Xylem shares fall 14.21% after company cuts 2026 revenue outlook
Key Facts
Xylem shares fell 14.21% on Tuesday, October 27, hitting a 52-week low after the company reported third-quarter results and cut its fiscal 2026 revenue outlook. The company forecast revenue of $8.95 billion, compared with analysts’ consensus of $9.19 billion, according to Investing.com, citing Reuters. Adjusted earnings per share were $1.44, one cent below analysts’ estimate of $1.45. The official statement showed reported revenue down 3% year over year, while organic revenue was flat.
Management attributed the weak conversion into revenue to delays in some projects and slower spending decisions by water utilities. On the earnings call, it said, "Some projects moved at a slower pace than expected, and spending decisions by utility customers took longer to materialize." Lower shipment volumes in measurement and control activities also weighed on results, along with the timing of water services and solutions projects. This contrasted with an expanding backlog, which rose 13% year over year to $5.5 billion at the end of the quarter. Backlog increased by about $200 million sequentially during the quarter, while management said the book-to-bill ratio exceeded one.
In the Measurement and Control Solutions segment, orders rose 30% during the quarter, driven by large water and gas meter awards. Deployments for these awards are scheduled to begin in the second half of 2027 and extend into 2028, according to the call transcript. The rollout schedule means new orders will enter shipment phases over subsequent periods, as the company works to convert its backlog into sales. In Applied Water, data center orders rose more than 200% during the quarter. Management said it expects data centers to account for 2% of company revenue on a run-rate basis at the end of 2026.
The company expanded its presence in water projects linked to digital infrastructure and semiconductors. It said it had won an ultrapure water treatment project for a U.S. manufacturing facility owned by a leading semiconductor company. Management also pointed to an expanding relationship with Amazon to provide water treatment solutions for data centers around the world. These projects come as Xylem seeks to direct its business toward markets where it sees growth opportunities, alongside announced plans to exit certain units and reorganize its segments. The chief executive said the company was moving "with urgency to shape Xylem around the markets where our capabilities can deliver the greatest value for customers and the strongest long-term growth."
Management is awaiting greater clarity on the size of the data center opportunity in 2027, with the chief executive saying its estimate would become clearer in February. That timing will test how far order growth translates into measurable revenue, after the quarter’s results showed a growing backlog alongside pressure from project and spending timing. In the near term, the market reaction remained sharp following the outlook update: shares posted their 14.21% decline during the October 27 session and reached a 52-week low. The developments combine strong demand in certain activities with annual revenue expectations below analysts’ consensus.