Xylem sells pumps, water-treatment equipment, meters and services that help utilities and businesses move, clean and measure water. In the second quarter of 2026, operating profit rose 27.9% while sales grew 1.5%, as productivity improvements, pricing and lower special costs helped the company keep more of each sales dollar. That improvement gives Xylem a stronger operating base, but customer projects, large share repurchases and newly announced acquisitions are placing greater demands on its cash and borrowing capacity.
Analysis period: three and six months ended June 30, 2026. Research cutoff: October 20, 2026, New York time. Material subsequent financing developments verified through September 29, 2026 are discussed separately from the June accounts.
Source: Xylem second-quarter 2026 Form 10-Q, income statements, p. 3; management discussion, pp. 44–50. Subsequent-event sources appear in Section 6.
1. Xylem is keeping more of its sales, despite slow growth
Profit improved because Xylem earned more from its business, with additional help from lower special costs. Higher sales alone explain little of the increase. Gross profit—the amount left after making products and delivering services—increased by $71 million in the quarter. Operating expenses fell by $14 million. Together, these changes explain the $85 million rise in operating profit.
Management’s simplification program aims to focus resources on the products and customers with the greatest business impact, reduce waste and make service faster. The quarterly results show progress toward that purpose. Operating margin is the share of sales left after operating costs. Xylem attributed 3.5 percentage points of improvement in that margin to productivity savings and 2.4 points to pricing. Inflation and lower volume offset much of that benefit. Management’s margin analysis measures the effect on profit, rather than cash saved during the quarter.
| Consolidated results, US$ millions except margins and EPS | Second quarter 2025 | Second quarter 2026 | First half 2025 | First half 2026 |
|---|---|---|---|---|
| Revenue | 2,301 | 2,336 | 4,370 | 4,461 |
| Gross profit | 892 | 963 | 1,660 | 1,766 |
| Operating profit | 305 | 390 | 536 | 634 |
| Operating margin | 13.3% | 16.7% | 12.3% | 14.2% |
| Net income attributable to Xylem | 226 | 263 | 395 | 456 |
| Diluted earnings per share, US$ | 0.93 | 1.11 | 1.62 | 1.90 |
Sources: 2026 Form 10-Q, pp. 3, 44 and 48–50; 2025 Form 10-K, business strategy, pp. 5–6. Margins in the table use the company’s rounded presentation.
Growth in the existing business remained modest. Xylem’s “organic” comparison removes currency movements and the effect of buying or selling businesses. On that basis, quarterly sales grew 1.3%, versus about 6% in the second quarter of 2025. First-half 2026 organic growth was just 0.5%. Favorable currency translation added $94 million to first-half reported revenue, more than the $91 million total increase, because business disposals offset part of the growth.
Sources: 2026 Form 10-Q, revenue reconciliation, pp. 44–46; Xylem second-quarter 2025 results, July 31, 2025, highlights and organic revenue reconciliation.
Some of the profit improvement came from items that should be separated from day-to-day performance. Xylem recognized $16 million of tariff recoveries as a reduction in product costs. Only $4 million had been received in cash; the other $12 million was recorded as money expected back. Restructuring and asset-impairment charges also fell to $11 million from $26 million.
The improvement survives management’s adjustments, although it becomes smaller. Adjusted operating profit rose 11.2%, compared with the reported increase of 27.9%. The calculation removes the accounting expense that spreads acquired intangible-asset costs over their useful lives, called amortization. It also removes restructuring and realignment costs and special items, including the tariff benefit. It still includes the favorable contract effects discussed below. It therefore measures a different set of costs; it does not establish that every remaining dollar will repeat.
Simplification still requires cash. Restructuring payments increased to $49 million in the first half from $36 million a year earlier, and management expected $50 million–$65 million of restructuring expense for all of 2026. Lower quarterly charges therefore do not mean the program is finished.
Source: 2026 Form 10-Q, Note 1, pp. 7–8; Note 5, pp. 14–16; management discussion and adjusted operating-profit reconciliation, pp. 49–51. The complete pretax reconciliation is in the calculation notes.
Below operating profit, business disposals produced a $16 million quarterly loss, and income-tax expense increased by $28 million. The effective tax rate rose from 25.0% to 28.3%, principally because of the disposal’s tax effects. These costs explain why net income attributable to Xylem grew 16.4%, less than operating profit.
