VLTO · Q2 2026 Earnings

Cautious

Veralto

Reported July 28, 2026

30-second summary

Veralto beat Q2 non-GAAP EPS by 11 cents ($1.11 vs. $0.96–$1.00 guide) and 9.9% above consensus, with core sales +4.2% clearing the 3.0–4.0% guide and adjusted operating margin at 24.6% blowing past the ~23.5% guide by 110bps. Management raised FY EPS to $4.35–$4.43 (+12–14% YoY) from $4.20–$4.28 and lifted the core sales floor to 4.0–4.5%. But the composition still hinges on PQI: Water Quality core sales +5.7% did the work while PQI core sales came in at +2.0%, and the H2 acceleration to "5% to 6%" now requires PQI to inflect meaningfully — a promise that has slipped from Q4 to Q1 to now Q3.

Headline numbers

EPS

Q2 FY2026

$1.11

+9.9% vs est.

Revenue

Q2 FY2026

$1.47B

+7.6% YoY

+1.6% vs est.

Gross margin

Q2 FY2026

61.2%

Free cash flow

Q2 FY2026

$0.33B

Operating margin

Q2 FY2026

21.4%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$1.47B	$1.37B	+7.5%	$1.42B	+3.7%
EPS	$1.11	$0.93	+19.4%	$1.07	+3.7%
Gross margin	61.2%	59.9%	+130bps	60.1%	+110bps
Operating margin	21.4%	22.8%	-140bps	23.8%	-240bps
Free cash flow	$0.33B	$0.32B	+1.5%	$0.17B	+92.9%

Guidance

Company raised full-year adjusted EPS guidance by 2.6% to $4.35-$4.43 and raised core sales growth floor to 4.0%-4.5%, driven by strong Q2 beats across EPS, revenue, and margin metrics.

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	Q2 FY2026	$0.96 to $1.00	$1.11	+$0.11 above high end of guide	Beat
Core Sales Growth (non-GAAP)	Q2 FY2026	3.0% to 4.0% YoY	4.2%	+20-120bps above guide	Beat
Adjusted Operating Profit Margin	Q2 FY2026	~23.5% (flat YoY)	24.6%	+110bps above guide	Beat

New guidance

Metric	Period	Guide	YoY
Adjusted Diluted EPS	Q3 FY2026	$1.06 to $1.09	—
Core Sales Growth (non-GAAP)	Q3 FY2026	4.0% to 5.0% YoY	+2.9% to +7.1% YoY
Adjusted Operating Profit Margin Expansion	Q3 FY2026	approximately 25 basis points YoY expansion	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Adjusted Diluted EPS	FY2026	$4.20 to $4.28	$4.35 to $4.43	+$0.07 to $0.15 (midpoint +$0.11 or +2.6%)	Raised
Core Sales Growth (non-GAAP)	FY2026	3.0% to 4.5% YoY	4.0% to 4.5% YoY	+100bps at low end	Raised
Free Cash Flow Conversion Ratio	FY2026	~100% of GAAP net earnings	>100% of GAAP net earnings	upgraded from ~100% to >100%	Raised

Reaffirmed unchanged this quarter: Adjusted Operating Profit Margin Expansion (25 to 50 basis points YoY expansion)

Segment KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Water Quality Core Sales Growth	5.7%	5.0%	—
Product Quality and Innovation Core Sales Growth	2.0%	4.6%	—
Total Company Core Sales Growth	4.2%	—	—

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Non-GAAP Adjusted Operating Profit Margin	24.6%	23.7%	—
Free Cash Flow Margin	22.3%	—	—
Operating Cash Flow	$340 million	$339 million	—

Management tone

Q3 FY2025 anchor: margin ceiling clipped, deceleration guided → Q4 FY2025 anchor: durability framing replaces growth acceleration → Q1 FY2026 anchor: segment bifurcation surfaces, cost program introduced → Q2 FY2026 anchor: raise-and-widen posture returns, PQI inflection re-promised for H2.

The FY margin expansion range moving from ~25bps back to 25–50bps is the most consequential tonal shift in the print — it restores the upside optionality that was clipped a year ago in Q3 FY2025. Combined with the FCF conversion lift from ~100% to >100%, management is signaling for the first time in five quarters that the structural framework has more room than the last several guides implied. The Q4 FY2025 brief flagged the double-digit EPS growth streak as ended; this print re-establishes it with the +12–14% FY EPS growth framing. From "durability" to double-digit growth in two quarters is a real narrative pivot — but it's driven by Q2 outperformance and $0.05 of tariff refunds, not by a structural reset investors can lean on.

The PQI acceleration promise has now been pushed forward three consecutive quarters. In Q4 FY2025 management said "meaningfully better" margins from tariff lapping in Q2 FY2026. In Q1 FY2026 they said PQI packaging/color weakness was "non-recurring" and would rebound in Q2. In this print, PQI came in at +2.0% (better than Q1's -1.0% but not "meaningful acceleration") and management now says PQI will accelerate "meaningfully in the second half, driven by increasing adoption of digital workflow solutions and contributions from recent product launches." The pattern: whenever PQI is asked to deliver, the inflection is one to two quarters out. The Q3 guide of 4.0–5.0% core requires PQI to run mid-single-digits — the first quarter that's mathematically required rather than aspirational.

