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Xylem Inc.

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Market Data

Financials

XBRL · SEC EDGAR

2009–2025(17yr)

Revenue

Net Income

Free CF

Metric	FY 2009	FY 2010	FY 2011	FY 2012	FY 2013	FY 2014	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024	FY 2025Latest	YoY
Revenue	$2.8B	$3.2B	$3.8B	$3.8B	$3.8B	$3.9B	$3.7B	$3.8B	$4.7B	$5.2B	$5.2B	$4.9B	$5.2B	$5.5B	$7.4B	$8.6B	$9.0B	+5.5%
Gross Profit	$1.0B	$1.2B	$1.5B	$1.5B	$1.5B	$1.5B	$1.4B	$1.5B	$1.9B	$2.0B	$2.0B	$1.8B	$2.0B	$2.1B	$2.7B	$3.2B	$3.5B	+8.2%
Gross Margin	36.4%	37.9%	38.4%	39.6%	39.1%	38.6%	38.4%	38.7%	39.3%	38.9%	39.0%	37.5%	38.0%	37.7%	36.9%	37.5%	38.5%	+0.9pp
Operating Income	$276.0M	$388.0M	$395.0M	$443.0M	$363.0M	$463.0M	$449.0M	$406.0M	$556.0M	$654.0M	$486.0M	$367.0M	$585.0M	$622.0M	$652.0M	$1.0B	$1.2B	+21.2%
Operating Margin	9.7%	12.1%	10.4%	11.7%	9.5%	11.8%	12.3%	10.8%	11.8%	12.6%	9.3%	7.5%	11.3%	11.3%	8.9%	11.8%	13.5%	+1.8pp
Net Income	$263.0M	$329.0M	$279.0M	$297.0M	$228.0M	$337.0M	$340.0M	$260.0M	$331.0M	$549.0M	$401.0M	$254.0M	$427.0M	$355.0M	$609.0M	$890.0M	$957.0M	+7.5%
Net Margin	9.2%	10.3%	7.3%	7.8%	5.9%	8.6%	9.3%	6.9%	7.0%	10.5%	7.6%	5.2%	8.2%	6.4%	8.3%	10.4%	10.6%	+0.2pp
Free Cash Flow	$308.0M	$301.0M	$323.0M	$284.0M	$198.0M	$297.0M	$347.0M	$373.0M	$516.0M	$349.0M	$613.0M	$641.0M	$330.0M	$388.0M	$566.0M	$942.0M	$910.0M	-3.4%
FCF Margin	10.8%	9.4%	8.5%	7.5%	5.2%	7.6%	9.5%	9.9%	11.0%	6.7%	11.7%	13.1%	6.4%	7.0%	7.7%	11.0%	10.1%	-0.9pp
EPS (Diluted)	$1.42	$1.78	$1.50	$1.59	$1.22	$1.83	$1.87	$1.45	$1.83	$3.03	$2.21	$1.40	$2.35	$1.96	$2.79	$3.65	$3.92	+7.4%

Total Debt$2.0B

Cash & Equiv.$1.5B

Net Debt$475.0M

4 min read

1. THE BIG PICTURE

Xylem is effectively a software company currently trapped in a hardware company’s cost structure. While it leverages 100-year-old brands and a massive global installed base to secure recurring service revenue, its financial performance remains tethered to the capital-intensive realities of manufacturing and global logistics. The central tension for Xylem is whether its digital platforms, like Xylem Vue, can move the needle on profitability before macroeconomic headwinds and supply chain vulnerabilities erode its industrial margins.

2. WHERE THE RISKS HIT HARDEST

Xylem’s "substantial global footprint" (10-K Item 1) is its greatest strength and its most acute vulnerability. This 150-country reach is threatened by geopolitical instability because 42% of revenue is generated outside the U.S., leaving cash flows susceptible to "trade barriers, tariffs, and foreign exchange volatility" in regions like the Middle East and the China-Taiwan corridor (Risks).

Furthermore, Xylem’s "application expertise" and "rapid response mobile services" (10-K Item 1) are directly threatened by its "complex, multi-tiered global supply chain." Because Xylem depends on single-source suppliers for motors and semiconductors, any disruption prevents the execution of its backlog, turning a service-based competitive moat into an operational bottleneck (Risks).

3. WHAT THE NUMBERS SAY TOGETHER

The financial data reveals a disconnect between management’s "exceptionally strong" narrative and the underlying efficiency of the business (8-K). While Xylem maintains a respectable gross margin of 38.1%, it struggles to convert those sales into cash as effectively as its rivals. Its Free Cash Flow (FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders) margin of 7.9% ranks 5th out of 6 peers, trailing significantly behind Veralto’s 17.3% (Peer Benchmarking).

The growth trajectory is also showing signs of a structural slowdown. While TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter revenue growth was 5.5%, management’s full-year 2026 guidance points to a much tighter range of 1% to 3% on a reported basis (8-K). This divergence suggests that the "broad-based demand" cited by the CEO may be cooling, or that Xylem Inc.’s "80/20 principle" strategy of streamlining operations is intentionally sacrificing lower-margin volume for earnings quality (8-K). With short interest at a low 2.4% of the float, the market appears to be giving Xylem the benefit of the doubt on this transformation, despite the decelerating top line.

4. IS IT WORTH IT AT THIS PRICE?

At a Forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations of 20.3x, Xylem trades at a modest 9% discount to the peer median of 22.3x (Peer Benchmarking). At this multiple, the market is pricing in approximately 6.0% long-term growth (CAPM analysis).

This valuation appears demanding when measured against Xylem's fundamentals. Management’s 2026 organic growth guidance of 2% to 4% falls short of the market’s 6.0% implied expectation (8-K). If growth were to settle at a 5.0% "base case," the justified multiple would drop to 16.9x—a roughly 17% downside from current levels (CAPM analysis). Xylem’s discount to peers is likely a reflection of its inferior FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin (7.9% vs. the peer leader's 17.3%) and its lack of share buybacks (0.0% yield) compared to peers like Ingersoll Rand (2.2%) (Peer Benchmarking). Investors are paying for the potential of the digital transformation, but the current price leaves little room for the "operational transformation risks" cited in Xylem Inc.'s filings.

5. WHAT WOULD CHANGE THIS VIEW?

Constructive if the FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin reaches the guided 10.2% to 11% range for 2026, which would prove the "Xylem Management System" is successfully extracting more cash from the existing hardware business (8-K).
Cautious if organic growth dips below the 2% floor of 2026 guidance, suggesting that "geopolitical instability" or "supply chain vulnerability" is actively cannibalizing Xylem Inc.'s market share (8-K, Risks).

6. BOTTOM LINE

Structural Advantage: A century-old installed base and a "FlexNet" communication network that create high customer switching costs and a steady stream of recurring service revenue.

Bottom Line: Xylem is a high-quality industrial utility play that is currently priced for tech-level growth that its own conservative 2026 guidance does not yet support.

Source: Synthesis · LLM Analysis

4 min read

1. Top 5 Material Risks

Macroeconomic and Geopolitical Sensitivity: Xylem Inc. generates 42% of its revenue outside the U.S., making its financial condition and cash flows highly susceptible to trade barriers, tariffs, foreign exchange volatility, and armed conflicts in regions such as the Middle East, Russia, Ukraine, and the China-Taiwan corridor.
Cybersecurity and Data Integrity: Xylem Inc. relies on IT and operational technology for manufacturing and customer-facing services; a breach or failure could result in product recalls, regulatory fines, and the loss of intellectual property or proprietary financial data.
Supply Chain Vulnerability: Xylem Inc. depends on sole- or single-source suppliers for critical components like motors, semiconductors, and rare earth minerals; disruptions from labor shortages, logistics challenges, or geopolitical tensions can prevent the execution of its backlog.
Operational Transformation Risks: Xylem Inc. is currently executing a multi-year business simplification and restructuring plan; failure to realize anticipated cost savings or successfully integrate new enterprise software could lead to operational inefficiencies and reduced profitability.
Environmental and Hazardous Material Liability: As a manufacturer involved in water treatment, Xylem Inc. faces strict, joint, and several liability under laws like CERCLA and RCRA for the handling and disposal of hazardous materials, which could result in significant remediation costs exceeding insurance coverage.

2. Company-Specific Risks

Radio Spectrum Regulation: A significant portion of the Measurement and Control Solutions segment relies on FCC-licensed spectrum in the 900MHz range; failure to renew these licenses or changes in frequency regulations could preclude the sale of smart metering products.
Performance Guarantee Obligations: Xylem Inc. provides performance guarantees for water treatment equipment; failure to meet these standards requires Xylem Inc. to fund engineering, parts replacement, or customer reimbursements, directly impacting earnings.
Connected Product Security: Xylem Inc.’s digitally-enabled products, including pumps and controllers, are susceptible to cybersecurity threats that could impact critical infrastructure applications, potentially triggering legal claims or regulatory penalties.
Acquisition Integration: With $9 billion in goodwill and indefinite-lived intangible assets as of December 31, 2025, Xylem Inc. faces the risk that acquired businesses fail to meet expected returns, necessitating material impairment charges.

3. Regulatory/Legal Risks

Anti-Corruption Compliance: Xylem Inc. operates in jurisdictions recognized for high levels of commercial corruption; violations of the FCPA or the U.K. Bribery Act could lead to criminal penalties and the curtailment of operations.
Data Privacy Laws: Xylem Inc. is subject to evolving global privacy frameworks, including the EU’s Data Act, the EU’s AI Act, GDPR, and China’s PIPL, which impose strict requirements on cross-border data movement and carry significant fines for non-compliance.
Environmental Regulatory Exposure: Operations are subject to the Clean Water Act and the Safe Drinking Water Act; failure to comply with these standards or manage emerging contaminants like PFAS could result in enforcement actions and facility shutdowns.
Tax Litigation: Xylem Inc. is currently appealing a tax assessment issued by the Swedish tax authority regarding a 2013 reorganization of its European business, highlighting the risk that tax examinations can lead to unfavorable financial outcomes.

4. Financial Impact Map

Macroeconomic and Geopolitical Instability → Net Sales → 42% of revenue is derived from non-U.S. markets, exposing top-line growth to currency and trade volatility. Cybersecurity Incidents → Operating Expenses → Increased prevention, response, and remediation costs, alongside potential regulatory fines and penalties. Supply Chain Disruptions → Cost of Goods Sold → Increased logistics, energy, and raw material costs, and potential inability to execute backlog. Business Transformation/Restructuring → Operating Income → Potential for unrealized cost savings and inefficiencies during transitional periods. Goodwill and Intangible Asset Impairment → Net Carrying Value → $9 billion in assets as of December 31, 2025, are subject to annual impairment testing based on industry trends and market capitalization.

Source: 10-K Item 1A · LLM Analysis

Recent Filings

Form	Filed	Period
10-K	Feb 2026	Dec 2025
8-K	Feb 2026	—
10-Q	Oct 2025	Sep 2025
14A	Mar 2025	—