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Businesses require significant capital expenditures and may suffer if we fail to secure appropriate funding or experience increases in short- and long-term interest rates or delays in completing major capital expenditure projects

ability to pay for service in a timely manner, economic utility regulation, inflation, compliance with environmental, health and safety standards, production costs, maintenance costs, customer growth, declining customer usage of water, employee-related costs, including pension funding, weather and seasonality, taxes and overall econom

delay, also known as “regulatory lag,” from the time that we invest in infrastructure improvements, incur increased operating expenses as a result of inflation or other factors, incur increased cost of capital, including as a result of increasing short- and long-term interest rates, or experience declining water usage, to the time at which we can seek to address these events in general rate cases

and maintenance 493 468 Depreciation and amortization 237 216 General taxes 86 87 Total operating expenses, net 816 771 Operating income 391 371 Other (expense) income: Interest expense (163) (144) Interest income 12 22 Non-operating benefit costs, net 5 4 Other, net 14 17 Total other (expense) income (132) (101) Income before income taxes 259 270 Provision for income taxes 63 65 Net income attributable to common shareholders $ 196 $ 205 Segment Results of Operations The Company’s operating segments are comp

894 788 704 General taxes 348 320 307 Other — — (1) Total operating expenses, net 3,261 2,966 2,730 Operating income 1,879 1,718 1,504 Other income (expense): Interest expense (615) (523) (460) Interest Income 90 94 73 Non-operating benefit costs, net 16 28 32 Other, net 52 42 47 Total other income (expense) (457) (359) (308) Income before income taxes 1,422 1,359 1,196 Provision for income taxes 311 308 252 Net income attributable to common shareholders $ 1,111 $ 1,051 $ 944 Segment Results of Opera

to balance sheet management is centered on maintaining investment-grade metrics, substantial liquidity provided by highly-rated financial institutions and interest rate management on new debt issuances through its hedging program

2, 2024 amendment to the HOS secured seller promissory note, which increased the aggregate principal amount from $720 million to $795 million and increased the interest rate from 7

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

2, 2024 amendment to the HOS secured seller promissory note, which increased the aggregate principal amount from $720 million to $795 million and increased the interest rate from 7

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

to balance sheet management is centered on maintaining investment-grade metrics, substantial liquidity provided by highly-rated financial institutions and interest rate management on new debt issuances through its hedging program

Businesses require significant capital expenditures and may suffer if we fail to secure appropriate funding or experience increases in short- and long-term interest rates or delays in completing major capital expenditure projects

form of consolidated tariff pricing, including California, Illinois, Indiana, Iowa, Kentucky, Missouri, New Jersey, Pennsylvania, Virginia and West Virginia. Seasonality Customer demand for the Company’s water service is affected by weather and tends to vary with temperature and amount and frequency of rainfall. Customer demand is generally greater during the warmer months, primarily due to increased outdoor water use, including irrigation systems. As such, the Company typically expects its operating revenues

form of consolidated tariff pricing, including California, Illinois, Indiana, Iowa, Kentucky, Missouri, New Jersey, Pennsylvania, Virginia and West Virginia. Seasonality Customer demand for the Company’s water service is affected by weather and tends to vary with temperature and amount and frequency of rainfall. Customer demand is generally greater during the warmer months, primarily due to increased outdoor water use, including irrigation systems. As such, the Company typically expects its operating revenues

materially affect our operations, results of operations and cash flows. Certain of the individuals who serve as regulators are elected or political appointees. Therefore, elections which result in a change of political administration or new appointments may also result in changes of the individuals who serve as regulators and changes in the policies of the regulatory agencies that they serve. New laws or regulations, new interpretations of existing laws or regulations, changes in agency policy, including those m

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”)

Risks Related to Our Industry and Business Operations • Our Regulated Businesses are subject to regulation by PUCs and other regulatory agencies, which affects our business, financial condition, results of operations and cash flows, and may be subject to fines, penalties and other sanctions for an inability to meet these regulatory requirements