Earnings per share rose faster, by 19.4%, because repurchases reduced the average diluted share count by about 3.0%. Using the prior-year share count, the quarter’s $263 million profit would have produced approximately $1.08 per share, compared with the reported $1.11. The business earned more, and fewer shares divided that profit.
Source: 2026 Form 10-Q, Notes 6–7, pp. 17–18; management discussion, pp. 49 and 59. The constant-share EPS comparison is calculated, not a company-adjusted measure.
2. Pumping businesses carried the improvement while metering weakened
Water Infrastructure supplied nearly two-thirds of the quarter’s operating-profit increase. This business sells equipment that transports and treats water. Higher U.S. transport volumes and European capital-project revenue helped sales, while productivity savings and a more favorable mix of work improved profitability. Treatment sales were weaker because of softer markets and deliberate exits from selected projects.
| Business, US$ millions except organic growth | Second-quarter 2025 sales | Second-quarter 2026 sales | Second-quarter 2026 organic sales growth | Second-quarter 2025 operating profit | Second-quarter 2026 operating profit |
|---|---|---|---|---|---|
| Water Infrastructure | 650 | 683 | 2.6% | 103 | 157 |
| Applied Water | 483 | 501 | 2.7% | 84 | 101 |
| Measurement and Control Solutions | 540 | 508 | −1.4% | 68 | 63 |
| Water Solutions and Services | 628 | 644 | 1.1% | 78 | 91 |
Source: 2026 Form 10-Q, Note 19, pp. 36–38; management discussion, pp. 45–46 and 56–58. The four businesses earned $412 million before $22 million of corporate costs, reconciling to consolidated operating profit of $390 million. The comparable 2025 amounts were $333 million, $28 million and $305 million.
Applied Water sells pumps and related equipment used in buildings and industrial operations. U.S. pricing and delivery of previously ordered commercial equipment supported growth. Data-center projects also helped U.S. industrial sales. Yet the segment’s industrial application declined organically by $1 million as weaker European activity offset that benefit. Data centers are an expanding application for Xylem, but the disclosed results do not show a broad industrial sales acceleration.
Applied Water’s reported profit improvement also needs context. Management attributed 2.7 percentage points of its 2.8-point operating-margin increase to lower restructuring and realignment costs and higher income from special items. After those adjustments, the margin improved only 0.1 percentage point. Water Infrastructure’s adjusted margin improved by 5.1 points. The two pump businesses therefore made very different contributions to the underlying improvement.
Source: 2026 Form 10-Q, pp. 45–46 and 56–57. Segment adjustment inputs are shown in the calculation notes.
Measurement and Control Solutions had fewer water-meter orders ready to ship in the United States, partly offset by higher energy-meter volumes. The sale of the international metering business accounted for $29 million of the segment’s $32 million revenue decline, but continuing operations also weakened organically. Inflation, lower volume and a less profitable sales mix outweighed productivity improvements and pricing.
The wider metering market offers a useful comparison. Badger Meter reported an 8% decline in second-quarter 2026 utility-water sales, including an acquisition. Excluding that acquisition, sales fell 9%, which it attributed to uneven starts of automated-metering projects. A year earlier, its comparable utility-water growth excluding SmartCover was 6%, following 26% growth in the second quarter of 2024. That history supports a project-timing slowdown across more than one supplier. It does not isolate Xylem’s market-share performance.
Sources: Xylem 2026 Form 10-Q, pp. 46 and 57; Badger Meter second-quarter 2026 results, July 22, 2026, operating results; Badger Meter second-quarter 2025 results, July 22, 2025, utility-water discussion.
Xylem’s competitive strength rests on combining equipment with application expertise, distribution and ongoing service. For example, its FlexNet network connects meters so utilities can read usage remotely and identify problems. These capabilities address real operating needs. The current results show that customer deployment schedules still determine when that need turns into sales, making the stronger pump operations particularly valuable while metering is slower.
Source: 2025 Form 10-K, business segments, distribution and competitive landscape, pp. 8–10.
3. The order jump strengthens future work, but much of it will take time
The surge in orders was concentrated in water services and projects. Total quarterly orders increased 42.0% to $3.086 billion. Water Solutions and Services supplied $850 million of the $879 million organic increase—about 97% of the net company-wide increase. The filing links the increase to a significant contract, without disclosing that contract’s individual value, customer or delivery schedule.
