Veralto's Q2 2026 sales rose 7.6% to $1.47B on 4.2% core growth led by Water Quality's industrial chemical treatment business; GAAP EPS rose 10% to $0.98, helped by a lower tax rate despite $29M of restructuring charges, and full-year adjusted EPS guidance was raised to $4.35–$4.43.
Revenue
$1.5B
+7.6% YoY
Net income
$241M
+8.6% YoY
Diluted EPS
$0.98
+10.1% YoY
Operating margin
21.4%
How VLTO compares with Industrials peers
Figure
VLTO
Peer median
Rank
Revenue growth (YoY)
+7.6%
+8.5%
49th of 79
Operating margin
21.4%
17.9%
21st of 78
EPS growth (YoY)
+10.1%
+13.4%
45th of 77
Rank 1 = fastest revenue growth, highest operating margin, fastest EPS growth. Peers are the other Industrials companies with a 2026 report on this site, each at its latest period we've analyzed; fiscal calendars differ, so periods are not always the same months.
Veralto's second quarter (ended July 3, 2026) combined a clear pickup in underlying demand, led by its water business, with a GAAP profit line held down by restructuring charges and propped up by a lower tax rate. Sales rose 7.6% to $1,474 million. Core sales, the company's measure that strips out acquisitions and currency swings, grew 4.2%, faster than the 3.1% for the half year as a whole. That implies Q1 core growth of roughly 2% (our calculation from the half-year figure). GAAP operating margin fell to 21.4% from 22.8% because of $29 million of charges under a new cost-cutting program. Diluted EPS still rose 10% to $0.98, helped by a 16.6% tax rate, down from 22.1%. Management raised its full-year adjusted EPS guidance by $0.15 to $4.35–$4.43.
At a glance
4.2% core sales growth. Water Quality grew 5.7% on this basis and Product Quality & Innovation 2.0%. Both segments accelerated from Q1, which is what the raised guidance rests on.
Adjusted EPS of $1.11, up 19%. About $0.05 of that was a one-time refund of tariffs paid under the International Emergency Economic Powers Act (IEEPA) that were later recovered. Without it, adjusted EPS growth was closer to 14%.
$328 million of free cash flow (cash from operations minus capital spending), up from $323 million, against $241 million of net earnings. The quarter turned more cash into the bank than it booked as profit.
Metric
Q2 2026
Q2 2025
YoY Change
Sales
$1,474M
$1,371M
+7.6%
Core sales growth (non-GAAP)
+4.2%
—
—
Gross margin
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Source: Veralto Form 10-Q for the quarter ended July 3, 2026, and Q2 2026 earnings release (Exhibit 99.1). Bps = basis points; 100 bps = 1 percentage point.
Where the 7.6% came from
Veralto's 7.6% sales growth breaks into three parts, per the 10-Q:
Core growth: 4.2 points. Price increases alone contributed 3.0 points, so higher volumes added only about 1 point. Most of the underlying growth came from charging more.
Acquisitions: 2.4 points. Veralto bought In-Situ, a maker of environmental water-monitoring sensors, in January for about $426 million. It bought GlobalVision, a packaging-artwork verification software company, in April for about $195 million.
Currency: 1.0 point. A weaker dollar made foreign sales worth more once converted.
By region, core sales grew 7.0% in North America and 4.9% in Western Europe. They slipped 0.1% in high-growth markets, where the filing cites low-single-digit declines in Latin America and China.
Water Quality: industrial water treatment did the work
Water Quality (brands include Hach, Trojan and ChemTreat) is 62% of sales. Revenue rose 10.1% to $908 million, with core growth of 5.7%. The filing is specific about the source. Core sales in the chemical treatment solutions business, ChemTreat's industrial water-treatment chemicals, grew 10.7%, "as a result of increased core sales across North America." The larger analytical instrumentation business, the Hach-type meters and test consumables used by municipal utilities, grew only 2.8%. Management's description of municipal demand as "steady" fits that figure.
Segment operating margin slipped to 25.1% from 25.6%. The 10-Q attributes 60 bps of the drop to restructuring charges and 40 bps to the lower margins of newly acquired businesses, mainly In-Situ. Those were partly offset by 50 bps from higher core sales and the tariff refunds. In-Situ also added intangible amortization, a non-cash charge that spreads the cost of acquired customer relationships and technology over several years. Segment amortization rose to $8 million from $3 million.
Product Quality & Innovation: marking and coding up, packaging and color still shrinking
Product Quality & Innovation (Videojet, Linx, Esko, X-Rite, Pantone) grew sales 3.8% to $566 million, with core growth of 2.0%. That improved on a flat first half (0.5% core for the six months). The two halves of the segment moved in opposite directions:
Marking and coding (the printers that put date and batch codes on packaged goods) grew core sales 3.5%, "driven by demand across most major end-markets and geographies."
Packaging and color (Esko software, X-Rite/Pantone color tools) saw core sales fall 1.4% in the quarter and 4.4% in the half year "due to the impact of global macroeconomic conditions on certain product lines."
The segment's GAAP operating margin dropped to 21.0% from 24.5%. The filing puts 380 bps of that on restructuring charges and 50 bps on GlobalVision deal costs. PQI is where most of the cost program is aimed: $60–68 million of the $85–105 million total.
