Financial Analysis

"Commitments and Contingencies Legal Proceedings From time to time, we are involved in legal and regulatory proceedings that are incidental to the operation of our businesses (or the business operations of previously owned entities). These proceedings may seek remedies relating to matters including environmental, tax, intellectual property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pension, government investigations or contract issues and commercial or contractual disputes. See Note 6, ""Income Taxes,"" of our condensed consolidated financial statements for a description of a pending tax litigation matter. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claims, we do not believe it is reasonably possible that any asserted or unasserted legal claims or proceedings, individually or in aggregate, will have a material effect on the Company's financial position, results of operations, or cash flows. We have estimated and accrued $3 million and $4 million as of June 30, 2026 and December 31, 2025, respectively, for these general legal matters. Guarantees We obtain certain stand-by letters of credit, bank guarantees, surety bonds and insurance letters of credit from third-party financial institutions in the ordinary course of business when required under contracts or to satisfy insurance-r …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"Credit Facilities and Debt Total debt outstanding is summarized as follows: (in millions) June 30, 2026 December 31, 2025 3.250% Senior Notes due 2026 (a) $ 500 $ 500 1.950% Senior Notes due 2028 (a) 500 500 2.250% Senior Notes due 2031 (a) 500 500 5.200% Senior Notes due 2033 (a) 500 5.450% Senior Notes due 2036 (a) 500 4.375% Senior Notes due 2046 (a) 400 400 Equipment Financing due 2026 to 2032 23 27 Other 24 27 Debt issuance costs and unamortized discount (b) (21) (12) Total debt 2,926 1,942 Less: short-term borrowings and current maturities of long-term debt 531 534 Total long-term debt $ 2,395 $ 1,408 (a) The fair value of our Senior Notes was determined using quoted prices in active markets for identical securities, which are considered Level 1 inputs. The fair value of our Senior Notes due 2026 was $499 million and $497 million as of June 30, 2026 and December 31, 2025, respectively. The fair value of our Senior Notes due 2028 was $481 million and $480 million as of June 30, 2026 and December 31, 2025, respectively. The fair value of our Senior Notes due 2031 was $452 million and $454 million as of June 30, 2026 and December 31, 2025, respectively. The fair value of our Senior Notes due 2033 was $509 million as of June 30, 2026. The fair value of our Senior Notes due 2036 was $512 million as of June 30, 2026. The fair value of our Senior Notes due 2046 was $336 million and $340 million as of June 30, 2026 and December 31, 2025, respectively. (b) The debt issuance cos …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"The following table illustrates the sources of revenue: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Revenue from contracts with customers $ 2,262 $ 2,227 $ 4,321 $ 4,229 Lease Revenue 74 74 140 141 Total $ 2,336 $ 2,301 $ 4,461 $ 4,370 The following table reflects revenue from contracts with customers by application. Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Water Infrastructure Transport $ 421 $ 385 $ 789 $ 730 Treatment 262 265 497 501 Applied Water Building Solutions 286 270 548 517 Industrial Water 215 213 401 401 Measurement and Control Solutions Smart Metering and Other 415 449 832 853 Analytics 93 91 184 177 Water Solutions and Services Capital and Other 314 299 564 553 Services 256 255 506 497 Total $ 2,262 $ 2,227 $ 4,321 $ 4,229 The following table reflects revenue from contracts with customers by geographical region. Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Water Infrastructure United States $ 275 $ 238 $ 513 $ 448 Western Europe 245 239 460 450 Emerging Markets (a) 107 120 207 235 Other 56 53 106 98 Applied Water United States 286 266 543 505 Western Europe 102 107 200 205 Emerging Markets (a) 80 77 142 142 Other 33 33 64 66 Measurement and Control Solutions United States 355 360 698 682 Western Europe 74 89 165 166 Emerging Markets (a) 38 52 77 97 Other 41 39 76 85 Water Solutions and Services United States 372 406 737 782 West …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