The other businesses give a more restrained picture. Applied Water’s organic orders rose 9.2%, Measurement and Control Solutions increased 2.4%, and Water Infrastructure declined 3.9%. A major service win improves the pipeline of work, but it cannot be read as a 41% improvement in demand across Xylem’s markets.
Backlog—orders and contractual customer agreements still to be fulfilled—reached $5.315 billion, up 5.9% from June 2025. Management expected approximately 40% to become revenue during the rest of 2026. That is roughly $2.126 billion, leaving most backlog for later periods. Xylem reported no significant quarterly cancellations, although customers can reschedule or cancel long-term agreements.
Source: 2026 Form 10-Q, orders and backlog, pp. 46–48. Order concentration and implied remaining-year backlog revenue are calculated from the disclosed figures.
Contract changes also helped current revenue. In the first half, Xylem recorded $36 million for work partly performed in earlier periods, mainly because the scope and price of that work changed. Separately, management identified a favorable contract modification as a contributor to Water Solutions and Services’ quarterly sales and margin.
This distinction matters because a new price for earlier work can raise today’s revenue without requiring the same amount of new work today. The $36 million company-wide amount is material beside the first half’s $21 million organic revenue increase. The filing does not provide matching costs or an after-tax profit figure for that amount, so it cannot support a precise “profit excluding contract changes” calculation. It does establish that current sales and adjusted margins benefited from more than new deliveries alone.
Source: 2026 Form 10-Q, Note 4, p. 13; Water Solutions and Services discussion, pp. 46 and 58. The company-wide $36 million disclosure is not identified as the value of the significant new order.
4. Project work is using cash before customers finish paying
Operating cash improved, but receivables and outsourced-water projects absorbed a substantial part of earnings. First-half operating cash flow increased to $398 million from $338 million. Management attributed the improvement to higher cash earnings and payment timing, including lower annual incentive payments, partly offset by more money tied up in customer projects and other operating assets.
Cash used by changes in receivables increased to $142 million from $103 million. Long-term receivables used another $104 million, versus $70 million, as outsourced-water projects required funding. Xylem is doing work and committing resources before receiving all the associated customer cash. This is an operating funding requirement even when a project is expected to be profitable.
Contract assets rose from $510 million at December 2025 to $585 million in June. These represent work performed before scheduled billing and are disclosed separately from receivables. Customer advance balances fell from $286 million to $272 million. Together, the movements show that customer prepayments were not keeping pace with the value of work awaiting billing.
Source: 2026 Form 10-Q, cash-flow statement, p. 6; Note 4, p. 13; liquidity discussion, p. 59. These balance changes and cash-flow movements have different scopes and are not added together.
| Cash generated and allocated, US$ millions | First half 2025 | First half 2026 |
|---|---|---|
| Operating cash flow | 338 | 398 |
| Capital expenditures: purchases of long-lived assets | 169 | 179 |
| Free cash flow | 169 | 219 |
| Cash dividends paid | 196 | 207 |
| Cash remaining after capital expenditures and dividends | −27 | 12 |
| Cash share repurchases | 13 | 1,243 |
| Cash remaining after those uses | −40 | −1,231 |
Source: 2026 Form 10-Q, pp. 6 and 43. Free cash flow is operating cash flow less the cash-flow statement’s capital expenditures. Expenditures and distributions are shown as positive uses; the remainder rows are calculated. Acquisitions, disposals, borrowings and other cash movements are outside this allocation table.
Investment spending is increasingly connected to the services business. Water Solutions and Services’ capital expenditures rose to $82 million from $63 million, while total company spending rose by only $10 million. This business operates water-treatment systems and rents equipment to customers. The filing also explicitly connects the separate long-term-receivable outflow to outsourced-water projects. These are two ways the company funds the delivery of water solutions. The disclosed capital-spending figures do not divide maintenance from expansion.
Source: 2026 Form 10-Q, Note 19, p. 39, and p. 59; 2025 Form 10-K, Water Solutions and Services description, pp. 9–10, and Note 1, lease accounting policy.
