Xylem shares fell 12% to $95.26 on Tuesday, making the water-technology company the worst performer in the S&P 500 for the session, after it reported weaker third-quarter revenue and cut its full-year outlook.
The company, which makes equipment and technology for water treatment, distribution and wastewater management, said delayed projects and increasingly cautious customer spending weighed on demand, even as orders grew.
Third-quarter results miss estimates
Xylem reported third-quarter revenue of $2.2 billion, down 3% from a year earlier and flat on an organic basis, against analyst expectations of $2.28 billion. Adjusted earnings were $1.44 per share, just below the $1.45 consensus, while reported earnings were $1.25 per share.
Orders told a different story, rising 7% on a reported basis and 10% organically to $2.3 billion. Adjusted EBITDA margin rose 70 basis points from a year earlier to 23.9%, helped by productivity savings and price increases that more than offset inflation, lower volumes and product mix.
The biggest weakness was in the company’s water monitoring and measurement business, where revenue fell 16% year over year on a reported basis as customers held off on new investments. By contrast, orders from data centres in its Applied Water business surged more than 200% year over year in the quarter, reflecting demand for equipment used to move, treat and manage water in data-centre construction.
Full-year outlook cut
Xylem lowered its full-year 2026 guidance across the board. It now expects revenue of about $8.95 billion, down about 1% from last year, compared with a previous forecast for 2% growth. Organic revenue is now expected to be flat, against a previous forecast of 2% to 3% growth.
Adjusted earnings guidance was cut to $5.40 to $5.45 per share, from $5.55 to $5.70 previously. The company still expects an adjusted EBITDA margin of about 23.2% for the year, up about 100 basis points from 2025, and a free-cash-flow margin of about 10.2%.
“The resilience we have built, evident this quarter, allows us to make those choices intentionally and from a position of strength,” president and chief executive Matthew Pine said.
Restructuring: two divestitures and three segments
Alongside the results, Xylem announced plans to sell two businesses — Applied Water International and Specialty Flow Control — as part of a broader restructuring aimed at focusing capital on higher-growth markets.
From 1 January 2027, the company will also consolidate from four business segments to three: Treatment and Services, Flow Solutions, and Measurement and Analytics.
Market reaction
The stock’s 12% fall to $95.26 left it down about 30% in 2026, putting it on track for its worst yearly performance on record, according to Dow Jones Market Data cited by Barron’s. Earlier in the session the shares had fallen 4.5% in premarket trading and about 9.7% in the morning session, before closing down 12%.
The reaction reflects a familiar tension in the results: margins held up and orders grew, but revenue conversion disappointed, and the lowered outlook suggests the soft patch in project timing will persist into the fourth quarter. Xylem said fourth-quarter revenue is expected to fall about 5% on a reported basis.
What to watch next
Investors will now look for detail on the planned divestitures — no transaction values were provided — and for evidence that the growing order book converts into revenue in early 2027. The new three-segment structure, and whether measurement demand stabilises, will also be closely watched.
This article reports market and company results only and is not investment advice.
Sources
- Barron’s: https://www.barrons.com/articles/xylem-earnings-stock-price-728f2d11
- StockStory: https://stockstory.org/us/stocks/nyse/xyl/news/why-up-down/why-xylem-xyl-stock-is-nosediving
- TradingView: https://www.tradingview.com/news/tradingview:2ec76f5ee3a51:0-xylem-inc-xyl-cuts-fy26-outlook-plans-two-divestitures/
Frequently asked questions
Why did Xylem shares fall? Revenue of $2.2 billion and adjusted earnings of $1.44 per share both missed analyst expectations, and the company cut its full-year revenue and earnings guidance.
What is the new outlook? Full-year 2026 revenue of about $8.95 billion and adjusted earnings of $5.40 to $5.45 per share, down from previous forecasts of about $9.2 billion in revenue and $5.55 to $5.70 in earnings.
What restructuring did Xylem announce? Plans to divest two businesses and move from four segments to three from 1 January 2027.
