Raises full-year 2026 revenue and adjusted1 operating income guidance
Financial Summary
Q2 2026*
- Revenue of $1.92 billion, up 22.0 percent, or 21.2 percent in constant currency1. On a pro forma2 basis, revenue is down 6.5 percent.
- GAAP net income of $13 million, or $0.07 per share, up $119 million or $0.94 per share, year-over-year, respectively.
- Adjusted1 net income of $55 million, or $0.38 per share, up $132 million or $1.02 per share, year-over-year, respectively.
- Adjusted1 operating income of $203 million, up $144 million year-over-year.
- Adjusted1 operating margin of 10.6 percent, up 690 basis points year-over-year.
- Operating cash flow of $37 million, up $48 million year-over year.
- Free cash flow1 of $11 million, up $41 million year-over-year.
* Profitability metrics for Q2 2026 include $105 million of a pre-tax benefit from the recognition of IEEPA tariff receivables. This benefit is not included in either Operating cash flow or Free cash flow for Q2 2026 as the sale of the receivables is currently accounted for within Financing cash flow.
NORWALK, Conn.--(BUSINESS WIRE)--Xerox Holdings Corporation (NASDAQ: XRX) today announced its 2026 second-quarter results.
“Our second-quarter results gave us another reason for confidence," said Louie Pastor, chief executive officer at Xerox. "We made progress on each of our three strategic priorities: stabilizing revenue, increasing profitability, and reducing leverage. As a result, we are raising both revenue and adjusted operating income guidance, as well as our Lexmark gross synergy targets. While we have more to prove, I like how our team is showing up and executing with urgency and discipline.”
Progress Against Strategic Priorities
Q2 2026
- Raised Lexmark gross cost synergy target by $50 million to at least $350 million
- Expanded the 9‑Series A3 lineup in June, adding new mid‑range devices and making the portfolio available to all clients and channel partners
- Launched new A4 color devices in June under the new unified brand and logo
- Print and IT Solutions total sales pipelines remain ahead of the prior year
-
Reduced total debt outstanding by more than $200 million:
- $125 million of 13.00% 2026 Senior Notes at maturity
- $93 million of 5.50% 2028 Senior Notes
- $6 million of 13.50% 2031 Senior Secured Notes
Second-Quarter Key Financial Results
(in millions, except per share data) | Q2 2026 |
| Q2 2025 |
| B/(W) YOY |
| Pro Forma2 B/(W) YOY | ||||||
Revenue | $ | 1,922 |
|
| $ | 1,576 |
|
| 22.0% AC 21.2% CC1 |
| (6.5)% AC | ||
Gross Profit | $ | 688 |
|
| $ | 451 |
|
| $ | 237 |
| $ | 93 |
Gross Margin |
| 35.8 | % |
|
| 28.6 | % |
| 720 bps |
| 690 bps | ||
RD&E % |
| 3.5 | % |
|
| 2.7 | % |
| (80) bps |
|
| ||
SAG % |
| 22.5 | % |
|
| 23.4 | % |
| 90 bps |
|
| ||
Pre-Tax Income (Loss) | $ | 31 |
|
| $ | (60 | ) |
| $ | 91 |
|
| |
Pre-Tax Income (Loss) Margin |
| 1.6 | % |
|
| (3.8 | )% |
| 540 bps |
|
| ||
Gross Profit - Adjusted1 | $ | 700 |
|
| $ | 461 |
|
| $ | 239 |
| $ | 78 |
Gross Margin - Adjusted1 |
| 36.4 | % |
|
| 29.3 | % |
| 710 bps |
| 610 bps | ||
Operating Income - Adjusted1 | $ | 203 |
|
| $ | 59 |
|
| $ | 144 |
|
| |
Operating Income Margin - Adjusted1 |
| 10.6 | % |
|
| 3.7 | % |
| 690 bps |
|
| ||
GAAP Diluted Income (Loss) per Share | $ | 0.07 |
|
| $ | (0.87 | ) |
| $ | 0.94 |
|
| |
Diluted Income (Loss) Per Share - Adjusted1 | $ | 0.38 |
|
| $ | (0.64 | ) |
| $ | 1.02 |
|
| |
Second-Quarter Segment Results
(in millions) | Q2 2026 |
| Q2 2025 |
|
B/(W) |
| Pro Forma2 B/(W) YOY | ||||||
Revenue |
|
|
|
|
|
|
| ||||||
Print and Other | $ | 1,733 |
|
| $ | 1,366 |
|
| 26.9 | % |
| (6.1 | )% |
IT Solutions |
| 194 |
|
|
| 213 |
|
| (8.9 | )% |
| (8.9 | )% |
Intersegment Elimination3 |
| (5 | ) |
|
| (3 | ) |
| NM |
|
| NM |
|
Total Revenue | $ | 1,922 |
|
| $ | 1,576 |
|
| 22.0 | % |
| (6.5 | )% |
Profit |
|
|
|
|
|
|
| ||||||
Print and Other4 | $ | 220 |
|
| $ | 65 |
|
| NM |
|
| 89.7 | % |
IT Solutions |
| 7 |
|
|
| 10 |
|
| (30.0 | )% |
| (30.0 | )% |
Corporate Other5 |
| (24 | ) |
|
| (16 | ) |
| 50.0 | % |
| 20.0 | % |
Total Profit | $ | 203 |
|
| $ | 59 |
|
| NM |
|
| 91.5 | % |
1. | Refer to the “Non-GAAP Financial Measures” section of this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measures. In Q2 2026, the Company recognized a $105 million pre-tax benefit related to the recognition of the IEEPA tariff receivables. The Company sold its rights to these receivables to a third party for $80 million in cash. Because the tariff receivables have not been processed by the U.S. Government as of June 30, 2026, the $80 million proceeds are classified within financing cash flows and excluded from free cash flow. Upon processing, the proceeds will be reclassified to operating cash flows with no impact on total cash. | |||
2. | Refer to the "Pro Forma Basis" section for an explanation of this measure. Reflects the inclusion of Lexmark's estimated results from April 1, 2025 through June 30, 2025. Lexmark's actual results are included in Xerox's reported results beginning on July 1, 2025, the effective date of the acquisition. | |||
3. | Reflects primarily IT hardware, software solutions and services, sold by the IT Solutions segment to the Print and Other segment. | |||
