The following discussion should be read together with the unaudited Consolidated Financial Statements and the Notes thereto included elsewhere in this Form 10-Q, and in the Company’s Form 10-K for the year ended December 31, 2025. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about the Company’s business, operations and financial performance. The cautionary statements made in this Form 10-Q should be read as applying to all related forward-looking statements whenever they appear in this Form 10-Q. The Company’s actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those that are discussed under “Forward-Looking Statements” and elsewhere in this Form 10-Q. The Company has a disclosure committee consisting of members of senior management and other key employees involved in the preparation of the Company’s SEC reports. The disclosure committee is actively involved in the review and discussion of the Company’s SEC filings. Overview American Water is the largest and most geographically diverse, publicly traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers, collectively presented as the “Regulated Businesses.” Services provided by the Company’s utilities are subject to regulation by multiple state utility commissions or other entities engaged in utility regulation, collectively referred to as public utility commissions (“PUCs”). The Company also operates other businesses not subject to economic regulation by state PUCs that provide water and wastewater services to the U.S. government on military installations, as well as municipalities, collectively presented throughout this Form 10-Q within “Other.” See Part I, Item 1—Business in the Company’s Form 10-K for additional information. Financial Results The following table provides the Company’s diluted earnings per share prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and adjusted diluted earnings per share (a non-GAAP measure): For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Diluted earnings per share (GAAP): Net income attributable to shareholders $ 1.61 $ 1.48 $ 2.61 $ 2.53 Non-GAAP adjustments: Estimated impact of weather (0.01) 0.04 (0.01) 0.04 Income tax impact — (0.01) — (0.01) Net non-GAAP adjustment (0.01) 0.03 (0.01) 0.03 Incremental interest income from amended Homeowner Services Group seller note — (0.03) (0.01) (0.07) Income tax impact — 0.01 — 0.02 Net non-GAAP adjustment — (0.02) (0.01) (0.05) Transaction costs associated with the pending merger with Essential 0.01 — 0.04 — Income tax impact — — (0.01) — Net non-GAAP adjustment 0.01 — 0.03 — Total net adjustments — 0.01 0.01 (0.02) Adjusted diluted earnings per share (non-GAAP) $ 1.61 $ 1.49 $ 2.62 $ 2.51 40 Table of Contents For the three and six months ended June 30, 2026, diluted earnings per share (GAAP) were $1.61 and $2.61, respectively, compared to $1.48 and $2.53 per share in the same periods in 2025, which includes the net adjustments presented in the table above and discussed in greater detail in the “Adjustments to GAAP” section below. Excluding the net adjustments presented in the table above, adjusted diluted earnings per share (non-GAAP) were $1.61 and $2.62, respectively, compared to $1.49 and $2.51 per share in the same periods in 2025. Revenue growth through implementation of new rates in the Regulated Businesses from the recovery of capital and acquisition investments was partially offset by increased operating costs and higher depreciation and financing costs to support the current capital investment plan. Adjustments to GAAP Adjusted diluted earnings per share represents a non-GAAP financial measure and, as shown in the table above, is calculated as GAAP diluted earnings per share, excluding the impact of one or more of the following events: (i) estimated impact of weather; (ii) incremental interest income from the February 2, 2024 amendment to the Homeowner Services Group (“HOS”) secured seller promissory note (which was repaid in full in February 2026), which increased the aggregate principal amount from $720 million to $795 million and increased the interest rate from 7.00% per year to 10.00% per year; and (iii) transaction costs incurred associated with the proposed merger with Essential. The most directly comparable GAAP measure for adjusted diluted earnings per share is the reported diluted earnings per share (GAAP) and is reconciled in the table above. The Company believes that this non-GAAP measure provides investors with useful information by excluding certain matters that may not be indicative of its ongoing operating results (or, in the case of weather, that is outside the Company’s operational control and is subject to significant period-to-period variability), and that providing this non-GAAP measure will allow investors to better understand the businesses’ operating performance and facilitate a meaningful year-to-year comparison of the Company’s results of operations and without the estimated impact of weather. Although management uses this non-GAAP financial measure internally to evaluate its results of operations, the Company does not intend results reflected by this non-GAAP measure to represent results as defined by GAAP, and the reader should not consider them as indicators of performance. This non-GAAP financial measure is derived from the Company’s consolidated financial information but is not presented in the financial statements prepared in accordance with GAAP. This measure should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, this non-GAAP financial measure as defined and used above, may not be comparable to similarly titled non-GAAP measures used by other companies, and, accordingly, may have significant limitations on its use. Growth Through Capital Investment in Infrastructure and Regulated Acquisitions The Company continues to grow its businesses, with the substantial majority of its growth to be achieved in the Regulated Businesses through (i) continued capital investment in the Company’s infrastructure to provide safe, clean, reliable and affordable water and wastewater services to its customers, (ii) regulated acquisitions to expand the Company’s services to new customers and (iii) organic growth in existing systems. The Company currently plans to invest approximately $3.7 billion in these growth strategies in 2026. During the first six months of 2026, the Company invested $1.8 billion, primarily in the Regulated Businesses, as discussed below. •$1.4 billion capital investment, primarily in the Regulated Businesses, for infrastructure improvements and replacements; and •$346 million to fund acquisitions in the Regulated Businesses, which added approximately 52,700 customers. This includes the acquisition by the Company of certain entities owning water and wastewater system assets from Nexus Regulated Utilities, LLC on June 1, 2026, for a cash purchase price of $319 million, which added approximately 47,000 customers. •Approximately 9,000 new customers were added through organic growth in existing systems. Excluding the Essential Merger Agreement (as defined below), as of June 30, 2026, the Company had entered into 19 agreements with a total aggregate purchase price of $236 million for pending acquisitions in the Regulated Businesses to add approximately 56,600 additional customers. Agreement and Plan of Merger with Essential On October 26, 2025, parent company entered into an Agreement and Plan of Merger with Essential (the “Essential Merger Agreement”) to combine the companies in a stock-for-stock transaction. The Essential Merger Agreement provides that, upon the completion of the proposed merger, Essential’s shareholders will receive 0.305 shares of parent company common stock in exchange for each share of Essential common stock eligible for exchange in the merger. Upon completion of the proposed merger, Essential will be a wholly owned subsidiary of parent company, which will retain its existing name and remain headquartered in Camden, New Jersey. The Company will continue to maintain substantial operations in Pennsylvania, including Essential’s offices in Bryn Mawr and Pittsburgh, Pennsylvania. 