VLTO · Q1 2026 Earnings

Cautious

Veralto

Reported April 28, 2026

30-second summary

Veralto beat Q1 non-GAAP EPS at $1.07 (vs. the prior $0.97–$1.01 guide) and raised FY2026 EPS to $4.20–$4.28 from $4.10–$4.20, with management announcing a new cost optimization program targeting 2027–2028 run-rate savings. But the print exposes the segment bifurcation the prior brief flagged: Water Quality core sales +3.8% while PQI core sales declined -1.0% YoY, pulling total core growth to 1.9% — the low end of the "flat to low-single digits" Q1 guide and below mid-point expectations. The Q2 core guide of 3.0–4.0% relies on PQI rebounding from a "non-recurring" packaging/color shortfall that management has not yet quantified.

Headline numbers

EPS

Q1 FY2026

$1.07

Revenue

Q1 FY2026

$1.42B

+6.7% YoY

Gross margin

Q1 FY2026

60.1%

Free cash flow

Q1 FY2026

$0.17B

Operating margin

Q1 FY2026

23.8%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$1.42B	+6.7%	$1.40B	+1.9%
EPS	$1.07	—	$1.04	+2.9%
Gross margin	60.1%	—	59.3%	+80bps
Operating margin	23.8%	—	22.6%	+120bps
Free cash flow	$0.17B	—	$0.29B	-41.6%

Guidance

Strong Q1 FY2026 beat drives full-year EPS guidance raise of $0.09 midpoint; management expects sequential core sales growth acceleration through FY2026.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Adjusted Diluted EPS	Q1 FY2026	$0.97 to $1.01	$1.07	+$0.06 to +$0.10 above guide	Beat
Core Sales Growth (non-GAAP)	Q1 FY2026	flat to low-single digits YoY	1.9% YoY	at low end of 'flat to low-single digits' range but below mid-point expectations	Missed
Adjusted Operating Profit Margin	Q1 FY2026	approximately 24.5%	25.1%	+60 basis points above guide	Beat

New guidance

Metric	Period	Guide	YoY
Adjusted Diluted EPS	Q2 FY2026	$0.96 to $1.00	+3% to +7% YoY
Core Sales Growth (non-GAAP)	Q2 FY2026	3.0% to 4.0% YoY	—
Adjusted Operating Profit Margin	Q2 FY2026	~23.5%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Adjusted Diluted EPS	FY2026	$4.10 to $4.20	$4.20 to $4.28	+$0.10 to +$0.08 at high end; midpoint raised from $4.15 to $4.24	Raised

Reaffirmed unchanged this quarter: Core Sales Growth (non-GAAP) (3.0% to 4.5% YoY), Adjusted Operating Profit Margin Expansion (~25 basis points), Free Cash Flow Conversion Ratio (~100% of GAAP net earnings)

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026
Water Quality Core Sales Growth	3.8%
Product Quality Core Sales Decline	-1.0%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Non-GAAP Adjusted Operating Profit Margin	25.1%
Total Company Core Sales Growth	1.9%
Free Cash Flow Margin (TTM)	18.6%
Operating Cash Flow	$182 million
Adjusted EPS Growth	12.6% YoY

Management tone

Q2 anchor: tariff neutralized, raise wrapped in "prudent" → Q3 anchor: margin ceiling clipped → Q4 anchor: durability framing, double-digit EPS streak ends → Q1 anchor: segment bifurcation surfaces, cost program introduced as future lever.

The narrative has now formally split into two stories. For four consecutive quarters management framed Veralto's growth as company-wide durability anchored on recurring revenue stickiness; this print breaks that frame by reporting Water Quality +3.8% and PQI -1.0% in the same quarter. The anchor from Kaplowitz's exchange — packaging and color weakness is "non-recurring, focused on discrete industrial end markets" — is doing heavy lifting. Calling a -1.0% segment print "non-recurring" without specifying the dollar size of the equipment shortfall or naming the inflection quarter is the same disclosure posture that produced "double-digit data center growth" without sizing for four quarters running. The pattern: when the number is favorable, qualitative is enough; when the number is unfavorable, qualitative is still enough.

The introduction of a multi-year cost optimization program is the most consequential tonal shift. Sprague's exchange anchored it: "approximately 50% of run-rate savings expected in 2027, full run-rate in 2028 ... no 2026 benefit included in guidance." Management framed it as "natural evolution post-separation," but three years after the spin the company is now telling investors a structural cost lever has been latent and is only now being pulled. Read against the Q4 brief's flagging of ~25bps margin expansion as the new structural cap, the timing reads as response, not coincidence — management needs a new EPS lever to defend the durability narrative now that double-digit organic EPS growth is gone and the FY OMM ceiling is fixed.

