Sizzling noise coming from my AO Smith water heater

There is nothing wrong with your AO Smith water heater and the sizzling noise it makes.

Condensation is what causes the sizzling and popping noise. This is a normal occurrence and it happens when the condensate is dripping on the burner.

Burning gas inside your gas fired water heater produces water vapor, and since your XGV-40 model is energy efficient unit where the temperature of the flue gases is lower, it is subjected to condensation. Condensate will form drops of water which may fall onto the burner or any other hot surface and produce the sizzling noise.

If your AO Smith heater is undersized than you will have more condensation. And you will notice that during the winter time when the incoming water temperature is the lowest, you will probably have more condensation and therefore, more sizzling, frying noise.

Sizzling or frying noise are not the only sounds you will hear from your water heater. When it works, your gas water heater due to the temperature change, expands or contracts.

You said you have AO Smith Conservationist XGV-40 model... and if you didn't know XGV-40 is equipped with the DynaClean automatic self-cleaning system, to reduce the sediment buildup.

Still, if you don't flush and drain your water heater it might deposit minerals at the bottom of the tank, makes noise and lead to the tank failure.