Strong Earnings Beat & Raised EPS Guidance: Xylem reported record adjusted earnings per share of $1.46, significantly exceeding analyst expectations. Net income attributable to Xylem for the quarter was $263 million. The company also raised its full-year adjusted EPS guidance to $5.55-$5.70, reflecting confidence in future profitability.
Revenue Performance & Adjusted Outlook: Total revenue for the quarter was approximately $2.34 billion, marking a 1% organic increase, though slightly below analyst forecasts. While the full-year organic revenue growth forecast was narrowed to 2%-3% from 2%-4% due to delayed electric-metering deployments, Xylem simultaneously raised its full-year adjusted EBITDA margin outlook to 23.1%-23.5%.
Key Growth Drivers: Data Centers & Industrial Markets: Data centers and industrial markets emerged as significant growth drivers, with Applied Water orders tied to data centers surging over 300% in the quarter. Management anticipates data-center revenue to grow approximately 200% in 2026, driven by the increasing strategic importance of water in AI infrastructure and other critical industries. The revenue from the Applied Water Segment was $501 million.
Robust Orders and Backlog: The company reported strong overall order growth of 41% organically, contributing to a substantial ending backlog of $5.3 billion. This was bolstered by a significant $850 million, 23-year outsourced water contract with Dow, enhancing future revenue visibility.
Enhanced Profitability and Operational Efficiency: Xylem demonstrated improved profitability, with the adjusted EBITDA margin expanding 150 basis points year-over-year to 23.3%. This improvement was attributed to strong operational performance, productivity savings, effective pricing, and a favorable business mix, despite some inflationary pressures. The net income margin also increased 150 basis points to 11.3%.

Overall Takeaway
The Q2 2026 earnings call for Xylem was broadly positive. Despite a modest revenue miss against expectations and a slightly narrowed full-year revenue growth forecast due to specific project delays, the company delivered a significant earnings beat and raised its full-year EPS and adjusted EBITDA margin guidance. Strong order growth, particularly fueled by surging demand from data centers and expanded industrial exposure, highlights robust underlying business momentum and effective strategy execution in key growth areas. The continued focus on profitability and operational efficiency, leading to margin expansion, further underscores a solid financial performance.

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