41 Table of Contents Completion of the proposed merger is subject to certain customary conditions, including, among others, the receipt of required approvals from all applicable PUCs (of which Kentucky, Ohio and Virginia have already been received) on such terms and conditions that would not, individually or in the aggregate, result in a Burdensome Effect (as defined in the Essential Merger Agreement), and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The Company currently estimates that the closing of the proposed merger will occur by the end of the first quarter of 2027. However, there can be no guarantee that all of the closing conditions and approvals will be satisfied, and the failure to complete the proposed merger on a timely basis or at all may adversely affect the Company’s financial condition and results of operations. For the three and six months ended June 30, 2026, $4 million and $9 million, respectively, of merger-related costs were included in Operation and maintenance expense in the Consolidated Statements of Operations. As of June 30, 2026, the Company has incurred a total of $22 million of merger-related costs, including costs incurred in 2025. Other Matters PFAS Multi-District Litigation Several of the Company’s utility subsidiaries are parties to a multi-district litigation (the “MDL”) lawsuit, which commenced on December 7, 2018, in the U.S. District Court for the District of South Carolina, against manufacturers of certain PFAS for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems owned and operated by these utility subsidiaries and throughout their service areas. Settlements with several defendants in the MDL have received final approval by the MDL court. As of June 30, 2026, the Company has received settlement payments from defendants in the MDL totaling $234 million, net of legal fees and administrative costs. The Company is seeking regulatory approval from the respective PUCs to apply the net proceeds of the settlement payments for the benefit of customers, where permissible. As of July 1, 2026, out of 11 Company utility subsidiaries that are parties to the MDL settlements and have filed to obtain such regulatory approval, approvals have been obtained for seven, two have been denied and two remain pending. When and as received, funds are initially being held in a law firm escrow account prior to distribution to the Company’s utility subsidiaries that are parties to the MDL settlements after approval or denial is received from the applicable PUCs. As of June 30, 2026, the funds held in the escrow account and not yet transferred to the Company or returned to customers, totaled $131 million and have been recorded on the Company’s Consolidated Balance Sheet within other current assets. As of June 30, 2026, the Company has recorded a total regulatory liability of $158 million and approximately $101 million of the escrowed funds were transferred from the escrow account for distribution to the Company’s utility subsidiaries. The Company anticipates that, during 2026, it may receive one or more additional settlement payments from parties to the MDL settlements. Military Services Group On July 13, 2026, the U.S. Army contract for Fort Lee, in Virginia, was transferred from the Company’s Virginia subsidiary to MSG. This contract represents the 19th installation in MSG’s footprint. Regulatory Matters General Rate Cases The table below summarizes the annualized incremental revenues, assuming a constant sales volume and customer count, resulting from general rate case authorizations that are effective during 2026. The amounts include reductions for the amortization of the excess accumulated deferred income taxes that are generally offset in income tax expense. (In millions) Effective Date Amount General rate cases by state: Pennsylvania August 13, 2026 $ 75 West Virginia March 1, 2026 20 Maryland February 26, 2026 2 California, Attrition Increase (a) January 1, 2026 14 Total general rate case authorizations $ 111 (a)The effective annualized incremental revenue increase for the 2026 attrition year was finalized through the standard Advice Letter process with the California Public Utilities Commission in January 2026. 42 Table of Contents On July 27, 2026, the Pennsylvania Public Utilities Commission (the “PaPUC”) released an order approving the adjustment of base rates pursuant to a general rate case filed by the Company’s Pennsylvania subsidiary on November 14, 2025. The PaPUC approved a $75 million annualized increase in the Pennsylvania subsidiary’s water and wastewater system revenues, excluding infrastructure surcharges of $24 million, based on an authorized return on equity of 9.55%, a common equity ratio of 54.23% and a long-term debt ratio of 45.77%, and authorized rate base of $6.6 billion, which reflects approximately $1.2 billion of capital investments to be made through mid-2027. The new rates will take effect on August 13, 2026. On March 5, 2026, the Public Service Commission of West Virginia (the “WVPSC”) issued an amended order that approves the adjustment of the Company’s West Virginia subsidiary’s base rates requested in a general rate case filed on May 5, 2025. The general rate case order approved an annualized increase of approximately $20 million in water and wastewater system revenues, which excludes previously recovered infrastructure surcharges of approximately $13 million, based on an authorized return on equity of 9.80%, a common equity ratio of 51.00% and a debt ratio of 49.00%. As of March 5, 2026, the West Virginia subsidiary’s view of its authorized rate base, which was not stated in the general rate case order, is approximately $1.1 billion. The increased water and wastewater revenues related to this base rate adjustment are being driven primarily by approximately $239 million of related water and wastewater system capital investments made since the completion of the West Virginia subsidiary’s previous rate case and through February 2026. The new water and wastewater rates became effective as of March 1, 2026. On February 26, 2026, the Public Service Commission of Maryland (the “MDPSC”) issued an order approving the joint settlement of the general rate case filed on August 1, 2025, by the Company’s Maryland subsidiary. A joint stipulation and settlement agreement by and among the Maryland subsidiary, the Office of People’s Counsel, and the Staff of the MDPSC was filed with the MDPSC on January 22, 2026. The general rate case order approves a consolidated annualized increase in water revenues of approximately $2 million, with approximately $1 million of the increase