4. | Second quarter 2026 Print and Other profit reflects a benefit from the recognition of $105 million from IEEPA tariff receivables associated with the recent Supreme Court ruling on IEEPA tariffs. | |||
5. | Corporate Other reflects certain administrative and general expenses, which primarily relate to corporate functions, and are not allocated to either of our reportable segments. | |||
Updated 2026 Guidance
- Revenue: Approximately $7.6 billion
- Adjusted1,2 Operating Income: $555-$605 million
- Free Cash Flow1,2: Approximately $250 million
Non-GAAP Measures
This release refers to the following non-GAAP financial measures:
- Adjusted1 EPS, which excludes Restructuring and related costs, net, Amortization of intangible assets, non-service retirement-related costs, gain on early extinguishment of debt, and other discrete adjustments from GAAP EPS, as applicable.
- Adjusted1 operating income and margin, which exclude the EPS adjustments noted above, except the tax expense charge related to the establishment of a valuation allowance against certain deferred tax assets, as well as the remainder of Other expenses (income), net from pre-tax income (loss) and margin.
- Constant currency1 (CC) revenue change, which excludes the effects of currency translation.
- Free cash flow 1, which is operating cash flow less capital expenditures.
1. | Refer to the “Non-GAAP Financial Measures” section of this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measures. | |||
2. | Adjusted operating income guidance reflects a benefit from the recognition of a $105 million pre-tax IEEPA tariff receivable associated with the recent Supreme Court ruling on IEEPA tariffs. The benefit to free cash flow guidance, resulting from Xerox’s sale of the IEEPA tariff receivable to a third party, is $80 million. | |||
Forward-Looking Statement
This presentation and other written or oral statements made from time to time by management contain “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995 and involve certain risks and uncertainties. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “would”, “could”, “can”, “should”, “targeting”, “projecting”, “driving”, “future”, “plan”, “predict”, “may” and similar expressions are intended to identify forward-looking statements. The Company’s actual results may differ significantly from the results discussed in the forward-looking statements. These statements reflect management’s current beliefs and assumptions and are subject to a number of other factors that may cause actual results to differ materially.
Such factors include but are not limited to: applicable market conditions; global macroeconomic conditions, including inflation, slower growth or recession, delays or disruptions in the global supply chain, higher interest rates, and wars and other conflicts; our ability to succeed in a competitive environment, including by developing new products and service offerings and preserving our existing products and market share as well as repositioning our business in the face of customer preference, technological, and other change, such as evolving return-to-office and hybrid working trends; failure of our customers, vendors, and logistics partners to perform their contractual obligations to us; our ability to attract, train, and retain key personnel; execution risks around our Transformation; the risk of breaches of our security systems due to cyber, malware, or other intentional attacks that could expose us to liability, litigation, regulatory action or damage our reputation; our ability to obtain adequate pricing for our products and services and to maintain and improve our cost structure; changes in economic and political conditions, licensing requirements, and tax laws in the United States and in the foreign countries in which we do business; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; interest rates, cost of capital, and access to credit markets; risks related to our indebtedness; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; funding requirements associated with our employee pension and retiree health benefit plans; changes in foreign currency exchange rates; the risk that we may be subject to new or heightened regulatory or operation risks as a result of our, or third parties,’ use or anticipated use of artificial intelligence technologies; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; laws, regulations, international agreements and other initiatives to limit greenhouse gas emissions or relating to climate change, as well as the physical effects of climate change; our ability to successfully integrate the Lexmark business and realize the anticipated benefits thereof, including expected synergies; and other factors that are set forth from time to time in the Company’s Securities and Exchange Commission filings, including the combined Annual Report on Form 10-K of Xerox Holdings and Xerox Corporation.
These forward-looking statements speak only as of the date hereof or of the date to which they refer, and the Company assumes no obligation to update or revise any forward-looking statements as a result of new information or future events or developments, except as required by law.
