XYL 10-K & 10-Q changes, risk factors and insider trading

These risk factors do not identify all of the risks we face. Our business is also subject to general risks that affect many other companies. In addition, we operate in a continually changing business, economic and geopolitical environmentenvironment, and as a result, new risk factors, or changes to our risk profile, may emerge from time to time. Risks not currently known to us, or that we currently believe are immaterial, may impact our business, operations, financial condition or share price. The global macroeconomic and geopolitical climate amplify many of the risks below. Risks in this section are grouped in the following categories: (1) Risks Related to Geopolitical, Macroeconomic and Industry Factors; (2) Risks Related to Our Business and Operations; (3) Risks Related to Financial and Tax; and (4) Risks Related to Legal and Regulatory. Many risks affect more than one category, and as a result the risks are not in order of significance or probability of occurrence.

With salessales, directly or indirectly, in approximately 150 countries, we compete across a wide range of geographies and end markets. Economic and industry factors that have had, or couldmay in the future have, a material impact on our businesses and demand for our products and services include: (i) the overall strength of, and our customers’ confidence in, local and global macroeconomic conditions; (ii) inflation and related monetary policy actions by governments in response,response; (iii) overall strength of industrial, governmental, public and private sector spending; (iv) overall strength of the industrial, residential and commercial real estate markets; (v) federal, state, local and municipal governments’ environmental, energy efficiency, fiscal, trade and procurement laws, regulations and policies, including as respects domestic content requirements; (vi) the availability of commercial financing for our customers and end-users; and (vii) the degreeavailability of funding for our public sector customers, including for water infrastructure investments. The aforementioned factorsThese and other macroeconomic impacts, including actual or potential economic slowdowns, recessionrecessions or other prolonged downturns in the global economy or our markets, supply chain dynamics and shortages, tight labor markets,shortages, inflation, and significant government debt and deficit levels, have had and may in the future have, a material adverse effect on demand for our products and solutions and therefore our business, financial condition, cash flows, results of operations and stock price.

In 2024,2025, 57%58% of our total revenue was from sales to U.S. customers and 43%42% was from sales to customers outside the U.S. We expect oura similar revenue profile to be similar movinggoing forward. Many of our manufacturing operations, employees, suppliers and distribution channels are located outside of the U.S. Our operations, supply chain and sales both within the U.S. and internationally are subject, into varying degrees, to risks and uncertainties inherent in doing business globally, including:

•nationalism, populism, protectionism, anti-global sentiment and changes in trade protection measures, including the imposition of increased or new embargoes, tariffs and other trade barriers, import and export regulations or restrictions, licensing requirements, domestic content requirements, and governments’retaliatory countermeasures in responsemeasures;

•uncertainty, volatility and impacts from the evolving global geopolitical environment involving the U.S. federal government and other countries’ governments, including the relationships among the U.S., European Union,Union (“EU”), Middle East, Latin America, Russia, India, China, Taiwan, or other foreign countries, and the international community at large;

•any actual or potential threat, outbreak, uncertainty or escalation of terrorism, political instability, insurrection, war, or other armed conflict,conflicts, including between Russia and Ukraine, the U.S. and Venezuela or Iran, and in the Middle East, with the potential for regional escalation, and other global safety and security concerns;

•threat or outbreak of epidemics, global health crisescrises, or pandemics,pandemics and related uncertainties;

•disruptions in global or regional supply chains, our operations, or those of third parties upon which we rely, including due to labor disruptions, supply shortages, trade restrictions, increased or new tariffs and freight and logistics challenges;

•unanticipated regulatory changes orto unfavorable circumstances arising fromapplicable U.S. or host country laws, regulations or policies, including those related to tax, water quality, the environment andenvironment, energy efficiency, infrastructure andinfrastructure, data transmission, security,security or privacy, labor, and artificial intelligence (“AI”), as well as potential negative consequences from the interpretation, application and enforcement of such measures;

•theft, compromise, misappropriation or challenges in protecting our technology, intellectual property or data;data, including from cybersecurity and AI threats.

Beyond the risks indicated above, our operations in emerging markets are subject to additional risks and uncertainties, including: (i) governmentsimposition may imposeof or increaseincreases in withholding or other taxes on remittances and other payments to us; (ii) governmentsnationalization may seek to nationalizeof our assets; (iii) governmentsimposition may imposeof or increaseincreases in investment barriers or other restrictions affecting our business; (iv) difficulty in enforcing commercial agreements or collecting receivables; (v) pricing pressure on our products and services; (vi) elevated business conduct risks; and (vii) challenges in our ability to attractattracting and retainretaining qualified talent and labor. We cannot predict the impact that such factors might have on our business, financial condition, cash flows, results of operations and share price.

Inflation, tariffs, customs dutiesduties, and other manufacturing and operating cost increases or fluctuations inhave manufacturingadversely affected, and operating costs have, and couldmay continue to,to adversely affectaffect, our cash flows and results of operations.

Our manufacturing and operating costs arefluctuate subject to fluctuations, particularly due towith volatility orin changes inthe prices forof commodities, parts, raw materials, energy and relatedenergy, utilities, freight andfreight, logistics, and the cost of labor. CostThese fluctuations have beenbeen, and may continue to bebe, driven by a variety of factors, such as inflation, tight labor markets, prevailing price levels, exchange rates, changes in trade agreements, tariffs and other trade protection measures, and other economic and geopolitical factors. Throughout 2024, our operating costs were adversely impacted by price inflation, which could continue in 2025 to varying degrees depending, in part, on broader macroeconomic, political or geopolitical conditions.factors. For example, our global supply chain includes shipping routes through the Red Sea, where vessels have been and may continue to be impacted by armed conflicts involving rebel groups; and continued conflictsongoing or escalation of ongoing conflicts in Ukraine orand the Middle EastEast, and the increasing tensions or outbreak of conflict between China and Taiwan, could adversely impact our logistics costs and result in anfurther increase in our costs forlogistics, energy and supplies,supply costs, and potentially delay shipmentscustomer to customers.shipments. We haverely on a large and complex network of suppliers (and their suppliers) and contract manufacturers globally, including in China and Mexico. The U.S. has enacted or threatened various trade actions, including new or additional tariffs on certain goods we importimported from China, Mexico, CanadaCanada, Europe and other countries, which has or may result in retaliatory measures. On August 29, 2025, the U.S. Court of Appeals for the Federal Circuit ruled that many of the tariffs imposed by the U.S. federal government under the International Emergency Economic Powers Act exceed presidential authority and othertherefore are invalid. On February 20, 2026, the U.S. Supreme Court affirmed that ruling. As of the date of this filing, tariffs issued under the different statutes remain in place, and the scope and durability of existing and future tariffs, as well as tariffs in place prior to the U.S. Supreme Court’s ruling, remain uncertain. U.S. and international trade actions. As a result, these U.S. trade measures or countermeasures by China, Mexico or other countriesactions could increase the cost of our products, which we may not be able to offset through price increasespricing or productivity, and could also impedeimpair our abilitycompetitiveness. to remain competitive. Further, inIn a declining price environment, our operating margins may contract because we account for inventory using the first-in, first-out method. Actions we take to mitigate cost volatility in manufacturing and operating costs may not be successful and, as a result, our business, financial condition, cash flows and results of operations could be materially and adversely affected.

We offeroperate in highly competitive markets for our technologies, products and servicesservices. in highly competitive markets. We believe theThe principal points of competition are performance, quality andquality, reliability, price, life cycle cost, security, speed of development and commercialization of new technologies, processes and business models, brand reputation, application expertise, energy efficiency, timelinessdelivery of delivery,timeliness, proximity of our service centers to customers, effectiveness of our distribution channels, and customers’ experience in doing business with us directly or through our channel partners. Maintaining and improving our competitive position will requirerequires successful management of these factors in a volatile business environment withmarked increasinglyby rapid rates of change and disruption.

Our competitive position and future growth depend uponon a number of factors, including our ability to successfully: (i) enhance and differentiate our product and service offerings, business models and customer experience bythrough increasing efficiency orefficiency, security, orand addingthe addition of innovative features or disruptive or emerging technologies, such as artificial intelligence,AI, that address emerging regulations and trends, meet customers’ needs, and prevent commoditization,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,firms; (iii) continue to invest in and maintain our distribution network of channel partners,partners; (iv) attract, develop, retain and train individualstalent with the requisitecommercial, innovation, digital and technical capabilities, expertiseexpertise, and understanding of customers’ needs to develop,develop and commercialize and sell new technologies, products, services and solutions,technologies; (v) continue to leverage and expand our external ecosystem of innovation partnerspartners, with joint venture partners,including universities, venture capital, the start-up communitystart-ups, and other technology innovators,innovators; (vi) continue to invest in our manufacturing, research and development, engineering, sales andsales, marketing, modernizationsystems ofmodernization, our systems,AI, and digitization of customer solutions, servicesolution and support tools,tools; (vii) win and execute large contracts on schedule and on budget,budget; and (viii) optimize our supply chain and manufacturing to enable predictable and efficient delivery to customers, and to compete for business subject to governmental procurement laws, regulations and government policies, includingand regulations governing sustainability and domestic content requirements in thevarious U.S.jurisdictions. Competitors may develop and globally,commercialize new technologies, such as theyAI, more effectively to drive internal efficiencies or create new or enhanced products or services that may evolveadversely overaffect time.our Additionalcompetitiveness. challenges we face include that customersCustomers may be slow to adopt our new and innovative solutions and technologies.technologies, delaying returns on our innovation investments and impacting our growth. Pricing pressures, includingtariffs, asprocurement a result of new or additional tariffs on our products or goods used in the manufacture of our products,policies, and/or the impact of disruptive or emerging technologies, such as artificial intelligence, and our efforts to optimize our productivityAI, may require thatprice we adjust the prices of certain products, services, solutionsadjustments or projectsrationalization or rationalizeof certain of our offerings toand stayaffect competitiveour or win large contracts.profitability.

