In an earnings release filed with Brazil's securities regulator, the CVM, on the evening of November 5, Sabesp reported that its Q3 2026 adjusted EBITDA rose 13.8% year-over-year, while adjusted net revenue grew 9.0%. However, adjusted net income fell 13.8%. For SBSP3 shareholders, the question is why operating performance improved while net income moved in the opposite direction.
What Happened to SBSP3 in Q3 2026?
Sabesp posted a quarter of stronger operations alongside lower net income. The figures below are the "adjusted" metrics used by the company itself, which exclude construction revenue, financial asset bifurcation, and non-recurring items—as well as FAUSP and court-ordered debt payments (precatórios) for net income. The company provides two sets of numbers: the organic figures exclude EMAE, while the reported adjusted figures include EMAE, whose incorporation we covered in our review of the completed process.
| R$ millions | Q3 25 | Q3 26 Organic | Change | Q3 26 with EMAE | Change |
|---|---|---|---|---|---|
| Adjusted net revenue | 5,468 | 5,958 | +9.0% | 6,095 | +11.5% |
| Adjusted EBITDA | 3,206 | 3,648 | +13.8% | 3,680 | +14.8% |
| Adjusted net income | 1,284 | 1,107 | −13.8% | 1,138 | −11.4% |
| Operating cash flow | 1,723 | 1,965 | +14.1% | 1,982 | +15.0% |
The EBITDA margin expanded from 58.6% to 61.2%, and EBITDA conversion into operating cash flow rose from 50.2% to 53.9% (both excluding EMAE). In other words, Sabesp gained efficiency and converted more of its operational generation into cash. That makes the drop in net income even more puzzling, and it is the key point investors need to understand.
The headline figures differ significantly from the adjusted ones. Reported revenue reached R$ 10.1 billion, of which R$ 4.0 billion represents construction revenue that Sabesp strips out. Reported EBITDA totaled R$ 3.98 billion, up 29.7% compared to 13.8% on an adjusted basis. Investors comparing figures across different media reports must verify which version they are looking at. But where did the 9.0% revenue growth come from?
Where Did Sabesp's Revenue Growth Come From?
Almost all of it came from tariffs. According to the release, adjusted revenue increased by R$ 490 million, with pricing accounting for the lion's share, supported by a smaller contribution from volume and an offset from customer mix.
The price effect represented a +7.7% increase over Q3 2025. It incorporates a 10.6% tariff adjustment, partially offset by a higher volume of renovations. Volume (+2.1%) was driven by new connections (+2.2%) and water meter replacements (+0.4%), offset by weather and economic headwinds (−0.4%). The customer category and consumption tier mix reduced revenue by 0.8%, with 0.6% related to weather. Sabesp stated it expects to recover these impacts during the 2028 tariff cycle—an expectation on its part, not a guaranteed figure.
The takeaway is that revenue depends heavily on tariff adjustments. With pricing doing the heavy lifting, the final result ultimately depends on what remains after costs and debt service. That is where net income slips.
If EBITDA Rises, Why Does Adjusted Net Income Fall?
The earnings release pages we analyzed do not break down the exact cause. The data shows a widening gap between the two lines: organic EBITDA increased by R$ 442 million (from 3,206 to 3,648), while adjusted net income fell by R$ 177 million (from 1,284 to 1,107). Everything separating the two—depreciation, financial results, taxes—weighed more heavily than the operational improvement. The document does not specify which of these items drove the decline, and we will not speculate.
As background context, the material highlights the scale of debt and capital expenditures. Sabesp reported R$ 12 billion in investments during the first nine months of 2026, a 15% increase over the same period in 2025. Ramping up investments while carrying high debt tends to pressure results below EBITDA, but this relationship is a plausible read, not an explanation explicitly provided by the company. Definitive answers should come from the full earnings release or the Q&A session on the presentation agenda.
Is Sabesp's Debt a Concern?
Sabesp reported gross debt of R$ 46.4 billion and net debt of R$ 38.6 billion. The difference is cash: R$ 7.9 billion available, or R$ 12.8 billion including the A/B loan, which the company says covers all amortization through 2029. This timeline forms the core of management's argument: there is no debt maturity wall in the coming years.
- Cash reserves that, according to Sabesp, cover debt amortization through 2029.
- Operating cash flow growing faster than revenue (+14.1% versus +9.0%, organic).
- Adjusted net income declining across both reporting scopes, with or without EMAE.
- Revenue sustained primarily by tariff adjustments, which rely on regulatory decisions.
Our editorial stance on the investment thesis is neutral: the quarter does not alter the long-term fundamentals, but it also leaves the question regarding net income unresolved.
Did SBSP3 Disappear From Brokerage Accounts, Will It Pay Dividends, and What Is It Worth?
If you arrived here because you could not find the stock, it was not delisted: SBSP3 continued trading, closing at R$ 25.01 on November 5, down 0.87% on the day and 5.35% over 12 months. This price predates the earnings release, which was filed at 6:15 PM that same day; the market's initial reaction only appears in the November 6 session. The change in some shareholders' portfolios over recent weeks stems from the EMAE incorporation explained via the link above.
Regarding dividends, the section of the release we analyzed contained no announcement of payouts; quotes and history can be found on the stock page with quotes, dividends, and documents. As for price targets, the last revision we covered was from Itaú BBA in August—prior to these results. Rico aos Poucos assigns SBSP3 a quality rating of 6.1 out of 10.
Operations improved and cash flow expanded, supporting the long-term thesis. However, the lower adjusted net income is the issue the market will focus on. There is no reason in this release to make an impulsive decision: the explanation for what consumed earnings between EBITDA and net income is missing, and that is what separates an isolated weak quarter from a structural trend.
What to Watch Moving Forward
The stock's reaction on November 6 — measured against the November 5 closing price of R$ 25.01, prior to the announcement.
The explanation for net income — in the full release or the Q&A, look for what weighed on results between EBITDA and net income. If Sabesp points to a one-off effect, the drop loses significance; if it proves structural, it gains weight.
The pace of capital expenditures — R$ 12 billion in nine months, up 15% from 2025. If investments climb further with gross debt already at R$ 46.4 billion, pressure on net income is likely to persist.
Cash coverage — management's commitment is that amortization is covered through 2029. Any change to this timeline in upcoming quarters would alter the risk profile.