Net investing cash use fell from $140 million to $98 million even as capital expenditures increased. Payments for asset acquisitions dropped from $37 million to $2 million, and cash proceeds from business sales rose from $50 million to $59 million. Disposals and smaller acquisition payments therefore released funding for other uses.
Source: 2026 Form 10-Q, cash-flow statement, p. 6, and investing discussion, p. 59.
The first-half cash result does not by itself establish a full-year shortfall. In July, management maintained a free-cash-flow target of 10.2%–11.0% of approximately $9.2 billion of annual revenue. Applying those assumptions implies about $938 million–$1.012 billion for the year, requiring roughly $719 million–$793 million in the second half.
There is relevant historical support for that pattern: calculated second-half free cash flow in 2025 was $741 million. The 2026 requirement is therefore near the previous year’s second-half result. Achieving it still depends on collections and project payment schedules, particularly as outsourced-water work uses more cash. This calculation applies the July outlook; it is not a forecast of acquisition payments or year-end cash.
Sources: Xylem second-quarter 2026 results, July 28, 2026, Outlook; 2025 Form 10-K, free-cash-flow reconciliation, p. 36; 2026 Form 10-Q, p. 43. Calculation inputs appear below.
5. Repurchases changed the balance sheet more than operating investment did
First-half cash covered capital spending and dividends; repurchases required other funding. Management describes repurchases as a way to deploy capital for shareholders while maintaining its focus on growth. The company bought 10.5 million shares for $1.243 billion in the first half, including $14 million used to settle employee tax-withholding obligations.
The resulting $1.231 billion gap after capital spending, dividends and repurchases was met through a combination of borrowing, existing cash and other cash flows. New long-term debt produced $990 million of net proceeds. Cash nevertheless fell by $203 million to $1.276 billion. Financing debt rose to $2.926 billion from $1.942 billion, and debt less cash rose to $1.650 billion from $463 million. The latter calculation excludes lease obligations and operating liabilities.
Source: 2026 Form 10-Q, balance sheet and cash-flow statement, pp. 5–6; Notes 12 and 16, pp. 23–25 and 32.
Borrowing rose faster than total liabilities because several other obligations declined. Amounts owed for employee compensation and benefits fell by $62 million, while the recorded liability on currency swaps used to protect overseas investments fell by $84 million. Accounts payable remained $1.013 billion. The growing financing requirement therefore came mainly from capital allocation, rather than a general increase in unpaid supplier bills.
Source: 2026 Form 10-Q, p. 5; Notes 10–11, pp. 21–22.
Receivables on the balance sheet rose by $116 million to $1.875 billion, while inventory rose by $33 million to $1.016 billion. Inventory increased across raw materials, unfinished production and finished goods. These balances required more resources even though sales grew slowly. Currency movements and disposals mean their changes are not identical to the cash-flow statement’s receivable and inventory outflows.
Net property and equipment changed little, rising from $1.159 billion to $1.167 billion, as investment occurred alongside depreciation and other movements. Other non-current assets increased by $145 million to $1.375 billion; the filing’s disclosed long-term-project cash use helps explain why this broader category deserves attention, but is not a complete reconciliation of that increase.
Source: 2026 Form 10-Q, pp. 5–6; Note 8, p. 18; liquidity discussion, p. 59.
Much of Xylem’s asset base reflects past acquisitions. Goodwill and other intangible assets totaled $10.406 billion, approximately 60% of total assets. Goodwill represents acquisition value not assigned to separately identifiable assets. Other intangibles include customer relationships, technology and software. The $76 million decline in goodwill was mainly a $70 million currency-and-other movement; finite-lived intangibles incurred $150 million of amortization. These accounting assets support future profit through the acquired businesses, but they are not cash available to pay debt.
The sale of international metering reduced assets and liabilities classified for sale and generated cash. The transaction’s approximately $80 million total consideration included deferred amounts, so it was not all immediate cash. Xylem recognized a cumulative $37 million disposal loss, of which $23 million had already been recorded in 2025. The first-half loss on all business sales was $12 million after other disposal gains.
Source: 2026 Form 10-Q, Notes 3 and 9, pp. 9–10 and 19; balance sheet, p. 5.