As a result of the foregoing,result, we may not be successful in maintainingmaintain our competitive position andor market share, which could adversely affect our business, financial condition, cash flows or results of operations.

Cybersecurity incidents and relatedincidents, data breachesbreaches, or other disruptionsdisruptions, and software and system implementations involving our enterprise or operational information technology and operations, ourtechnology, connected products and services, or information technology on which we or our customers rely, could materially and adversely affect our business.

We rely on information technology,technology (“IT”), including operational technology,technology and communicationscommunication networksnetworks, to runoperate our manufacturing processes and equipment, to enable business processesprocesses, andsupport employee productivity, interface with customers and tochannel process, transmit, storepartners, and manage our electronic information, including confidential business information and data relating to employees, customerscustomers, or other businessand partners. We also rely on key third parties, such as direct and indirect suppliers, contract manufacturers, cloud-based service providers, and outsourced business process providers, including in theour areasbusinesses ofand functions, such as Information Technology, Finance, Human Resources, Commercial Services, Procurement and Travel. Together, we depend on information technology infrastructure and communication networks for access to reliable and secure networks in order to run our and their businesses. Regardless of the protection measures we, or the third parties we rely on, have implemented, information technologyIT and communicationscommunication networks may be susceptible to damage or disruption due to causescauses, such as: equipment, system or application failure, including as a result of maintenance, obsolescence, unsupportability or age; application upgrades or implementations; human error or malfeasance; vandalism; natural disasterdisasters; fire; power, communication or other utility outage or failureoutages; and cybersecurity incidents, including ransomware, denial-of-service, vendor e-mail compromise,compromises, deepfake attacks, malware, phishing, and computer viruses resulting from a wide ranging threat landscape, including attacks by nation states and others. In addition to damage or disruption, these cybersecurity incidents may leadalso toresult in security and data breaches. Cybersecurity and other IT disruption risks may increase during integration or separation of businesses or during the provision of transition services.

We provide certain digitally enabled or internet-connected products, which may include the use of AI, such as pumps, controllers, meters and other equipment, digital (ormeters, intelligent) solutions, and other remote monitoring and condition assessment capabilities, and an interoperability platform via Idrica, our strategic joint venture partner.venture. These products and services are used by us and our customers for operational purposes or to collect data. Our connected products and services may be susceptible to damage or disruption from athe myriad ofsame causes as described above. Cybersecurity incidents may impact hardware, software and information installed, stored or transmitted by our products and services after they have been purchased and incorporated into customers’ and other third parties’ products, facilities, systems or infrastructure, including critical infrastructure applications. While we attempt to provide our customers with reasonable measures to safeguard our products and services from cybersecurity threats, the potential for a cybersecurity incident remains. In addition, certain of our customers continue to use older digitally enabled products that we designed, manufactured and sold at a time whenlack current security features were not available.features.

A cybersecurity incident or other damage or disruption to information technologyIT and communications networks, or involving our connected products and services, may have adverse effects on us, our customers or third parties on which we rely,rely including:by interferenceinterfering with operations and services, potentially with public health and safety risks involving certain of our customers; disruption ofdisrupting production, supply chain, shipments, billing, collections and customer service; disruption todisrupting data analytics; disruption toor remote monitoring and control of operational systems; enabling unauthorized access, disclosure, misappropriation, misuse, destruction, compromisecompromise, or theft of our financial, operational or other proprietary information, including intellectual property and trade secrets, or data pertaining to our employees, customers or suppliers; damage todamaging employee, customer and businessor partner relationships; recalltriggering ofproduct our products;recalls, legal claims, proceedings or regulatory enforcement actions, and fines or penalties; increasedincreasing prevention and response costs to prevent, respond to or mitigate cybersecurity incidents; and damage toharming our brands and reputation. Moreover,Additionally, aapplication upgrades and software implementations, such as the launch of our Enterprise Resource Planning software, may increase our exposure to such risks as upgrades may have undiscovered vulnerabilities or provide threat actors with new avenues of attack. Any delay in or failure to detect a cybersecurity incident or the full extent of an incident could exacerbate the effects of the incident.

To mitigate reliability and cybersecurity risks related to our enterprise and connected products and services,risks, we maintain relevant policies, standards, proceduresprocedures, and technologies that are applicable to all Xylem employees and contractors, including: patching; passwords; network and data access, including requirements and rightsaccess; business continuity and disaster recovery plans; monitoring for external and insider risks; technology obsolescence or end-of-life of operating technologies or applications’ operating systems; IT general computing controls; andnetwork segmentation; secure software development. We are also operationalizing our strategy to establish segmentation between our information technologydevelopment; and operationalsystem technology.integration testing. As implementation and compliance is the responsibility of employees across the enterprise, we cannot guarantee full adherence in all instances with our policies, standards and procedures, or that our technologies will be sufficient to fully mitigate the aforementioned or evolving risks.

We, and some third parties upon which we rely, have in the pastpreviously experienced cybersecurity incidents or other attempts from unauthorized parties, including criminal threat actors, nation states, or insiders (including employees or contractors engaged in fraudulent or malicious activities), to gain unauthorized access to our information technologyIT and connected products and services. As technology, including thegenerative useAI of artificial intelligence, and the threat landscape evolve, we maymodels, continue to experienceevolve, such events,incidents likelymay withoccur more frequencyfrequently, and involvingaffect a broader range of devicesdevices, and moregrow sophisticatedin modessophistication, ofwith attack.threat actors leveraging these technologies to develop new attack methods that are increasingly automated, targeted, coordinated and difficult to defend against. To date, none have resulted in any material adverse impact toimpacts or theft, misusemisuse, or loss of information of our business, operations, products and services, or customers.

Although we maintain a cybersecurity program that we believe is reasonably designed to protect our information technology,IT, products and services, because the timing,unpredictable and evolving nature and modes of cybersecurity attacks and incidents change frequently, evolveincidents, and arethe unpredictable,difficulty andof becausedetecting unauthorized accessesaccess may beprevent difficultus tofrom detect for long periods of time, we may be unable to anticipateanticipating or prevent thesepreventing intrusions or implementimplementing adequate protective or remedial measures. Additionally, it may take considerable time for us to investigate and evaluate the full impact of cybersecurity incidents, particularly for sophisticated attacks, which may inhibit our ability to provide prompt, full, and reliable information about an incident to our investors, customers, regulators, and the public.

While we maintain insurance coverage designed to address certain aspects of business interruption and cybersecurity risks, itsuch coverage may not be sufficient to cover all losses or all types of claims.claims that may arise. Although we continue to assess the aforementioned risks, implement policies, processes, standards, measures, technologies and redundanciessafeguards to mitigate these risksrisks, and performconduct business continuity and disaster recovery planning, we cannot be sureensure that material cybersecurity incidents or other disruptions with material adverse effects will not occur, or that our business continuity and disaster recovery efforts will be effectivefully andeffective. adequate. As such, anyAny of the foregoing could havematerially aand materialadversely adverse effect onaffect our reputation, competitive position, results of operations, cash flows or financial condition.

Lack of or delaydelays in availability of products, parts, raw materialsmaterials, andtransportation, or energy from our supply chainchain, or thesupplier inability of suppliersfailures to meet delivery and other requirements, could adversely affect our business.

Our business reliesdepends on a large and complex network of suppliers (and theirindirect suppliers),suppliers, contract manufacturers and subcontractors that perform manufacturing and customer-related services for us, commoditycommodities markets, and freight and logistics providers to secure and ship finished goods and raw materials, parts, and electronic and other components used in our products. Some of ourCertain key components are available only from a sole- or single-source suppliersuppliers or a limited group of suppliers. We also have significant direct and indirect suppliers in China, Taiwan, Mexico and Europe. We expect that our reliance on, and the complexity of, the aforementionedthis supply chain will continue to beremain significant and, in some cases, increase.

