Xylem (XYL -1.69%), a leading provider of water technology solutions, released its second-quarter 2025 earnings on July 31, 2025. The big headline: Xylem delivered better-than-expected financial results, topping both non-GAAP earnings and GAAP revenue estimates. The company reported non-GAAP earnings per share (EPS) of $1.26, notably higher than analyst projections of $1.15 (non-GAAP). GAAP revenue reached $2.3 billion, above the anticipated $2.21 billion (GAAP). Margins and profits all improved compared to the same quarter last year. Xylem also raised its full-year 2025 guidance for both revenue and adjusted EPS, suggesting positive momentum as it looks toward the rest of fiscal 2025.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.26 | $1.15 | $1.09 | 16.0 % |
| Revenue (GAAP) | $2.3 billion | N/A | $2.17 billion | 6.0 % |
| Operating Margin (GAAP) | 13.3 % | 11.7 % | 1.6 pp | |
| Adjusted EBITDA Margin | 21.8 % | 20.8 % | 1.0 pp | |
| Net Income (GAAP) | $226 million | $194 million | 16.5 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
What Xylem Does and Where It’s Focusing
Xylem specializes in products and services for water management, including pumps, smart meters, advanced analytics, and treatment systems. Its technology helps municipal, industrial, and commercial customers move, measure, and treat water efficiently and safely. With operations in over 150 countries and a broad product portfolio, Xylem is a major player supporting water infrastructure and sustainability worldwide.
In recent years, Xylem has placed heavy emphasis on sustainability initiatives, digital transformation, and operational efficiency. It is working towards ambitious environmental targets, investing steadily in research and development (R&D) focused on smart metering, analytics, and digital solutions. Strategic acquisitions and portfolio simplification have also been central to its growth plan. Success for Xylem means maintaining innovation leadership, advancing sustainability goals, and efficiently executing on cost and productivity improvements.
Quarter in Detail: Financial and Operational Drivers
Xylem’s second-quarter outperformance was broad-based.
Segment revenue grew across all four main divisions: Water Infrastructure (+3%), Applied Water (+6%), Measurement and Control Solutions (+12%), and Water Solutions and Services (+5%) (GAAP).
The sharpest increase came from Measurement and Control Solutions, which provides advanced metering and analytics technology, with revenue up 12% year-over-year. Even with margin pressure from a less favorable sales mix (more energy meters versus water meters), this area benefitted from robust demand for smart devices and data-driven services.
Profitability improved, with GAAP operating margin reaching 13.3%, up 1.6 points from the prior year.
Adjusted EBITDA margin also set a new high at 21.8%, an increase of 1.0 points. Management credited productivity gains, successful pricing actions, and ongoing portfolio simplification. The integration of Evoqua, acquired last year, generated faster-than-expected cost synergies. The addition of Baycom, specializing in zero liquid discharge technology for industrial customers, expanded Xylem's capabilities further in high-value treatment solutions.
The company noted continued investment in research and development, holding R&D expense flat at $58 million. Xylem is prioritizing innovation in digital analytics and intelligent water management—areas viewed as key to longer-term growth. Integration of technologies from recent acquisitions was highlighted as an ongoing driver for future revenue.
Margins within Measurement and Control Solutions remained under pressure due to an increased share of energy meters, which typically have lower profit margins than water meters, as discussed on an adjusted (non-GAAP) basis. Management expects this mix issue to improve in the second half of 2025. Across the company, restructuring and realignment activities continued, with approximately 2,000 positions affected, designed to streamline the business and sharpen customer focus. Book-to-bill ratios—a measure of orders received to revenue billed—remained healthy, indicating sustained demand, although the company flagged the potential for order volatility in some areas, especially due to price and tariff impacts.
Looking Ahead: Guidance and Watchpoints
Xylem raised its full-year non-GAAP guidance for 2025. GAAP revenue is now expected to reach $8.9–$9.0 billion, up from the previous $8.7–$8.8 billion. Adjusted EPS guidance was increased to $4.70–$4.85 (up from $4.50–$4.70 before). Management also projects an adjusted EBITDA margin of 21.3–21.8%, reflecting confidence in sustained operational improvement. These upward revisions follow a quarter of broad-based growth and higher-than-expected profitability.
Xylem's leadership did note ongoing risks that could affect the second half of the year. These include order volatility, the impact of tariffs and trade policy shifts, and pressure on Measurement and Control Solutions margins from continued business mix effects. Management also indicated modest demand softness could emerge as price and tariff increases work through the system, as discussed during management commentary, but stated it expects to manage these risks with existing productivity and pricing levers.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