The cost optimization program disclosed in Q1 remains completely unquantified in this release. No restructuring charge, no headcount figure, no run-rate savings sizing. With one quarter now behind us since disclosure, the absence continues to make the 2027–2028 EPS lever un-modelable. This is the third consecutive quarter management has advanced a narrative (data center dollar sizing, PQI ex-In-Situ margin, cost program quantum) that they decline to number.

Answers to last quarter's watch list

PQI segment core sales in Q2 — PQI core sales came in at +2.0%, swinging from Q1's -1.0% and clearing the flat-to-positive threshold the Q1 brief flagged. The FY guide was raised rather than cut, so the technical test is passed. But +2.0% is not the "meaningful acceleration" promised; it's a return-to-mediocre that requires a further step-up to mid-single-digits in H2 to hit the FY 4.0–4.5% range. Composition remains the story: Water Quality +5.7% is doing the work. Status: Resolved positively (narrowly — the guide-cut scenario didn't materialize)

Cost optimization program sizing — No restructuring charge, headcount figure, or run-rate savings quantum disclosed in the press release. One full quarter since the program was announced with zero incremental sizing. The framing remains "2027 half run-rate, 2028 full run-rate" without a dollar denominator. This is now the second consecutive quarter without a sizing disclosure, and the Q3 watch flag from the Q1 brief is not yet triggered but is approaching. Status: Not resolved

H2 core sales acceleration — Q2 landed at 4.2%, above the 4% high end of the guide. The Q1 brief framed this outcome as suggesting "Q1 was the trough" and preserving the FY range. H1 midpoint of ~3.1% now requires H2 to average ~5.5% to hit the FY 4.0–4.5% range. Q3 is guided 4.0–5.0%, implying Q4 needs 6–7% to reach the FY top end. Management has explicitly under-written H2 at 5–6%. The math is tight but coherent. Status: Resolved positively

Adjusted OMM in H2 — Q2 came in at 24.6% vs. the ~23.5% guide, a 110bps beat. H1 average of ~24.9% means H2 only needs to average ~24.1% for FY expansion of ~50bps YoY (vs. FY2025's 24.3%). The Q1 brief flagged the ~23.5% Q2 guide as embedding H2 margin compression; the actual print eliminates that concern and lets the FY high end of 25–50bps expansion reopen credibly. Status: Resolved positively

PQI margin disclosure ex-In-Situ — The press release does not break out PQI segment operating margin ex-In-Situ. Third consecutive quarter management has declined to give investors the tools to validate the 30–35% incremental fall-through claim from Q3 FY2025. With PQI core sales at +2.0% this quarter, the fall-through math is impossible to check. Status: Not resolved

What to watch into next quarter

PQI core sales in Q3 vs. the implicit mid-single-digit requirement — Q3 total core guide of 4.0–5.0% with Water Quality likely running ~5–6% implies PQI needs to accelerate to at least +3–4%. A PQI Q3 print below 3% would break the "meaningful H2 acceleration" narrative and force a rethink of the FY 4.0–4.5% floor.

IEEPA tariff refund recurrence — The $0.05 Q2 EPS benefit represented roughly half the guide-beat. Watch whether Q3 or Q4 discloses additional refund benefits, or whether Q2 was one-time. If one-time, the underlying operating beat was closer to $0.06 above the high end, not $0.11.

Cost optimization program sizing — Third quarter approaching without dollar quantum, headcount, or restructuring charge. The Q1 brief flagged "absence beyond Q3 would suggest the program is smaller than the framing implies." Q3 is now the deadline.

FY EPS cushion after two consecutive raises — FY EPS raised twice from $4.10–$4.20 → $4.20–$4.28 → $4.35–$4.43, or +$0.24 at midpoint YTD. With H1 delivering roughly $2.18 (Q1 $1.07 + Q2 $1.11), the implied H2 is $2.17–$2.25, requiring roughly +11–15% YoY EPS growth in H2. Watch whether the Q3 guide midpoint of $1.075 leaves room for a third raise or consumes the remaining cushion.

Adjusted OMM expansion trajectory toward the reopened 50bps ceiling — With H1 running ~24.9% vs. FY2025's 24.3%, the FY high end of +50bps expansion is achievable if H2 holds ~24.5%. Watch whether Q3 actual comes in at the ~25bps expansion floor (24.5%) or above — a Q3 print near 25% would put the +50bps FY outcome on the table for the first time since Q2 FY2025.

Sources

Veralto Q2 FY2026 press release — https://www.sec.gov/Archives/edgar/data/1967680/000196768026000043/vlto-20260728xex991.htm
Veralto Q1 FY2026 brief (Tapebrief, internal)
Veralto Q4 FY2025 brief (Tapebrief, internal)
Veralto Q3 FY2025 brief (Tapebrief, internal)
Veralto Q2 FY2025 brief (Tapebrief, internal)

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