Xylem Inc.

Previous wording

This Report contains “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” "contemplate," "predict," “forecast,” “likely,” “believe,” “target,” "goal," "objective," “will,” “could,” “would,” “should,” "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that: are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or goals (including those related to our social, environmental and other sustainability goals); or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth.

Current wording

This Report contains “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” "contemplate," "predict," “forecast,” “likely,” “believe,” “target,” "goal," "objective," “will,” “could,” “would,” “should,” "potential," "may" and similar expressions or their negative, may, but are not necessarily to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that: are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or goals (including those related to our social, environmental and other sustainability goals); or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth.

Previous wording

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: the impact of overall industry and general economic conditions, including industrial, governmental, and public and private sector spending, interest rates, availability of funding to our customers, inflation and governments' related monetary policy in response, and the strength of the real estate markets, on economic activity and our operations; geopolitical matters, including nationalism, protectionism and anti-global sentiment, volatility involving the U.S. and other governments, ongoing, escalation or outbreak of international conflicts, and regulatory, trade protection, economic and other risks associated with our global sales and operations; manufacturing and operating cost increases due to macroeconomic conditions, including inflation, energy supply, supply chain shortages, logistics challenges, labor shortages, trade agreements, tariffs, and other trade protection measures, and other factors; demand for our products, disruption, competition or pricing pressures in the markets we serve; cybersecurity incidents, data breaches, or other disruptions of information technology systems on which we or our customers rely, or involving our connected products and services; lack of availability or delays in receiving parts and raw materials from our supply chain, including semiconductors or other key components; operational disruptions at our facilities or that of third parties upon which we rely; safe and compliant treatment and handling of water, wastewater and hazardous materials; failure to successfully execute large projects, including as respects performance guarantees and customers’ budgets, timelines and safety requirements; our ability to retain, compete for, and attract leadership, other key talent, and labor; defects, security, warranty and liability claims, and recalls related to our products; uncertainty around productivity, simplification, restructuring and realignment actions and related costs and savings; our ability to execute strategic investments for growth, including acquisitions and divestitures; availability, regulation or interference with radio spectrum used by certain of our products; volatility in served markets or impacts on our business and operations due to weather conditions, volatile weather events, or changing climate patterns; risks related to our sustaina…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: the impact of overall industry and general economic conditions, including industrial, governmental, and public and private sector demand and spending, interest rates, availability of funding to our customers, timing of our customers' capital spending and project deployments, inflation and governments' related monetary policy in response, and the strength of the real estate markets, on economic activity and our operations; geopolitical matters, including nationalism, protectionism and anti-global sentiment, volatility involving the U.S. and other governments, ongoing, escalation or outbreak of international conflicts, and regulatory, trade protection, economic and other risks associated with our global sales and operations; manufacturing and operating cost increases due to macroeconomic conditions, including inflation, energy supply, supply chain shortages, logistics challenges, labor shortages, trade agreements, tariffs, and other trade protection measures, and other factors; demand for our products, disruption, competition or pricing pressures in the markets we serve; cybersecurity incidents, data breaches, or other disruptions of information technology systems on which we or our customers rely, or involving our connected products and services; lack of availability or delays in receiving parts and raw materials from our supply chain, including semiconductors or other key components; operational disruptions at our facilities or that of third parties upon which we rely; safe and compliant treatment and handling of water, wastewater and hazardous materials; failure to successfully execute large projects, including as respects performance guarantees and customers’ budgets, timelines and safety requirements; our ability to retain, compete for, and attract leadership, other key talent and labor; defects, security, warranty and liability claims, and recalls related to our products; uncertainty around productivity, simplification, restructuring and realignment actions and related costs and savings; our ability to execute strategic investments for growth and portfolio optimization actions, including acquisitions and divestitures; availability, regulation or interference with radio spectrum used by certain of our products; volatility in served markets or impacts on our business and operations…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Xylem reported revenue for the second quarter of 2026 of $2,336 million, an increase of 1.5% compared to $2,301 million reported in the second quarter of 2025. The revenue increase consisted primarily of organic growth of $30 million, or 1.3%, and favorable foreign currency impacts of $29 million. Revenue growth was partially offset by the net impact of $31 million of revenue loss from divestitures and $7 million of additional revenue from acquisitions.

Current wording

Xylem reported revenue for the third quarter of 2026 of $2,201 million, a decrease of 3.0% compared to $2,268 million reported in the third quarter of 2025. The revenue decreases consisted of the net impact of $80 million of revenue loss from divestitures and $17 million of additional revenue from acquisitions, organic declines of $7 million, or 0.3%, partially offset by favorable foreign currency impacts of $3 million.

Previous wording

•Orders of $3,086 million, up 42.0% from $2,174 million in the prior year period, and up 40.9% on an organic basis.