to be included in rates effective concurrently with the date of the general rate case order, and the remainder effective January 1, 2027. The Maryland subsidiary’s view of its return on equity, common equity ratio and debt ratio (each of which is based on the information included in the general rate case order and the joint stipulation and settlement agreement, but was not disclosed therein), is 9.75%, 52.32% and 47.68%, respectively. The annualized incremental revenue is driven primarily by approximately $22 million of capital investments completed by the Maryland subsidiary since its last general rate case approval in 2019. On December 5, 2024, the California Public Utilities Commission (the “CPUC”) approved a final decision adopting the terms of a partial settlement agreement filed on November 17, 2023, in the Company’s California subsidiary’s general rate case originally filed on July 1, 2022. Incorporating the then currently effective return on equity of 10.20%, the decision provides incremental annualized water and wastewater revenues of $21 million in the 2024 test year, and an estimated $16 million in the 2025 escalation year and $16 million in the 2026 attrition year. On September 19, 2025, the California subsidiary filed a petition to modify the CPUC order, seeking clarification from the CPUC on the method used to calculate the Conservation Adjustment for Rate Tier Designs (“CART”), specifically for the California subsidiary’s Monterey service area. The CART is a ratemaking mechanism that allows the Company to recover, in subsequent periods, a portion of the impact on operating revenues as a result of implementing customer rates structured to promote conservation usage. On October 20, 2025, the California Public Advocate submitted a response opposing the California subsidiary’s request and stating the request should instead be addressed in the California subsidiary’s pending base rate case. On October 30, 2025, the California subsidiary filed a reply to the California Public Advocate’s response, which underscored the need for clarity on the CART calculation. The California subsidiary expects resolution of the petition to modify later in 2026. Pending General Rate Case Filings On July 1, 2026, the Company’s Missouri subsidiary filed a request with the Missouri Public Service Commission for new water and wastewater rates. The request seeks annualized incremental revenue of $179 million, excluding infrastructure surcharges of $32 million. The request is based on a return on equity of 10.50% and a capital structure with an equity component of 50.30% and a long-term debt component of 49.70%. The requested annualized incremental revenue is driven primarily by approximately $1.6 billion of incremental capital investments completed and planned by the Missouri subsidiary from June 2025 through May 2028, the forecasted future test period. The Missouri subsidiary anticipates that new rates will take effect in June 2027. Pursuant to statutory requirements, the Missouri subsidiary will implement subsequent rate adjustments following the conclusion of the future test year based on required reconciliations, subject to regulatory approval. On May 15, 2026, the Company’s Kentucky subsidiary filed a request with the Kentucky Public Service Commission (the “KPSC”) to adjust its water rates. As filed, the request seeks aggregate annualized incremental revenues of $18 million. The Kentucky subsidiary intends to put interim rates into effect beginning on December 14, 2026. The difference between the interim rates and final approved rates will be subject to refund. The request is based on a proposed return on equity of 10.75% and a proposed capital structure with a common equity component of 52.29% and a non-equity component of 47.71%. The requested annualized incremental revenue is driven primarily by approximately $108 million of capital to be invested between January 2027 and December 2027. The request is subject to approval by the KPSC, and the general rate case is expected to be completed by the end of the first quarter of 2027. 43 Table of Contents On January 27, 2026, the Company’s Illinois subsidiary filed a request with the Illinois Commerce Commission (the “ICC”) to adjust its water and wastewater rates. The filing seeks a two-step rate increase in aggregate annualized incremental revenue, based on a proposed return on equity of 10.75%, of (i) approximately $119 million effective January 1, 2027, based on a future test year through December 31, 2027 and a capital structure with an equity component of 52.42% and a debt component of 47.58%, and (ii) approximately $15 million effective January 1, 2028, based on a future test year to include end-of-period rate base and a capital structure with an equity component of 52.74% and a debt component of 47.26%, in each case, exclusive of infrastructure surcharges. On June 23, 2026, as part of the standard rebuttal process, the Illinois subsidiary filed an update with the ICC to its request originally filed on January 27, 2026. The updated request seeks aggregate annualized incremental revenue of approximately $107 million effective January 1, 2027, with the reduction primarily driven by the removal of the impacts of CAMT from rate base as a result of Internal Revenue Service Notice 2026-7 issued in February 2026. The second step increase of $15 million proposed effective January 1, 2028, was unchanged. The request is driven primarily by approximately $577 million in capital investments made and to be made by the Illinois subsidiary from January 2026 through December 2027. The request must be approved by the ICC. On January 16, 2026, the Company’s New Jersey subsidiary filed a request with the New Jersey Board of Public Utilities (the “NJBPU”) to adjust its water and wastewater rates. The request seeks aggregate annualized incremental revenues of approximately $146 million and is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 55.18% and a debt component of 44.82%. On July 27, 2026, as part of the standard process to update the filing for actual costs incurred, the New Jersey subsidiary filed an update with the NJBPU to its request originally filed on January 16, 2026 and updated on April 24, 2026. The updated request seeks aggregate annualized incremental revenue of approximately $145 million, which is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 54.00% and a debt component of 46.00%. The requested annualized incremental revenue is driven primarily by an estimated $1.4 billion of capital investments completed and planned by the New Jersey subsidiary through December 2026. The filing is subject to the approval of the NJBPU. On November 3, 2025, the Company’s Virginia subsidiary filed a request with the Virginia State Corporation Commission (the “SCC”) to adjust its water and wastewater rates. The request seeks aggregate annualized incremental revenues of approximately $22 million and is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 51.79%. On June 5, 2026, the Virginia subsidiary filed with the SCC a “black box” stipulation of settlement that agreed to a $16 million annualized increase in the Virginia subsidiary’s revenues. The stipulation of settlement also agreed, solely for purposes of the Virginia subsidiary’s future filings requiring a stated cost of capital and/or capital structure (including