Parts, components and raw materials commonly used in our products include motors, fabricated parts, castings, magnets, bearings, seals, batteries, PCBs and electronic components, including semiconductors, as well as commodities, including steel, brass, nickel, copper, aluminum, rare earth minerals and plastics. We are exposed to the availabilityAvailability of these items, whichitems has in the pastbeen, and may in the future bebe, subjectaffected toby delay,delays, shortage,shortages, curtailmentcurtailment, or changechanges due to macroeconomic, geopolitical and other factors, including: supply and demand dynamics; labor shortages or disputes; changes in suppliers’supplier strategy or production planning including decisions to exit production of key components uponon which we rely; production interruptions infrom suppliers'cybersecurity production,or includinginformation astechnology adisruptions, result ofor humanmade or natural disasters; a supplier’s impairedsupplier financial conditiondistress; suppliers’ capacity allocations to other purchasers; changes in trade agreementsagreements, andor trade protection measures including tariffs or export restrictions; ability to meet regulatory requirements; weather emergencies and the effects of climatevolatile changeweather patterns; public health crises; and threatened or actual terrorism, armed conflict or war,war. including the ongoing conflicts between Russia and Ukraine, in the Middle East, and rebel attacks on commercial vessels in the Red Sea. Any threatenedActual or actualthreatened escalation of the aforementionedthese conditions and related impacts may disrupt supply, increase the cost of energy or logistics,logistics costs, or delay or interrupt our supplies from suppliers. We have also experienced, and may continue to experience, fluctuating freight and logistics costs, and delivery delays related tofrom port congestion, labor actions and other challenges. If supply disruptions in our supplies occur (including in the rare earthsearths, or global semiconductor industriessemiconductors, or other key inputs), or if our mitigation efforts to mitigate these shortages and disruptions are insufficient or unsuccessful, we may be delayed or unable to execute on our backlog, fill new customer ordersorders, or timely deliver products to our customers,products, which could havematerially aand materialadversely adverse effect onaffect our business, financial condition or results of operations. Although we havemaintain insurance relatedcoverage tofor business continuity and supply chain,chain werisks, cannot be certain that thissuch coverage willmay continuenot to beremain available at a reasonable cost or will be adequate toadequately cover any or all aspects of our supply chain disruptions.

A material disruption to any of our facilities or operations, or thatthose of third parties upon which we rely, may adversely affect our business and financial performance.

Our operations and businesses relydepend on our facilities and a complex and highly reactive global supply chain, including supplierssuppliers, (indirect suppliers, and theirmulti-tiered suppliers),suppliers, some of which are a single- or sole-source, as well as distributors, contract manufacturers, subcontractors, joint venture partners, utilities providers, and freightutilities and logistics providers. InWe addition, wealso outsource certain critical business processes and activities, including in the areas of Finance, Human Resources, Commercial Services, Procurement, Travel and Information Technology. CertainSome of our businesses require that weus or our subcontractors haveto access to customer sites to provide our products and services. Our facilities, operations, customers, contract manufacturers, subcontractors or otherand third parties on which we rely, have experienced, or may in the future experience, disruptions or delays resulting from an actual or threatened eventevents or circumstance,circumstances, including due to: equipment, technologicalequipment or system failure; application upgrades or implementations (such as our Enterprise Resource Planning software); natural disasterdisasters; weather eventevents or effectsvolatile ofweather climate changepatterns; water,utility communications, power or energy curtailment or outageoutages; fire; explosion; critical supply chain failurefailures; export restrictions on critical materials; terrorism; cybersecurity incidentincidents; political disruption; outbreak of a pandemicpandemics or other public health crisiscrises; insurrection; armed conflict or war,war; includingrising thetensions ongoingor conflictspotential involvingoutbreak Russiaof conflict between China and Ukraine, the Middle East, and rebel attacks on vessels in the Red SeaTaiwan; labor dispute, stoppagedisputes; or slowdown; lack of financial viabilitydistress. orOur other reason. In addition, our facilitiesfacilities, or those of third parties uponon which we relyrely, may operate certain equipment and manufacturing technology that may be unique and difficult or slow to replacereplace. or involve long lead times for replacement. A significantSignificant disruption to any of our facilities or operations, or that of customers or third parties on which we rely, could causematerially material adverse impacts onimpact our operations and business, includingby anpreventing inabilityus tofrom meet customermeeting demand or contractual commitments, increasedincreasing costs, and reducedreducing market share or sales, and could also impactimpacting our business processes and activities, including our ability to timely report financial results. Any interruptionInterruptions may be lengthy, have lasting effects, require ademand significant amount of management and other employees' time and focus, and require substantial expendituresmitigation to mitigate the situation,costs, which could negatively affect our operations, business processes and activities, profitability, financial condition and reputation. Any recovery under our insurance policies may not fully offset the lost sales, increased costs, or longer-term loss of supplierssupplier or customerscustomer thatlosses weresulting mayfrom experience as a result of a disruption.disruptions. Although we continue to assess theseour critical processes and risks, implement mitigation plansplans, and performconduct business continuity and disaster recovery planning, we cannot guarantee that interruptions with material adverse effects on our operational and financial performance will not occur.

Water and wastewater treatment operations, including those related to emerging contaminants, as well as the generation, handling, storage, use, transport, treatment, release or disposal of hazardous materials may result in contamination, environmental, personal or other liabilities, or pose other significant risks that could causeresult us to incurin significant costs and reputational harm.

Our water and wastewater treatment offerings involve unique risks and require compliance with a variety of laws orand regulations, including the Clean Water Act and the Safe Drinking Water Act. IfSystem ourfailures, treatment systems failspills, or dooperational noterrors operatecould properly, or if there is a spill,discharge untreated or partially treated wastewater could discharge onto property or into nearby bodies of water and groundwater, causing variousenvironmental liabilities, damagesharm and injuries,triggering includingregulatory environmental.enforcement, Inlitigation, addition,and areputational numberdamage. ofEmerging emergingcontaminants, contaminantssuch might be found in water that we treat, includingas PFAS, PFOA, selenium, micro-plastics,microplastics, chemicalschemicals, or pathogens, thatpose additional risk. Failure to adequately handle emerging contaminants may cause illness or death if not eliminated during the treatment process, and result in liabilitiesillness, death, and damagessignificant against us.liability. Changes in environmental requirements, laws andor regulations, or increased public awareness aroundof the presence and health impacts of human-made chemicals and naturally occurring contaminants in drinking water, could increase or decrease demand for our products and services, increase costs, render products obsolete, increase our costs,potential resultliability inwith respect to the obsolescencehandling or disposal of ourthese products,contaminants or lead to an interruption ofor suspension of our operations.

Furthermore, ourOur Water Solutions and Services segment engages in business activities including manufacturing, waste recyclingrecycling, and treatment processes that involveinvolving the use, treatment, storage, transfer, handling and/or disposal of non-hazardoushazardous and hazardousnon-hazardous materials, chemicals and wastes, subject to applicable federal, state and local laws and regulations. The cost of compliance with these laws and regulations may increaseincrease, resulting in increased operating costsexpenses, or requiredrequire additional investmentfacility in facilities.investments. These business activities also create a riskrisks of accidental contamination or injury to the environment and ourenvironment, employees, customers, other third partiesparties, and the general publicpublic. (as end-users of our industrial and municipal customers’ products and services). In addition, under certain applicableUnder environmental laws and regulations, includingsuch as the Resource Conservation and Recovery Act ("RCRA") and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), we could be strictly, jointly and severally liable for releases of regulated substances at our current or former properties or the properties of others, or by other businesses that previously owned or used our current or former properties. We could also beface liableliability or incur reputational damageharm if we transport such materials, generategenerate, or arrange for the disposal of such hazardous materials or wastes, or merely arrange for their transportation, disposal, or treatmentwaste if they are subsequently released or cause harm.

If the foregoing businessthese activities result in legal or environmental claims, damage or liabilities, including those described above, we could incur significant costs, liabilities or reputational damage in connection with legal defense, investigation, remediation of environmental contamination, damage to property or natural resourcesresource damage, or personal injuries. Such costs and liabilities could exceed any applicableour insurance coverage weand may havematerially and thereforeadversely could have a material adverse effect onaffect our business, financial condition, results of operations oroperations, prospects, as well as ourand reputation.

We may be unable to successfully execute large projects or meet customers’customer timelines, budget, performanceperformance, andor safety requirements.

A portion of our revenue is derivedcomes from largecomplex, multi-year projects that areinvolve complex and may occur over multiple years. These projects are subject to a number ofsignificant risks, including delays;delays, cost overruns; changes inoverruns, scope; changes, unanticipated site conditions;conditions, design and engineering issues;issues, incorrect cost assumptions;assumptions, increasesrising in the cost of materialsmaterial and labor; costs, health and safety hazards;hazards, subcontractor performance issues;issues, supply chain disruptions, weather issues;events, and changes in laws, regulations or permitting requirements. If we are unableFailure to manage these risks, werisks may incurresult in higher costs, liquidated damages, and other liabilitiesliabilities, topotentially our customers, which may decreasereducing our profitability and harmharming our reputation.

Furthermore, our project-basedMany customers typically require performance guarantees for the effluent produced by our water treatment equipment and services. Failure ofIf our products and services fail to meet performancethese guaranteesguarantees, we may requireincur additionaladded costs related to engineering, replacement of parts andparts, equipment, frequentor replacement of consumablesconsumables, or monetarycustomer reimbursementreimbursements. toEstimating aperformance customer,guarantee orobligations could otherwise increase our costs or result in liability to our customers. There are significantinvolves uncertainties and judgments involved in estimating performance guarantee obligations,judgments, including changing product designs, differencesvariations in customer installation processesprocesses, and failure to identify or disclaim certain variablesdifferences in ainfluent customer’sconditions. influent. If we incur substantialSubstantial performance guarantee claims incould anymaterially period,and adversely affect our reputation, earningsearnings, and future business prospects could be materially adversely affected.prospects.

