AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · — · Integrated offerings and outsourced operations suggest potential switching costs, but neither replacement difficulty nor superior competitive economics is established. The moat position remains uncertain.
durability · — · Multi-year customer relationships are possible, but cancellation rights and absent renewal or competitive-history evidence prevent establishing durable protection.
customer dependency · — · Operationally important water services do not establish dependence on Xylem specifically. Supplier replacement costs and customer alternatives are undisclosed.
erosion resilience · — · Pricing and demand achievements support current performance, but cannot establish resilience of an unidentified structural advantage. Competitive risk disclosures describe possibilities rather than realized erosion.
Pricing power50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 3/4 · Reported positive price realization spans 2023, 2024, 2025 and second-quarter 2026. Consolidated gross-margin contributions were 140 basis points in 2025 and 180 basis points in second-quarter 2026. This demonstrates strong pricing execution, without proving exceptional customer price tolerance or full inflation recovery.
retention · 2/4 · Indirect operating evidence is mixed: June 2026 backlog grew 5.9% year over year and there were no significant quarterly cancellations, but some segment backlogs declined and customer contracts remain cancellable. These indicators support continuing demand, without establishing repeat-customer retention rates.
margin resilience · 2/4 · Recent productivity and pricing supported higher gross profit and operating income despite inflation. However, inflation exceeded the consolidated gross-margin pricing contribution in both 2025 and second-quarter 2026, and consolidated gross margin fell in 2023. Tariff recoveries also benefited 2026 costs. Resilience is demonstrated but has mixed drivers and cannot be attributed to pricing alone.
contractual freedom · 1/4 · Disclosed customer cancellation and rescheduling rights, performance guarantees, and transaction-price adjustments for discounts, penalties and retainage indicate constrained terms. These support a weak assessment of demonstrated contractual freedom; repricing rights and escalation clauses remain undisclosed.
Predictability96
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 11.22
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.80
Financial strength87
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 83.80
- netDebtEbitGrade
- 92.43
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 70.00
- Debt / FCF (x)
- 2.13
- Net debt / operating income (x)
- 0.38
- Interest coverage (x)
- 42.17
- Current ratio (x)
- 1.63
Capital allocation59
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 9.13
- 3-year average dilution (%)
- 10.84
- 3-year average SBC / revenue (%)
- 0.69
- cashConversionGrade
- 98.45
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half 2026 operating cash flow increased to $398 million against $179 million of capital expenditures. However, $1.243 billion of repurchases and $207 million of dividends substantially exceeded internally generated cash after capital spending, alongside $990 million of net long-term debt issuance. Reported early synergy delivery is favorable, while the $37 million cumulative metering disposal loss is adverse. Outcomes are mixed; repurchase value creation is unestablished.
incentive alignment · 3/4 · Actual awards use three-year performance conditions including relative TSR, EBITDA, revenue and EPS, and the disclosures record achieved adjustments and vested awards. Anti-hedging and pledging restrictions reinforce exposure to shareholder outcomes. These support strong demonstrated incentive design, with actual executive ownership and comprehensive payout calibration unestablished.
execution · 3/4 · Reported achievement of the $140 million Evoqua cost-synergy run rate one year early is supported by actual productivity contributions, higher first-half 2026 operating income and improved operating cash flow. This is strong execution evidence, partly assessed indirectly from operating results. The first-quarter organic revenue decline and disposal loss temper the assessment.
governance · 3/4 · Disclosures establish an independent chair, 89% independent directors, fully independent committees, annual elections, 100% 2025 meeting attendance and meaningful shareholder rights. The auditor's effective internal-control opinion adds demonstrated reporting oversight. These support strong governance without establishing exceptional durability or guaranteeing future oversight quality.
Evidence
The Measurement and Control Solutions segment's major products include smart metering, networked communications, measurement and control technologies, critical infrastructure technologies, software and services including cloud-based analytics, and remote monitoring and data management.
Segment information / Measurement and Control Solutions offerings · Filed 25/02/2026
The Water Solutions and Services segment provides tailored services and solutions, in collaboration with customers and backed by life‑cycle services, including on‑demand water, outsourced water, recycle/reuse, specialty dewatering and emergency response service alternatives to improve operational reliability, performance and environmental compliance.
