A Xylem factory in Lindås in a September 2016 photograph. Photo: Bernt Fransson, Wikimedia Commons, CC BY-SA 4.0. Image resized.
Xylem cut its full-year sales and adjusted earnings forecasts Tuesday and announced plans to sell two businesses, saying project timing and more cautious customer spending weighed on third-quarter revenue.
The water-technology company now expects about $8.95 billion in 2026 revenue, a 1% decline from a year earlier. Its previous forecast called for 2% reported growth. On an organic basis, it now expects sales to be flat, rather than increasing 2% to 3%.
Full-year adjusted earnings per share are expected to be $5.40 to $5.45, down from the earlier range of $5.55 to $5.70, according to the company’s earnings announcement.
The lowered outlook comes alongside stronger orders and higher quarterly profit. That combination points to a difference between demand being booked and revenue being recognized, rather than a simple across-the-board decline in the business.
Orders rise while quarterly revenue falls
Xylem reported third-quarter revenue of $2.201 billion, down from $2.268 billion a year earlier. That was a 3% reported decline and flat organic growth.
Orders totaled $2.3 billion, increasing 7% as reported and 10% organically. The company described the spending environment as more cautious and cited project timing as a factor affecting sales.
For customers that operate water systems or buy industrial equipment, placing an order and completing a project are separate steps. The order growth does not mean all that work immediately became revenue during the quarter.
It also does not establish a change in household water rates. Those bills are separate from Xylem’s equipment and services sales, and the company did not announce a general change in consumer utility charges.
Profit improves despite the sales decline
Net income attributable to Xylem increased to $291 million, or $1.25 per share, from $227 million, or 93 cents per share, a year earlier. The company attributed the improvement mainly to operating performance and a smaller loss on business sales, partly offset by higher interest and income-tax expenses.
Adjusted net income was $336 million, or $1.44 per share. Adjusted earnings per share increased 5%, slower than the 34% increase in reported earnings per share.
The adjusted figures exclude items including amortization of acquired intangible assets, losses on business sales, restructuring and other special charges. They should be distinguished from the company’s reported earnings rather than treated as interchangeable.
Adjusted earnings before interest, tax, depreciation and amortization margin increased to 23.9%, up 0.7 percentage points. Productivity savings and pricing more than offset inflation, lower volumes and changes in the mix of business, Xylem said.
Two planned sales and a new operating structure
Xylem announced its intention to divest Applied Water International and Specialty Flow Control. The announcement describes planned sales, not completed transactions, and does not identify a buyer or announce a sale price.
The company said it wants to direct capital toward technologies and markets that fit its longer-term strategy. It cited momentum in data centers and microelectronics as areas where it sees opportunities for further investment.
Beginning January 1, 2027, Xylem plans to move from four business segments to three: Treatment and Services, Flow Solutions, and Measurement and Analytics.
Rodney Aulick will lead Treatment and Services, Joe Johnston will lead Flow Solutions, and Meredith Emmerich will lead Measurement and Analytics, the company said. Xylem described the structure as a way to group businesses around moving, treating and measuring water.
A narrower financial target for the rest of the year
The company now expects a full-year adjusted EBITDA margin of about 23.2%, an increase of one percentage point over its 2025 adjusted result. It forecasts a free-cash-flow margin of about 10.2%, compared with its previous range of 10.2% to 11%.
The reduced revenue and earnings targets remain forecasts. Xylem identified customer funding, the timing of capital spending and project deployments, interest rates and industrial and government demand among the factors that could affect its results.
JBizNews Desk | Washington
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