Xylem Inc.

Xylem said Q2 revenue was up 1% year over year, EBITDA margin was 23.3% (up 150 basis points), and record EPS was $1.46, up 16%. Orders were up 41% in WSS, Applied Water data center orders were up over 300%, and backlog ended at $5.3 billion with book-to-bill above 1. Revenue was pressured by a 27% decline in China and walkaway revenue of almost 2%. For the full year, reported revenue is expected to be roughly $9.2 billion, organic revenue growth 2% to 3%, EBITDA margin 23.1% to 23.5%, and EPS $5.55 to $5.70, up from prior EPS guidance of $5.35 to $5.60. For Q3, management expects flat reported revenue, about 3% organic growth, EBITDA margin of 23.5% to 24%, and EPS of $1.42 to $1.47.

Matthew Pine framed the quarter as evidence that Xylem’s strategic shift toward comprehensive water solutions and higher-growth industrial end markets is paying off. He emphasized customer demand for simplicity, resilience, and integrated offerings, and pointed to major wins like the expanded Dow partnership, a 20-year commitment with a large chemical company, and a rising data center opportunity tied to the AI buildout. His tone was constructive and confident, with repeated comments that the company is aligning its portfolio to demand it is already seeing rather than investing ahead of hypothetical demand.

William Grogan highlighted disciplined execution and strong operating leverage, noting backlog of $5.3 billion, book-to-bill above 1, revenue up 1%, EBITDA margin of 23.3%, and EPS of $1.46. He said margin gains came from productivity, price, and mix offsetting inflation and lower volume, while net debt to adjusted EBITDA rose to 0.8x because of opportunistic share repurchases. He also raised full-year EPS guidance to $5.55-$5.70, lifted EBITDA margin guidance to 23.1% to 23.5%, reiterated a low-double-digit free cash flow margin target, and said tariff changes or refunds should not materially affect results.

Analysts pressed management on the MCS outlook, especially the electric metering pushouts and whether the business needs a strong fourth quarter to hit the year. Management said the slowdown is tied to affordability concerns, more cautious utility spending, and election-related hesitation, but pointed to strong water-side orders, a healthy pipeline, and confidence that the second half will improve. Questions also focused on Applied Water and data centers, Water Infrastructure margins and 80/20, China exposure, supply chain risk, and M&A; management said data centers are a fast-growing opportunity, Water Infrastructure margins benefited from simplification and selective bidding, China remains a challenged but rightsized market at about 2% of sales this year, supply chain is manageable, and the M&A pipeline is active with a goal of deploying $1 billion this year.