5% to $436 million, though its organic orders jumped 30%.

On the call, management said backlog grew 13% to $5.5 billion with book-to-bill above 1.

Xylem Guidance: Which Rationales Explain the Cut and the Fourth-Quarter Outlook?

Management said municipal utilities are deferring discretionary metering purchases amid affordability pressure, while large industrial projects are ramping more slowly. It described the issue as pace rather than demand. Full-year adjusted EBITDA margin is still expected at about 23.2%, roughly 100 basis points above 2025.

For the fourth quarter, reported revenue is expected to fall about 5% and organic revenue to decline 1% to 2%. Adjusted EBITDA margin is guided to about 24.5%.

Free cash flow margin is expected at about 10.2%, the low end of the earlier range, reflecting higher interest costs from acquisition financing and buybacks. Nine-month share repurchases totaled $1.58 billion, compared with $14 million a year earlier.

Xylem Portfolio Moves: What Do the Divestitures and Data Center Orders Signal?

The company intends to divest Applied Water International and Specialty Flow Control, which management said represent about 9% of revenue but less than 5% of EBITDA and are margin-dilutive. Proceeds are not expected until late 2027 or early 2028. From January 1, 2027, the company will report three segments instead of four: Treatment and Services, Flow Solutions, and Measurement and Analytics.

Applied Water data center orders rose more than 200% in the quarter, and data centers are expected to reach about 2% of revenue on a run-rate basis. Management is adding capacity cautiously, which may weigh on near-term margins.

Xylem Next Steps: What Should Be Watched After This Reset?

Detailed 2027 guidance, including the sizing of data center growth, is expected in February. Investors can also track whether municipal metering spending recovers, whether the 10% organic order growth converts into revenue in the fourth quarter, and when divestiture agreements are announced.