its annual information and water and wastewater infrastructure surcharge filings), that its return on equity will be 9.75% and its capital structure will consist of an equity component of 51.79%. The requested annualized incremental revenue is driven primarily by an estimated $115 million of capital investments completed and planned by the Virginia subsidiary from May 2025 through April 2027. The stipulation of settlement remains subject to SCC review and approval. Interim rates became effective May 2, 2026, with the difference between interim and final approved rates subject to refund to customers. On July 1, 2025, the Company’s California subsidiary filed an application with the CPUC to set new water and wastewater rates in each of its service areas for 2027 through 2029. On June 8, 2026, the California subsidiary filed with the CPUC a partial settlement agreement reached with the CPUC’s Public Advocates Office to determine the amount of incremental annualized water and wastewater revenue to be received by the California subsidiary in its general rate case filed on July 1, 2025. The requested annualized incremental revenue was driven primarily by approximately $750 million of capital investments completed and planned by the California subsidiary from 2025 to 2028. Under the partial settlement agreement, the total incremental annualized water and wastewater revenue to be received by the California subsidiary would be $24 million in the 2027 test year, $21 million in the 2028 escalation year, and $22 million in the 2029 attrition year. The California subsidiary’s revised proposed position in this general rate case was $43 million in the 2027 test year (updated to reflect a current level of revenue and sales), an estimated $22 million in the 2028 escalation year, and an estimated $26 million in the 2029 attrition year. The treatment in the general rate case of construction work in progress (“CWIP”) is the only primary issue that remains pending in the general rate case. If CWIP is ultimately excluded from rate base, it is estimated that the incremental annualized water and wastewater revenues to be received by the California subsidiary for the 2027 test year and the 2028 escalation year would decrease to $20 million and $19 million, respectively, and would remain at $22 million in the 2029 attrition year. New rates would be implemented by the California subsidiary as of January 1, 2027, upon a final decision issued by the CPUC with respect to the general rate case. Also, under the partial settlement agreement, the California subsidiary withdrew its request for a Fixed Cost Recovery Account, which was intended to be a full decoupling mechanism. 44 Table of Contents Infrastructure Surcharges A number of states have authorized the use of regulatory mechanisms that permit rates to be adjusted outside of a general rate case for certain costs and investments, such as infrastructure surcharge mechanisms that permit recovery of capital investments to replace aging infrastructure. Presented in the table below are annualized incremental revenues, assuming a constant sales volume and customer count, resulting from infrastructure surcharge authorizations that are effective during 2026: (In millions) Effective Date Amount Infrastructure surcharges by state: Missouri August 15, 2026 $ 18 Pennsylvania (a) 27 New Jersey May 30, 2026 25 Indiana March 18, 2026 15 West Virginia March 1, 2026 2 Missouri March 1, 2026 13 Illinois January 1, 2026 5 Total infrastructure surcharge authorizations $ 105 (a)In 2026, $11 million was effective January 1, $7 million was effective April 1 and $9 million was effective July 1. Pending Infrastructure Surcharge Filings On June 30, 2026, the Company’s West Virginia subsidiary filed an infrastructure surcharge proceeding requesting $5 million in additional annualized revenues. Consolidated Results of Operations Presented in the table below are the Company’s consolidated results of operations: For the Three Months Ended June 30, For the Six Months Ended June 30, (In millions) 2026 2025 2026 2025 Operating revenues $ 1,355 $ 1,276 $ 2,562 $ 2,418 Operating expenses: Operation and maintenance 481 480 974 948 Depreciation and amortization 240 221 477 437 General taxes 92 86 178 173 Total operating expenses, net 813 787 1,629 1,558 Operating income 542 489 933 860 Other (expense) income: Interest expense (167) (151) (330) (295) Interest income 3 22 15 44 Non-operating benefit costs, net 5 4 10 8 Other, net 22 12 36 29 Total other (expense) income (137) (113) (269) (214) Income before income taxes 405 376 664 646 Provision for income taxes 90 87 153 152 Net income attributable to common shareholders $ 315 $ 289 $ 511 $ 494 45 Table of Contents Segment Results of Operations The Company’s operating segments are comprised of its businesses which generate revenue, incur expense and have separate financial information which is regularly used by the chief operating decision maker to make operating decisions, assess performance and allocate resources. The Company operates its business primarily through one reportable segment, the Regulated Businesses segment. Other, primarily includes MSG, which does not meet the criteria of a reportable segment in accordance with GAAP. Other also includes corporate costs that are not allocated to the Company’s Regulated Businesses, interest income related to the secured seller promissory note from the sale of HOS, income from assets not associated with the Regulated Businesses, eliminations of inter-segment transactions and fair value adjustments related to acquisitions that have not been allocated to the Regulated Businesses segment. This presentation is consistent with how management assesses the results of these businesses. Regulated Businesses Segment Presented in the table below is financial information for the Regulated Businesses: For the Three Months Ended June 30, For the Six Months Ended June 30, (In millions) 2026 2025 2026 2025 Operating revenues $ 1,268 $ 1,178 $ 2,379 $ 2,227 Operation and maintenance 409 406 826 801 Depreciation and amortization 238 217 472 430 General taxes 86 81 168 162 Other (expense) income (108) (102) (217) (201) Provision for income taxes 96 84 157 144 Net income attributable to common shareholders $ 331 $ 288 $ 539 $ 489 Operating Revenues Presented in the tables below is information regarding the main components of the Regulated Businesses’ operating revenues: For the Three Months Ended June 30, For the Six Months Ended June 30, (In millions) 2026 2025 2026 2025 Water services: Residential $ 689 $ 637 $ 1,282 $ 1,197 Commercial 259 243 488 455 Fire service 49 48 97 93 Industrial 56 46 104 91 Public and other 85 78 155 145 Total water services 1,138 1,052 2,126 1,981 Wastewater services: Residential 74 71 148 139 Commercial 25 21 47 39 Industrial 3 5 5 10 Public and other 11 10 20 20 Total wastewater services 113 107 220 208 Other (a) 17 19 33 38 Total operating revenues $ 1,268 $ 1,178 $ 2,379 $ 2,227 (a)Includes other operating revenues consisting primarily of alternative revenue programs, miscellaneous utility charges, fees and rents. 