Services provided by the Company’s utilities are subject to regulation by PUCs

” 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”)

Subject to applicable regulations, the Company may elect to amend or cancel the program or the stock repurchase parameters at its discretion to manage dilution

” 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”)

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”)

Risks Related to Our Industry and Business Operations • Our Regulated Businesses are subject to regulation by PUCs and other regulatory agencies, which affects our business, financial condition, results of operations and cash flows, and may be subject to fines, penalties and other sanctions for an inability to meet these regulatory requirements

Services provided by the Company’s utilities are subject to regulation by PUCs

Subject to applicable regulations, the Company may elect to amend or cancel the program or the stock repurchase parameters at its discretion to manage dilution

increase in customers without recovery of the operating and other costs associated with serving them, or a decrease in customers that causes a decrease in operating revenue, or (v) our investments or expenses prove to be higher than the levels estimated in establishing rates. It may be difficult to predict the outcome or impact of these events on us or the actions that may be taken by the PUCs or other governmental authorities in response thereto. Our operations and the quality of water we supply and waste

886, 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. A holding company originally incorporated in Delaware in 1936, the Company employs approximately 7,000 professionals who provide drinking water, wastewater and other related services to approximately 14 million people in 24 states. The Company conducts the majority of its business through regulated utilities that

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 employs approximately 7,000 professionals who provide drinking water, wastewater and other related services to approximately 14 million people in 24 states. The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, indus

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 utili

increase in customers without recovery of the operating and other costs associated with serving them, or a decrease in customers that causes a decrease in operating revenue, or (v) our investments or expenses prove to be higher than the levels estimated in establishing rates. It may be difficult to predict the outcome or impact of these events on us or the actions that may be taken by the PUCs or other governmental authorities in response thereto. Our operations and the quality of water we supply and waste

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 employs approximately 7,000 professionals who provide drinking water, wastewater and other related services to approximately 14 million people in 24 states. The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, indus

886, 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. A holding company originally incorporated in Delaware in 1936, the Company employs approximately 7,000 professionals who provide drinking water, wastewater and other related services to approximately 14 million people in 24 states. The Company conducts the majority of its business through regulated utilities that

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 utili

75 73 68 Total operation and maintenance expense $ 1,642 $ 1,517 $ 1,441 Employee-Related Costs For the Years Ended December 31, (In millions) 2025 2024 2023 Salaries and wages $ 468 $ 434 $ 413 Group insurance 73 69 60 Pensions 5 7 9 Other benefits 36 33 31 Total employee-related costs $ 582 $ 543 $ 513 In 2025, as compared to 2024, employee-related costs increased $39 million primarily due to an increase in salaries and wages due to higher employee headcount to support growth of the business and merit increase

impact on its results of operations or financial condition. The EPA has identified wastewater discharge permitting and permits for the application of biosolids, or sewage sludge, containing PFAS as areas of focus in its PFAS Strategic Roadmap. Individual states may also take action in these areas. As indicated previously, capital expenditures and operating costs to comply with environmental mandates have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates. As a result, t

to obtain favorable labor contract terms during renegotiations, may disrupt our operations, negatively impact the ability to serve our customers, and result in higher labor costs, which could adversely affect our reputation, financial condition, results of operations, cash flows and liquidity. While we have developed contingency plans to be implemented as necessary if a work stoppage or strike does occur, a strike or work stoppage may have a material adverse impact on our financial position, results of opera

2026. 42 Table of Contents • 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 is awaiting action by the Governor and will become effective on July 1, 2026. • Virginia passed House Bill 770, which allows a public utility

impact on its results of operations or financial condition. The EPA has identified wastewater discharge permitting and permits for the application of biosolids, or sewage sludge, containing PFAS as areas of focus in its PFAS Strategic Roadmap. Individual states may also take action in these areas. As indicated previously, capital expenditures and operating costs to comply with environmental mandates have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates. As a result, t

2026. 42 Table of Contents • 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 is awaiting action by the Governor and will become effective on July 1, 2026. • Virginia passed House Bill 770, which allows a public utility