Current wording

•Orders of $2,331 million, up 6.9% from $2,181 million in the prior year period, and up 9.9% on an organic basis.

Previous wording

•Earnings per share of $1.11, up 19.4% compared to prior year ($1.46, up 15.9% versus prior year, on an adjusted basis).

Current wording

•Earnings per share of $1.25, up 34.4% compared to prior year ($1.44, up 5.1% versus prior year, on an adjusted basis).

Previous wording

•Net income attributable to Xylem as a percent of revenue of 11.3%, up 150 basis points compared to 9.8% in the prior year. Adjusted EBITDA margin of 23.3%, up 150 basis points when compared to 21.8% in the prior year.

Current wording

•Net income attributable to Xylem as a percent of revenue of 13.2%, up 320 basis points compared to 10.0% in the prior year. Adjusted EBITDA margin of 23.9%, up 70 basis points when compared to 23.2% in the prior year.

Previous wording

Revenue generated during the three and six months ended June 30, 2026 was $2,336 million and $4,461 million, respectively, reflecting an increase of $35 million, or 1.5%, and an increase of $91 million, or 2.1% compared to the prior year. Organic revenue increased $30 million, or 1.3%, and $21 million, or 0.5% for the three and six months ended June 30, 2026, respectively. Foreign currency translation had a favorable impact on revenue of $29 million for the three months ended June 30, 2026, and a favorable impact on revenue of $94 million for the six months ended June 30, 2026. The loss of revenue from divestitures of $31 million was partially offset by a corresponding increase in revenue from acquisitions of $7 million for the three months ended June 30, 2026. For the six months ended June 30, 2026 the loss of revenue from divestitures of $36 million was partially offset by a corresponding increase in revenue from acquisitions of $12 million. The increase in organic revenue for the three months ended June 30, 2026 is primarily due to increased sales volume in the U.S. in our Water Infrastructure segment and strong data center project growth in our Applied Water segment. The increase in organic revenue for the six months ended June 30, 2026 is primarily due to increased sales volume in the U.S. in our Water Infrastructure segment and strong price realization and backlog execution in the U.S. in our Applied Water segment.

Current wording

Revenue generated during the three and nine months ended September 30, 2026 was $2,201 million and $6,662 million, respectively, reflecting a decrease of $67 million, or 3.0%, and an increase of $24 million, or 0.4% compared to the prior year. Organic revenue decreased $7 million, or 0.3%, and increased $14 million, or 0.2% for the three and nine months ended September 30, 2026, respectively. Foreign currency translation had a favorable impact on revenue of $3 million and $97 million for the three and nine months ended September 30, 2026. The loss of revenue from divestitures of $80 million was partially offset by a corresponding increase in revenue from acquisitions of $17 million for the three months ended September 30, 2026. For the nine months ended September 30, 2026 the loss of revenue from divestitures of $116 million was partially offset by a corresponding increase in revenue from acquisitions of $29 million. The decrease in organic revenue for the three months ended September 30, 2026 is primarily due to reduced sales volume in U.S. metering in our Measurement and Control Solutions segment and service and rental volume in our Water Solutions and Services segment, mostly offset by strong growth in our Applied Water segment. The increase in organic revenue for the nine months ended September 30, 2026 is primarily due to strong price realization and backlog execution in the U.S. in our Applied Water segment and increased sales volume in the U.S. in our Water Infrastructure segment.

Previous wording

The following tables illustrate the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to revenue during the three and six months ended June 30, 2026:

Current wording

The following tables illustrate the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to revenue during the three and nine months ended September 30, 2026:

Previous wording

(a)Foreign currency translation impact for the year due to the strengthening in value of various currencies against the U.S. Dollar, the largest being the Euro, Australian Dollar, British Pound, Hungarian Forint, Chinese Yuan and the Swedish Krona.

Current wording

(a)Foreign currency translation impact for the year primarily due to the strengthening in value of various currencies against the U.S. Dollar, the largest being the Euro, Australian Dollar, Hungarian Forint, Chinese Yuan, British Pound, Norwegian Krone, and the Swedish Krona.

Previous wording

Water Infrastructure revenue increased $33 million, or 5.1%, for the second quarter of 2026 as compared to the prior year. Revenue growth for the quarter included organic growth of $17 million, or 2.6%, and $14 million of favorable impacts from foreign currency translation. Revenue growth also included the net impact of additional revenue of $4 million from acquisitions and a loss of $2 million of revenue from divestitures. Revenue in the transport application grew $28 million organically due to increased sales volume in the U.S. and increased capital project revenue in western Europe, partially offset by reduced backlog execution in the emerging markets. Revenue growth was partially offset by organic revenue declines in the treatment application of $11 million due to decreased sales volume in Western Europe, targeted exits on non-strategic capital revenue and market softness in Emerging Markets, partially offset by favorable timing of capital projects in the U.S.