46 Table of Contents For the Three Months Ended June 30, For the Six Months Ended June 30, (Gallons in millions) 2026 2025 2026 2025 Billed water services volumes: Residential 38,739 37,423 73,250 72,114 Commercial 19,310 19,066 36,863 36,263 Industrial 8,955 8,660 18,115 17,314 Fire service, public and other 13,459 12,643 25,411 25,035 Total billed water services volumes 80,463 77,792 153,639 150,726 For the three and six months ended June 30, 2026, operating revenues increased $90 million and $152 million, respectively, primarily due to increases of $52 million and $108 million, respectively, from authorized rate increases, including infrastructure surcharges, principally to recover infrastructure investment in various states. In addition, operating revenues increased $11 million and $17 million for the three and six months ended June 30, 2026, respectively, from water and wastewater acquisitions, as well as organic growth in existing systems. For both the three and six months ended June 30, 2026, operating revenues increased $15 million from higher customer demand. Also, for both the three and six months ended June 30, 2026, operating revenues increased $11 million due to warm, dry weather in the second quarter of 2026 and unfavorable weather impacts in the second quarter of 2025. Presented in the table below is information regarding the main components of the Regulated Businesses’ operation and maintenance expense: For the Three Months Ended June 30, For the Six Months Ended June 30, (In millions) 2026 2025 2026 2025 Employee-related costs $ 149 $ 140 $ 302 $ 289 Production costs 128 117 245 223 Operating supplies and services 72 84 148 156 Maintenance materials and supplies 19 26 47 55 Customer billing and accounting 19 22 43 42 Other 22 17 41 36 Total operation and maintenance expense $ 409 $ 406 $ 826 $ 801 For the three and six months ended June 30, 2026, operation and maintenance expense increased $3 million and $25 million, respectively, due to increased production costs from higher purchased water cost and usage, increased purchased power, increased chemical costs and increased waste disposal costs. In addition, operation and maintenance expense was higher due to increased employee-related costs and other operating expenses. The increase in operation and maintenance expense was partially offset by a decrease in operating supplies and services costs, primarily from lower technology related costs, and a decrease in maintenance materials and supplies costs. Depreciation and Amortization For the three and six months ended June 30, 2026, depreciation and amortization increased $21 million and $42 million, respectively, primarily due to additional utility plant placed in service from capital infrastructure investments. Other Expenses For the three and six months ended June 30, 2026, other expenses increased $6 million and $16 million, respectively, primarily due to higher interest expense from the issuance of incremental long-term debt partially offset by an increase in allowance for funds used during construction in the current periods. Provision for Income Taxes For the three and six months ended June 30, 2026, the Regulated Businesses’ provision for income taxes increased $12 million and $13 million, respectively. The Regulated Businesses’ effective income tax rate was 22.5% and 22.6% for the three months ended June 30, 2026 and 2025, respectively, and 22.6% and 22.7% for the six months ended June 30, 2026 and 2025, respectively. 47 Table of Contents Other Presented in the table below is information for Other: For the Three Months Ended June 30, For the Six Months Ended June 30, (In millions) 2026 2025 2026 2025 Operating revenues $ 87 $ 98 $ 183 $ 191 Operation and maintenance 72 74 148 147 Depreciation and amortization 2 4 5 7 General taxes 6 5 10 11 Interest expense (40) (35) (77) (65) Interest income — 21 11 42 Other income 11 3 14 10 (Benefit from) provision for income taxes (6) 3 (4) 8 Net (loss) income attributable to common shareholders $ (16) $ 1 $ (28) $ 5 Operating Revenues For the three and six months ended June 30, 2026, operating revenues decreased $11 million and $8 million, respectively, primarily from a decrease in capital projects in the Contract Services Group. Interest Expense For the three and six months ended June 30, 2026, interest expense increased $5 million and $12 million, respectively, primarily due to the issuance of incremental long-term debt. Interest Income For the three and six months ended June 30, 2026, interest income decreased $21 million and $31 million, respectively, primarily due to the repayment of the secured seller promissory note in February 2026. See Note 5—Mergers, Acquisitions and Divestitures—Secured Seller Promissory Note from the Sale of Homeowner Services Group, in the Notes to Consolidated Financial Statements for additional information. Other Income For the three and six months ended June 30, 2026, other income increased $8 million and $4 million, respectively, primarily due to the gain on treasury lock agreements that were terminated in May 2026. See Note 7—Long-Term Debt, in the Notes to Consolidated Financial Statements for additional information. Legislative Updates During 2026, the Company’s regulatory jurisdictions enacted the following legislation that has been approved and is effective as of July 29, 2026: •Indiana passed Senate Bill 241, which enables water and wastewater utilities to recover certain power and chemical costs if they rise or decrease within a 3% margin after a two-year period from the date of the eligible utility’s most recent rate case order. Legislation was signed by the Governor on March 6, 2026, and became effective on July 1, 2026. •Iowa passed Senate File 2304, which authorizes the Iowa Utilities Commission to approve alternative ratemaking mechanisms allowing investor-owned water and wastewater utilities to timely adjust rates for costs associated with qualifying system enhancement infrastructure investments outside of traditional rate cases. Legislation was signed by the Governor on June 1, 2026, and became effective on July 1, 2026. •Maryland passed House Bill 1164, which authorizes the MDPSC to extend existing limited-income customer assistance provisions to water and sewage disposal companies, authorizes the adoption of MDPSC-approved limited-income mechanisms, and requires the MDPSC to study the feasibility of mandating such mechanisms for these utilities. Legislation was signed by the Governor on May 12, 2026, and became effective on July 1, 2026. 