75 73 68 Total operation and maintenance expense $ 1,642 $ 1,517 $ 1,441 Employee-Related Costs For the Years Ended December 31, (In millions) 2025 2024 2023 Salaries and wages $ 468 $ 434 $ 413 Group insurance 73 69 60 Pensions 5 7 9 Other benefits 36 33 31 Total employee-related costs $ 582 $ 543 $ 513 In 2025, as compared to 2024, employee-related costs increased $39 million primarily due to an increase in salaries and wages due to higher employee headcount to support growth of the business and merit increase

to obtain favorable labor contract terms during renegotiations, may disrupt our operations, negatively impact the ability to serve our customers, and result in higher labor costs, which could adversely affect our reputation, financial condition, results of operations, cash flows and liquidity. While we have developed contingency plans to be implemented as necessary if a work stoppage or strike does occur, a strike or work stoppage may have a material adverse impact on our financial position, results of opera

31, 2025 2024 2023 Diluted earnings per share (GAAP): Net income attributable to shareholders $ 5.69 $ 5.39 $ 4.90 Non-GAAP adjustments: Estimated impact of favorable weather — (0.16) (0.17) Income tax impact — 0.04 0.04 Net non-GAAP adjustment — (0.12) (0.13) Incremental interest income from amended HOS seller note (0.13) (0.12) — Income tax impact 0.03 0.03 — Net non-GAAP adjustment (0.10) (0.09) — Transaction costs associated with the pending merger with Essential 0.07 — — Income tax impac

Three Months Ended March 31, 2026 2025 Diluted earnings per share (GAAP): Net income attributable to shareholders $ 1.00 $ 1.05 Non-GAAP adjustments: Estimated impact of weather — — Income tax impact — — Net non-GAAP adjustment — — Incremental interest income from amended HOS seller note (0.01) (0.04) Income tax impact — 0.01 Net non-GAAP adjustment (0.01) (0.03) Transaction costs associated with the pending merger with Essential 0.03 — Income tax impact (0.01) — Net non-GAAP adjustment 0.02

short-term and over the long-term. The geographic diversity of the Company’s service areas may mitigate some of the economic effects on the water supply associated with weather extremes the Company might encounter in any particular service territory. For example, in any given summer, some areas may experience drier than average weather, which may reduce the amount of source water available, while other areas the Company serves may experience wetter than average weather. The Company evaluates quality, quantity

on water supplies may adversely affect our access to sources of water, our ability to supply water to customers and, together with climate variability, severe weather, natural disasters and seasonality, may cause service disruptions, reduced demand or increased costs. • The current regulatory rate setting process may result in a significant delay, also known as “regulatory lag,” from the time that we invest in infrastructure improvements, incur increased operating expenses, incur increased cost

31, 2025 2024 2023 Diluted earnings per share (GAAP): Net income attributable to shareholders $ 5.69 $ 5.39 $ 4.90 Non-GAAP adjustments: Estimated impact of favorable weather — (0.16) (0.17) Income tax impact — 0.04 0.04 Net non-GAAP adjustment — (0.12) (0.13) Incremental interest income from amended HOS seller note (0.13) (0.12) — Income tax impact 0.03 0.03 — Net non-GAAP adjustment (0.10) (0.09) — Transaction costs associated with the pending merger with Essential 0.07 — — Income tax impac

Three Months Ended March 31, 2026 2025 Diluted earnings per share (GAAP): Net income attributable to shareholders $ 1.00 $ 1.05 Non-GAAP adjustments: Estimated impact of weather — — Income tax impact — — Net non-GAAP adjustment — — Incremental interest income from amended HOS seller note (0.01) (0.04) Income tax impact — 0.01 Net non-GAAP adjustment (0.01) (0.03) Transaction costs associated with the pending merger with Essential 0.03 — Income tax impact (0.01) — Net non-GAAP adjustment 0.02

short-term and over the long-term. The geographic diversity of the Company’s service areas may mitigate some of the economic effects on the water supply associated with weather extremes the Company might encounter in any particular service territory. For example, in any given summer, some areas may experience drier than average weather, which may reduce the amount of source water available, while other areas the Company serves may experience wetter than average weather. The Company evaluates quality, quantity

on water supplies may adversely affect our access to sources of water, our ability to supply water to customers and, together with climate variability, severe weather, natural disasters and seasonality, may cause service disruptions, reduced demand or increased costs. • The current regulatory rate setting process may result in a significant delay, also known as “regulatory lag,” from the time that we invest in infrastructure improvements, incur increased operating expenses, incur increased cost