Segment information / tailored solutions and life-cycle services · Filed 25/02/2026
Key offerings within this segment also include equipment systems for industrial needs (influent water, boiler feed water, ultrahigh purity, process water, wastewater treatment, and recycle/reuse), full-scale outsourcing of operations and maintenance, and municipal services, including odor and corrosion control services, as well as leak detection, condition assessment and asset management and pressure monitoring solutions.
Segment information / outsourced operations and maintenance · Filed 25/02/2026
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.
MD&A / June 2026 backlog and year-over-year comparison · Filed 28/07/2026
There were no significant order cancellations during the quarter.
MD&A / second-quarter order cancellations · Filed 28/07/2026
Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts.
MD&A / customer contract cancellation and rescheduling rights · Filed 28/07/2026
Our competitive position and future growth depend on a number of factors, including our ability to: (i) enhance and differentiate our offerings, business models and customer experience through efficiency, security, and the addition of innovative features or technologies, such as AI, that address emerging regulations and trends, meet customers’ needs, and prevent commoditization; (ii) defend our market share against an ever-expanding number of competitors, including new or non-traditional competitors from outside our industry, such as large technology firms; (iii) invest in and maintain our network of channel partners; (iv) attract, develop, retain and train talent with commercial, innovation, digital and technical expertise, and understanding of customers’ needs to develop and commercialize new technologies; (v) leverage and expand our ecosystem of innovation partners, including universities, venture capital, start-ups, and other technology innovators; (vi) invest in manufacturing, research and development, engineering, sales, marketing, systems modernization, AI, and digitization of customer solution and support tools; (vii) win and execute large contracts on schedule and on budget; and (viii) optimize our supply chain and manufacturing to enable predictable and efficient delivery to customers, and to compete for business subject to procurement laws, regulations and government policies, and regulations governing sustainability and domestic content in various jurisdictions.
Risk factors / differentiation, competition and investment requirements · Filed 25/02/2026
Many customers require performance guarantees for effluent produced by our water treatment equipment and services.
Risk factors / customer performance guarantees · Filed 25/02/2026
driven by strong price realization, increased sales volume bolstered by backlog execution, and higher rental revenue.
MD&A / 2023 utility demand, price realization and backlog execution · Filed 28/02/2024
The transport application had $79 million of organic revenue growth, driven by strength in all of our major geographic regions, led by increased sales volume and price realization in the U.S.
MD&A / 2024 transport organic growth and price realization · Filed 03/03/2025
The gross margin increase for the year included favorable operational impacts of 370 basis points, consisting of 230 basis points of productivity savings and 140 basis points of price realization.
MD&A / 2025 consolidated gross-margin productivity and pricing bridge · Filed 25/02/2026
These impacts were partially offset by 290 basis points of unfavorable operating impacts, driven by 190 basis points of inflation and 60 basis points of unfavorable mix.
MD&A / 2025 consolidated gross-margin inflation and mix bridge · Filed 25/02/2026
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.
MD&A / second-quarter 2026 consolidated gross-margin operating improvements · Filed 28/07/2026
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.
MD&A / second-quarter 2026 consolidated gross-margin inflation and volume offsets · Filed 28/07/2026
AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (in millions, except per share data) Three Months Six Months For the periods ended June 30, 2026 2025 2026 2025 Revenue from products $ 1,953 $ 1,911 $ 3,710 $ 3,620 Revenue from services 383 390 751 750 Revenue 2,336 2,301 4,461 4,370 Cost of revenue from products 1,093 1,129 2,150 2,170 Cost of revenue from services 280 280 545 540 Cost of revenue 1,373 1,409 2,695 2,710 Gross profit 963 892 1,766 1,660 Selling, general and administrative expenses 503 503 975 963 Research and development expenses 59 58 115 114 Restructuring and asset impairment charges 11 26 42 47 Operating income 390 305 634 536 Interest expense (7) (9) (11) (17) Other non-operating (expense)/income, net (3) 3 (3) 7 Loss on sale of businesses (16) — (12) (10) Income before taxes 364 299 608 516 Income tax expense (103) (75) (158) (125) Net income $ 261 $ 224 $ 450 $ 391 Net loss attributable to non-controlling interests 2 2 6 4 Net income attributable to Xylem $ 263 $ 226 $ 456 $ 395 Earnings per share: Basic $ 1.11 $ 0.93 $ 1.90 $ 1.62 Diluted $ 1.11 $ 0.93 $ 1.90 $ 1.62 Weighted average number of shares: Basic 236.3 243.4 239.5 243.3 Diluted 236.6 243.9 240.0 243.8 See accompanying notes to condensed consolidated financial statements.
