01—Abstract
Summary
Summary of the 10-Q filed July 28, 2026. Cited figures are marked; the original filing is the authoritative source.
Xylem Inc. reported second-quarter 2026 revenue of $2,336 milliona, up 1.5% from $2,301 million a year earlier, with organic revenue growth of $30 million, or 1.3%.
Operating income rose to $390 millionb from $305 million, and net income attributable to Xylem was $263 million, or $1.11 per diluted share, compared with $226 million, or $0.93, in the prior-year quarter. Gross margin improved to 41.2% from 38.8%. Management cites productivity savings and price realization as drivers of margin expansion, partially offset by inflation.
Orders were $3,086 millionc, up 42.0% from $2,174 million, and total backlog reached $5,315 million at June 30, 2026. Capital allocation was a major theme in the first half of 2026. Xylem repurchased 10.5 million shares for $1,243 million, issued $1.0 billion of senior notes due 2033 and 2036, and paid $207 million in dividends.
Cash and cash equivalents fell to $1,276 milliond from $1,479 million at year-end 2025, and long-term debt rose to $2,395 million from $1,408 million. Free cash flow for the six months was $219 million, compared with $169 million a year earlier. Management updated its 2026 outlook to total revenue growth of approximately 2% and organic revenue growth of 2% to 3%.
Acquisition activity continued after quarter-end, with a definitive agreement signed on July 24, 2026 to acquire WaterFleet for approximately $200 million, and the July 1, 2026 closing of TriOS for approximately €190 million ($216 million). The filing also reports a $12 million IEEPA tariff refund receivable recognized in the quarter and a pending Swedish tax matter for which no unrecognized tax benefit has been recorded.
02—Key points
Key Highlights
- Revenue of $2,336 million in Q2 2026, up 1.5% year over year; organic revenue up 1.3% to $30 million.
- Operating income of $390 million (16.7% operating margin) versus $305 million (13.3%) in Q2 2025; gross margin of 41.2% versus 38.8%.
- Diluted EPS of $1.11 for Q2 2026 versus $0.93 in Q2 2025; first-half diluted EPS of $1.90 versus $1.62.
- Orders of $3,086 million, up 42.0%, and total backlog of $5,315 million at June 30, 2026, up 5.9% from a year earlier.
- Repurchased $1,243 million of common stock in the first half of 2026; issued $1.0 billion of 5.200% notes due 2033 and 5.450% notes due 2036 in May 2026.
- Management updated 2026 outlook to approximately 2% total revenue growth and 2% to 3% organic revenue growth; restructuring costs expected at $50 to $65 million for the full year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, Xylem kept $0.11.
- Revenue$2.34B100.0%
- Cost of revenue−$1.37B58.8%
- Gross profit$963.0M41.2%
- Operating costs−$573.0M24.5%
- Operating income$390.0M16.7%
- Interest, other & tax−$127.0M5.4%
- Net income$263.0M11.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed July 28, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $2.34B$2.30B | +1.5% |
| Cost of Revenue | $1.37B$1.41B | −2.6% |
| Gross Profit | $963.00M$892.00M | +8.0% |
| R&D Expenses | $59.00M$58.00M | +1.7% |
| SG&A Expenses | $503.00M$503.00M | 0.0% |
| Operating Income | $390.00M$305.00M | +27.9% |
| Net Income | $263.00M$226.00M | +16.4% |
| EPS (Basic) | $1.11$0.93 | +19.4% |
| EPS (Diluted) | $1.11$0.93 | +19.4% |
| Shares Outstanding (Basic) | 236.29M243.40M | −2.9% |
| Shares Outstanding (Diluted) | 236.57M243.86M | −3.0% |
05—Questions
Frequently Asked Questions
How did Xylem's profitability change in the second quarter of 2026?
Operating income rose to $390 million from $305 million, and net income attributable to Xylem increased to $263 million from $226 million. Management attributed margin expansion mainly to productivity savings and price realization, partially offset by inflation. Restructuring and realignment costs fell to $15 million from $29 million.
What drove the increase in orders and backlog?
Orders rose 42.0% to $3,086 million, including $872 million of organic growth in Water Solutions and Services, which the filing attributes in part to a significant contract secured in the quarter. Backlog increased to $5,315 million, with management expecting about 40% of it to be recognized as revenue in the remainder of 2026.
How did Xylem's balance sheet and capital structure change?
Long-term debt increased to $2,395 million from $1,408 million after $1.0 billion of new senior notes were issued in May 2026. Cash fell to $1,276 million from $1,479 million, reflecting $1,243 million of share repurchases and $207 million of dividends. Stockholders' equity declined to $10,421 million from $11,480 million, largely due to treasury stock purchases.
What acquisitions and divestitures affected the results?
Xylem acquired TriOS for approximately €190 million ($216 million) on July 1, 2026, and agreed on July 24, 2026 to acquire WaterFleet for approximately $200 million. It completed the sale of its international metering business in May 2026 for about $80 million in total fair value consideration, recognizing a cumulative loss of $37 million, of which $14 million was recorded in 2026.
What are the notable tax and legal items?
The effective tax rate was 28.3% for the quarter versus 25.0% a year earlier, attributed mainly to earnings mix and the international metering divestiture. A Swedish tax assessment case remains pending after a December 2025 trial court ruling in Xylem's favor, which the STA has appealed; no unrecognized tax benefit has been recorded.
06—Continue