Current wording

Water Infrastructure revenue decreased $11 million, or 1.7%, for the third quarter of 2026 as compared to the prior year. Revenue declines for the quarter included decreased organic revenue of $8 million, or 1.2%, the impact of $6 million of lost revenue from divestitures and $1 million of increased revenue from acquisitions, and $2 million of favorable impacts from foreign currency translation. Revenue in the treatment application declined $19 million organically due to timing of revenue recognition in western Europe, market softness in China, and targeted exits on non-strategic capital revenue and market softness in emerging markets. The decreased organic revenue was partially offset by organic revenue growth in the transport application of $8 million due to strong backlog execution in the U.S., partially offset by reduced backlog execution and project timing in the emerging markets.

Previous wording

Water Infrastructure revenue increased $55 million, or 4.5%, for the six months ended June 30, 2026 as compared to the prior year. Revenue growth for the period included $43 million of favorable impacts from foreign currency translation and organic revenue growth of $12 million, or 1.0%. Revenue growth also included the net impact of $7 million of additional revenue from acquisitions offset by a loss of revenue of $7 million from divestitures. Revenue growth was driven by $31 million of organic growth in the transport application due to increased sales volume and strong backlog execution in the U.S. partially offset by market softness and reduced backlog execution in the emerging markets. Revenue in the treatment application declined by $19 million organically. Organic declines in the treatment application were driven by targeted exits on non-strategic capital revenue, market softness in emerging markets and reduced sales volume and capital project revenue in western Europe, partially offset by favorable timing of capital projects in the U.S.

Current wording

Water Infrastructure revenue increased $44 million, or 2.3%, for the nine months ended September 30, 2026 as compared to the prior year. Revenue growth for the period included $45 million of favorable impacts from foreign currency translation, an increase of $8 million of revenue from acquisitions, organic revenue growth of $4 million, or 0.2% and a loss of revenue of $13 million from divestitures. Organic revenue growth was driven by $42 million of organic growth in the transport application due to increased sales volume and strong backlog execution in the U.S. partially offset by market softness and reduced backlog execution in the emerging markets. Revenue in the treatment application declined by $38 million organically, driven by targeted exits on non-strategic capital revenue, market softness in China and reduced sales volume and capital project revenue in western Europe, partially offset by favorable capital project revenue in the U.S.

Previous wording

Applied Water revenue increased $18 million, or 3.7% for the second quarter of 2026 as compared to the prior year. Revenue growth for the quarter included organic revenue growth of $13 million, or 2.7%, and $5 million of favorable foreign currency translation. Building solutions revenue grew $14 million organically, due primarily to backlog execution and price in the U.S. and increased sales volume in western Europe related to the commercial market, partially offset by declines in the residential market in western Europe and the emerging markets. Organic revenue growth was partially offset by organic declines of $1 million in the industrial application due to changing customer dynamics coupled with lower backlog execution in western Europe, partially offset by increased data center project revenue in the U.S.

Current wording

Applied Water revenue increased $33 million, or 7.2% for the third quarter of 2026 as compared to the prior year. Revenue growth for the quarter included organic revenue growth of $39 million, or 8.7%, and $6 million of lost revenue from divestitures. Revenue from the industrial application grew $24 million organically, due primarily to increased data center project revenue and backlog execution in the emerging markets and U.S. Building solutions revenue grew $15 million organically due to strong backlog execution and price realization in the U.S. commercial market, partially offset by declines in the residential market across all major geographies.

Previous wording

Applied Water revenue increased $31 million, or 3.4% for the six months ended June 30, 2026 as compared to the prior year. Revenue growth for the period included $19 million of favorable foreign currency translation and organic revenue growth of $12 million, or 1.3%. Building solutions revenue grew $21 million organically, due primarily to commercial backlog execution and price in the U.S. and increased sales volume in western Europe, partially offset by residential declines in the emerging markets and western Europe. Organic revenue growth was partially offset by organic declines of $9 million in the industrial application driven by the same factors impacting the second quarter revenue declines.

Current wording

Applied Water revenue increased $64 million, or 4.7% for the nine months ended September 30, 2026 as compared to the prior year. Revenue growth for the period included $51 million, or 3.7%, of organic revenue growth, $19 million of favorable foreign currency translation and $6 million of lost revenue from divestitures. Building solutions revenue grew $36 million organically, due primarily to commercial backlog execution and price in the U.S., partially offset by residential declines in the emerging markets and western Europe. Revenue from the industrial application grew by $15 million organically due primarily to increased data center project revenue and backlog execution in the U.S. and emerging markets, partially offset by reduced demand in western Europe driven by geopolitical uncertainty.