Equity is the accounting amount belonging to owners after other claims on assets. Total equity declined from $11.491 billion to $10.424 billion despite positive earnings, mainly because repurchased shares are subtracted from equity at their cost. Xylem kept those shares as treasury stock instead of retiring them; issued shares actually rose from 259.9 million to 260.3 million. The company recorded $25 million of share-based compensation, so employee awards remained a cost even as repurchases reduced the overall share count. The equity bridge below separates these effects from dividends and currency-related changes.
Source: 2026 Form 10-Q, pp. 5 and 27–33. Treasury shares rose from 16.3 million to 26.8 million; their cost increased by $1.255 billion, including $12 million of accrued repurchase excise tax.
6. Acquisitions expand Xylem’s capabilities and increase its financing burden
The post-quarter acquisition plan makes the June cash balance an incomplete picture of funding needs. The smaller transactions add identifiable capabilities. Xylem acquired TriOS on July 1 for approximately €190 million, or $216 million, adding optical water-quality sensors to Measurement and Control Solutions. It also agreed to acquire WaterFleet for approximately $200 million, adding mobile water and wastewater services.
WaterFleet’s June description of a data-center construction project shows how those services are used: water storage, pumping, wastewater reuse and ongoing operation where infrastructure must be provided on site. That offers Xylem a practical route into customers’ water-supply needs beyond selling an individual pump. The reviewed documents establish the WaterFleet agreement, but not its subsequent closing or final purchase price.
Sources: 2026 Form 10-Q, Note 3, pp. 8–9; EagleTree’s WaterFleet sale announcement, July 29, 2026; WaterFleet project description, June 9, 2026.
A larger step followed on August 11: Xylem agreed to buy Cornell Pump and Roper Pump from Indicor for $1.46 billion. Their equipment handles difficult fluids, including mixtures containing solids, extending Xylem’s industrial and municipal offerings. Management projected more than $260 million of 2026 revenue, EBITDA margins above 30% and $23 million of annual cost savings once fully achieved. These are forecasts for the businesses and planned savings, not contributions already included in Xylem’s second-quarter results. Closing was expected in the fourth quarter, subject to approvals and other conditions.
Source: Xylem acquisition announcement, August 11, 2026, transaction overview. EBITDA is profit before interest, tax, depreciation and amortization; it is not cash available after investment.
Xylem expanded its financing ahead of that purchase. On September 8, it replaced its $1 billion revolving bank credit line with a five-year, $1.5 billion facility. A revolver lets the company borrow, repay and borrow again within the limit. No borrowings were outstanding on that date. On September 29, it issued $1.5 billion of bonds, with proceeds intended for the Cornell and Roper purchase, associated costs and general corporate purposes. Those bonds add approximately $82.75 million of annual interest at their stated rates, before fees, hedges or interest earned on cash awaiting use.
Sources: September 8 credit agreement reported in Form 8-K, filed September 9, 2026, Items 1.01–1.02; September 29, 2026 Form 8-K, Item 8.01.
| Senior bonds outstanding at June 30, 2026, US$ millions | Principal | Stated annual interest rate | Annual coupon interest, calculated |
|---|---|---|---|
| Due 2026 | 500 | 3.250% | 16.25 |
| Due 2028 | 500 | 1.950% | 9.75 |
| Due 2031 | 500 | 2.250% | 11.25 |
| Due 2033 | 500 | 5.200% | 26.00 |
| Due 2036 | 500 | 5.450% | 27.25 |
| Due 2046 | 400 | 4.375% | 17.50 |
| Total | 2,900 | — | 108.00 |
Source: 2026 Form 10-Q, Note 12, pp. 23–25. This is the June schedule, not a statement of debt outstanding at the research cutoff. The September issue separately comprised $500 million each due in 2029, 2032 and 2037, at coupons of 5.250%, 5.450% and 5.850%.
At June, all debt maturities due in the rest of 2026 totaled $527 million, mostly the $500 million senior bond. The next substantial scheduled amount was $508 million in 2028. The $1.276 billion cash balance and then-undrawn $1 billion revolver provided resources to address the near-term maturity, while acquisitions and distributions competed for those resources. Subsequent bond issuance spreads additional obligations across later years, but also raises the ongoing cost of funding.
The $11 million first-half interest expense does not capture a full year’s cost of the newer debt. The May bonds were outstanding for only about a month of the first half, and cross-currency swaps contributed $28 million of income within interest expense. Cash interest paid was $29 million. These figures describe different periods and offsets; none should replace the contractual coupon schedule.
