Cook bacon in a large pot over medium heat, flipping once, until brown and crisp, about 15 minutes. Drain on paper towels; discard fat from pot but do not wipe clean.
Melt butter in pot over medium heat. Cook onion, stirring occasionally, until softened and golden, about 15 minutes. Add squash, thyme, 1 tablespoon salt, broth, and water; increase heat to high and bring to a boil. Reduce heat, cover, and simmer until squash is tender, 12 to 15 minutes. Discard thyme.
Working in batches, puree soup in a blender until very smooth. Return soup to pot and season with salt and pepper; cover to keep warm or reheat if necessary. Divide among heatproof glasses and garnish each glass with bacon. Bacon and soup can be made up to 3 days ahead, cooled completely, and stored in refrigerator in separate containers. Recrisp bacon on a baking sheet in a preheated 300 degrees oven, about 10 minutes, while reheating soup over low heat.