Previous wording

Measurement and Control Solutions revenue decreased $32 million, or 5.9%, for the second quarter of 2026 as compared to the prior year. The decrease in revenue was primarily due to a $29 million loss of revenue from divestitures and $7 million, or 1.4%, of decreased organic revenue, partially offset by $4 million of favorable foreign currency translation. Organic revenue declines were driven by $7 million from the smart metering and other applications, driven by the U.S., which had lower shippable backlog coming into the quarter in water partially offset by increased sales volume in energy. Organic revenue remained flat in the analytics application as compared to the prior year.

Current wording

Measurement and Control Solutions revenue decreased $100 million, or 6.4%, for the nine months ended September 30, 2026 as compared to the prior year. The decrease in revenue was primarily due to the net effect of $97 million of lost revenue from divestitures and $6 million of additional revenue from acquisitions. Revenue declines also included organic revenue declines of $23 million, or 1.6%, partially offset by $14 million of favorable foreign currency translation. Organic revenue declines were driven by $16 million from the smart metering and other applications, driven by reduced sales volume in water metering, partially offset by energy metering due to lower shippable backlog coming into the year in the U.S. Organic revenue declined by $7 million in the analytics application due primarily to reduced sales volume in the emerging markets and U.S.

Previous wording

Water Solutions and Services revenue increased $16 million, or 2.5%, for the second quarter of 2026 as compared to the prior year. The revenue growth was primarily driven by $7 million, or 1.1%, of organic growth, $6 million of favorable impacts from foreign currency translation and $3 million of acquisition activity. Revenue in the capital and other applications grew by $8 million organically, primarily due to increased capital project revenue recognized in North America as the result of a contract modification and increased dewatering sales in western Europe. Organic revenue growth was partially offset by $1 million of organic declines in the service application, driven by unfavorable service project timing in the U.S. almost entirely offset by service volume in the emerging markets.

Current wording

Water Solutions and Services revenue increased $16 million, or 0.9%, for the nine months ended September 30, 2026 as compared to the prior year. The revenue growth was primarily driven by $19 million of favorable impacts from foreign currency and $15 million of revenue from acquisitions, offset by $18 million, or 1.0%, of organic declines. Revenue in the capital and other applications declined by $12 million organically, primarily due to lower sales volume, in the U.S. and lapping of prior year capital project revenue in the emerging markets, partially offset by increased capital project revenue recognized in North America as the result of a contract modification and favorable sales volume in the emerging markets and western Europe. Organic revenue from the service application declined by $6 million driven by unfavorable service project timing in the U.S., partially offset by favorable service and rental volume in the emerging markets.

Previous wording

The following tables illustrate the impact from organic decline/growth, recent acquisitions and divestitures, and foreign currency translation in relation to orders during the three and six months ended June 30, 2026:

Current wording

The following table illustrates the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to orders during 2026:

Previous wording

Backlog includes orders on hand as well as contractual customer agreements at the end of the period. Delivery schedules vary from customer to customer based on their requirements. Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors. Typically, capital projects require longer lead production cycles and deployment schedules and delays occur from time to time. Total backlog was $5,315 million at June 30, 2026, an increase of $297 million, or 5.9%, as compared to June 30, 2025 backlog of $5,018 million. The backlog increase was due to strong order intake in the Water Solutions and Services and Applied Water segments, including the securing of a significant contract in Water Solutions and Services during the three months ended June 30, 2026. The backlog increase was partially offset by backlog declines in the Measurement and Control Solutions and Water Infrastructure segments primarily due to revenue outpacing orders and contract wins. Backlog increased $700 million, or 15.2%, at June 30, 2026, as compared to December 31, 2025 backlog of $4,615 million. The increase in backlog as compared to December 31, 2025 was driven primarily by strong order intake, including the securing of a significant contract in the Water Solutions and Services segment, partially offset by backlog declines in the Measurement and Control Solutions segment due to revenue outpacing orders and contract wins. We anticipate that approximately 40% of the backlog as of June 30, 2026 will be recognized as revenue in the remainder of 2026. There were no significant order cancellations during the quarter.

Current wording

Backlog includes orders on hand as well as contractual customer agreements at the end of the period. Delivery schedules vary from customer to customer based on their requirements. Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors. Typically, capital projects require longer lead production cycles and deployment schedules and delays occur from time to time. Total backlog was $5,466 million at September 30, 2026, an increase of $647 million, or 13.4%, as compared to September 30, 2025 backlog of $4,819 million. The backlog increase was due to strong order intake in the Water Solutions and Services and Applied Water segments, including the securing of a significant contract in Water Solutions and Services during the nine months ended September 30, 2026. The backlog increase was partially offset by backlog declines in the Measurement and Control Solutions due to the net impact of divestiture and acquisition activity, and Water Infrastructure segments primarily due to revenue outpacing orders and contract wins. Backlog increased $851 million, or 18.4%, at September 30, 2026, as compared to December 31, 2025 backlog of $4,615 million. The increase in backlog as compared to December 31, 2025 was driven primarily by strong order intake across all segments, including the securing of a significant contract in the Water Solutions and Services segment, partially offset by the divestiture of the international metering business in the Measurement and Control Solutions segment. We anticipate that approximately 20% of the backlog as of September 30, 2026 will be recognized as revenue in the remainder of 2026. There were no significant order cancellations during the quarter.