Source: 2026 Form 10-Q, p. 6; Notes 10 and 12, pp. 20–25; interest discussion, pp. 58–59.
The new bank agreement generally limits debt to 3.5 times the previous four quarters’ earnings measure defined in the agreement. It allows a temporary increase to 4.0 times following a qualifying acquisition and notice. These loan conditions, called covenants, constrain how much Xylem can borrow as it expands. The company reported compliance with its June covenants; the reviewed later disclosures do not provide a current calculation of remaining capacity under the new agreement.
Lease payments add another obligation outside the financing-debt total above. At December 2025, operating and finance leases had $612 million of undiscounted future payments, including $140 million scheduled for 2026. Their recorded liability was $533 million after adjusting future payments to their present value. June’s current lease liability was $129 million; the interim report did not replace the full annual maturity schedule. Xylem also had $269 million of supplier invoices in financing programs within accounts payable, payable on their original terms. These remain operating payments, distinct from the bonds.
Sources: 2026 revolving credit agreement, Section 6.05; 2026 Form 10-Q, Notes 11–12, pp. 22–25; 2025 Form 10-K, Note 11, pp. 87–89.
The acquisition program can broaden Xylem’s earnings base, but successful delivery now has a larger cash consequence. Keeping customers, integrating the acquired operations and achieving the planned savings must support interest payments as well as investment in existing projects. The September financing confirms access to funding; it does not yet establish the operating outcome of the planned acquisition.
7. The Swedish tax appeal remains a specific exposure
Xylem has won recent rulings, but Sweden’s tax authority is still appealing. A Swedish subsidiary received an assessment concerning a 2013 transfer of intellectual property. An adverse 2022 decision covered SEK837 million, approximately $86 million as described in the filing, including tax, penalties and interest.
Xylem won an appellate decision in 2024 and a ruling on a remanded issue in December 2025. The Swedish Tax Agency appealed the latter ruling. Management believes it is more likely than not to prevail and has not recorded a tax reserve for this disputed position. That accounting conclusion does not eliminate a possible payment if the final decision goes against Xylem; the disclosed assessment is not a new estimate of the eventual loss.
Other disclosed obligations require proportionate treatment. General legal and environmental accruals were $3 million each at June, and the warranty balance was $53 million. Guarantees, surety bonds and letters of credit totaled $899 million, supporting contracts and insurance requirements rather than representing an immediate cash bill. Management did not identify a reasonably possible material effect from the general legal matters described in Note 18.
Xylem could also have to buy the remaining ownership in its consolidated software subsidiary Idrica. The minority holders’ sale right becomes exercisable after December 10, 2027, at €168 million during the first two years of exercisability. Its $242 million carrying amount sits separately between liabilities and equity. This creates a future potential cash use that is separate from the bond schedule and the newly announced acquisitions.
Source: 2026 Form 10-Q, Note 6, p. 17; Note 18, pp. 34–35; Note 20, p. 39.
8. Stronger operations now need to produce more available cash
Xylem has improved profitability, but the next business test is converting that improvement into cash while expanding its operations. Water Infrastructure’s gains provide substantial evidence that productivity and pricing are working. Metering weakness, lower volumes and favorable contract adjustments show why the full profit increase should not be treated as a uniform improvement in customer demand.
Management’s July outlook captured that split: it narrowed organic revenue growth to 2%–3%, from 2%–4%, while raising its adjusted earnings-per-share outlook. The important operating question is whether larger project orders can turn into deliveries and customer payments without absorbing an increasing share of available cash.
The subsequent pump acquisition adds a second requirement: the acquired businesses must deliver enough operating profit and cash to support their integration and the larger interest bill. Progress would be visible in collections, sustained margins after special benefits, and the performance of the acquired operations. Slower project payments or weaker acquired earnings would leave less room for further repurchases and investment, even if reported profit remained positive.
Sources: 2026 Form 10-Q, pp. 45–60; July 28, 2026 results release, Outlook; August 11 acquisition announcement; September 29 financing filing.