48 Table of Contents During 2026, the Company’s regulatory jurisdictions enacted the following legislation that has been approved but is not yet effective as of July 29, 2026: •Virginia passed House Bill 770, which allows a public utility engaged in the business of furnishing water or sewerage facilities to propose, and the SCC to approve, rates and tariff provisions that provide discounted service to customers with an annual household income equal to or less than 200 percent of the federal poverty level. The discounted service program may include a tiered discount structure, and the utility may recover the costs of providing such discounted service through its base and general rates for service. Legislation was signed by the Governor on April 6, 2026, and will become effective on January 1, 2027. •Missouri passed House Bill 2397, which changes the voter threshold to dissolve a public water district from two-thirds to three-fifths if certain conditions are met. The legislation requires that any dissolution petition include a defined asset sale agreement, a plan to fully satisfy all debts and proof that another water supplier can reliably serve residents. Legislation was signed by the Governor on July 9, 2026, and will become effective August 28, 2026. Condemnation and Eminent Domain All or portions of the Regulated Businesses’ utility assets could be acquired by state, municipal or other government entities through one or more of the following methods: (i) eminent domain (also known as condemnation); (ii) the right of purchase given or reserved by a municipality or political subdivision when the original certificate of public convenience and necessity (“CPCN”) was granted; and (iii) the right of purchase given or reserved under the law of the state in which the utility subsidiary was incorporated or from which it received its CPCN. The acquisition consideration related to such a proceeding initiated by a local government may be determined consistent with applicable eminent domain law or may be negotiated or fixed by appraisers as prescribed by the law of the state or the jurisdiction of the particular CPCN. As such, the Regulated Businesses are periodically subject to condemnation proceedings in the ordinary course of business. For example, the Monterey system assets of Cal Am are the subject of a condemnation lawsuit filed by the Monterey Peninsula Water Management District (the “MPWMD”) stemming from a November 2018 public ballot initiative. For more information on this matter, see Note 11—Commitments and Contingencies—Proposed Acquisition of Monterey System Assets — Potential Condemnation in the Notes to Consolidated Financial Statements. Furthermore, the law in certain jurisdictions in which the Regulated Businesses operate provides for eminent domain rights allowing private property owners to file a lawsuit to seek just compensation against a public utility, if a public utility’s infrastructure has been determined to be a substantial cause of damage to that property. In these actions, the plaintiff would not have to prove that the public utility acted negligently. In California, for example, lawsuits have been filed in connection with large-scale natural events such as wildfires. Some of these lawsuits have included allegations that infrastructure of certain utilities triggered the natural event that resulted in damage to the property. In some cases, the PUC has allowed certain costs or losses incurred by the utility to be recovered from customers in rates, but in other cases such recovery in rates has been disallowed. Also, the utility may have obtained insurance that could respond to some or all of such losses, although the utility would be at risk for any losses not ultimately subject to rate or insurance recovery or losses that exceed the limits of such insurance. Tax Matters On February 18, 2026, the Internal Revenue Service issued Notice 2026-7, providing additional CAMT guidance that, among other changes, allows tax repairs to be deducted when calculating the CAMT liability and allows retroactive reliance for companies to file amended returns and recover CAMT already paid. As a result of this guidance, the Company does not expect to be in a CAMT liability position. In 2026, previously recorded current and deferred tax amounts relating to CAMT were adjusted in the Company’s Consolidated Financial Statements to reflect the revised calculation and refund claim status including the reversal of the $200 million CAMT credit carryforward outstanding as of December 31, 2025. Also, in 2026, the Company recognized additional uncertain tax liabilities of $50 million and, for the three and six months ended June 30, 2026, the Company recognized additional interest of $1 million and $3 million, respectively, as the CAMT credit carryforward is no longer available for offset. The Company will continue to evaluate CAMT applicability on a prospective basis. Liquidity and Capital Resources For a general overview of the sources and uses of capital resources, see the introductory discussion in Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources in the Company’s Form 10-K. 49 Table of Contents Liquidity needs for capital investment, working capital and other financial commitments are generally funded through cash flows from operations, public and private debt offerings, issuances of commercial paper and equity and, if and to the extent necessary, borrowings under the revolving credit facility of American Water Capital Corp. (“AWCC”), the Company’s wholly owned finance subsidiary. The Company expects to fund future maturities of long-term debt through a combination of external debt and, to the extent available, cash flows from operations. Since the Company expects its capital investments over the next few years to be greater than its cash flows from operating activities, the Company currently plans to fund the excess of its capital investments over its cash flows from operating activities for the 2026-2030 time period through a combination of long-term debt and equity issuances, in addition to the remaining proceeds from the sale of HOS, all of which were received as of February 13, 2026. See Note 5—Mergers, Acquisitions and Divestitures—Secured Seller Promissory Note from the Sale of Homeowner Services Group, in the Notes to Consolidated Financial Statements for additional information. If necessary, the Company may delay certain capital investments or other funding requirements or pursue financing from other sources to preserve liquidity. In this event, the Company believes it can rely upon cash flows from operations to meet its obligations and fund its minimum required capital investments for an extended period of time. On May 20, 2026, AWCC completed the sale of $500 million aggregate principal amount of its 4.625% Senior Notes due 2029. At the closing of this offering, AWCC received, after deduction of underwriting discounts and before deduction of offering expenses, net proceeds of approximately $498 million. AWCC used the net proceeds of the offering (i) to repay a portion at maturity of its 3.625% Exchangeable Senior Notes due 2026 (the “Exchangeable Notes”); (ii) to repay a portion of its commercial paper obligations; and (iii) for general corporate purposes. On April 1, 2026, AWCC completed the sale of $700 million aggregate principal amount of its 5.200% Senior Notes due 2036. At the closing of this offering, AWCC received, after deduction of underwriting discounts and before deduction of offering expenses, net proceeds of approximately $695 million. AWCC used the net proceeds of the offering (i) to lend funds to American Water and the Company’s regulated subsidiaries; (ii) to repay its commercial paper obligations; and (iii) for general corporate purposes. In August 2025, the Company entered into separate forward sale agreements (the “Forward Sale Agreements”) with several forward purchasers relating to an aggregate of 8,098,592 shares of the Company’s common stock at an initial forward price of $139.657 per share, which is equal to the price to public per share less an underwriting discount. Each Forward Sale Agreement will be physically settled unless the Company elects to settle such Forward Sale Agreement in cash or to net share settle such Forward Sale Agreement (which the Company has the right to do, subject to certain conditions, other than in the limited circumstances set forth in the Forward Sale