"Share-Based Compensation Plans Share-based compensation expense was $12 million and $25 million during the three and six months ended June 30, 2026, respectively, and $13 million and $25 million during the three and six months ended June 30, 2025, respectively. The unrecognized compensation expense related to our stock options, restricted stock units and performance share units was $16 million, $56 million and $28 million, respectively, at June 30, 2026 and is expected to be recognized over a weighted average period of 2.2, 2.2 and 2.0 years, respectively. The amount of cash received from the exercise of stock options was $2 million and $8 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, there were 4.0 million shares of common stock available for future awards. Stock Option Grants The following is a summary of the changes in outstanding stock options for the six months ended June 30, 2026 : Share units (in thousands) Weighted Average Exercise Price / Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions) Outstanding at January 1, 2026 1,142 $ 95.75 6.4 $ 46 Granted 287 128.24 Exercised (31) 77.93 Forfeited and expired (23) 128.77 Other (1) 129.67 Outstanding at June 30, 2026 1,374 $ 102.37 6.6 $ 28 Options exercisable at June 30, 2026 869 $ 86.95 5.0 $ 28 Vested and expected to vest as of June 30, 2026 1,307 $ 101.02 6.4 $ 28 The total intrinsic value of options exercised (which is the amou …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Goodwill and Other Intangible Assets Goodwill Changes in the carrying value of goodwill by reportable segment for the six months ended June 30, 2026 are as follows: (in millions) Water Infrastructure Applied Water Measurement and Control Solutions Water Solutions and Services Total Balance as of January 1, 2026 $ 2,264 $ 905 $ 2,270 $ 2,893 $ 8,332 Activity in 2026 Acquisitions (2) (2) Divestitures (1) (1) (2) Reclassification to assets held for sale (2) (2) Foreign currency and other (22) (6) (36) (6) (70) Balance as of June 30, 2026 $ 2,241 $ 897 $ 2,233 $ 2,885 $ 8,256 Other Intangible Assets Information regarding our other intangible assets is as follows: June 30, 2026 December 31, 2025 (in millions) Carrying Amount Accumulated Amortization Net Intangibles Carrying Amount Accumulated Amortization Net Intangibles Customer and distributor relationships $ 2,176 $ (747) $ 1,429 $ 2,180 $ (688) $ 1,492 Proprietary technology and patents 423 (207) 216 430 (185) 245 Trademarks 182 (134) 48 183 (126) 57 Software (a) 631 (429) 202 644 (431) 213 Other 151 (63) 88 153 (56) 97 Indefinite-lived intangibles 167 167 168 168 Other Intangibles $ 3,730 $ (1,580) $ 2,150 $ 3,758 $ (1,486) $ 2,272 (a) Includes capitalized software developed as a product or service offered directly to external customers. As of June 30, 2026 and December 31, 2025, we had net capitalized software used in sales and services to external customers of $166 million and $175 million, respectively. Amortization expens …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

"Income Taxes Our quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items within the periods presented. The comparison of our effective tax rate between periods is significantly impacted by the level and mix of earnings and losses by tax jurisdiction and discrete items. The income tax provision for the three months ended June 30, 2026 was $103 million resulting in an effective tax rate of 28.3%, compared to a $75 million expense resulting in an effective tax rate of 25.0% for the same period in 2025. The income tax provision for the six months ended June 30, 2026 was $158 million resulting in an effective tax rate of 26.0%, compared to a $125 million expense resulting in an effective tax rate of 24.2% for the same period in 2025. The effective tax rate for the three and six month periods ended June 30, 2026 was higher than the U.S. federal statutory rate primarily due to earnings mix and the impact of the 2026 international metering business divestiture. Unrecognized Tax Benefits During 2019, Xylems Swedish subsidiary received a tax assessment from the Swedish Tax Agency (the ""STA"") for the 2013 tax year related to the tax treatment of an intercompany transfer of certain intellectual property that was made in connection with a reorganization of our European businesses. Xylem filed an appeal with the Administrative Court of Vaxjo, which rendered a decision adverse to Xylem in June 2022 for SEK837 million (app …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

"Pronouncements Not Yet Adopted In September 2025, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""ASU"") No. 2025-06, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU amends the capitalization criteria for internal-use software and requires entities to make certain disclosure of costs capitalized under this subtopic. This ASU also supersedes existing guidance on web site development costs. The standard is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. Prospective, retrospective, or modified transition adoption methods are all permitted under this ASU. We are currently evaluating the impact and method of adoption of this amendment. In November 2024, the FASB issued ASU No. 2024-03, ""Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses"". This ASU requires a footnote disclosure to disaggregate each relevant expense caption on the face of the income statement that includes specific natural expense categories. In addition, the standard requires disclosure of selling expenses on an annual and interim basis. The standard is effective in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

"Post-retirement Benefit Plans The components of net periodic benefit cost for our defined benefit pension plans are as follows: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Domestic defined benefit pension plans: Service cost $ 1 $ $ 1 $ 1 Interest cost 1 1 2 2 Expected return on plan assets (1) (2) (2) (3) Amortization of net actuarial loss 1 1 1 Net periodic benefit cost $ 1 $ $ 2 $ 1 International defined benefit pension plans: Service cost $ 3 $ 3 $ 5 $ 5 Interest cost 4 4 9 8 Expected return on plan assets (4) (3) (7) (6) Amortization of actuarial gain $ $ $ (2) $ Net periodic benefit cost $ 3 $ 4 $ 5 $ 7 Total net periodic benefit cost $ 4 $ 4 $ 7 $ 8 The components of net periodic benefit cost, other than the service cost component, are included in the line item ""Other non-operating (expense)/income, net"" in the Condensed Consolidated Income Statements. The total net periodic benefit cost for other post-retirement employee benefit plans was less than $1 million, including net credits recognized into ""Other comprehensive income (loss)"" of less than $1 million, for each of the three and six months ended June 30, 2026 and 2025, respectively. We contributed $11 million and $9 million to our defined benefit plans for the six months ended June 30, 2026 and 2025, respectively. Additional contributions ranging between approximately $12 million and $16 million are expected to be made during the remainder of 2026." …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