Reporting basis and calculation notes
Reporting basis: Xylem Inc., ticker XYL, CIK 0001524472; Form 10-Q, accession 0001524472-26-000110, filed July 28, 2026, for the period presented as ending June 30, 2026. The analysis uses unaudited consolidated U.S. GAAP accounts, including subsidiaries and eliminating intercompany transactions. Quarterly income comparisons cover April–June; cash flows and first-half comparisons cover January–June. Balance-sheet comparisons use June 30, 2026 and December 31, 2025. Xylem actually closes interim quarters on the Saturday closest to calendar quarter-end and presents them using calendar quarter-end dates.
The information cutoff is October 20, 2026, New York time. The latest substantive company filing used is dated September 29, 2026. Acquisition agreements and forecasts are identified by their announcement dates; the analysis does not assume that their expected closings occurred or that the June cash and debt balances remained unchanged afterward.
Sources: SEC filing index; 2026 Form 10-Q, cover and Note 1; SEC company facts. XBRL checks used this accession, the applicable instant or duration, and U.S.-dollar or share units. Statement labels and footnotes govern where a taxonomy label has broader or narrower wording.
Calculation notes: The following checks use US$ millions unless a different unit is stated.
Reported and adjusted operating profit. These are pretax amounts, with no income-tax adjustment. Positive adjustments add back costs; negative adjustments remove net benefits. The total special-item adjustment is not identical to the $16 million gross tariff recovery because other special costs remain within that category.
| Consolidated operating-profit calculation, US$ millions | Second quarter 2025 | Second quarter 2026 | First half 2025 | First half 2026 |
|---|---|---|---|---|
| Reported operating profit | 305 | 390 | 536 | 634 |
| Add restructuring and realignment | 29 | 15 | 56 | 53 |
| Add acquired-intangible amortization | 55 | 52 | 110 | 107 |
| Add special charges or remove net special benefits | 13 | −10 | 25 | −5 |
| Adjusted operating profit | 402 | 447 | 727 | 789 |
| Adjusted operating margin | 17.5% | 19.1% | 16.6% | 17.7% |
| Segment operating-profit calculation, US$ millions | Water Infrastructure, second quarter 2025 | Water Infrastructure, second quarter 2026 | Applied Water, second quarter 2025 | Applied Water, second quarter 2026 |
|---|---|---|---|---|
| Reported operating profit | 103 | 157 | 84 | 101 |
| Restructuring and realignment adjustment | 12 | 5 | 10 | 3 |
| Acquired-intangible amortization adjustment | 10 | 9 | 0 | 0 |
| Special-item adjustment | 2 | −3 | 0 | −6 |
| Adjusted operating profit | 127 | 168 | 94 | 98 |
| Adjusted operating margin | 19.5% | 24.6% | 19.5% | 19.6% |
Source: 2026 Form 10-Q, pp. 50–51. Margin changes discussed in the article follow the company’s rounded presentation. “Adjusted” is a non-GAAP measure and retains contract-modification effects.
Revenue and profit checks. Second-quarter revenue reconciles as prior-year revenue of $2,301 million plus $30 million organic growth, $29 million currency benefit and $7 million acquisition revenue, less $31 million from disposals, equaling $2,336 million. The first-half calculation is $4,370 million + $21 million + $94 million + $12 million − $36 million = $4,461 million.
Second-quarter net income attributable to Xylem reconciles from $226 million to $263 million through $85 million higher operating profit, $2 million lower interest expense, $6 million worse other non-operating results, a $16 million disposal loss and $28 million higher taxes. Constant-share EPS uses $263 million divided by the prior-year diluted average of 243.859 million shares, or approximately $1.08. The current average was 236.574 million shares.
Source: 2026 Form 10-Q, pp. 3, 17–18 and 44–49.
Profit to operating cash. The 2026 cash-flow calculation begins with consolidated net income of $450 million, including the results attributable to minority owners, rather than the $456 million attributable to Xylem alone. Depreciation and amortization spread the cost of equipment and other long-lived assets over their useful lives. They reduce accounting profit without requiring a new cash payment when the expense is recorded, so the cash calculation adds them back.
| First-half 2026 operating-cash reconciliation, US$ millions | Amount |
|---|---|
| Consolidated net income | 450 |
| Add depreciation and amortization | 280 |
| Add stock compensation, restructuring charges, disposal losses and other net adjustments | 52 |
| Deduct cash restructuring payments | −49 |
| Deduct net changes in receivables, inventories and other operating assets and liabilities | −335 |
| Operating cash flow | 398 |
The $52 million adjustment comprises $25 million share compensation + $42 million restructuring and impairment + $12 million disposal losses − $27 million other adjustments. The $335 million cash use comprises $142 million receivables + $41 million inventory + $13 million accrued expenses + $104 million long-term receivables + $36 million other uses − $1 million from tax-balance changes. These are cash-flow statement categories and should not be added again to balance-sheet changes.