Agreements). The Forward Sale Agreements provide for settlement on a settlement date or dates to be specified at the Company’s discretion on or prior to December 31, 2026. To the extent the Forward Sale Agreements are physically settled, the Company will issue common stock to the forward purchasers and receive cash proceeds based on the applicable forward sale price on the settlement date as defined in the Forward Sale Agreements. During June 2026, the Company elected to physically settle 3,403,756 shares at the forward price provided in the relevant Forward Sale Agreements. The net proceeds received by the Company from these settlements were $476 million. As of June 30, 2026, 4,694,836 shares of the Company’s common stock remain available for future settlement under the remaining Forward Sale Agreements. The Company intends to use any net cash proceeds that it may receive upon a future settlement of the Forward Sale Agreements for general corporate purposes. The Forward Sale Agreements have been classified as equity transactions because they are indexed to the Company’s common stock and physical settlement is within the Company’s control. On June 29, 2023, AWCC issued $1,035 million aggregate principal amount of Exchangeable Notes. The Exchangeable Notes matured in full on June 15, 2026, and the Company repaid, in cash, the outstanding principal balance. AWCC’s revolving credit facility provides $2.75 billion in aggregate total commitments from a diversified group of financial institutions. The revolving credit facility is used principally to support AWCC’s commercial paper program, to provide additional liquidity support, and to provide a sub-limit for the issuance of up to $150 million in letters of credit. The maximum aggregate principal amount of short-term borrowings authorized for issuance under AWCC’s commercial paper program is $2.6 billion. Subject to satisfying certain conditions, the credit agreement permits AWCC to increase the maximum commitment by up to an aggregate of $500 million. 50 Table of Contents Presented in the tables below are the aggregate credit facility commitment, commercial paper limit and letter of credit availability under the revolving credit facility, as well as the available capacity for each: As of June 30, 2026 (In millions) Commercial Paper Limit Letters of Credit Total (a) Total availability $ 2,600 $ 150 $ 2,750 Outstanding debt (1,500) (78) (1,578) Remaining availability as of June 30, 2026 $ 1,100 $ 72 $ 1,172 (a)Total remaining availability of $1.2 billion as of June 30, 2026, was accessible through revolver draws. As of December 31, 2025 (In millions) Commercial Paper Limit Letters of Credit Total (a) Total availability $ 2,600 $ 150 $ 2,750 Outstanding debt (1,590) (84) (1,674) Remaining availability as of December 31, 2025 $ 1,010 $ 66 $ 1,076 (a)Total remaining availability of $1.1 billion as of December 31, 2025, was accessible through revolver draws. Presented in the table below is the Company’s total available liquidity as of June 30, 2026, and December 31, 2025, respectively: (In millions) Cash and Cash Equivalents Availability on Revolving Credit Facility Total Available Liquidity Available liquidity as of June 30, 2026 $ 191 $ 1,172 $ 1,363 Available liquidity as of December 31, 2025 $ 98 $ 1,076 $ 1,174 The weighted-average interest rate on AWCC’s outstanding short-term borrowings was approximately 3.99% and 3.89% at June 30, 2026, and December 31, 2025, respectively. The Company believes that its ability to access the debt and equity capital markets, the revolving credit facility and cash flows from operations will generate sufficient cash to fund the Company’s short-term requirements. The Company believes it has sufficient liquidity and the ability to manage its expenditures, should there be a disruption of the capital and credit markets. However, there can be no assurance that the lenders will be able to meet existing commitments to AWCC under the revolving credit facility, or that AWCC will be able to access the commercial paper or loan markets in the future on acceptable terms or at all. See Note 8—Short-Term Debt in the Notes to Consolidated Financial Statements for additional information. As of June 30, 2026, the Company had entered into three treasury lock agreements, with a term of seven years and an aggregate notional amount totaling $75 million, to reduce interest rate exposure on expected future debt issuances. These treasury lock agreements terminate in October 2026 and have an average fixed interest rate of 4.39%. The Company designated these treasury lock agreements as cash flow hedges, with their fair value recorded in accumulated other comprehensive gain or loss. In May 2026, the Company terminated one treasury lock agreement, designated as cash flow hedge, with a term of three years and a notional amount of $400 million, realizing a pre-tax gain of less than $1 million recorded in accumulated other comprehensive income. The gain will be amortized through Interest expense over a three-year period, in accordance with the tenor of the notes issued on May 20, 2026. In May 2026, the Company terminated five treasury lock agreements, designated as cash flow hedges, with a term of 30 years and an aggregate notional amount totaling $175 million, realizing a pre-tax gain of $7 million included in Other, net in the accompanying Consolidated Statements of Operations. In March 2026, the Company terminated 10 treasury lock agreements designated as cash flow hedges, with a term of 10 years and an aggregate notional amount totaling $600 million, realizing a pre-tax net gain of $3 million recorded in accumulated other comprehensive income. The gain will be amortized through Interest expense over a 10-year period, in accordance with the tenor of the notes issued on April 1, 2026. 51 Table of Contents No ineffectiveness was recognized on hedging instruments for the three and six months ended June 30, 2026 or 2025. Cash Flows from Operating Activities Cash flows from operating activities primarily result from the sale of water and wastewater services and, due to the seasonality of demand, are generally greater during the warmer months. Presented in the table below is a summary of the major items affecting the Company’s cash flows from operating activities: For the Six Months Ended June 30, (In millions) 2026 2025 Net income $ 511 $ 494 Add (less): Depreciation and amortization 477 437 Deferred income taxes and amortization of investment tax credits 294 51 Other non-cash activities (a) (14) (19) Changes in assets and liabilities (b) (339) (309) Pension contributions (22) (22) Net cash provided by operating activities $ 907 $ 632 (a)Includes provision for losses on accounts receivable, pension and non-pension postretirement benefits and other non-cash, net. (b)Changes in assets and liabilities include changes to receivables and unbilled revenues, income tax receivable, accounts payable and accrued liabilities, accrued taxes and other assets and liabilities, net. For the six months ended June 30, 2026, cash flows provided by operating activities increased $275 million, due to the CAMT liability included in the Company’s extension payment in the second quarter of 2025. As a result of Notice 2026-7 issued by the Internal Revenue Service, in 2026, previously recorded current and deferred tax amounts relating to