Unaudited consolidated income statements / first-half and second-quarter 2026 results · Filed 28/07/2026
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) For the six months ended June 30, 2026 2025 Operating Activities Net income $ 450 $ 395 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 130 137 Amortization 150 153 Share-based compensation 25 25 Restructuring and asset impairment charges 42 47 Loss from sale of businesses 12 10 Other, net (27) 6 Payments for restructuring (49) (36) Changes in assets and liabilities (net of acquisitions): Changes in receivables (142) (103) Changes in inventories (41) (27) Changes in accrued expenses (13) (64) Changes in accrued and deferred taxes 1 (50) Changes in long term receivables (104) (70) Other, net (36) (85) Net Cash – Operating activities 398 338 Investing Activities Capital expenditures (179) (169) Acquisitions of businesses, net of cash acquired (1) (7) Proceeds from sale of businesses, net of cash disposed 59 50 Proceeds from the sale of property, plant and equipment 11 5 Cash paid for investments (3) (3) Cash paid for asset acquisition (2) (37) Cash received from cross-currency swaps 17 21 Net Cash – Investing activities (98) (140) Financing Activities Short-term debt issued, net — 4 Long-term debt issued, net 990 — Long-term debt repaid (6) (28) Repurchase of common stock (1,243) (13) Proceeds from exercise of employee stock options 2 8 Dividends paid (207) (196) Other, net (20) (19) Net Cash – Financing activities (484) (244) Effect of exchange rate changes on cash (31) 84 Increase in cash classified within assets held for sale — 11 Decrease in cash classified within assets held for sale 12 — Changes in cash classified within assets held for sale 12 11 Net change in cash and cash equivalents (203) 49 Cash and cash equivalents at beginning of year 1,479 1,121 Cash and cash equivalents at end of period $ 1,276 $ 1,170 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 29 $ 32 Income taxes (net of refunds received) $ 157 $ 175 See accompanying notes to condensed consolidated financial statements.
Unaudited consolidated cash-flow statements / spending, financing and shareholder distributions · Filed 28/07/2026
As a result of the sale, the Company recognized a cumulative loss of $37 million, of which $23 million was recognized during the year ended December 31, 2025, and the remaining $14 million was recognized during 2026.
Acquisitions and divestitures / international metering cumulative disposal loss · Filed 28/07/2026
SPOTLIGHT: 2025 Performance Highlights ● Record orders over $8.9B (reported) supporting a $4.6B backlog ● Drove above market revenue growth and record adjusted EBITDA margin* through price and productivity ● Exited 2025 at full $140M Evoqua cost synergy run rate, 1 year ahead of our 3-year target ● Accelerated margin expansion through targeted efforts to simplify our businesses and take complexity out of our processes and structure, all to streamline our organization, strengthen our competitive positioning and enable us to better serve our customers ● Transformed our operating model, driving significant structural cost savings through simplification, 80/20 and strategic categorization of divisions ● Advanced our systems modernization journey to increase operational productivity, which will further bolster margin expansion and position us for more profitable growth · Returned $391M in capital to shareholders with our 2025 dividends · Advanced our high-impact culture ● Announced the signing of a definitive agreement to divest our international metering business, expected to close Q1 2026, to drive higher profitability and greater focus on our North America metering business ● Achieved an Injury Frequency rate of 0.43, a >17% improvement YOY ● Achieved the Carbon Disclosure Project A-list for Climate Change, reinforcing our leadership in environmental stewardship and translating meaningful progress into best-in-class reporting ● Impacted our communities with 81% of our ~22,000 colleagues globally volunteering ~255,000 hours for Xylem Watermark, our corporate social responsibility program Xylem 2026 Proxy Statement | 2 Table of Contents STRATEGY Our overarching strategy is to help customers solve the world’s greatest water challenges with innovative products, services and solutions to deliver sustainable economic, social and environmental benefits.
Proxy performance highlights / reported synergy achievement and transformation outcomes · Filed 30/03/2026
The fair value of the restricted share unit awards is determined using the closing price of our common stock on date of grant: Share units (in thousands) Weighted Average Grant Date Fair Value / Share Outstanding at January 1, 2026 506 $ 123.27 Granted 289 127.60 Vested (239) $ 118.75 Forfeited (20) 129.37 Other (4) 123.24 Outstanding at June 30, 2026 532 $ 127.41 Performance Share Unit Grants Performance share units awarded under the long-term incentive plan vest based upon performance by the Company over a three-year period against targets approved by the Leadership Development & Compensation Committee of the Company's Board of Directors prior to the grant date.