Many of our customers alsorequire haveus to meet safety performance requirements that we must meetstandards to be allowed access to their sites tosites, perform our services, install our productsproducts, and execute projects. Risks arising from unsafeUnsafe products or employee performance bymay our employees include, among other things,cause delays in or suspension of site access needed to service or timely deliver our products. Workplace or product-related accidents or near-accidents, or the failure to follow our own or our customers’ safety policies could also damage our reputationreputation, or our customers’ perception of our safety record, which could have a material adverse impact onreduce demand for our products and services, resultincrease incosts, additionalcause costs to our business, thecustomer loss of customers or litigation against us,litigation, or increase government or regulatory oversight.

We may be unable to retain our existingkey leadership, engineering, technology, sales, servicesservice and other key talent or attract new qualified talent with diverse backgrounds, experiences and perspectives.

Our success depends to a significant extent on our ability to attract, retain and develop highly qualified employees in leadership positions, and in strategic or core competencies,areas, includingsuch as engineering, innovation, systems modernization, digital technologies, commercial excellence, service, and project management, asand well as general production-related talent.production. The market for highly skilled talent, leaders and labor with diverse backgrounds, experiences and perspectives remains highly competitive in our industry. As a result, our successSuccess in attracting and retaining employees, particularly in the areas of services, digital technologies, innovationincluding AI, innovation, and data science, hasdepends depended,in and will continue to depend,part on our ability to offer attractive career growth opportunities, work arrangements, compensation and benefits, and also policies and ways of working that support employee well-being. In addition, weWe continue to evolve our culture, where colleagues are inspired to innovate, empowered to lead and accountable to deliver,deliver. and includes advancing inclusion and belonging. OurThis high-impact culture has been and will remainis critical to attracting and retaining the talent needed to execute our strategy, drive innovation, remain competitive and create long-term value. We also need tomust continue to developdeveloping qualified talent to support business growth and robust succession plans, both ofplanning, which are critical to our long-term success. A failureFailure to attract or retain highly engaged and skilled talent and labor could adversely affect our ability to meet and exceed the needscustomer of our customers, operate andneeds, grow our business and execute our strategy.

Defects, unanticipated or improper useuse, or inadequate disclosures concerningabout our products could adversely affect our business, reputation and financial condition.

Defects, inadequaciesDefects or quality issues in the manufacture, design, software, AI capabilities, security or service of our products (including finished goods, parts or components that we source from third parties), unanticipated or improper use, or inadequate disclosure of risks relating toabout the use of our products, could result in product safety, product security, regulatory or environmental risks, personal injury, death, and property or environmental damage. These events could also lead totrigger product recalls,recalls or withdrawals, safety or security alerts, or removal of a product from the market, issuance of credits, or warranty, liability or contractual claims and damages against us.damages. Although we havemaintain liability insurance, we cannot be certain that this insurance coverage willmay continuenot to beremain available to us at a reasonable cost or will be adequate toadequately cover anyall claims. Defects or allinadequacies aspectsin of liability claims. Manufacturing,manufacturing, design, software, securitysecurity, or service defects or inadequacies may therefore result in significant costs, decreasedreduced profitability, and negative publicity and reputational damage,harm, that could reducereducing demand for our products and havematerially material adverse impacts onaffecting our business, financial condition and results of operations.

We may not achieve some of the expected benefits of our simplificationsimplification, andproductivity, productivity initiativesrestructuring, or restructuring and realignment plans, or such initiatives and plans may adversely affect our business.

From time to time,Periodically, we have and may continue to initiate simplification, productivity, restructuringrestructuring, and realignment actions for various reasons, including to optimize our cost structure, increase profitability, drive growth, improve our operational efficiency and effectiveness, and enable us to better serve our customers, or in responserespond to impacts from business and economic conditions. Starting in 2024, we launched initiatives focused on improving margins and customer centricity through a range of business simplification, strategic pricing and operational productivity measures across our offerings, operations and customer base. Such measures may include: differentiating our offerings and pricing among customers and channels; adjusting the prices of certain offerings; rationalizing certain of our offerings; modernizing our systems by standardizing key enterprise applications; rationalizing our footprint; write-offswriting on affectedoff assets; and simplifying our supply chain. AsThese a result of these measures, theremeasures could beadversely an adverse impact onaffect our market share, competitiveness, profitability and growth, asand wellmay as the potential forcause unanticipated disruption in customer service.service disruptions.

We are also engaged in an ongoing, multi-year effort to transform our company’s operating model, including our businesses and supporting functions, and have initiated related restructuring and realignment actions. Challenges with enabling technologies, modernizingsystems our systems,modernization, and implementing planned restructuring and realignment activities have in the past, and may incontinue the future,to delay the realization of some of the expected operational, financial and customer centricity benefits from such actions.benefits. We may not be able to obtain some ofachieve the cost savings and benefits that were initially anticipated in connection withfrom our transformation, restructuring and realignment plans. Additionally,These as a result of these plans, weplans may experiencealso cause a loss of talent or continuityreduced of accumulatedinstitutional knowledge, or inefficiencies during transitional periods. Transforming, realigning and restructuring our company require arequires significant amount of management and other employees'employee time and focus, whichpotentially may divertdiverting attention from operatingoperations and growing our business.growth.

The successfulSuccessful implementation and execution of our simplification, productivity, restructuring and realignmentthese actions are critical to achieving our strategy and long-range plan through expected cost savings, effectively competing in the marketplace,competitiveness, and positioning us for future growth. Factors that may impede the successful implementation, execution or realization of the benefits of these actionssuccess include a failure to retain key customers or employees; the impact ofemployees, regulatory matters includingor tax; mattersmatters, involvingchallenges certainwith third-party service providers selected to assist us, including staffing, technology, and compliance of service providers with our internal controls over financial reporting;reporting, and adverse economic market conditions. If our simplification, productivity, restructuring and realignmentthese actions are not executed successfully or we do not realize the anticipated benefits of such actions, it could have material adverse impacts onbenefits, our competitive position, business, financial condition, cash flows and results of operations.operations could be materially and adversely affected.

The execution of ourOur strategy includes acquisitions and divestitures, which we may be unable to successfullyexecute execute.successfully.

InTo support of our growth strategy, we continue to realign and enhance our portfolio by pursuing the acquisition of companies, assets, technologies, product lines and customer channels that complement or expand our existing business or improve ourcompetitiveness, competitive position, andwhile divesting non-core or less strategic businesses. We may not be ableunable to complete acquisitions or divestitures on favorable terms, timingtiming, or at all, or obtain financing that may be needed to consummate acquisitions. In addition, we may be adversely impacted by: (i) the failure to efficiently, effectively and timely integrate acquired businesses into our operations, technology, financial and other systems,systems; (ii) the failure of acquired businesses to meet or exceed expected returns, which in the past has led to, and in the future may lead to, accounting impairments,impairments; or (iii) thefailure discoveryto of unanticipateddiscover liabilities, adverse operational issues, cybersecurity concerns,issues, control or compliance issues, environmental matters, labor relations difficulties, or other issues for which we lack contractual protections, insurance or indemnities. Failure to successfully execute our growth strategy via acquisitions andor successfully integrate thesethem, acquisitionsor failure to execute divestitures could adversely affect our competitive position, business, financial condition or results of operations.

Acquisitions involve a number of risks and present financial, managerial and operational challenges, including: diversion of management’s time and attention from existing businesses and operations; insufficient internal controls over financial or compliance activities or financial reporting of acquired businesses; failure to realize expected synergies; impact on our ability to achieve some or all of our sustainability commitmentsaspirations; assumption of new material risks associated with the acquired businesses; and loss of key employees of the acquired businesses. As a result, the anticipated benefits of acquisitions may take longer to realize or not be fully realized, or may cost more than expected, which could materially and adversely affect our business, results of operations or financial condition.

A significant portion of the offerings in our Measurement and Control Solutions segment use radio spectrum that is subject to government regulation. In the U.S., our products are primarily designed to use FCC-licensed spectrum in the 900MHz range. The FCC may elect notdecline to renew our existing spectrum licenses, or materially change the regulations affecting the use of these licenses. InSome addition, theremarkets may belack insufficient availablesufficient frequencies in some markets to sustain or develop our planned operations at a commercially feasible pricecost or at all.

Outside the U.S., certain of our products require the use of radio frequency and are subject to regulations. In some jurisdictions, radio station licenses may be granted for a fixed term and must be periodically renewed. Our advanced and smart metering systems offerings transmit to (and receive information from, if applicable) handheld, mobile, or fixed network reading devices in licensed bands made available to us through strategic partnerships and are reliant, to some extent, on the licensed spectrum continuing to be available through our partners or our customers. We may be unable to findsecure partners or customers that have access to sufficient frequencies in some markets to sustain or develop our planned operations, or that have access to sufficient frequencies at a commercially feasible pricecost or at all.

