Xylem Cuts Full-Year Outlook and Plans Two Divestitures as Revenue Falls

Xylem cut its full-year revenue forecast to about $8.95 billion and lowered its earnings guide, even as orders rose and third-quarter profit beat its year-earlier level.

Xylem Inc. reported its third-quarter results on Oct. 27, 2026. The quarter covered the three months ended Sept. 30, 2026.

Xylem is a water solutions company with 22,000 employees. Its businesses move, treat and measure water for utilities and industrial customers.

The outlook cut leads the story

Xylem now forecasts full-year 2026 revenue of about $8.95 billion. That is down 1% on a reported basis from a year earlier.

The previous guidance called for revenue up 2%. On an organic basis, Xylem now expects revenue flat, versus up 2% to 3% before.

Adjusted earnings are now guided at $5.40 to $5.45 a share. The previous range was $5.55 to $5.70 a share.

Xylem expects an adjusted EBITDA margin of about 23.2% for the year. EBITDA is earnings before interest, taxes, depreciation and amortization.

That margin would be up 100 basis points from 2025 adjusted results. Free cash flow margin is now expected at about 10.2%, the low end of the prior range.

The company said revenue was hurt by project timing and more cautious spending decisions. It described the operating environment as mixed.

A mixed quarter underneath

Third-quarter revenue was $2.2 billion, down 3% on a reported basis. Revenue was flat on an organic basis, and a year earlier it was $2.27 billion.

Orders were $2.33 billion, up 7% on a reported basis. Orders rose 10% on an organic basis.

Net income attributable to Xylem was $291 million. Diluted earnings were $1.25 a share, up 34% from $0.93 a year earlier.

Net income margin rose 320 basis points to 13.2%. Adjusted net income was $336 million, or $1.44 a share, up 5%.

Adjusted earnings exclude purchase accounting intangible amortization, loss on sale of businesses and restructuring costs. They also exclude special charges, including tariff refunds under the emergency powers law cited by the company.

The adjusted EBITDA margin was 23.9%, up 70 basis points from a year earlier. Productivity savings and strong price realization drove the expansion, outweighing inflation, lower volumes and mix.

Operating income was $385 million, a margin of 17.5%. Adjusted operating income was $428 million, a margin of 19.4%.

The quarter missed consensus. StockStory, citing S&P consensus, put expected revenue at $2.28 billion, a 3.5% miss for the actual result.

Adjusted earnings of $1.44 a share sat just below the $1.45 consensus. Adjusted EBITDA of $527 million compared with consensus of $544.3 million.

Segments diverged

Water Infrastructure revenue was $645 million, down 2% from $656 million. Applied Water revenue was $489 million, up 7% from $456 million.

Measurement and Control Solutions revenue was $436 million, down 16% from $522 million. Water Solutions and Services revenue was $631 million, essentially flat against $634 million.

Orders told a stronger story than revenue. Water Infrastructure orders were $675 million and Applied Water orders were $502 million.

Measurement and Control Solutions orders were $504 million. Water Solutions and Services orders were $650 million.

Two divestitures and a three-segment future

Xylem said it intends to divest Applied Water International and Specialty Flow Control. The release disclosed no transaction values, timing or financial contributions for either business.

Chief Executive Matthew Pine tied the moves to focus. "We're moving with urgency to shape Xylem around the markets where our capabilities can deliver the greatest customer value and strongest long-term growth," he said.

"The resilience we've built, evident this quarter, allows us to make those choices deliberately and from a position of strength," Pine added.

From Jan. 1, 2027, Xylem will align its business into three segments. They are Treatment and Services, Flow Solutions, and Measurement and Analytics.

Treatment and Services will be led by Rodney Aulick. Flow Solutions will be led by Joe Johnston, and Measurement and Analytics by Meredith Emmerich.

The new structure groups businesses around moving water, treating water, and measuring and optimizing water systems. Xylem cited momentum in data centers and microelectronics.

Cash, buybacks and the market reaction

For the first nine months, revenue was $6.66 billion against $6.64 billion a year earlier. Net income attributable to Xylem was $747 million for the period.

Xylem repurchased $1.58 billion of its common stock in the nine months. It paid $307 million in dividends and spent $425 million on acquisitions.

Cash was $708 million at Sept. 30, down from $1.48 billion at Dec. 31, 2025. The company issued $990 million of long-term debt in the period.

Xylem fell 7.15% in premarket trading to $100.50, a ChartMill snapshot showed. That move followed the release and the outlook cut.

What remains unknown

What remains unknown is what the two divestitures will fetch, who might buy them, and when they might close, because Xylem disclosed none of that. Also unknown is whether the strong orders convert into fourth-quarter revenue quickly enough to reach even the reduced guide. What to watch is any divestiture terms, fourth-quarter orders and revenue against the new guide, and how the three-segment structure is staffed before it takes effect on Jan. 1, 2027. The verified record is clear on the quarter itself: revenue fell, orders and margins rose, and the full-year outlook came down.