The comparative 2025 cash-flow statement starts with $395 million, whereas the income statement reports $391 million of consolidated net income and $395 million attributable to Xylem. The published comparative cash-flow rows sum to the disclosed $338 million operating total. Cash comparisons use the reported operating totals; the two starting profit amounts have different scopes.
Source: 2026 Form 10-Q, pp. 3 and 6.
Cash balance and free cash flow. Opening cash of $1,479 million + $398 million operating cash − $98 million investing cash − $484 million financing cash − $31 million exchange effects + $12 million change in cash classified within assets held for sale = closing cash of $1,276 million. The statements do not identify an additional restricted-cash balance to add; the held-for-sale classification movement is included once in this reconciliation.
Free cash flow is $398 million operating cash less $179 million capital expenditures = $219 million. It does not add back outsourced-project spending already included in operating cash. For the July outlook, $9,200 million forecast revenue × 10.2%–11.0% forecast cash margin = $938.4 million–$1,012 million annual free cash flow; subtracting $219 million leaves $719.4 million–$793 million for the second half. The 2025 comparator is annual free cash flow of $910 million less first-half free cash flow of $169 million = $741 million.
Sources: 2026 Form 10-Q, pp. 6 and 43; 2025 Form 10-K, p. 36; July 28, 2026 results release, Outlook.
Balance sheet and equity. Because redeemable minority ownership is presented outside ordinary equity, the June accounting equation is assets of $17,342 million = liabilities of $6,676 million + redeemable non-controlling interest of $242 million + total equity of $10,424 million. The December equation is $17,634 million = $5,885 million + $258 million + $11,491 million.
| Equity reconciliation, US$ millions | December 31, 2025 | First-half 2026 change | June 30, 2026 |
|---|---|---|---|
| Common stock | 3 | 0 | 3 |
| Paid-in capital above share par value | 8,759 | 28 | 8,787 |
| Retained earnings | 3,706 | 250 | 3,956 |
| Treasury shares, deducted at cost | −768 | −1,255 | −2,023 |
| Accumulated other comprehensive loss | −220 | −82 | −302 |
| Xylem shareholders’ equity | 11,480 | −1,059 | 10,421 |
| Other non-controlling equity | 11 | −8 | 3 |
| Total equity | 11,491 | −1,067 | 10,424 |
Retained earnings increased by $456 million of attributable profit less $206 million of declared dividends. Cash dividends paid were $207 million, a different timing measure. Stock-incentive activity increased paid-in capital by $28 million. The $1,255 million increase in the treasury-share deduction equals $1,243 million repurchase cash plus $12 million accrued excise tax. The $82 million increase in accumulated other comprehensive loss comprises $66 million of currency-related changes, $15 million of derivative changes and $1 million of pension-related changes, after the relevant taxes and reclassifications. These equity movements are not additional operating expenses to deduct from reported profit.
Source: 2026 Form 10-Q, pp. 5–6 and Notes 14–17, pp. 27–33.
Debt and interest calculations. The June senior-bond principal of $2,900 million + $23 million equipment financing + $24 million other debt − $21 million unamortized issuance costs and discounts = $2,926 million reported financing debt. Annual coupon interest equals bond principal multiplied by the contractual rate, assuming a full year outstanding. The May issues add $500 million × 5.200% + $500 million × 5.450% = $53.25 million annually. The September issues add $500 million × 5.250% + $500 million × 5.450% + $500 million × 5.850% = $82.75 million annually. These calculations exclude issuance-cost amortization, other borrowing, hedges, cash interest income and changes from repayments. They are not forecasts of reported net interest expense.
Sources: 2026 Form 10-Q, Note 12, pp. 23–25; September 29, 2026 Form 8-K, Item 8.01.
This analysis is for information and education. It assesses Xylem’s business and financial disclosures and is not investment advice.