To the extent we introduce newNew products designed for use in the U.S. or another country, such productscountry may require significant modification or redesign in order to meet frequency requirements and other regulatory specifications. Limitations on frequency availability or the cost of making necessary modifications may preclude us from selling our products in certain countries. The regulations that govern our use of radio spectrum may change or new products may be allowed under the regulations that cause interference with our products, which may require us to modify our products or seek new partnerships. In addition, weWe may notalso be ableunable to secure suitable partners for co-development of products. The lack of availabilityLack of radio spectrum availability or an inability or delay in modifying our products to meet frequency requirements, or the cost of completing such modifications, could havematerially materialand adverseadversely effects onaffect our business, financial condition, and results of operations.

Weather conditions, including the effects of changing climate changepatterns and associated efforts byrelated governmental or regulatory authoritiesefforts to mitigate such effects, may cause volatility in our served markets and demand for our products.

The unpredictable nature, frequency, and severity of, and changes in weather events, patterns and related conditions,conditions - such as heavy flooding, prolonged droughts, wildfires, rainfall amounts and intensity, sea levels, and fluctuations in temperatures,temperatures including as a result of climate change,- can positively or negatively impact portions of our business and therefore result increate volatility in our financial results. For example, certain events may disrupt customers’customer operations, creatingcausing shutdowns that prevent our site access or defer ourdelay performance of services or saleequipment of equipment.sales. Heavy flooding and rain events may increase demand for our solutions that help manage water and stormwater overflows or remove and transfer excess or unwanted water. Prolonged drought conditions may increase demand for our pumping technology used in agriculture and turf irrigation applications. Demand for water reuse applications, such as those provided by our treatment business, may also increase as communities look to address water scarcityscarcity. challenges.Temperature Fluctuations in temperaturesfluctuations may result in varying demand for our products used in residential and commercial hydronic applications, where homes and buildings use circulating water to heat and cool living spaces.

•Water Infrastructure serves the water infrastructure sector with pump systems that transport water from aquifers, lakes, rivers and seas; with filtration, ultraviolet and ozone systems that provide treatment, making the water fit to use; and pumping solutions that move the wastewater and storm water to treatment facilities where our mixers, biological treatment, monitoring and control systems provide the primary functions in the treatment process. Additionally, our offerings use monitoring and control, smart and connected technologies to allow for remote monitoring of performance and enable products to self-optimize pump operations maximizing energy efficiency and minimizing unplanned downtime and maintenance for our customers. The Water Infrastructure segment also provides a range of highly differentiated and scalable products and technologies with product offerings in the filtration and separation, disinfection, and wastewater solutions, for municipal and industrial applications. In the Water Infrastructure segment,segment we providereach thecustomers majorityindirectly, ofthrough channel partners and distributors, directly and through our salesservice directly to customers along with strong applications expertise, while the remaining amount is through distribution partners.capabilities.

•Applied Water serves the water usage applications sector with water pressure boosting systems for heating, ventilation and air conditioning, and for fire protection systems to the residential and commercial building solutions markets. In addition, our pumps, heat exchangers and controls provide cooling to power plants and manufacturing facilities, circulation for food and beverage processing, as well asand boosting systems for agricultural irrigation. In the Applied Water segment, we provide the majority of our sales through long-standing relationships with many of the leading independent distributors in the markets we serve, with the remainder going directly to customers.

•Water Solutions and Services provides tailored services and solutions, in collaboration with customers, including on‑demand water, outsourced water, recycle/reuse, pipeline assessment services, specialty dewatering and emergency response service alternatives to improve operational reliability, performance and environmental compliance. 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. In the Water Solutions and Services segment, we leverage our internal and external partners, and extensive service branch networks across the globe, including a rental fleet of transfer and treatment assets to serve our customers.

•"organic revenue" and "organic orders" defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales or discontinuance of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the sameprior period currency conversion rate.

•"adjusted net income" and "adjusted earnings per share" defined as net income attributable to Xylem and corresponding earnings per share, respectively, adjusted to exclude restructuring and realignment costs, amortization of acquired intangible assets, gain or loss from sale of businesses, gain on remeasurement of previously held equity interest, special charges and tax-related special items, as applicable. A reconciliation of adjusted net income and adjusted earnings per share is provided below.

(a)The special charges in the years end December 31, 20242025 and 20232024 primarily relate to $50$28 million and $134$50 millionmillion, respectively, of acquisitionacquisition, divestiture and integration related costs, respectively.costs.

(cb)The tax-related special items in 2023 primarily relate to $70one-time million ofdeferred tax benefits from taxinternal exam impacts and $27 million of tax benefits relating to tax law changes.reorganizations.

▪“special charges" defined as non-recurring costs incurred by the Company, such as acquisitionthose related to acquisitions and integrationintegrations, relateddivestitures costs,and non-cash impairment charges and both operating and non-operating adjustments for costs related to the U.K. pension plan buy-out.charges.

Xylem reported revenue of $8,562$9,035 million for 2024,2025, an increase of $1,198$473 million, or 16.3%,5.5%, from $7,364$8,562 million reported in 2023. On a constant currency basis, revenue increased by $1,210 million, or 16.4%, during the year.2024. The increase at constant currency consists of organic growth of $419 million and favorable foreign currency impacts of $71 million, partially offset by net revenue declines from acquisitions of $786 million and an increase in organic revenuedivestitures of $424$17 millionmillion, reflecting organic growth across all segments and most major geographic regions, with organic growth in the MeasurementU.S. and Controlwestern Solutions, Water Infrastructure, and Water Solutions and Services segments,Europe more than offsetting organic declines in the Appliedemerging Water segment.markets.

Operating income for 20242025 was $1,009$1,223 million, reflecting an increase of $357$214 million, or 54.8%,21.2%, compared to $652$1,009 million in 2023.2024. Operating margin was 11.8%13.5% in 2024,2025, up 290170 basis points from 8.9%11.8% in 2023.2024. The operating margin increase included negative impacts from increases in operatingrestructuring incomeand forrealignment 2024costs includedof $42 million and purchased intangible amortization of $4 million, partially offset by a decrease in special charges of $81$21 million, an increase in purchased intangible amortization of $40 million, and a decrease in restructuring and realignment costs of $15 million as compared to 2023.million. Excluding the impact of these items, adjusted operating income was $1,612 million, with an adjusted operating margin of 17.8% in 2025 as compared to adjusted operating income of $1,373 million,million with an adjusted operating margin of 16.0% in 2024 as compared to adjusted operating income of $1,072 million with an adjusted operating margin of 14.6% in 2023,2024, an increase of 140180 basis points.

•Net income attributable to Xylem of $890$957 million, or $3.65$3.92 per diluted share, up 30.8%7.4% ($1,041$1,240 million or $4.27$5.08 per diluted share on an adjusted basis, up 13.0%19.0% from 20232024)

•Net cash provided by operating activities of $1,263$1,241 million, updown 51%2% from 2023,2024, and free cash flow of $942$910 million, updown 66%3% from 20232024

•Dividends per share paid to shareholders increased 9%11% in 2024.2025.

Revenue generated for 20242025 was $8,562$9,035 million, an increase of $1,198$473 million, or 16.3%,5.5%, compared to $7,364$8,562 million in 2023.2024. The increase at constant currency consists of organic growth of $419 million and favorable foreign currency impacts of $71 million, partially offset by net revenue declines from acquisitions of $786 million and an increase in organic revenuedivestitures of $424$17 million, reflecting organic growth across all segments and most major geographic regions, with organic growth in the MeasurementU.S. and Controlwestern Solutions, Water Infrastructure, and Water Solutions and Services segments,Europe more than offsetting organic declines in the Appliedemerging Water segment.markets.

(a)Foreign currency translation impact for the year primarily due to the weakeningstrengthening in value of various currencies against the U.S. Dollar, the largest being the CanadianEuro, Dollar,British Chinese Yuan, Chilean Peso, Brazilian RealPound and the HungarianSwedish Forint,Krona, offset by the strengtheningweakening in the BritishCanadian Pound.Dollar.

Water Solutions and Services revenue increased $659$121 million, or 39.2%5.2% to $2,343$2,464 million in 20242025 compared to 2023.2024. Revenue growth was partiallydriven madeby uporganic revenue growth of the$117 million, favorable foreign currency translation of $3 million and revenue contributed by acquisitions of $561$1 million, with the remainder of the increase coming from organic revenue growth of $104 million, or 6.2%. Revenue was negatively impacted by $6 million of foreign currency translation.million. Organic revenue growth was primarilyled fromby strengthservice ingrowth theof dewatering$62 applications in the emerging markets and the U.S.million, due to increased sales volume, strongfavorable rental demandprice realization in North America. Organic revenue growth from the capital and other applications of $55 million was driven by increased capital project revenue in Canada.North America.

(a)Foreign currency translation impact for the year primarily due to the weakeningstrengthening in value of various currencies against the U.S. Dollar, the largest being the CanadianEuro, Dollar,British Chinese Yuan, Chilean Peso, Brazilian RealPound and the HungarianSwedish Forint,Krona, offset by the strengtheningweakening in the BritishCanadian Pound.Dollar.

