Data centers carry Watts Water to a record quarter and a higher 2026 guide

Twelve per cent organic growth is not something a water products manufacturer usually reports in a soft building market. Watts Water Technologies did exactly that in its third-quarter 2026 results on 4 November, and it gave most of the credit to data centers.

The numbers

Net sales reached $728.0 million, up 19% on a reported basis. Acquisitions added $41 million, or 7 points, and currency added $1 million. Adjusted operating income rose to $151.8 million from $113.3 million, and adjusted operating margin widened by 240 basis points to 20.9%. Adjusted diluted EPS came in at $3.40, up 36%.

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Reported figures look even stronger, with operating margin at 26.2% and diluted EPS of $4.34, but they include $39.3 million of tariff refunds that Watts treats as a special item and strips out of its adjusted results.

Where the growth came from

The Americas, by far the biggest region, posted sales of $553 million, up 19% reported and 12% organic. Watts put the organic gain down mainly to higher volume from data center growth and good price realisation, with acquisitions contributing a further 8 points. Segment margin rose 180 basis points. Europe grew 9% organically to $120 million, and the smaller APMEA region grew 30% organically to $56 million.

Chief Executive Officer Robert J. Pagano Jr. said demand "remained particularly strong in data center applications". He also pointed to higher interest rates and market uncertainty as continuing pressure on new construction.

The outlook

Watts now expects full-year 2026 reported sales growth of 17% to 18% and organic growth of 11% to 12%. It has lifted its adjusted operating margin guide to 20.3% to 20.4%. Free cash flow for the first nine months was $230.2 million, against $216.0 million a year earlier, and the company expects a strong fourth quarter for cash on normal seasonality.

The bigger picture

Last week Zurn Elkay reported 7% core growth and a margin jump. Watts now adds double-digit organic growth. The common thread among the water products manufacturers selling into buildings is that large, technical, water-hungry projects are filling the gap left by slower general construction. Our read is that the suppliers getting specified early on those projects are the ones taking the volume. Acquisitions matter too: they added 7 points of growth at Watts in the quarter alone.

What it means for hiring

We expect demand for specification sellers and applications engineers who can work with data center designers and mechanical contractors early in a project, not just quote at bid stage.
Acquisition-led growth on this scale usually needs integration, pricing and channel leaders to pull new product lines into one sales motion, and those people are hard to find.
With new construction still under pressure, manufacturers that move salespeople towards mission-critical and large-project work could gain share. In our view that is where commercial hiring budgets should follow.

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