# Xylem Inc. (XYL) — Financial Analysis

**Exchange:** NYSE  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-29  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/XYL/thesis · /stocks/XYL/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: XYL
step: "04"
title: Financial Snapshot — Xylem Inc.
created: 2026-05-29
---

### Step 04: Financial Snapshot

#### Income Statement Summary (Last 3 Years)

| Metric | FY2022 | FY2023 | FY2024E |
|--------|-------:|-------:|--------:|
| Revenue | $5,523M | $7,362M | ~$8,100M |
| YoY Growth | +10.4% | +33.3% (Evoqua) | ~+10% |
| Organic Growth | +10% | +5% | +5–7% |
| Gross Profit | $2,210M | $2,794M | ~$3,120M |
| Gross Margin | 40.0% | 37.9% | ~38.5% |
| Adj. EBITDA | ~$940M | ~$1,150M | ~$1,420M |
| Adj. EBITDA Margin | ~17.0% | ~15.6% | ~17.5% |
| Adj. Operating Income | ~$775M | ~$920M | ~$1,150M |
| Adj. Operating Margin | ~14.0% | ~12.5% | ~14.2% |
| Adj. EPS | ~$3.02 | ~$3.40 | ~$4.10–4.30 |
| GAAP EPS | ~$2.10 | ~$1.50 | ~$2.80 |

*Note: FY2023 reflects ~7 months of Evoqua consolidation (May–December 2023). FY2024E estimates reflect full Evoqua year. GAAP EPS in FY2023 is depressed by acquisition-related charges including purchase accounting amortization, transaction costs, and integration expenses estimated at $500–600M combined.*

#### Revenue Bridge: Pre to Post Evoqua

The Evoqua acquisition is the dominant financial story. Pro forma FY2023 revenue (as if Evoqua owned for full year) was approximately $8.0B, implying the combination generates roughly $2.5B incremental annual revenue vs. standalone Xylem.

| Revenue Component | FY2022 | Pro Forma FY2023 | FY2024E |
|------------------|-------:|----------------:|--------:|
| Legacy Xylem | $5,523M | ~$5,800M | ~$6,100M |
| Evoqua (full year basis) | — | ~$2,100M | ~$2,000M |
| **Combined** | — | **~$7,900M** | **~$8,100M** |

#### Margin Analysis

##### Gross Margin Dynamics
Gross margin declined from ~40% (FY2022) to ~38% (FY2023) due to:
1. Evoqua mix dilution: Evoqua's services business carries lower gross margins (~30–32%) than Xylem's equipment/technology businesses (~42–45%)
2. Purchase accounting inventory step-up charges (~100–150 bps impact in initial integration period)
3. Supply chain cost pressures flowing through cost of goods

Recovery toward 38.5–39.5% in FY2024 reflects Evoqua integration cost synergies (targeted at $140M total) and improved supply chain conditions.

##### EBITDA Margin Trajectory
| Year | EBITDA Margin | Commentary |
|------|:-------------:|-----------|
| FY2021 | ~17.5% | Pre-Evoqua, peak efficiency |
| FY2022 | ~17.0% | Supply chain headwinds |
| FY2023 | ~15.6% | Evoqua integration costs + dilution |
| FY2024E | ~17.5% | Recovery + synergy capture |
| FY2025E | ~18.5–19.0% | Full synergy run-rate |
| FY2026E | ~19.5–20.0% | Margin maturity target |

Xylem's management target is 22%+ EBITDA margin at the "Xylem of the future" (2026+ horizon), implying approximately 250–400 bps of continued margin expansion from the FY2024 base.

##### Cost Synergy Program
Xylem targets $140M in annual run-rate cost synergies from the Evoqua integration, phased:
- Year 1 (2023): ~$25M realized
- Year 2 (2024): ~$75M cumulative
- Year 3 (2025): ~$140M full run-rate

Revenue synergies (cross-selling Evoqua services to Xylem utility customers; selling Xylem equipment into Evoqua's services contracts) are targeted at $100M+ but not given in formal guidance due to visibility uncertainty.

#### Key Adjustments (GAAP to Adjusted)

The gap between GAAP and adjusted metrics is meaningful in FY2023–2024 due to:
- **Amortization of acquired intangibles**: ~$300–350M annually (Evoqua customer relationships, technology)
- **Integration/restructuring costs**: ~$150–200M in FY2023, declining to ~$60–80M in FY2024
- **Purchase accounting charges**: ~$50–75M in FY2023
- **Stock-based compensation**: ~$60–70M annually

Investors and management focus on adjusted EPS and adjusted EBITDA as operational metrics; the amortization charges are non-cash and do not affect economic earning power.

#### Capital Expenditures

| Year | CapEx | % of Revenue |
|------|------:|:------------:|
| FY2022 | ~$165M | 3.0% |
| FY2023 | ~$250M | 3.4% |
| FY2024E | ~$280–320M | 3.5–4.0% |

Evoqua's services business is slightly more CapEx-intensive than legacy Xylem (Evoqua owns treatment equipment deployed at customer sites), explaining the modest uptick as a percentage of revenue. Management targets maintenance CapEx at 2.5–3.0% of revenue, with the remainder being growth/integration investment.

#### Free Cash Flow

| Year | FCF | FCF Margin | FCF/Adj. Net Income |
|------|----:|:----------:|:-------------------:|
| FY2022 | ~$550M | 10% | ~95% |
| FY2023 | ~$550M | 7.5% | ~85% |
| FY2024E | ~$750–850M | ~9.5% | ~90%+ |

FY2023 FCF was impacted by acquisition-related cash costs ($150M+) and working capital investment in the combined business. FY2024 should see a normalization toward Xylem's historical ~90–100% FCF/adjusted net income conversion. Management targets FCF conversion at 100%+ of adjusted net income at steady state.

#### Key Financial Ratios

| Ratio | FY2022 | FY2024E |
|-------|-------:|--------:|
| EV/EBITDA | ~16x | ~14x (on current price) |
| P/E (Adjusted) | ~28x | ~22–24x |
| P/FCF | ~30x | ~18–20x |
| Net Debt/EBITDA | 0.5x | ~2.5–3.0x |
| Dividend Yield | ~1.0% | ~1.1% |
| ROIC (Adj.) | ~11% | ~9–10% (temporarily diluted) |

The increase in financial leverage (from minimal net debt to ~$3B post-Evoqua) is the most notable near-term concern; Xylem has committed to deleveraging toward 2.0x by end of 2025.

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/XYL/fundamental

## Navigation

- Overview: /stocks/XYL
- Financials (this page): /stocks/XYL/financials
- Thesis: /stocks/XYL/thesis
- Investment Memo: /stocks/XYL/memo
- Coverage universe: /stocks