025 $ 525 Other American Water subsidiaries Private activity bonds and government funded debt—fixed rate 0.00%-5.00% 0.37% 2025-2061 145 Other American Water subsidiaries Mortgage bonds—fixed rate 8.15%-8.58% 8.23% 2025 21 Total retirements and redemptions $ 691 From time to time and as market conditions warrant, the Company may engage in long-term debt retirements through make-whole redemptions, tender offers, open market repurchases or other viable alternatives. 77 Table of Contents Issuer and Guarantor of S

markets, including the commercial paper market, through AWCC. However, the Company has also issued debt through its regulated subsidiaries, 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

with the LCRR and final LCRI. The Lead Service Line Replacement Collaborative is a diverse group of public health, water utility, environmental, labor, consumer and housing organizations from across the country working together to encourage communities to accelerate the full replacement of LSLs through collaborative efforts at the local level. 14 Table of Contents As part of its ongoing water main replacement and service line renewal projects, and in accordance with applicable state regulations and anticip

025 $ 525 Other American Water subsidiaries Private activity bonds and government funded debt—fixed rate 0.00%-5.00% 0.37% 2025-2061 145 Other American Water subsidiaries Mortgage bonds—fixed rate 8.15%-8.58% 8.23% 2025 21 Total retirements and redemptions $ 691 From time to time and as market conditions warrant, the Company may engage in long-term debt retirements through make-whole redemptions, tender offers, open market repurchases or other viable alternatives. 77 Table of Contents Issuer and Guarantor of S

markets, including the commercial paper market, through AWCC. However, the Company has also issued debt through its regulated subsidiaries, 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

with the LCRR and final LCRI. The Lead Service Line Replacement Collaborative is a diverse group of public health, water utility, environmental, labor, consumer and housing organizations from across the country working together to encourage communities to accelerate the full replacement of LSLs through collaborative efforts at the local level. 14 Table of Contents As part of its ongoing water main replacement and service line renewal projects, and in accordance with applicable state regulations and anticip

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

CA, IL Consolidated utility tariffs Use of a unified rate structure for water systems owned and operated by a single utility, which may or may not be physically interconnected

Utility tariffs in place or cost recovery proceedings with respect to our Regulated Businesses may not provide reimbursement to us, in whole or in part, for any of these impacts

Utility tariffs in place or cost recovery proceedings with respect to our Regulated Businesses may not provide reimbursement to us, in whole or in part, for any of these impacts

CA, IL Consolidated utility tariffs Use of a unified rate structure for water systems owned and operated by a single utility, which may or may not be physically interconnected

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

conditions in the national and international economic and geopolitical arenas

regulatory agencies, which affects our business, financial condition, results of operations and cash flows, and may be subject to fines, penalties and other sanctions for an inability to meet these regulatory requirements

regulatory agencies, which affects our business, financial condition, results of operations and cash flows, and may be subject to fines, penalties and other sanctions for an inability to meet these regulatory requirements

conditions in the national and international economic and geopolitical arenas

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 March 31, 2026, the Company has

which commenced on December 7, 2018, in 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 proceeding have received final approval by the MDL court. 62 Table of Contents As of

that hold polluters accountable and is participating in the multi-district litigation and other lawsuits filed against certain PFAS manufacturers seeking damages and reimbursement of costs incurred and continuing to be incurred to address contamination of public water supply systems by PFAS. For more information on the PFAS multi-district litigation, see Item 3—Legal Proceedings—PFAS Multi-District Litigation. On April 19, 2024, the EPA issued a final rule to designate PFOA and PFOS as hazardous substan

make substantial capital expenditures to repair any damage. Utility tariffs in place or cost recovery proceedings with respect to our Regulated Businesses may not provide reimbursement to us, in whole or in part, for any of these impacts. Government restrictions on water use may also result in decreased use of water and wastewater services, even if our water supplies are sufficient to serve our customers, which may adversely affect our financial condition, results of operations and cash flows. Seasonal and other