Share-based compensation / restricted awards and three-year performance vesting · Filed 28/07/2026
The performance share units were each awarded at a target of 100% with actual payout for each type of grant contingent upon the achievement of performance targets as follows: •EBITDA performance share units — a third-year adjusted EBITDA performance target •TSR performance share units — a relative TSR performance target •Revenue performance share units — a pre-set third-year revenue target •EPS performance share units — a cumulative three-year EPS performance target The calculated compensation cost for EBITDA, Revenue and EPS performance share units is adjusted based on an estimate of awards ultimately expected to vest and our assessment of the probable outcome of the performance condition.
Share-based compensation / EBITDA, relative TSR, revenue and EPS award conditions · Filed 28/07/2026
The following is a summary of our adjusted EBITDA grants for the six months ended June 30, 2026: Share units (in thousands) Weighted Average Grant Date Fair Value / Share Outstanding at January 1, 2026 47 $ 113.89 Adjustment for Performance Condition Achieved (a) 18 100.50 Vested (42) 100.50 Forfeited (2) 125.86 Outstanding at June 30, 2026 21 $ 127.94 (a) Represents an increase in the number of original EBITDA performance share units awarded based on the final market condition achievement at the end of the performance period of such awards.
Share-based compensation / achieved performance adjustment and vested EBITDA awards · Filed 28/07/2026
Prohibition on Pledging, Hedging and Shorting: Insider Trading Policy prohibits employees and directors from pledging Xylem securities, purchasing financial instruments, or otherwise engaging in transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of Xylem securities
Executive compensation policies / prohibition on pledging, hedging and shorting · Filed 30/03/2026
This year’s updates include: · Implementation of a director skills matrix (see page 9) · Consolidated oversight of all cybersecurity and product safety matters with the Board, with the Audit Committee retaining oversight of cybersecurity disclosures in regulatory filings · Engaged a third-party to facilitate the 2025 annual Board assessment Board Matters · All current directors are independent except our Chief Executive Officer (89%) · Independent Board Chair · Overall 2025 Board and committee meeting attendance of 100% · All directors elected annually · Robust director nominee identification and selection process · Board with a mix of experience, skills, qualifications, attributes, perspectives and backgrounds · Balanced mix of new and more experienced directors, with ~33% of the director nominees’ tenure >6 years and ~66% <6 years · 3 fully independent Board committees · Directors may not stand for re-election after age 72 · Board and committee oversight of strategy, risk, cybersecurity, and human capital matters · Board oversight of our sustainability approach, including regular management updates to the Nominating & Governance Committee · Regular executive sessions of only the independent directors of the Board and each committee · Annual Board and committee self-assessments, with facilitation by a third-party advisor for the 2025 assessments · Comprehensive orientation program for new directors Shareholder Matters · Majority voting with a director resignation policy for directors in uncontested elections · Shareholder proxy access right · Regular engagement with shareholders ● Annual “Say-on-Pay” · Shareholders have the right to call special meetings · One class of stock · No poison pill We value the views of our shareholders and believe that fostering positive relationships with our shareholders is critical to our long-term success.
Corporate governance / independence, attendance and shareholder rights · Filed 30/03/2026
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Independent auditor report / effective internal control opinion at December 31, 2025 · Filed 25/02/2026
Organic revenue decreased $9 million, or 0.4% for the three months ended March 31, 2026.
MD&A / first-quarter 2026 organic revenue decline · Filed 28/04/2026
Gross margin as a percentage of consolidated revenue decreased 80 basis points to 36.9% in 2023 as compared to 37.7% in 2022.
MD&A / 2023 consolidated gross-margin decline · Filed 28/02/2024
During the second quarter of 2026, the Company received $4 million of refunds and also recognized a $12 million receivable within prepaid and other current assets in the condensed consolidated balance sheets, with a corresponding reduction to cost of revenue from products.
Accounting disclosures / tariff refunds and receivable reducing product cost of revenue · Filed 28/07/2026
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.
MD&A / segment backlog declines as revenue outpaced orders and contract wins · Filed 28/07/2026
The transaction price is adjusted for our estimate of variable consideration which may include a right of return, discounts, rebates, penalties, retainage, and warranties.
Revenue recognition / discounts, rebates, penalties, retainage and warranties · Filed 25/02/2026
