01—Abstract
Summary
Summary of the 10-Q filed April 28, 2026. Cited figures are marked; the original filing is the authoritative source.
Xylem Inc. reported first-quarter 2026 revenue of $2,125 milliona, up 2.7% from $2,069 million in the prior-year quarter, with favorable foreign currency translation of $65 million partially offset by an organic decline of $9 million (0.4%).
Operating income rose to $244 millionb (11.5% operating margin) from $231 million, and net income attributable to Xylem was $193 million, or $0.79 per diluted share, versus $169 million and $0.69 a year earlier. Adjusted operating margin was 16.1% and adjusted EBITDA margin was 20.6%, per the company's non-GAAP reconciliations. Orders were $2,228 million, up 3.2%, though down 0.3% organically, and total backlog was $4,712 million, a decrease of 7.5% from a year earlier.
Cash flow and capital returns dominated the quarter's financing activity. Operating cash flow was $108 millionc and free cash flow was $18 million, compared with $33 million and negative $38 million a year earlier. Xylem repurchased 4.8 million shares for $595 million, and cash and cash equivalents fell to $808 million from $1,479 million at December 31, 2025.
The company's board authorized a new $1.5 billiond repurchase program on February 25, 2026, of which $1.1 billion remained available at quarter end. Total debt was $1,938 million, and the $1 billion revolving credit facility was undrawn. The company raised its 2026 total revenue growth outlook to 2% to 3% and maintained its organic revenue growth outlook at 2% to 4%.
It also agreed on March 25, 2026 to acquire an optical sensing and measurement systems company for approximately $219 million, expected to close in 2026. Management expects to incur $40 to $55 million in restructuring costs for the full year, and a pending Swedish tax matter of SEK837 million remains under appeal with no unrecognized tax benefit recorded.
02—Key points
Key Highlights
- Revenue rose 2.7% to $2,125 million, with foreign currency adding $65 million and organic revenue declining 0.4%.
- Operating income increased 5.6% to $244 million; adjusted operating margin was 16.1%, up from 15.7%.
- Diluted EPS was $0.79, up from $0.69; net income attributable to Xylem was $193 million.
- Orders were $2,228 million (up 3.2%, down 0.3% organically); backlog was $4,712 million, down 7.5% year over year.
- Share repurchases totaled $595 million in Q1 2026 under the programs, and cash fell to $808 million from $1,479 million at year-end 2025.
- 2026 total revenue growth outlook was raised to 2% to 3%, with organic growth outlook maintained at 2% to 4%.
- Pending acquisition of an optical sensing and measurement systems company for approximately $219 million, expected to close in 2026.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Xylem kept $0.09.
- Revenue$2.13B100.0%
- Cost of revenue−$1.32B62.2%
- Gross profit$803.0M37.8%
- Operating costs−$559.0M26.3%
- Operating income$244.0M11.5%
- Interest, other & tax−$51.0M2.4%
- Net income$193.0M9.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed April 28, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $2.13B$2.07B | +2.7% |
| Cost of Revenue | $1.32B$1.30B | +1.6% |
| Gross Profit | $803.00M$768.00M | +4.6% |
| R&D Expenses | $56.00M$56.00M | 0.0% |
| SG&A Expenses | $472.00M$460.00M | +2.6% |
| Operating Income | $244.00M$231.00M | +5.6% |
| Net Income | $193.00M$169.00M | +14.2% |
| EPS (Basic) | $0.79$0.69 | +14.5% |
| EPS (Diluted) | $0.79$0.69 | +14.5% |
| Shares Outstanding (Basic) | 242.77M243.10M | −0.1% |
| Shares Outstanding (Diluted) | 243.36M243.78M | −0.2% |
05—Questions
Frequently Asked Questions
How did Xylem perform in the first quarter of 2026?
Revenue grew 2.7% to $2,125 million, operating income rose to $244 million from $231 million, and diluted EPS was $0.79 versus $0.69. Most of the revenue gain came from favorable currency translation, while organic revenue declined 0.4%.
Why did cash and cash equivalents decline so sharply?
Cash fell to $808 million from $1,479 million, mainly because Xylem repurchased $563 million of common stock in financing activities and paid $106 million in dividends, alongside $90 million of capital expenditures.
What is the outlook for 2026?
Xylem raised its total revenue growth outlook to 2% to 3% and kept its organic revenue growth outlook at 2% to 4% for 2026, citing ongoing geopolitical, trade, macroeconomic and regulatory uncertainty.
What is happening with backlog and orders?
Orders were $2,228 million, up 3.2% in total but down 0.3% organically. Backlog was $4,712 million at March 31, 2026, down 7.5% from a year earlier, though up 2.1% from December 31, 2025, and management expects about 60% to be recognized as revenue in the rest of 2026.
Are there any notable legal or tax risks?
A Swedish tax assessment of SEK837 million (about $88 million) remains under appeal after a December 2025 trial court ruling in Xylem's favor, which the Swedish Tax Agency has appealed. Xylem has recorded no unrecognized tax benefit for this position and believes it is more likely than not to prevail.
06—Continue