The Company also serves (i) commercial customers, such as food and beverage providers, commercial property developers and proprietors, and energy suppliers, (ii) fire service customers, where the Company supplies water through its distribution systems to public fire hydrants for firefighting purposes and to private fire customers for use in fire suppression systems in office buildings and other faciliti

• Disruptions in our supply chain related to goods, such as pipe, chemicals, power and other fuel, equipment, water and other raw materials and services, could adversely impact our operations and our ability to serve our customers, as well as our financial results

• Disruptions in our supply chain related to goods, such as pipe, chemicals, power and other fuel, equipment, water and other raw materials and services, could adversely impact our operations and our ability to serve our customers, as well as our financial results

The Company also serves (i) commercial customers, such as food and beverage providers, commercial property developers and proprietors, and energy suppliers, (ii) fire service customers, where the Company supplies water through its distribution systems to public fire hydrants for firefighting purposes and to private fire customers for use in fire suppression systems in office buildings and other faciliti

educating water consumers, the 2021 Lead and Copper Rule Revisions (“LCRR”) and 2024 Lead and Copper Rule Improvements (“LCRI”) rules further advance public health protections by addressing the legacy lead service lines as well as lead plumbing materials, primarily in building plumbing, that still remain in many communities

tornadoes, earthquakes, landslides, drought, wildfires, coastal and intercoastal floods or high water conditions, including those in or near designated flood plains, pandemics and epidemics, electrical storms, sinkholes, solar flares and chemical spills or other contamination causing temporary unavailability of our source water supplies. Weather and other natural events such as these may affect the condition or operability of our facilities, limiting or preventing us from delivering water or wastewater serv

educating water consumers, the 2021 Lead and Copper Rule Revisions (“LCRR”) and 2024 Lead and Copper Rule Improvements (“LCRI”) rules further advance public health protections by addressing the legacy lead service lines as well as lead plumbing materials, primarily in building plumbing, that still remain in many communities

tornadoes, earthquakes, landslides, drought, wildfires, coastal and intercoastal floods or high water conditions, including those in or near designated flood plains, pandemics and epidemics, electrical storms, sinkholes, solar flares and chemical spills or other contamination causing temporary unavailability of our source water supplies. Weather and other natural events such as these may affect the condition or operability of our facilities, limiting or preventing us from delivering water or wastewater serv

Increasingly stringent environmental, health and safety, cybersecurity and water quality and water accountability regulations, the amount of infrastructure in need of significant capital investment, financial challenges and industry legislation are several elements, among others, that may drive more municipalities t

• We face technology, cybersecurity and data privacy risks, including failures, cyber attacks, unauthorized access and evolving privacy requirements, any of which may result in operational disruption, regulatory actions or reputational harm

• risks related to owning, operating, maintaining and successfully managing Essential’s natural gas distribution business, including any increased risks and liabilities associated with the operation of that business

• risks related to owning, operating, maintaining and successfully managing Essential’s natural gas distribution business, including any increased risks and liabilities associated with the operation of that business

to prohibit the installation of pipe, solder and flux in public water systems and premise plumbing systems that was not lead-free. In 1991, the EPA published the Lead and Copper Rule, as amended (“LCR”), to reduce the corrosivity of water and control lead and copper in drinking water. In 2011, the Reduction of Lead in Drinking Water Act was enacted, further limiting the use and introduction into commerce of lead pipes, plumbing fittings for fixtures, solder and flux. Since that time, the EPA has issued sever