Previous wording

Gross margin as a percentage of revenue increased 240 basis points to 41.2% for the three months ended June 30, 2026, as compared to 38.8% for the three months ended June 30, 2025. The gross margin increase included net favorable impacts of 70 basis points from decreases in special charges and acquired intangible amortization partially offset by increased restructuring and realignment costs as compared to the prior year. Gross margin expansion included 550 basis points of favorable operational impacts, driven by 230 basis points of productivity savings, 180 basis points of price realization, and 80 basis points of favorable mix. These increases in gross margin were partially offset by 380 basis points of unfavorable operational impacts driven by 240 basis points of inflation and 80 basis points of decreased volume.

Current wording

Gross margin as a percentage of revenue increased 230 basis points to 41.2% for the three months ended September 30, 2026, as compared to 38.9% for the three months ended September 30, 2025. The gross margin increase included net favorable impacts of 160 basis points from IEEPA tariff refunds in special charges, and decreased realignments costs, and acquired intangible amortization as compared to the prior year. Gross margin expansion also included 420 basis points of favorable operational impacts, driven by 220 basis points of productivity savings and 140 basis points of price realization. These increases in gross margin were partially offset by 350 basis points of unfavorable operational impacts driven by 150 basis points of inflation, 80 basis points of unfavorable foreign currency impacts and 70 basis points of unfavorable mix.

Previous wording

Gross margin as a percentage of revenue increased 160 basis points to 39.6% for the six months ended June 30, 2026, as compared to 38.0% for the six months ended June 30, 2025. The gross margin increase included net favorable impacts of 40 basis points from decreases in special charges and acquired intangible amortization partially offset by increased restructuring and realignment costs as compared to the prior year. Gross margin expansion included 460 basis points of favorable operational impacts, led by 260 basis points of productivity savings and 150 basis points of price realization. These increases in gross margin were partially offset by 340 basis points of unfavorable operational impacts driven by 240 basis points of inflation and 40 basis points of decreased volume.

Current wording

Gross margin as a percentage of revenue increased 180 basis points to 40.1% for the nine months ended September 30, 2026, as compared to 38.3% for the nine months ended September 30, 2025. The gross margin increase included net favorable impacts of 80 basis points from IEEPA tariff refunds in special charges and acquired intangible amortization, partially offset by realignment costs as compared to the prior year. Gross margin expansion also included 430 basis points of favorable operational impacts, led by 250 basis points of productivity savings and

Previous wording

SG&A expenses remained flat at $503 million, and decreased to 21.5% of revenue in the second quarter of 2026, as compared to 21.9% of revenue, in the comparable 2025 period. In the second quarter of 2026, SG&A benefited from productivity savings, decreased special charges and realignment cost, which was offset by inflation, unfavorable foreign currency effects and increased spending on strategic investments.

Current wording

SG&A expenses decreased by $16 million to $458 million, or 20.8% of revenue in the third quarter of 2026, as compared to 20.9%, of revenue, in the comparable 2025 period. In the third quarter of 2026, SG&A benefited from productivity savings and favorable foreign currency effects, which was partially offset by inflation.

Previous wording

SG&A expenses increased by $12 million to $975 million, or 21.9% of revenue, in the six months ended June 30, 2026, as compared to $963 million, or 22.0% of revenue, in the six months ended June 30, 2025. The increase in SG&A in the six months ended June 30, 2026 as compared to the prior year was driven by unfavorable currency impacts, inflation and increased spending on strategic investments, partially offset by productivity savings and lower special charges and realignment costs.

Current wording

SG&A expenses decreased by $4 million to $1,433 million, or 21.5% of revenue, in the nine months ended September 30, 2026, as compared to $1,437 million, or 21.6% of revenue, in the nine months ended September 30, 2025. The decrease in SG&A in the nine months ended September 30, 2026 as compared to the prior year was driven by productivity savings, mostly offset by inflation, increased spending on strategic investments, and the net impact of decreased special charges and realignment costs, partially offset by increased acquired intangible asset amortization as compared to the prior year.

