Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 28, 2026 · Beat 7 of last 7 quarters
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Veralto's strong industrial water demand, particularly from data centers and the associated ecosystem (power, mining, semiconductor), underscores the AI infrastructure buildout's ripple effects on water treatment and analytics. The company's partnership with Dow for liquid cooling applications and its positioning in high-growth areas highlight the growing importance of water management in AI data center operations. As AI infrastructure expands, demand for reliable water quality and treatment solutions is likely to remain a durable growth driver for Veralto.
Veralto delivered Q2 total sales growth of 7.6% and adjusted EPS growth of 19.4%, with core sales growth of 4.2% (Water Quality 5.7%, PQI 2.0%). The company generated $328 million in free cash flow and repurchased over 5 million shares year-to-date. Management highlighted continued strength in industrial water demand, particularly from data centers and the associated ecosystem, and noted the acquisition of Alfaa UV, an India-based UV water treatment leader. They also discussed the integration of recent acquisitions (In-Situ, GlobalVision, Esko, TraceGains) and the progress of the cost optimization program.
Management raised full-year 2026 adjusted EPS guidance to $4.35–$4.43, representing 12%–14% growth year-over-year. They expect core sales growth to accelerate in the second half to approximately 5%–6%, led by volume with pricing moderating slightly but remaining at or above the high end of the range. Drivers include strong industrial water demand from data centers and the associated ecosystem (power, mining, semiconductor), water scarcity-driven recycling/reuse, and PQI momentum from digital workflow solutions and easier comps in Q4. Margin expansion is expected to be roughly 25 bps in Q3 and 25–50 bps for the full year, with Q4 north of 50 bps, largely led by PQI. The cost optimization program is on track, with minimal benefit in 2026 and the biggest benefit in 2027. Management remains committed to disciplined capital allocation, with a bias toward M&A and opportunistic buybacks.
“So based on where the funnels were at the end of Q2, we feel really good about the momentum and confident in the second half guide for core sales growth.”
on Second half core growth confidence
“So this will be a volume story in the second half of the year.”
on Volume-led growth
“And we are the right custodian to deliver the kind of value that those customers want. So I think we're well positioned here. We're looking at lots of things.”
on Data center opportunity and M&A
Can we start with the core revenue guidance that's implied and you referenced it here this morning, the impressive 5% to 6% for the second half. Maybe unpack the drivers and your degree of confidence in this acceleration.
Jennifer cited strong industrial water demand from data centers and the associated ecosystem (power, mining, semiconductor), water scarcity-driven recycling/reuse, and PQI strength in digital workflow solutions and marking/coding. Sameer added that the second half growth will be volume-led with pricing moderating slightly but still at or above the high end of the range.
You talked a little bit about the opportunity around data center, power gen, semi-cons, I think you threw mining in there, too. Is there any way you can kind of size that if you combine those or even help us understand the TAM in those businesses or opportunities or how big of a potential tailwind that may be to your top line in industrial water treatment?
Sameer said the revenue from data centers and the associated ecosystem is still a small number at the Veralto level, but becoming interesting. Jennifer noted ChemTreat is seeing strong double-digit growth, though it remains a smaller part of the overall business.
Maybe just a quick one on the pricing side. I think, Sameer, you said, back half, you're not assuming much in terms of further price acceleration. I guess, is that a function of the comps are a bit tougher? Or is that a function of you just don't see the need for it at this point, just given that costs may have stabilized?
Sameer explained that pricing in the second half is expected to remain strong, slightly above the high end of the range, but the moderation is due to lapping price increases from last year's tariffs and annual increases. In Q3, they return to normal price increases.