Gross margin as a percentage of consolidated revenue increased 60100 basis points to 37.5%38.5% in 20242025 as compared to 36.9%37.5% in 2023. The gross margin increase included 40 basis points of favorable impacts from decreases in realignment costs and special charges as compared to the prior year and 10 basis points of unfavorable impacts from increased intangible amortization expense.2024. The gross margin increase for the year included favorable operational impacts of 280370 basis points, drivenconsisting byof 180230 basis points of productivity savings and 90140 basis points of price realization. These impacts were partially offset by 250290 basis points of negativeunfavorable operating impacts, driven by 150190 basis points of inflation,inflation 50and 60 basis points of unfavorable impactsmix. fromThe thegross Evoquamargin acquisition,increase andalso 30included 20 basis points of increasedfavorable spendingimpacts onfrom strategica investments.net decrease in acquired intangible asset amortization, special charges, and realignment costs as compared to the prior year.

For the yearyears ended December 31, 2024,2025, the charges incurred primarily related to actionssimplification takenactions, informed by 80/20 principles, to further streamline ourthe organization in order to strengthen our competitive positioning and the ability to better serve our customers. The charges incurred were across all of our segments, with the majority of the charges impacting the Water SolutionsInfrastructure and Services andApplied Water Infrastructure segments.

As a result of the actions initiated in 2024,2025, we achieved savings of approximately $8$29 million in 20242025 and estimate annual future net savings beginning in 20252026 of approximately $55$80 million to $120 million, resultingthe majority of which is expected to be realized in $47 million of incremental savings from 2024 actions.2026.

Operating income was $1,223 million (operating margin of 13.5%) during 2025, an increase of $214 million, or 21.2%, when compared to operating income of $1,009 million (operating margin of 11.8%) during 2024, an increase of $357 million, or 54.8%, when compared to operating income of $652 million (operating margin of 8.9%) during the prior year. Operating margin expansion included favorableunfavorable impacts of 15010 basis points from a net decreaseincrease in special charges, restructuring and realignment costs, and acquired intangible asset amortizationamortization, and special charges as compared to the prior year. Additionally, operating margin included 490540 basis points of expansion from favorable operating impacts, driven by a 270330 basis point increase from productivity savings,savings 130and 190 basis points from price realization, and 80 basis points from favorable volume.realization. Margin expansion was offset by 350360 basis points of unfavorable impacts driven by 210240 basis points of inflation and 8050 basis points of increasedunfavorable spending on strategic investments.mix. Excluding specialrestructuring charges,and realignment costs, acquired intangible asset amortization, and restructuringspecial and realignment costs,charges, adjusted operating income was $1,612 million (adjusted operating margin of 17.8%) for 2025 as compared to adjusted operating income of $1,373 million (adjusted operating margin of 16.0%) for 2024 as compared to adjusted operating income of $1,072 million (adjusted operating margin of 14.6%) during the prior year.

The table below provides a reconciliation of net income attributable to Xylem to consolidated EBITDA and adjusted EBITDA:

Operating income was $247$462 million for our MeasurementWater and Control SolutionsInfrastructure segment (operating margin of 13.2%17.5%) during 2024,2025, an increase of $114$106 million, or 85.7%,29.8%, when compared to operating income of $133$356 million (operating margin of 8.3%13.9%) during the prior year, or a total increase of 490360 basis points of operating margin. Operating margin increasesexpansion included favorableunfavorable impacts of 6070 basis points from thean netincrease impact ofin restructuring and realignment costs, offset by decreases in acquired intangible asset amortization,amortization and special charges being flat as compared to the prior year relative to an increase in revenue.year. Additionally, the operating margin increaseincreases included 870830 basis points from favorable operating impactsimpacts, driven by 340460 basis points from productivity savings, 260230 basis points of price realization, and 24070 basis points fromof favorable volume.mix. FavorableOperating impactsmargin weregrowth was partially offset by 440negative operating impacts of 400 basis points including 230 basis points of inflation and 90 basis points of unfavorable impacts driven by 270 basis points of inflation, 80 basis points of increased spending on strategic investments, and 60 basis points of increased inventory management costs.volume. Excluding restructuring and realignment costs, acquired intangible asset amortization, and special charges, adjusted operating income was $327$583 million (adjusted operating margin of 17.5%22.1%) during 20242025 as compared to adjusted operating income of $213$455 million (adjusted operating margin of 13.2%17.8%) during the prior year.

Adjusted EBITDA was $548$641 million (adjusted EBITDA margin of 23.4%24.3%) during 2024,2025, an increase of $179$112 million, or 49%,21.2%, when compared to adjusted EBITDA of $369$529 million (adjusted EBITDA margin of 21.9%20.7%) during the prior year. The increase in adjusted EBITDA margin was primarily due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA wasdid not unfavorablybenefit impactedfrom by the increase indecreased depreciation and software amortization expense.

Operating loss was $84$97 million for corporate and other during 2024,2025, aan decreaseincrease of $114$13 million, or 57.6%15.5% when comparing to operating loss of $198$84 million during the prior year. The decreaseincrease in operating loss for the year was primarilypartially dueoffset toby lower special charges and restructuring and realignment costs as compared to the prior year. Excluding special charges andcharges, restructuring and realignment costs, and acquired intangible asset amortization, adjusted operating loss decreasedincreased $16$23 million during 20242025 or 20.3%,36.5%, compared to the prior year. The decreaseincrease in adjusted operating loss is primarily driven by lowerincreased employeespending costson strategic investments and productivitysustainability savings.goals, as well as inflation.

Xylem reported revenue for the firstsecond quarter of 2026 of $2,125$2,336 million, an increase of 2.7%1.5% compared to $2,069$2,301 million reported in the firstsecond quarter of 2025. The revenue increase consisted primarily of organic growth of $30 million, or 1.3%, and favorable foreign currency impacts of $65$29 million,million. orRevenue 3.1%,growth was partially offset by slightthe organicnet declinesimpact of $9$31 million,million orof 0.4%.revenue loss from divestitures and $7 million of additional revenue from acquisitions.

Additional financial highlights for the quarter ended MarchJune 31,30, 2026 include the following:

•Orders of $2,228$3,086 million, up 3.2%42.0% from $2,158$2,174 million in the prior year period, and downup 0.3%40.9% on an organic basis.

•“special charges" defined as non-recurring costs incurred by the Company, such as those related to acquisitions and integrations, divestitures, non-cash impairment charges and other non-cash special charges. In 2026, these charges include reductions of expense related to the refunds of certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”).

•"free cash flow" defined as net cash from operating activities, less capital expenditures, as reported in the Statement of Cash Flows, less capital expenditures.Flows. Our definition of "free cash flow" does not consider certain non-discretionary cash payments, such as debt. The following table provides a reconciliation of free cash flow.

Revenue generated during the three and six months ended MarchJune 31,30, 2026 and 2025 was $2,125$2,336 million and $2,069$4,461 million, respectively, reflecting an increase of $56$35 million, or 2.7%,1.5%, and an increase of $91 million, or 2.1% compared to the prior year. Organic revenue decreasedincreased $9$30 million, or 0.4%1.3%, and $21 million, or 0.5% for the three and six months ended MarchJune 31,30, 2026.2026, respectively. Foreign currency translation had a favorable impact on revenue of $65$29 million for the three months ended MarchJune 31,30, 2026, and a favorable impact on revenue of $94 million for the six months ended June 30, 2026. The netloss of revenue from divestitures of $31 million was partially offset by a corresponding increase in revenue from acquisitions of $5$7 million wasfor offsetthe bythree amonths correspondingended June 30, 2026. For the six months ended June 30, 2026 the loss of revenue from divestitures forof the$36 threemillion monthswas endedpartially Marchoffset 31,by 2026.a corresponding increase in revenue from acquisitions of $12 million. The decreaseincrease in organic revenue for the three months ended MarchJune 31,30, 2026 is primarily due to reducedincreased capitalsales project revenuevolume in the U.S. in our Water SolutionsInfrastructure segment and Servicesstrong segment,data andcenter reduced backlog execution due to lower opening backlog in western Europe across multiple segments. Organic declines were partially offset by modest organicproject growth in our MeasurementApplied Water segment. The increase in organic revenue for the six months ended June 30, 2026 is primarily due to increased sales volume in the U.S. in our Water Infrastructure segment and Controlstrong Solutionsprice segmentrealization whereand backlog execution in the U.S. energy growth outpaced declines in water.our Applied Water segment.

The following tabletables illustratesillustrate the impact from organic growth, recent acquisitions and divestitures, and foreign currency translation in relation to revenue during the three and six months ended MarchJune 31,30, 2026:

(a)Foreign currency translation impact for the year due to the strengthening in value of various currencies against the U.S. Dollar, the largest being the Euro, British Pound, Australian DollarDollar, Hungarian Forint, Chinese Yuan and the CanadianNorwegian Dollar.Krone.