Previous wording

R&D expense was $59 million, or 2.5% of revenue, in the second quarter of 2026, as compared to $58 million, or 2.5% of revenue, in the second quarter of 2025, and was $115 million, or 2.6% of revenue, in the six months ended June 30, 2026, as compared to $114 million, or 2.6% of revenue, in the six months ended June 30, 2025. R&D expense was fairly consistent year over year and in line with planned spending in this area.

Current wording

R&D expense was $56 million, or 2.5% of revenue, in the third quarter of 2026, as compared to $52 million, or 2.3% of revenue, in the third quarter of 2025, and was $171 million, or 2.6% of revenue, in the nine months ended September 30, 2026, as compared to $166 million, or 2.5% of revenue, in the nine months ended September 30, 2025. R&D expense was fairly consistent year over year and in line with planned spending in this area.

Previous wording

From time to time, the Company incurs costs related to restructuring actions undertaken to optimize its cost base and improve its strategic positioning. During the three and six months ended June 30, 2026, we incurred restructuring charges of $11 million and $42 million, respectively. During the three and six months ended June 30, 2025, we incurred restructuring charges of $22 million and $39 million, respectively.

Current wording

From time to time, the Company incurs costs related to restructuring actions undertaken to optimize our cost base and improve its strategic positioning. During the three and nine months ended September 30, 2026, we incurred restructuring charges of $8 million and $50 million, respectively. During the three and nine months ended September 30, 2025, we incurred restructuring charges of $23 million and $62 million, respectively.

Previous wording

Actions commenced in 2025 and 2026 were primarily related to simplification actions, informed by 80/20 principles, to streamline the organization and better serve our customers. We currently expect to incur between $50 and $65 million in restructuring costs for the full year.

Current wording

Actions commenced in 2025 and 2026 were primarily related to simplification actions, informed by 80/20 principles to streamline the organization and better serve our customers. We currently expect to incur between $55 and $65 million in restructuring costs for the full year.

Previous wording

Refer to Note 9, "Goodwill and Other Intangible Assets" for more information on intangible asset impairment charges incurred during the three and six months ended June 30, 2026 and June 30, 2025.

Current wording

Refer to Note 9, Goodwill and Other Intangible Assets," for more information on intangible asset impairment charges incurred during the nine months ended September 30, 2026 and 2025.

Previous wording

Net income attributable to Xylem for the second quarter was $263 million (net income margin of 11.3%), an increase of $37 million as compared to net income attributable to Xylem in the prior year of $226 million (net income margin of 9.8%). The increase in net income attributable to Xylem was driven by increased operating income of $85 million and decreased interest expense of $2 million, partially offset by increased income tax expense of $28 million, loss on sale of businesses of $16 million and increased non-operating expense of $6 million.

Current wording

Net income attributable to Xylem for the third quarter was $291 million (net income margin of 13.2%), an increase of $64 million as compared to net income attributable to Xylem in the prior year of $227 million (net income margin of 10.0%). The increase in net income attributable to Xylem was driven by increased operating income of $51 million and decreased loss on sale of business of $32 million and an increase in the net loss attributable to non-controlling interest of $2 million partially offset by increased interest expense of $15 million and increased income tax expense of $6 million.

Previous wording

Adjusted EBITDA was $544 million (adjusted EBITDA margin of 23.3%) during the second quarter of 2026, an increase of $42 million, or 8.4%, when compared to adjusted EBITDA of $502 million (adjusted EBITDA margin of 21.8%) during the comparable quarter in the prior year, an increase to adjusted EBITDA margin of 150 basis points. The increase in adjusted EBITDA margin was primarily driven by the same factors impacting the adjusted operating margin increase.

Current wording

Adjusted EBITDA was $527 million (adjusted EBITDA margin of 23.9%) during the third quarter of 2026, flat as compared to adjusted EBITDA of $527 million (adjusted EBITDA margin of 23.2%) during the comparable quarter in the prior year, an increase to adjusted EBITDA margin of 70 basis points. The increase in adjusted EBITDA margin was primarily driven by the same factors impacting the adjusted operating margin increase.

Previous wording

Net income attributable to Xylem for the six months ended June 30, 2026 was $456 million (net income margin of 10.2%), an increase of $61 million as compared to net income attributable to Xylem in the prior year of $395 million (net income margin of 9.0%). The increase in net income attributable to Xylem was driven by increased operating income of $98 million, decreased interest expense of $6 million and an increase in the net loss attributable to non-controlling interest of $2 million, partially offset by increased income tax expense of $33 million, increased non-operating loss of $10 million and increased loss from sale of businesses of $2 million.

