The correct statement is - The reaction is exothermic because the total energy released by the products is greater than the energy absorbed in the reactants.
What happens in an exothermic reaction
In an exothermic reaction, the products have lower energy than the reactants, and the excess energy is released into the surroundings, usually in the form of heat.
In the case of the formation of water from hydrogen and oxygen), the reaction is exothermic. The breaking of bonds in the reactants requires energy, but the formation of new bonds in the product (water) releases more energy than is absorbed.