CAMT have been adjusted and offset in Deferred income taxes and amortization of investment tax credits and changes in assets and liabilities. Cash flows provided by operating activities also increased from normal business operations, primarily relating to changes other assets and liabilities. Cash Flows from Investing Activities Presented in the table below is a summary of the major items affecting the Company’s cash flows from investing activities: For the Six Months Ended June 30, (In millions) 2026 2025 Capital expenditures $ (1,519) $ (1,281) Acquisitions, net of cash acquired (346) (13) Proceeds from secured seller promissory note from the sale of the Homeowner Services Group 795 — Removal costs from property, plant and equipment retirements, net (89) (71) Purchases of available-for-sale fixed-income securities — (35) Proceeds from sales and maturities of available-for-sale fixed-income securities 32 60 Net cash used in investing activities $ (1,127) $ (1,340) For the six months ended June 30, 2026, cash flows used in investing activities decreased $213 million, primarily due to proceeds from the HOS secured seller promissory note repaid in February 2026 partially offset by increased payments for capital expenditures and acquisitions. The Company currently plans to invest approximately $3.7 billion on growth through capital investment in infrastructure and acquisitions in the Regulated Businesses in 2026. 52 Table of Contents Cash Flows from Financing Activities Presented in the table below is a summary of the major items affecting the Company’s cash flows from financing activities: For the Six Months Ended June 30, (In millions) 2026 2025 Proceeds from long-term debt, net of discount $ 1,293 $ 876 Repayments of long-term debt (1,061) (606) Proceeds from the issuance of common stock 476 — Net short-term (repayments) borrowings with original maturities less than three months (89) 710 Debt issuance costs (9) (7) Dividends paid (336) (311) Other financing activities, net (a) 35 41 Net cash provided by financing activities $ 309 $ 703 (a)Includes proceeds from issuances of common stock under various employee stock plans and the Company’s dividend reinvestment and direct stock purchase plan, net of taxes paid, and advances and contributions in aid of construction, net of refunds. For the six months ended June 30, 2026, cash flows provided by financing activities decreased $394 million, primarily due to net repayments of short-term commercial paper compared to net borrowings in the prior period, higher repayments of long-term debt and higher dividend payments, partially offset by higher issuances of long-term debt and settlements of forward sale agreements. Debt Covenants The Company’s debt agreements contain financial and non-financial covenants. To the extent that the Company is not in compliance with these covenants, an event of default may occur under one or more debt agreements and the Company, or its subsidiaries, may be restricted in its ability to pay dividends, issue new debt or access the revolving credit facility. The long-term debt indentures contain a number of covenants that, among other things, prohibit or restrict the Company from issuing debt secured by the Company’s assets, subject to certain exceptions. Failure to comply with any of these covenants could accelerate repayment obligations. Covenants in certain long-term notes and the revolving credit facility require the Company to maintain a ratio of consolidated debt to consolidated capitalization (as defined in the relevant documents) of not more than 0.70 to 1.00. On June 30, 2026, the Company’s ratio was 0.58 to 1.00 and therefore the Company was in compliance with the covenants. Security Ratings Presented in the table below are long-term and short-term credit ratings and rating outlooks as of July 29, 2026, as issued by Moody’s Ratings on January 29, 2026, and S&P Global Ratings on June 5, 2026: Securities Moody’s Ratings S&P Global Ratings Rating outlook Stable Stable Senior unsecured debt Baa1 A Commercial paper P-2 A-1 A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency, and each rating should be evaluated independently of any other rating. Security ratings are highly dependent upon the ability to generate cash flows in an amount sufficient to service debt and meet investment plans. The Company can provide no assurances that its ability to generate cash flows is sufficient to maintain its existing ratings. The Company does not have any material borrowings that are subject to default or prepayment as a result of the downgrading of these security ratings, although such a downgrading could increase fees and interest charges under its credit facility. 53 Table of Contents As part of its normal course of business, the Company routinely enters into contracts for the purchase and sale of water, power and other fuel, chemicals and other services. These contracts either contain express provisions or otherwise permit the Company and its counterparties to demand adequate assurance of future performance when there are reasonable grounds for doing so. In accordance with the contracts and applicable contract law, if the Company is downgraded by a credit rating agency, especially if such downgrade is to a level below investment grade, it is possible that a counterparty would attempt to rely on such a downgrade as a basis for making a demand for adequate assurance of future performance, which could include a demand that the Company must provide collateral to secure its obligations. The Company does not expect to post any collateral which will have a material adverse impact on the Company’s results of operations, financial position or cash flows. Access to the capital markets, including the commercial paper market, and respective financing costs in those markets, may be directly affected by the Company’s securities ratings. The Company primarily accesses the debt capital markets, including the commercial paper market, through AWCC. However, the Company has also issued debt through the Regulated Businesses, primarily in the form of mortgage bonds and tax-exempt securities or borrowings under state revolving funds, to lower the overall cost of debt. Dividends For discussion of the Company’s dividends, see Note 6—Shareholders’ Equity in the Notes to Consolidated Financial Statements for additional information. Application of Critical Accounting Policies and Estimates The financial condition of the Company, results of operations and cash flows, as reflected in the Company’s Consolidated Financial statements, are impacted by the methods, assumptions and estimates used in the application of critical accounting policies. See Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates in the Company’s Form 10-K for a discussion of its critical accounting policies. There have been no material changes to the Company’s critical accounting estimates since the filing of the Company’s Form 10-K. Additionally, see Note 2—Significant Accounting Policies in the Notes to Consolidated Financial Statements for updates, if any, to the significant accounting policies previously disclosed in the Company’s Form 10-K. Recent Accounting Standards See Note 2—Significant Accounting Policies in the Notes to Consolidated Financial Statements for a description of new accounting standards recently adopted or pending adoption.