Water Infrastructure revenue increased $22$55 million, or 3.8%,4.5%, for the firstsix quartermonths ofended June 30, 2026 as compared to the prior year. Revenue growth for the quarterperiod included $29$43 million of favorable impacts from foreign currency translation partially offset byand organic revenue declinesgrowth of $5$12 million, or 0.9%,1.0%. andRevenue growth also included the net impact of $7 million of additional revenue from acquisitions offset by a loss of $5revenue of $7 million from divestitures. Revenue growth was driven by $31 million of revenueorganic fromgrowth divestituresin the transport application due to increased sales volume and additionalstrong revenuebacklog ofexecution $3in millionthe fromU.S. acquisitions.partially offset by market softness and reduced backlog execution in the emerging markets. Revenue in the treatment application declined $8by $19 million organically. Organic declines in the treatment application were driven by unfavorabletargeted orderexits on non-strategic capital revenue, market softness in emerging markets and reduced sales volume and strong prior yearcapital project revenue in the emerging markets, and reduced backlog execution in western Europe, partially offset by favorable timing of capital projects in the U.S. Organic revenue declines in the treatment application were partially offset by organic revenue growth in the transport application of $3 million, driven by backlog execution and price realization in the U.S., partially offset by unfavorable sales volume in western Europe and project timing in the emerging markets.

Applied Water revenue increased $13$18 million, or 3.0%3.7% for the firstsecond quarter of 2026 as compared to the prior year. Revenue growth for the quarter included $14organic revenue growth of $13 million, or 2.7%, and $5 million of favorable foreign currency translationtranslation. Building solutions revenue grew $14 million organically, due primarily to backlog execution and price in the U.S. and increased sales volume in western Europe related to the commercial market, partially offset by organic revenue declines of $1 million, or 0.2%. Revenue in the industrialresidential application declined by $8 million organically, primarily due to order softnessmarket in western Europe and the emerging markets,markets. partiallyOrganic offsetrevenue bygrowth favorable price realization in the U.S. These declines werewas partially offset by organic growthdeclines of $7$1 million fromin buildingthe solutions,industrial primarilyapplication due to commercialchanging customer dynamics coupled with lower backlog execution in thewestern U.S.,Europe, partially offset by residentialincreased softnessdata center project revenue in the emerging markets.U.S.

MeasurementApplied and Control SolutionsWater revenue increased $18$31 million, or 3.7%,3.4% for the firstsix quartermonths ofended June 30, 2026 as compared to the prior year. The revenueRevenue growth wasfor driventhe $11period included $19 million of favorable foreign currency translation and organic revenue growth of $7$12 million, or 1.4%.1.3%. OrganicBuilding solutions revenue growthgrew during the quarter was driven by $7$21 million fromorganically, thedue smartprimarily meteringto and other applications, driven by strongcommercial backlog execution and price realization in energy in the U.S. and increased sales volume in western Europe, partially offset by residential declines in the U.S.emerging in water with lower shippable backlog coming into the yearmarkets and unfavorablewestern sales volume in energy in Canada.Europe. Organic revenue growth was partially offset by organic declines of $9 million in the analyticsindustrial application wasdriven essentiallyby flatthe yearsame overfactors year.impacting the second quarter revenue declines.

WaterMeasurement and Control Solutions and Services revenue increaseddecreased $3$32 million, or 0.5%,5.9%, for the firstsecond quarter of 2026 as compared to the prior year. The decrease in revenue growth was primarily drivendue to a $29 million loss of revenue from divestitures and $7 million, or 1.4%, of decreased organic revenue, partially offset by $11$4 million of favorable impacts from foreign currency translationtranslation. Organic revenue declines were driven by $7 million from the smart metering and $2other millionapplications, ofdriven acquisitionby activity,the U.S., which had lower shippable backlog coming into the quarter in water partially offset by organic revenue declines of $10 million, or 1.8%. Revenue in the capital and other applications declined by $14 million organically, primarily due to reduced capital project revenue andincreased sales volume in theenergy. U.S.,Organic partiallyrevenue offsetremained by sales volumeflat in the emerginganalytics markets.application Organicas revenuecompared fromto the serviceprior application increased by $4 million due to rental price realization and sales volume in dewatering in the U.S.year.

The following tables illustrate the impact from organic decline/growth, recent acquisitions and divestitures, and foreign currency translation in relation to orders during the three and six months ended MarchJune 31,30, 2026:

(a)Foreign currency translation impact for the year due to the strengthening in value of various currencies against the U.S. Dollar, the largest being the Euro, British Pound, Australian DollarDollar, Hungarian Forint, Chinese Yuan and the CanadianNorwegian Dollar.Krone.

Backlog includes orders on hand as well as contractual customer agreements at the end of the period. Delivery schedules vary from customer to customer based on their requirements. Annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts. As such, beginning total backlog, plus orders, minus revenues, will not equal ending total backlog due to contract adjustments, foreign currency fluctuations, and other factors. Typically, capital projects require longer lead production cycles and deployment schedules and delays occur from time to time. Total backlog was $4,712$5,315 million at MarchJune 31,30, 2026, aan decreaseincrease of $383$297 million, or 7.5%,5.9%, as compared to MarchJune 31,30, 2025 backlog of $5,095$5,018 million. The decreasebacklog in backlogincrease was drivendue byto increased revenue outpacingstrong order intake and contract wins in the currentWater period,Solutions and Services and Applied Water segments, including the securing of a significant contract in Water Solutions and Services during the three months ended June 30, 2026. The backlog increase was partially offset by favorable impacts from foreign currency translation. The backlog decreasedeclines was led byin the Measurement and Control Solutions and Water Solutions and Services segments due to strong backlog execution and improved lead times. These backlog declines were partially offset by backlog growth in the Water Infrastructure and Applied Water segments primarily due to revenue outpacing orders and contract wins outpacing revenue, and favorable foreign currency impacts.wins. Backlog increased $97$700 million, or 2.1%,15.2%, at MarchJune 31,30, 2026, as compared to December 31, 2025 backlog of $4,615 million. The increase in backlog as compared to December 31, 2025 was driven primarily by strong order intake, including the securing of a significant contract in the Water Solutions and Services segment, partially offset by backlog declines in the Measurement and Control Solutions segment due to revenue outpacing orders and contract wins. We anticipate that approximately 60%40% of the backlog as of MarchJune 31,30, 2026 will be recognized as revenue in the remainder of 2026. There were no significant order cancellations during the quarter.

Gross margin as a percentage of revenue increased 70240 basis points to 37.8%41.2% for the three months ended MarchJune 31,30, 2026, as compared to 37.1%38.8% for the three months ended MarchJune 31,30, 2025. The gross margin increase wasincluded net favorable impacts of 70 basis points from decreases in special charges and acquired intangible amortization partially offset by net unfavorable impacts of 10 basis points from increases inincreased restructuring and realignment costs, flat special charges, and decreased acquired intangible amortization and special chargescosts as compared to the prior year. Gross margin expansion wasincluded driven by 460550 basis points of favorable operational impacts, leddriven by 310230 basis points of productivity savingssavings, and 110180 basis points of price realization.realization, and 80 basis points of favorable mix. These increases in gross margin were partially offset by 380 basis points of unfavorable operational impacts driven by 240 basis points of inflation and 12080 basis points of unfavorabledecreased mix.volume.

The following table presents operating expenses for the three and six months ended MarchJune 31,30, 2026 and 2025:

SG&A expenses increasedremained byflat $12at million$503 million, and decreased to $472 million, or 22.2%21.5% of revenue,revenue in the firstsecond quarter of 2026, as compared to $460 million, or 22.2%21.9% of revenue, in the comparable 2025 period. TheIn increasethe insecond quarter of 2026, SG&A inbenefited thefrom firstproductivity quartersavings, ofdecreased 2026special ascharges comparedand torealignment thecost, prior yearwhich was drivenoffset by inflation, unfavorable foreign currency impacts, inflation,effects and increased spending on strategic investments, partially offset by productivity savings, and lower realignment and special charges.investments.

R&D expense was $56$59 million, or 2.5% of revenue, in the second quarter of 2026, as compared to $58 million, or 2.5% of revenue, in the second quarter of 2025, and was $115 million, or 2.6% of revenue, in the firstsix quartermonths ofended June 30, 2026, as compared to $56$114 million, or 2.7%2.6% of revenue, in the firstsix quartermonths ofended June 30, 2025. R&D expense was fairly consistent year over year and in line with planned spending in this area.

From time to time, the Company incurs costs related to restructuring actions undertaken to optimize its cost base and improve its strategic positioning. During the three and six months ended MarchJune 31,30, 20262026, we incurred restructuring charges of $11 million and $42 million, respectively. During the three and six months ended June 30, 2025, we incurred restructuring charges of $31$22 million and $17$39 million, respectively.

There were no actions commenced in the three months ended March 31, 2026. Actions commenced in 2025 and 2026 were primarily related to simplification actions, informed by 80/20 principles, to streamline the organization and better serve our customers. We currently expect to incur between $40$50 and $55$65 million in restructuring costs for the full year.

Refer to Note 9, "Goodwill and Other Intangible Assets" for more information on intangible asset impairment charges incurred during the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025.