The 2026 Cost Optimization Program
Veralto announced a restructuring in April 2026 to "simplify business processes and streamline our organization." It expects $85–105 million in total charges, substantially complete by the end of 2028. The plan covers workforce reductions, site consolidations and "functional transformation initiatives." Q2 absorbed the first $29 million, all of it severance: $22 million in PQI, $4 million in Water Quality and $3 million at corporate. $7 million had been paid out by quarter-end. On GAAP numbers, restructuring alone cut 200 bps from the quarter's consolidated operating margin. The payoff should show up as lower SG&A (selling, general and administrative costs) in later periods. In Q2, SG&A rose to 34.9% of sales from 32.2%, driven, per the 10-Q, "primarily by restructuring costs... incremental labor costs, and sales and marketing growth initiatives."
Takeaway: Water Quality carried this quarter, and within it one business did most of the work: industrial chemical treatment at +10.7%. The raised guidance depends on something else, though. PQI core growth has to "accelerate meaningfully" in the second half, while packaging and color is still shrinking. That is the part of the story still unproven.
What the headline numbers hide
Operating profit barely grew; EPS growth came from below the operating line. GAAP operating profit rose just $2 million (+0.6%) and pre-tax earnings rose $4 million (+1.4%), yet net earnings grew 8.6%. The gap is tax. The effective rate fell to 16.6% from 22.1%. The 10-Q credits the One Big Beautiful Bill Act tax changes and a $12 million net discrete benefit (one-time tax items, here mainly tied to restructuring costs and amended returns). The discrete benefit alone cut the rate by 2.9 points. At last year's 22.1% rate, Q2 net earnings would have been about $225 million, or roughly $0.92 per share instead of $0.98 (our calculation).
Buybacks helped too. Veralto repurchased $434 million of stock in the first half, including 1.5 million shares for $135 million in Q2. Diluted shares fell 1.6% to 245.8 million, worth roughly $0.02 of the year-on-year EPS gain.
Adjusted EPS includes a one-off in the other direction. Adjusted EPS of $1.11 excludes $17 million of amortization, the $29 million restructuring charge and $2 million of deal costs. It does not exclude the roughly $0.05 per share of IEEPA tariff refunds, which boosted gross margin and will not repeat. The adjusted tax rate also fell, to about 18.7% from about 21.9% (our calculation from the reconciliation). So of the $0.18 adjusted-EPS increase, around $0.05 came from tariff refunds, $0.04 from tax and $0.02 from buybacks. That leaves roughly $0.07, or about 7–8% growth, from operations.
GAAP vs adjusted gap widened. The difference between GAAP and adjusted operating profit rose to $48 million from $12 million, mostly because of restructuring ($29 million) and higher amortization from the acquisitions ($17 million vs $9 million). Amortization will recur for years, so part of that gap is permanent.
Cash conversion was good. Q2 operating cash flow of $340 million was 1.4 times net earnings. For the half year it was $522 million against $495 million of net earnings. Receivables rose only 2.7% since December, to $921 million, well below sales growth. Inventory rose 9.4% to $336 million, which partly reflects the acquired businesses.
The balance sheet is being used more actively. In H1 Veralto spent $620 million on acquisitions and $434 million on buybacks. It raised $725 million of new notes due 2032, and long-term debt rose to $2.68 billion from $1.97 billion. A further $700 million of 5.50% notes due September 2026 sits in current liabilities, against $2.1 billion of cash.
Guidance: raised, with the tariff refund inside it
Measure
New 2026 guidance
Prior guidance
Core sales growth
+4.0% to 4.5%
+3.0% to 4.5%
Adjusted operating margin
+25 to 50 bps
—
Adjusted diluted EPS
$4.35 – $4.43
$4.20 – $4.28
Free cash flow / net earnings
>100%
raised (prior level not stated in the release)
For Q3, Veralto guides to 4.0–5.0% core growth, about 25 bps of adjusted margin expansion and adjusted EPS of $1.06–$1.09. The $0.15 increase in the EPS range includes the $0.05 IEEPA refund already banked in Q2, so the raise from operations and tax is about $0.10. The core-sales range was raised only at the bottom; the top stays at 4.5%. H1 core growth was 3.1%, so hitting even the low end requires the 5–6% second-half acceleration management described.
Our read
Water Quality's industrial chemical-treatment business and pricing (3.0 points of growth) are doing the heavy lifting. The municipal instrument franchise is growing at a low-single-digit rate. Over the next two quarters, watch three things:
PQI core growth in Q3. Management expects meaningful acceleration from digital workflow adoption, new products and an industrial recovery. Packaging and color's −1.4% makes that the least certain part of the plan.
Whether restructuring savings show up in SG&A. Another $56–76 million of program charges are still to come. The 10-Q gives no figure for expected annual savings, so the benefit has to be judged from the margins.
How much of the EPS growth is repeatable. The lower tax rate appears partly structural (OBBBA), but the $12 million discrete tax benefit and the tariff refund are not. Q3 guidance of $1.06–$1.09 adjusted EPS comes with no mention of further tariff refunds, so the actual Q3 result should be a cleaner test of the underlying pace than Q2's 19%.