The growth-acceleration claim is now load-bearing in a way it wasn't last quarter. Q4 guided FY2026 core sales at low-to-mid single digits with Q1 flat-to-LSD; Q1 came in at 1.9% and Q2 is now guided to 3.0–4.0%. Management's "we expect core sales growth to accelerate as the year progresses" is the only path from 1.9% YTD to the 3.0–4.5% FY range. The Q2 brief flagged a similar "back-end-loaded margin payoff"; the Q3 brief flagged the slip; this Q1 print extends the pattern to top-line. Each quarter the H2 inflection gets re-promised.

Pricing language tightened versus Q4. The McNulty exchange explicitly distinguished Veralto's "surgical" pricing approach from competitors' 8–14% increases, with management defending the mid-to-high single-digit growth profile since spin as the validation. This is the first quarter pricing has been positioned defensively against peer benchmarks rather than as an offensive lever — a subtle concession that the easy pricing-led margin expansion of 2025 is behind the business.

Q&A highlights

Dean Dre · RBC Capital Markets

How much of water quality's core sales upside versus peers is attributable to Veralto's higher OpEx/services mix versus CapEx? What is the update on Trojan and UV quoting activity?

Management attributes strong water growth to products being integral to customer operations with high cost of failure. Municipal markets showing mid-single-digit growth with stronger wastewater trends from recycle/reuse drivers. Industrial showing mid-high single-digit growth driven by data centers, semiconductors, power, and mining. Trojan/UV quoting activity remains strong with good order book but longer cycle business (bookings shipping in Q4 2027).

7% total sales growth in Q1 202613% adjusted EPS growth in Q1 2026Municipal water markets: mid-single-digit growthIndustrial water markets: mid-high single-digit growth

Jeff Sprague · Vertical Research

What is the catalyst for the new cost optimization program? What levers are being pulled? Should we expect benefits in 2026 or is this geared for 2027-2028?

Cost optimization is part of continuous improvement mindset and natural evolution post-separation. Program allows leverage of functional attributes across enterprise while maintaining decentralized operating model. Most actions oriented toward end of 2026 (Q4); 50% of run-rate savings expected in 2027, full run-rate in 2028. No benefits baked into 2026 guidance.

Cost optimization program initiated as natural next step after 3-year post-separation journeyMost actions to be completed by Q4 2026Approximately 50% of run-rate savings expected in 2027Full run-rate savings expected in 2028

Andy Kaplowitz · Citi

What is driving packaging and color weakness in PQI in Q1 (down high single digits)? Are CPG companies concerned about inflation? Will PQI margins normalize given lumpiness in recent years?

Weakness in Q1 packaging/color is non-recurring, focused on discrete industrial end markets (automotive, textiles, building materials) driven by housing headwinds. CPG demand remains steady with strong quoting activity in marking and coding. PQI margins show sequential improvement and structure similar opportunities to water quality in H2 2026 and 2027.

Q1 packaging and color sales down high single digits due to non-recurring equipment salesWeakness concentrated in automotive, textiles, building materials end marketsCPG demand described as 'continued strong' and 'steady'Global Vision acquisition strengthens packaging/ingredient solutions workflow

John McNulty · BMO Capital Markets

Competitors in chemical treatment have implemented significant price increases (8-14%). Does Veralto see a need for similar pricing? What is the approach given raw material pressures from Iran conflict?

Management takes disciplined surgical approach to pricing, leveraging 75% direct-to-customer sales in water for customer intimacy. Partners with customers to offset rising costs but does so surgically. Mid-to-high single-digit core sales growth has been achieved with this approach since spin and is expected to continue.

75% of water sales are direct-to-customerDisciplined, surgical pricing approach vs. chunky competitor increasesMid-to-high single-digit core sales growth achieved with this approach since spinCustomer partnership model used to offset cost headwinds

Andrew Krill · Deutsche Bank

Can you provide an update on tariff headwinds? How are new Section 232 rules, Supreme Court ruling, and oil-driven cost inflation factored into guidance?

Prior year tariff impacts (from 2025) have been priced through; rollover impact stops in H2. New Section 232 impacts baked into guidance but much smaller than prior year (limited steel/aluminum component exposure). Middle East conflict commodity impacts also baked in. Company actively discussing pricing with customers. Expected pricing to be at high end of 100-200 basis points range for year, with PQI exceeding that.