Current wording

Net income attributable to Xylem for the nine months ended September 30, 2026 was $747 million (net income margin of 11.2%), an increase of $125 million as compared to net income attributable to Xylem in the prior year of $622 million (net income margin of 9.4%). The increase in net income attributable to Xylem was driven by increased operating income of $149 million, decreased loss on sale of businesses of $30 million and an increase in the net loss attributable to non-controlling interests of $4 million, partially offset by increased income tax expense of $39 million, decreased non-operating income of $10 million and increased interest expense of $9 million.

Previous wording

Adjusted EBITDA was $981 million (adjusted EBITDA margin of 22.0%) during the six months ended June 30, 2026, an increase of $56 million, or 6.1%, when compared to adjusted EBITDA of $925 million (adjusted EBITDA margin of 21.2%) during the comparable quarter in the prior year, an increase to adjusted EBITDA margin of 80 basis points. The increase in adjusted EBITDA margin was primarily driven by the same factors impacting the adjusted operating margin increase.

Current wording

Adjusted EBITDA was $1,508 million (adjusted EBITDA margin of 22.6%) during the nine months ended September 30, 2026, an increase of $56 million, or 3.9%, when compared to adjusted EBITDA of $1,452 million (adjusted EBITDA margin of 21.9%) during the comparable period in the prior year, an increase to adjusted EBITDA margin of 70 basis points. The increase in adjusted EBITDA margin was primarily driven by the same factors impacting the adjusted operating margin increase.

Previous wording

The table below provides a reconciliation of net income to consolidated EBITDA and adjusted EBITDA:

Current wording

The table below provides a reconciliation of net income attributable to Xylem to consolidated EBITDA and adjusted EBITDA:

Previous wording

Adjusted EBITDA was $314 million (adjusted EBITDA margin of 24.4%) for the six months ended June 30, 2026, an increase of $52 million, or 19.8%, when compared to adjusted EBITDA of $262 million (adjusted EBITDA margin of 21.3%) during the prior year. The increase in adjusted EBITDA margin of 310 basis points was primarily driven by the same factors impacting the increase in adjusted operating margin.

Current wording

Adjusted EBITDA was $169 million (adjusted EBITDA margin of 26.2%) for the third quarter of 2026, an increase of $9 million, or 5.6%, when compared to adjusted EBITDA of $160 million (adjusted EBITDA margin of 24.4%) during the prior year. The increase in adjusted EBITDA margin of 180 basis points was primarily driven by the same factors impacting the increase in adjusted operating margin.

Previous wording

Operating income for our Water Infrastructure segment was $233 million (operating margin of 18.1%) during the six months ended June 30, 2026, an increase of $50 million, or 27.3%, when compared to operating income of $183 million (operating margin of 14.9%) during the prior year, or a total increase in operating margin of 320 basis points. Operating margin expansion included 680 basis points of favorable operating impacts driven by 510 basis points of productivity savings and 70 basis points of favorable price realization. Margin expansion was partially offset by 360 basis points of unfavorable operational impacts, driven by 230 basis points of inflation and 50 basis points of increased spending on strategic investments. Excluding restructuring and realignment costs, amortization of acquired intangibles, and special charges, adjusted operating income was $285 million (adjusted operating margin of 22.2%) for the six months ended June 30, 2026 as compared to adjusted operating income of $234 million (adjusted operating margin of 19.0%) for the six months ended June 30, 2025, an increase of 320 basis points.

Current wording

Operating income for our Water Infrastructure segment was $380 million (operating margin of 19.7%) during the nine months ended September 30, 2026, an increase of $84 million, or 28.4%, when compared to operating income of $296 million (operating margin of 15.7%) during the prior year, or a total increase in operating margin of 400 basis points. Operating margin expansion included net favorable impacts of 140 basis points from decreased special charges, including IEEPA tariff refund benefits and decreased restructuring and realignment costs as compared to the prior year. Operating margin expansion included 660 basis points of favorable operating impacts driven by 510 basis points of productivity savings and 110 basis points of favorable price realization. Margin expansion was partially offset by 400 basis points of unfavorable operational impacts, driven by 180 basis points of inflation, 60 basis points of increased spending on strategic investments and 60 basis points of unfavorable foreign currency impacts. Excluding restructuring and realignment costs, amortization of acquired intangibles, and special charges, adjusted operating income was $439 million (adjusted operating margin of 22.7%) for the nine months ended September 30, 2026 as compared to adjusted operating income of $379 million (adjusted operating margin of 20.1%) for the nine months ended September 30, 2025, an increase of 260 basis points.

Previous wording

Adjusted EBITDA was $194 million (adjusted EBITDA margin of 20.4%) for the six months ended June 30, 2026, an increase of $4 million, or 2.1%, when compared to adjusted EBITDA of $190 million (adjusted EBITDA margin of 20.7%) during the prior year, a decrease of 30 basis points. The decrease in adjusted EBITDA margin was primarily due to the same factors impacting the increase in adjusted operating margin; however, adjusted EBITDA did not benefit from the relative impact of decreased depreciation expense.

