The Business Hiding Inside America’s Broken Pipes

Water infrastructure is one of those problems where everyone agrees something needs to be done, but nobody can agree on when to pay for it.

Utilities and industrial operators are dealing with aging pipes, more frequent extreme weather, and stricter regulations. But replacing infrastructure is expensive, and big projects often get delayed or broken into smaller phases that stretch out over years. Xylem knows this better than anyone.

Water main breaks in the United States and Canada every year. An estimated $2B+ maintenance cost.

Here’s what you’ll learn: 

Water and wastewater operators know their pipes are failing. The average water main that breaks today is 53 years old. One in five water mains in the country has already exceeded its useful life but sits unreplaced because the money isn't there.

That math shows up everywhere. The EPA estimates the U.S. needs $625 billion over the next 20 years just to keep drinking water systems functional. Wastewater and stormwater add another $630 billion on top of that. Federal financing currently covers less than 2% of that documented need each year, and utility balance sheets aren't picking up the slack — only 59% of utilities say they feel fully able to cover costs through rates and fees. The rest are managing a slow-motion shortfall with no obvious fix in sight.

Climate change is making the wait more expensive. In 2024, NOAA recorded 27 major weather disasters in the U.S. that cost a combined $182.7 billion and killed 568 people. For water utilities, that means flooded stormwater systems, overwhelmed pumps, and treatment plants under pressure during the worst possible moments. "Good enough" infrastructure stops being good enough fast when a major storm hits.

Regulation is also forcing utilities to act whether they want to or not. New EPA rules require most water systems to find and replace lead pipes within 10 years. Separate rules now set strict limits on PFAS chemicals in drinking water, pushing utilities to monitor and treat on yet another front.

The daily cost of doing nothing is staggering. The U.S. loses 6 billion gallons of treated water every day, and the country absorbs 260,000 water main breaks a year, adding up to $2.6 billion in annual repair costs alone. That is the problem Xylem is building its business around.

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Xylem's answer to the budget problem is simple: if cities can't replace everything at once, help them see everything at once.

Most water systems are essentially blind. Utilities find out about leaks or unusual usage after a billing cycle or a customer complaint, not before. Xylem's Sensus brand is the top AMI vendor in North America by installed base, and its meters push near-real-time data to operators on what's actually moving through their pipes. Only about 40% of North American water endpoints have made that upgrade, which means most of the addressable market is still ahead of Xylem.

Meters create the data. Connectivity turns it into something useful. When devices across a system feed into one platform, small utility teams can monitor assets remotely instead of sending crews out manually. Analytics help them prioritize the worst leaks and the costliest inefficiencies rather than guessing. And lifecycle services keep Xylem in the relationship long after the hardware is installed. That last piece is not incidental. Xylem reports services revenue separately in its financials because recurring contracts are a deliberate part of the model.

The outcomes are documented. Anglian Water deployed over one million Sensus smart meters and found more than 300,000 leaks in four years. In Fairmont, West Virginia, the system helped customers cut excess water consumption by 25 million gallons a year across 14,500 meters. Those results matter because a platform that saves utilities real money becomes very hard to walk away from.

The numbers are starting to confirm that Xylem's strategy is working.

In 2025, Xylem brought in $9.0 billion in total revenue and turned 22.2% of that into adjusted EBITDA, up from 20.6% the year before. That 160-basis-point improvement is the key signal. When a business shifts its mix toward software and services, profits tend to grow faster than revenue because those streams cost less to deliver at scale. Hardware is a one-time sale. A services contract pays out every year.

The cash flow picture confirms it. Xylem generated $925 million in free cash flow in 2025. That number matters because it shows the business produces significantly more cash than it needs to operate, which gives Xylem the flexibility to keep investing in customers who are themselves constrained by tight budgets.

Water utilities are not going to modernize overnight. Most will start with monitoring, use the data to target the worst problems, and replace physical infrastructure only when the budget finally allows. That process plays out over years, sometimes decades. The companies that win are not the ones landing the biggest single contracts. They are the ones still in the room when the next phase of the project starts. Xylem gets paid at monitoring. It gets paid at remediation. It gets paid at replacement. That is a fundamentally different business than selling pumps.

Key takeaways to consider…

60% of your budget disappears into channels that never convert. If your pipeline has 100 qualified leads and you only close 8, the issue isn’t traffic. You’re likely treating every stage of the customer journey the same way. Sending cold prospects the same content as hot ones, using identical outreach for leads at completely different decision points.

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$9.0 billion - FY2025 revenue (+6% reported, +5% organic)

22.2% - FY2025 adjusted EBITDA margin (vs. 20.6% in FY2024)

$910 million - FY2025 approximate free cash flow

$1.563 billion - FY2025 services revenue (vs. $1.467 B in FY2024)

23,000 - Employees serving customers in ~150 countries

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