Prior year tariff pricing actions completed; rollover stops in H2 2026New Section 232 tariff impact 'much smaller' than 2025 (limited steel/aluminum exposure)Tariff and commodity impacts included in guidanceExpected pricing: high end of 100-200 basis points for company, higher for PQI

Answers to last quarter's watch list

Q1 FY2026 core sales realization vs. flat-to-LSD guide — Q1 core sales came in at 1.9%, just clearing the 2% threshold flagged as the "cushion preserved" line and well inside the flat-to-LSD framing rather than above it. The Water Quality vs. PQI bifurcation (+3.8% vs. -1.0%) is what made the number — without PQI's drag, the print would have cleared comfortably. The Q2 guide of 3.0–4.0% requires PQI to turn positive; the FY 3.0–4.5% range now requires sustained H2 acceleration. The guide was met technically, but the composition is worse than the headline. Status: Continue monitoring

Implied PQ&I margin trajectory ex-In-Situ — PQI core sales declined -1.0% with margins showing sequential improvement, but the company did not break out segment OMM expansion ex-In-Situ this quarter. Management asserted PQI has the "same opportunity as Water Quality long-term" without quantifying the path. With PQI volumes negative, the 25–50bps OMM expansion thesis from the Q3 brief is now harder to validate — management is reframing the timeline ("H2 2026 and 2027") rather than demonstrating fall-through. Status: Not resolved

Tariff lapping in Q2 FY2026 — Q2 EPS guide of $0.96–$1.00 implies +3–7% YoY, and Q2 adjusted operating margin is guided to ~23.5% (flat to prior year). The Q1 actual margin of 25.1% beat by 60bps but Q2 guidance does not show a tariff-relief step-up — management instead introduced the cost optimization program, which has no 2026 benefit. The tariff-lapping margin tailwind appears to have been smaller than telegraphed, or absorbed by other costs. Status: Resolved negatively

Data center revenue disclosure — Management again declined to quantify data center revenue or its growth contribution, instead citing industrial water growing mid-to-high single-digits with data centers as one of several drivers (semiconductors, power, mining). Five quarters of qualitative "double-digit" growth without dollar disclosure. The walk-back from Q4 is now the operating posture. Status: Resolved negatively

Capital deployment cadence — Management cited the balance sheet's "flexibility to pursue additional acquisitions and share repurchases" without specifying H1 deployment splits. No deal closed this quarter; the Global Vision acquisition was mentioned in Q&A as a packaging/ingredient workflow asset, but its size and close timing weren't disclosed in the press release. Status: Continue monitoring

What to watch into next quarter

PQI segment core sales in Q2 — Q2 company core sales guide of 3.0–4.0% mathematically requires PQI to swing from -1.0% to roughly flat-to-positive while Water Quality holds ~4%. A PQI Q2 core sales print at -1% or worse confirms the packaging/color weakness is structural rather than non-recurring and forces a FY guide cut.

Cost optimization program sizing — Management has now signaled the program but disclosed neither dollar quantum nor headcount nor charge amount. Watch Q2 or Q3 for restructuring charge disclosure that lets investors size 2027 run-rate savings; absence beyond Q3 would suggest the program is smaller than the framing implies.

H2 core sales acceleration — FY 3.0–4.5% requires H2 well above the 2.5% Q1+Q2 implied midpoint. Watch whether Q2 actual lands above the 4% high end (suggesting Q1 was the trough) or at the 3% low end (suggesting H2 needs 4–5%+ to hit the FY guide).

Adjusted OMM in H2 — Q2 guide of ~23.5% is 160bps below Q1's 25.1%. For FY OMM expansion of ~25bps to hold, H2 needs to average roughly 24.5%. Watch the Q2 actual vs. the ~23.5% guide; a meaningful beat (Q1-style) would suggest the FY framework is preserved, while an in-line print compresses the H2 margin runway.

PQI margin disclosure ex-In-Situ — Management has now twice (Q4 and Q1) avoided giving investors the tools to back out In-Situ dilution from segment margins. Watch Q2 for any acquisition-adjusted segment metric; continued opacity means the 30–35% incremental fall-through claim from the Q3 brief cannot be verified.

Sources

Veralto Q1 FY2026 press release — https://www.sec.gov/Archives/edgar/data/1967680/000196768026000023/vlto-20260428xex991.htm
Veralto Q1 FY2026 earnings call Q&A
Veralto Q4 FY2025 brief (Tapebrief, internal)
Veralto Q3 FY2025 brief (Tapebrief, internal)
Veralto Q2 FY2025 brief (Tapebrief, internal)

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