Operating income was $244$390 million (operating margin of 11.5%16.7%) during the firstsecond quarter of 2026, an increase of $13$85 million, or 5.6%,27.9%, when compared to operating income of $231$305 million (operating margin of 11.2%13.3%) during the prior year. Operating margin increased 30340 basis points. Operating margin expansion wasincluded partially offset by 10180 basis points of net unfavorablefavorable impacts from increasedlower special charges, restructuring and realignment costs, flatand acquired intangible amortization and decreased special charges relative to the prior year period. Additionally, operating margin expansion included 610680 basis points of favorable operational impacts drivenconsisting bymostly 430of 350 basis points of productivity savingssavings, and 150240 basis points of price realization.realization and 80 basis points of favorable mix. These favorable impacts were partially offset by 570520 basis points of unfavorable operational impacts, consistingdriven ofby 300270 basis points of inflation,inflation 120and basis points of unfavorable mix, 100160 basis points of decreased volume, and 50 basis points of increased spending on strategic investments.volume. Excluding restructuring and realignment costs, acquired intangible asset amortization, and special charges, adjusted operating income was $342$447 million (adjusted operating margin of 16.1%19.1%) for the firstsecond quarter of 2026 as compared to adjusted operating income of $325$402 million (adjusted operating margin of 15.7%17.5%) during the comparable quarter in the prior year.

Net income attributable to Xylem for the firstsecond quarter was $193$263 million (net income margin of 9.1%11.3%), an increase of $24$37 million as compared to net income attributable to Xylem in the prior year of $169$226 million (net income margin of 8.2%9.8%). The increase in net income attributable to Xylem was driven by increased operating income of $13 million, $14$85 million of decreased loss on sale of businesses,and decreased interest expense of $4 million, and an increase in the net loss attributable to non-controlling interest of $2 million, partially offset by increased income tax expense of $5$28 million, loss on sale of businesses of $16 million and decreasedincreased non-operating incomeexpense of $4$6 million.

Adjusted EBITDA was $437$544 million (adjusted EBITDA margin of 20.6%23.3%) during the firstsecond quarter of 2026, an increase of $14$42 million, or 3.0%,8.4%, when compared to adjusted EBITDA of $423$502 million (adjusted EBITDA margin of 20.4%21.8%) during the comparable quarter in the prior year, an increase to adjusted EBITDA margin of 20150 basis points. The increase in adjusted EBITDA margin was primarily driven by the same factors impacting the adjusted operating margin increase.

Operating income for our Water Infrastructure segment was $76$157 million (operating margin of 12.6%23.0%) during the firstsecond quarter of 2026, aan decreaseincrease of $4$54 million, or 5.0%,52.4%, when compared to operating income of $80$103 million (operating margin of 13.8%15.8%) during the prior year, or a total decreaseincrease in operating margin of 120720 basis points. Operating margin declinesexpansion included net unfavorablefavorable impacts of 220210 basis points from increaseddecreased restructuring and realignment costscosts, special charges and acquired intangible asset amortization and a slight decrease in special charges as compared to the prior year. Additionally, operating margin declinesexpansion included 480870 basis points of favorable operating impacts driven by 490 basis points of productivity improvements, 190 basis points of favorable mix and 80 basis points of price realization. Margin expansion was partially offset by 360 basis points of unfavorable operating impacts driven by 250 basis points of inflation, 120 basis points of unfavorable mix, and 50 basis points of foreign currency impacts. Margin declines were partially offset by 580 basis points of favorable operational impacts, driven by 520200 basis points of productivityinflation savings.and 60 basis points of increased spending on strategic investments. Excluding restructuring and realignment costs, amortization of acquired intangibles, and special charges, adjusted operating income was $117$168 million (adjusted operating margin of 19.4%24.6%) for the firstsecond quarter of 2026 as compared to adjusted operating income of $107$127 million (adjusted operating margin of 18.4%19.5%) for the firstsecond quarter of 2025, an increase of 100510 basis points.

Adjusted EBITDA was $132$182 million (adjusted EBITDA margin of 21.9%26.6%) for the firstsecond quarter of 2026, an increase of $12$40 million, or 10.0%,28.2%, when compared to adjusted EBITDA of $120$142 million (adjusted EBITDA margin of 20.7%21.8%) during the prior year. The increase in adjusted EBITDA margin of 120480 basis points was primarily driven by the same factors impacting the increase in adjusted operating margin.

Operating income for our AppliedWater WaterInfrastructure segment was $77$233 million (operating margin of 17.2%18.1%) during the firstsix quartermonths ofended June 30, 2026, an increase of $5$50 million, or 6.9%,27.3%, when compared to operating income of $72$183 million (operating margin of 16.6%14.9%) during the prior year, or a total increase in operating margin of 60320 basis points. Operating margin expansion included 70 basis points from decreased restructuring and realignment costs as compared to the prior year. Additionally, operating margin expansion included 920680 basis points of favorable operationaloperating impacts consistingdriven ofby 750510 basis points of productivity savings and 17070 basis points of favorable price realization. Operating marginMargin expansion was partially offset by 930360 basis points of unfavorable operational impactsimpacts, driven primarily by 350230 basis points of inflation, 260 basis points of decreased volume, 210 basis points of unfavorable mix,inflation and 10050 basis points of increased spending on strategic investments. Excluding restructuring and realignment costs, amortization of acquired intangibles, and special charges, adjusted operating income was $79$285 million (adjusted operating margin of 17.6%22.2%) for the firstsix quartermonths ofended June 30, 2026 as compared to adjusted operating income of $77$234 million (adjusted operating margin of 17.7%19.0%) for the firstsix quartermonths ended June 30, 2025, an increase of 2025, a decrease of 10320 basis points.

Adjusted EBITDA was $106$314 million (adjusted EBITDA margin of 20.9%24.4%) for the firstsix quartermonths ofended June 30, 2026, an increase of $3$52 million, or 3%,19.8%, when compared to adjusted EBITDA of $103$262 million (adjusted EBITDA margin of 21.0%21.3%) during the prior year, a decrease of 10 basis points.year. The decreaseincrease in adjusted EBITDA margin of 310 basis points was primarily duedriven toby the same factors as those impacting the decreaseincrease in adjusted operating margin.

Operating income for our Applied Water Solutions and Services segment was $56$101 million (operating margin of 9.9%20.2%) during the firstsecond quarter of 2026, an increase of $12$17 million, or 27.3%,20.2%, when compared to operating income of $44$84 million (operating margin of 7.8%17.4%) during the prior year, or a total increase in operating margin of 210280 basis points. The operatingOperating margin expansion included favorable impacts of 130270 basis points from decreased special charges, restructuring and realignment costs,costs and acquiredan intangibleincrease assetin amortizationincome relativefrom special items as compared to the prior year period.year. Additionally, operating margin expansion included 530770 basis points of favorable operational impacts includingconsisting 210primarily of 610 basis points of productivity savings and 140 basis points of price realization,realization. 170Operating basis points of productivity savings, 60 basis points of favorable foreign currency impacts and 50 basis points of favorable mix. Marginmargin expansion was partially offset by unfavorable operational impacts of 450 basis points driven by 310 basis points of inflation and 100760 basis points of unfavorable volume.operational impacts driven primarily by 480 basis points of inflation, 140 basis points of decreased volume and 70 basis points of unfavorable foreign currency impacts. Excluding special charges, acquired intangible asset amortization, and restructuring and realignment costs, adjusted operating income was $83$98 million (adjusted operating margin of 14.7%19.6%) for the firstsecond quarter of 2026 as compared to adjusted operating income of $78$94 million (adjusted operating margin of 13.9%19.5%) for the firstsecond quarter of 2025, an increase of 8010 basis points.

Adjusted EBITDA was $125$106 million (adjusted EBITDA margin of 22.1%21.2%) for the firstsecond quarter of 2026, an increase of $3$1 million, or 2%,1.0%, when compared to adjusted EBITDA of $122$105 million (adjusted EBITDA margin of 21.7%) during the prior year, ana increasedecrease of 4050 basis points. The increasedecrease in adjusted EBITDA margin was primarily due to the same factors as those impacting the increase in adjusted operating margin; however, adjusted EBITDA margin did not benefit from the relative impact of decreased depreciation and amortization expense.

Operating loss for corporate and other increaseddecreased $1$6 million, or 4.8%,21.4%, during the firstsecond quarter of 2026 compared to the prior year period. Operating loss increaseddecreased primarily due to increasedlower special charges and spending on and timing of strategic investments and inflation.investments. Excluding special charges, adjusted operating loss for corporate and other increaseddecreased $1 million, or 5.3%,4.3%, for the three months ended MarchJune 31,30, 2026, driven by thelower samespending factorson asand thosetiming drivingof thestrategic increase in operating loss.investments.

Interest expense was $4$7 million for the three months ended MarchJune 31,30, 2026, compared to $8$9 million for the comparable prior year period. The decrease in interest expense was primarily driven by increased interest income generated on cross currency swaps reducing interest expense.expense and lower outstanding equipment financing obligations, partially offset by increased interest expense from the Senior Notes due 2033 and Blue Notes due 2036.

The income tax provision for the three months ended MarchJune 31,30, 2026 was $55$103 million resulting in an effective tax rate of 22.3%,28.3%, compared to $50$75 million of expense resulting in an effective tax rate of 23.1%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 $125 million of 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 period ended MarchJune 31,30, 2026 was lowerhigher than the effective tax rate for the same period in 2025, primarily due to earningsthe mix.impact of the 2026 international metering business divestiture.

(a)The impact is primarily due to weakening of the Euro, ChileanCanadian PesoDollar and the CanadianChilean DollarPeso against the U.S. Dollar.