"Revenue Disaggregation of Revenue The following table illustrates the sources of revenue: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Revenue from contracts with customers $ 2,262 $ 2,227 $ 4,321 $ 4,229 Lease Revenue 74 74 140 141 Total $ 2,336 $ 2,301 $ 4,461 $ 4,370 The following table reflects revenue from contracts with customers by application. Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Water Infrastructure Transport $ 421 $ 385 $ 789 $ 730 Treatment 262 265 497 501 Applied Water Building Solutions 286 270 548 517 Industrial Water 215 213 401 401 Measurement and Control Solutions Smart Metering and Other 415 449 832 853 Analytics 93 91 184 177 Water Solutions and Services Capital and Other 314 299 564 553 Services 256 255 506 497 Total $ 2,262 $ 2,227 $ 4,321 $ 4,229 The following table reflects revenue from contracts with customers by geographical region. Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Water Infrastructure United States $ 275 $ 238 $ 513 $ 448 Western Europe 245 239 460 450 Emerging Markets (a) 107 120 207 235 Other 56 53 106 98 Applied Water United States 286 266 543 505 Western Europe 102 107 200 205 Emerging Markets (a) 80 77 142 142 Other 33 33 64 66 Measurement and Control Solutions United States 355 360 698 682 Western Europe 74 89 165 166 Emerging Markets (a) 38 52 77 97 Other 41 39 76 85 Water Solutions and Services …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Segment Information Our business has four reportable segments: Water Infrastructure, Applied Water, Measurement and Control Solutions and Water Solutions and Services. The Water Infrastructure segment focuses on the transportation and treatment of water, offering a range of products including water, wastewater and storm water pumps, controls and systems; treatment equipment: filtration and separation, disinfection, wastewater solutions for municipal and industrial applications. The Applied Water segment serves many of the primary uses of water and focuses on the residential, commercial and industrial markets. The Applied Water segment's major products include pumps, valves, heat exchangers, controls and dispensing equipment. The Measurement and Control Solutions segment focuses on developing advanced technology solutions that enable intelligent use and conservation of critical water and energy resources as well as analytical instrumentation used in the testing of water. 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. The Water Solutions and Services segment provides tailored services and solutions, in collaboration with customers, including on-demand water, outsourced water, recycle / reuse, pipeline services, specialty dewatering and emerg …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"Recently Issued Accounting Pronouncements Pronouncements Not Yet Adopted In September 2025, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""ASU"") No. 2025-06, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU amends the capitalization criteria for internal-use software and requires entities to make certain disclosure of costs capitalized under this subtopic. This ASU also supersedes existing guidance on web site development costs. The standard is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. Prospective, retrospective, or modified transition adoption methods are all permitted under this ASU. We are currently evaluating the impact and method of adoption of this amendment. In November 2024, the FASB issued ASU No. 2024-03, ""Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses"". This ASU requires a footnote disclosure to disaggregate each relevant expense caption on the face of the income statement that includes specific natural expense categories. In addition, the standard requires disclosure of selling expenses on an annual and interim basis. The standard is effective in annual reporting periods beginning after December 15, 2026, and interim periods within annual repo …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Equity The following table shows the changes in stockholders' equity for the six months ended June 30, 2026: (in millions) Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Non-Controlling Interest Total Balance at January 1, 2026 $ 3 $ 8,759 $ 3,706 $ (768) $ (220) $ 11 $ 11,491 Net income attributable to Xylem 193 193 Other comprehensive loss, net (9) (2) (11) Dividends declared ($0.43 per share) (105) (105) Stock incentive plan activity 13 (14) (1) Distributions to minority shareholder (1) (1) Repurchase of common stock (586) (586) Balance at March 31, 2026 $ 3 $ 8,772 $ 3,794 $ (1,368) $ (229) $ 8 $ 10,980 Net income attributable to Xylem 263 263 Other comprehensive income (loss), net (73) 1 (72) Divestiture of non-controlling interest (7) (7) Dividends declared ($0.43 per share) (101) (101) Net income attributable to non-controlling interests 1 1 Stock incentive plan activity 15 15 Repurchase of common stock (655) (655) Balance at June 30, 2026 $ 3 $ 8,787 $ 3,956 $ (2,023) $ (302) $ 3 $ 10,424 The following table shows the changes in stockholders' equity for the six months ended June 30, 2025: Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Non-Controlling Interest Total Balance at January 1, 2025 $ 3 $ 8,687 $ 3,140 $ (753) $ (435) $ 5 $ 10,647 Net income attributable to Xylem 169 169 Other comprehensive income, net 98 98 D …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing