XYLEM (NYSE: XYL) is a globally leading water solutions company committed to addressing the world's most challenging water challenges. On October 27, the company released its results for the third quarter of 2026 and announced further measures to accelerate the transformation of its business portfolio.
Although revenue has been affected by project timing and more prudent spending decisions, strong order activity and solid profitability demonstrate the business's resilience and the benefits derived from the company's transformation. XYLEM also announced its intention to sell its international application water business and its special flow control business, and will consolidate its operations from four business segments into three by 2027. (Note: This primarily involves multiple brands, including B&G and Lowara.)
Key highlights of third-quarter performance:
Orders: $2.3 billion; report-based growth: 7%; organic growth: 10%
Revenue: $2.2 billion; reported figures declined by 3%, while organic revenue remained unchanged.
Earnings per share: $1.25, up 34%; adjusted earnings per share: $1.44, up 5%
Third-quarter results reflect a mixed operating environment. Against a dynamic backdrop, the company achieved total revenue of USD 2.2 billion. Earnings per share reported for the third quarter grew 34% on a GAAP basis and 5% on an adjusted basis.
Net income attributable to XYLEM for the quarter was USD 291 million, or USD 1.25 per share. The net profit margin increased by 320 basis points to 13.2%. These results were primarily driven by strong operating performance and a decline in business sale losses, although these were partially offset by increased interest and income tax expenses. Adjusted net income attributable to XYLEM was USD 336 million, or USD 1.44 per share, excluding amortization of purchased accounting intangible assets, business sale losses, restructuring and business adjustment costs, and special expenses, including the impact of IEEPA tariff refunds.
In the third quarter, the adjusted EBITDA margin stood at 23.9%, up 70 basis points year on year. Productivity gains and strong pricing drove the expansion in margins, with their impact outweighing the effects of inflation, declining sales, and changes in the product mix.
Outlook
XYLEM currently expects full-year revenue for 2026 to be approximately USD 8.95 billion, representing a year-on-year decrease of 1% under the reported metrics; this contrasts with its previous guidance of 2% growth. Revenue under organic metrics is expected to remain flat, compared with its previous guidance of 2%–3% growth.
For the full year 2026, adjusted EBITDA margin is expected to be approximately 23.2%, representing a 100 basis-point increase over Xylem's adjusted results for 2025. Accordingly, adjusted earnings per share for the full year are expected to range from USD 5.40 to USD 5.45, below the previously provided guidance range of USD 5.55 to USD 5.70. Full-year free cash flow margin is expected to be approximately 10.2%, compared with the previously provided guidance range of 10.2% to 11.0%.
Focus on the core to drive growth
XYLEM plans to divest its international water applications and specialized flow control businesses and transition to a three-pillar structure, with the aim of building a more focused company organized around customer needs and long-term growth priorities.
The planned sale will further focus Xylem's business operations, enabling the company to allocate capital toward technologies, capabilities, and markets that best align with its long-term strategy. Xylem has already demonstrated momentum in high-growth vertical sectors such as data centers and microelectronics, which has created opportunities to increase investment in and exposure to these markets.
Effective January 1, 2027, XYLEM will integrate its operations into three major business segments: Treatment and Services, Flow Solutions, and Measurement and Analytics. The new structure will center on core activities—including water conveyance, water treatment, and the measurement and optimization of water systems—while integrating complementary technologies and capabilities. By consolidating businesses that share common customers, technologies, and growth opportunities, XYLEM expects to unlock greater value across its entire business portfolio and operate with greater simplicity, speed, and accountability. Treatment and Services will be led by Rodney Aulick; Flow Solutions by Joe Johnston; and Measurement and Analytics by Meredith Emmerich.
"We are moving forward with a sense of urgency, shaping Xylem around the markets where our capabilities can deliver the greatest customer value and the strongest long-term growth," said Matthew Pine, President and CEO of Xylem. "The resilience we demonstrated this quarter has enabled us to make these choices with composure, from our advantageous position."
IPv6 network supported.