Water control and measurement company Badger Meter (NYSE: BMI) missed Wall Street’s revenue expectations in Q3 2026, with sales flat year on year at $235.9 million. Its non-GAAP profit of $1.24 per share was 1.8% above analysts’ consensus estimates.

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StockStory’s take

Badger Meter’s third quarter was marked by sales that remained flat compared to the prior year, missing Wall Street’s revenue expectations, but with better-than-expected earnings per share and steady operating margins. Management attributed the market’s positive reaction to continued growth in higher-margin software and ultrasonic meter products, as well as effective cost controls that helped offset persistent pressures in electronic component costs. CEO Ken Bockhorst highlighted that “demand feels good to us,” and pointed to sequential improvement in base sales due to ramping awarded projects and resilient day-to-day replacement business.

Looking ahead, Badger Meter’s guidance is supported by a pipeline of ongoing utility projects and the expectation of sequential and year-over-year revenue growth in the next quarter. Management is optimistic about sustaining growth momentum into next year, citing the formal launch of the OneNetwork platform and continued expansion in both metering and non-metering solutions. CFO Dan Weltzien cautioned, however, that supply chain pressures and electronic component availability remain risk factors, noting, “the challenges posed by these pressures have not abated,” even as the company aims to maintain margin discipline.

Key insights from management’s remarks

Management highlighted several drivers of the quarter’s performance, including software revenue growth, favorable product mix, and execution on awarded projects, while also addressing ongoing supply chain and cost pressures.

• Software revenue growth: The company continued to benefit from increased adoption of its software-as-a-service (SaaS) offerings, which deliver higher gross margins compared to hardware. This recurring revenue helped offset weaker advanced metering infrastructure (AMI) hardware sales.
• Ultrasonic meter mix: Higher sales of ultrasonic meters, which are more profitable than mechanical meters, contributed to both gross and operating margin improvement. Management emphasized that this product mix remains central to their structural margin advantage.
• Awarded projects ramping: Sequential sales growth was driven largely by the ramp-up of previously awarded utility projects, including large-scale deployments that provide revenue visibility. Management noted, however, that project timing remains inherently uneven due to factors like customer scheduling and weather.
• Supply chain and cost headwinds: Ongoing challenges in sourcing electronic components, exacerbated by AI and data center industry demand, put upward pressure on input costs. Management credited disciplined pricing and cost controls for mitigating much of this impact, but acknowledged risks remain.
• OneNetwork platform launch: The formal introduction of the OneNetwork platform at a major industry event was positioned as a strategic milestone, enhancing the company’s competitive differentiation by integrating AMI, network monitoring, and water quality data for utility customers.

Drivers of future performance

Badger Meter’s outlook is shaped by the continued ramp of utility projects, strategic product launches, and a focus on sustaining margin discipline amid ongoing cost pressures.

• Utility project momentum: Management expects sequential and year-over-year base sales growth in the next quarter, fueled by continued ramping of awarded projects and a healthy pipeline of future awards. However, they cautioned that quarter-to-quarter results will remain uneven due to project timing and customer dynamics.
• Product and software expansion: The launch of the OneNetwork platform and ongoing investment in non-metering businesses like UDlive and SmartCover are expected to drive long-term growth. Management believes these solutions address critical needs for utilities and will contribute to the company’s targeted high single-digit annual growth profile.
• Supply chain and cost management: Persistent pressures in electronic component costs and availability are expected to continue into next year, particularly given competition from the AI and data center sectors. Management plans to maintain pricing discipline and operational efficiency to protect margins, though risks from cost volatility remain elevated.

Catalysts in upcoming quarters

In the coming quarters, the StockStory team will watch (1) the pace of awarded utility project ramp-ups and any signs of accelerated customer deployments, (2) the adoption rate and customer feedback for the newly launched OneNetwork platform, and (3) the company’s ability to maintain margin discipline amid persistent supply chain and input cost challenges. Progress in expanding non-metering solutions and managing inventory levels will also be key indicators of execution.

Badger Meter currently trades at $148.66, up from $132.21 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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