Current wording

Adjusted EBITDA was $298 million (adjusted EBITDA margin of 20.7%) for the nine months ended September 30, 2026, an increase of $9 million, or 3.1%, when compared to adjusted EBITDA of $289 million (adjusted EBITDA margin of 21.0%) during the prior year, a decrease of 30 basis points. The decrease in adjusted EBITDA margin was primarily due to the same factors impacting the decrease in adjusted operating margin.

Previous wording

Operating loss for corporate and other decreased $6 million, or 21.4%, during the second quarter of 2026 compared to the prior year period. Operating loss decreased primarily due to lower special charges and spending on and timing of strategic investments. Excluding special charges, adjusted operating loss for corporate and other decreased $1 million, or 4.3%, for the three months ended June 30, 2026, driven by lower spending on and timing of strategic investments.

Current wording

Operating loss for corporate and other decreased $6 million, or 23.1%, during the third quarter of 2026 compared to the prior year period. Operating loss decreased due to lower special charges and restructuring and realignment costs. Excluding special charges and restructuring and realignment costs, adjusted operating loss for corporate and other decreased $4 million, or 18.2%, for the three months ended September 30, 2026, driven by lower spending on strategic investments.

Previous wording

Operating loss for corporate and other decreased $5 million, or 10.2%, during the six months ended June 30, 2026 compared to the prior year period. Operating loss decreased primarily due to lower special charges. Excluding special charges, adjusted operating loss for corporate and other remained flat for the six months ended June 30, 2026.

Current wording

Operating loss for corporate and other decreased $11 million, or 14.7%, during the nine months ended September 30, 2026 compared to the prior year period. Operating loss decreased due to lower special charges, restructuring and realignment costs, and acquired intangible asset amortization. Excluding these items, adjusted operating loss for corporate and other decreased $4 million, or 6.3% for the nine months ended September 30, 2026.

Previous wording

Interest expense was $7 million for the three months ended June 30, 2026, compared to $9 million for the comparable prior year period. The decrease in interest expense was primarily driven by increased interest income generated on cross currency swaps reducing interest expense and lower outstanding equipment financing obligations, partially offset by increased interest expense from the Senior Notes due 2033 and Blue Notes due 2036.

Current wording

Interest expense was $21 million for the three months ended September 30, 2026, compared to $6 million for the comparable prior year period. The increase in interest expense was primarily driven by increased interest expense from the May 2026 Notes, partially offset by increased interest income generated on cross currency swaps reducing interest expense.

Previous wording

Interest expense was $11 million for the six months ended June 30, 2026, compared to $17 million for the comparable prior year period. The decrease in interest expense was primarily driven by the same dynamics impacting the decrease for the quarter.

Current wording

Interest expense was $32 million for the nine months ended September 30, 2026, compared to $23 million for the comparable prior year period. The increase in interest expense was primarily driven by the same dynamics impacting the decrease for the quarter.

Previous wording

See Note 10, “Derivative Financial Instruments” and Note 12, "Credit Facilities and Debt," of our condensed consolidated financial statements for a description of our net investment hedges and credit facilities and long-term debt, respectively.

Current wording

See Note 10, “Derivative Financial Instruments” and Note 12, "Credit Facilities and Debt," of our condensed consolidated financial statements for a description of our net investment hedges and credit facilities and debt, respectively.

Previous wording

The income tax provision for the three months ended June 30, 2026 was $103 million resulting in an effective tax rate of 28.3%, compared to $75 million of expense resulting in an effective tax rate of 25.0% for the same period in 2025. The income tax provision for the six months ended June 30, 2026 was $158 million resulting in an effective tax rate of 26.0%, compared to $125 million of expense resulting in an effective tax rate of 24.2% for the same period in 2025. The effective tax rate for the three and six month period ended June 30, 2026 was higher than the effective tax rate for the same period in 2025, primarily due to the impact of the 2026 international metering business divestiture.

Current wording

The income tax provision for the three months ended September 30, 2026 was $77 million resulting in an effective tax rate of 21.1%, compared to $71 million of expense resulting in an effective tax rate of 23.9% for the same period in 2025. The income tax provision for the nine months ended September 30, 2026 was $235 million resulting in an effective tax rate of 24.2%, compared to $196 million of expense resulting in an effective tax rate of 24.1% for the same period in 2025. The effective lower tax rate for the three months ended September 30, 2026 compared to the same period in 2025 was primarily due to the jurisdictional mix of earnings.

Previous wording

(a)The impact is primarily due to weakening of the Euro, Canadian Dollar and the Chilean Peso against the U.S. Dollar.

Current wording

(a)The impact is primarily due to weakening of the Euro against the U.S. Dollar.