Note: To receive RSS news feeds, visit https://www.news.xerox.com. For open commentary, industry perspectives and views, visit http://www.linkedin.com/company/xerox or http://www.youtube.com/XeroxCorp.
©2026 Xerox Corporation. All rights reserved. Xerox® and the Xerox logo are trademarks of XRX Brandco LLC in the United States and/or other countries.
XEROX HOLDINGS CORPORATION | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) | ||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||
(in millions, except per-share data) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||||||
Revenues |
|
|
|
|
|
|
|
| ||||||||
Sales |
| $ | 996 |
|
| $ | 665 |
|
| $ | 1,916 |
|
| $ | 1,222 |
|
Services, maintenance, rentals and other |
|
| 926 |
|
|
| 911 |
|
|
| 1,852 |
|
|
| 1,811 |
|
Total Revenues |
|
| 1,922 |
|
|
| 1,576 |
|
|
| 3,768 |
|
|
| 3,033 |
|
Costs and Expenses |
|
|
|
|
|
|
|
| ||||||||
Cost of sales |
|
| 579 |
|
|
| 480 |
|
|
| 1,179 |
|
|
| 862 |
|
Cost of services, maintenance, rentals and other |
|
| 655 |
|
|
| 645 |
|
|
| 1,352 |
|
|
| 1,294 |
|
Research, development and engineering expenses |
|
| 67 |
|
|
| 43 |
|
|
| 131 |
|
|
| 85 |
|
Selling, administrative and general expenses |
|
| 432 |
|
|
| 368 |
|
|
| 862 |
|
|
| 746 |
|
Restructuring and related costs, net |
|
| 23 |
|
|
| 10 |
|
|
| 68 |
|
|
| 9 |
|
Amortization of intangible assets |
|
| 30 |
|
|
| 10 |
|
|
| 60 |
|
|
| 20 |
|
Divestitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
Non-financing interest expense |
|
| 100 |
|
|
| 55 |
|
|
| 184 |
|
|
| 88 |
|
Other expenses (income), net |
|
| 5 |
|
|
| 25 |
|
|
| (26 | ) |
|
| 60 |
|
Total Costs and Expenses |
|
| 1,891 |
|
|
| 1,636 |
|
|
| 3,810 |
|
|
| 3,160 |
|
Income (Loss) before Income Taxes(1) |
|
| 31 |
|
|
| (60 | ) |
|
| (42 | ) |
|
| (127 | ) |
Income tax expense |
|
| 18 |
|
|
| 46 |
|
|
| 50 |
|
|
| 69 |
|
Net Income (Loss) |
|
| 13 |
|
|
| (106 | ) |
|
| (92 | ) |
|
| (196 | ) |
Less: Preferred stock dividends, net |
|
| (3 | ) |
|
| (3 | ) |
|
| (7 | ) |
|
| (7 | ) |
Net Income (Loss) attributable to Common Shareholders |
| $ | 10 |
|
| $ | (109 | ) |
| $ | (99 | ) |
| $ | (203 | ) |
|
|
|
|
|
|
|
|
| ||||||||
Basic Income (Loss) per Share |
| $ | 0.07 |
|
| $ | (0.87 | ) |
| $ | (0.77 | ) |
| $ | (1.62 | ) |
Diluted Income (Loss) per Share |
| $ | 0.07 |
|
| $ | (0.87 | ) |
| $ | (0.77 | ) |
| $ | (1.62 | ) |
(1) | Referred to as "Pre-tax income (loss)" throughout the remainder of this document. | |||
XEROX HOLDINGS CORPORATION | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | |||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||||
(in millions) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | |||||||
Net Income (Loss) |
| $ | 13 |
| $ | (106 | ) |
| $ | (92 | ) |
| $ | (196 | ) |
|
|
|
|
|
|
|
|
| |||||||
Other Comprehensive Income (Loss), Net |
|
|
|
|
|
|
|
| |||||||
Translation adjustments, net |
|
| 1 |
|
| 229 |
|
|
| (76 | ) |
|
| 334 |
|
Unrealized gains (losses), net |
|
| 4 |
|
| (4 | ) |
|
| 8 |
|
|
| (6 | ) |
Changes in defined benefit plans, net |
|
| 5 |
|
| (56 | ) |
|
| 45 |
|
|
| (77 | ) |
Other Comprehensive Income (Loss), Net |
|
| 10 |
|
| 169 |
|
|
| (23 | ) |
|
| 251 |
|
|
|
|
|
|
|
|
|
| |||||||
Comprehensive Income (Loss), Net |
| $ | 23 |
| $ | 63 |
|
| $ | (115 | ) |
| $ | 55 |
|
XEROX HOLDINGS CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
(in millions, except share data in thousands) |
| June 30, 2026 |
| December 31, 2025 | ||||
Assets |
|
|
|
| ||||
Cash and cash equivalents |
| $ | 495 |
|
| $ | 512 |
|
Accounts receivable, net |
|
| 1,185 |
|
|
| 1,122 |
|
Billed portion of finance receivables, net |
|
| 40 |
|
|
| 46 |
|
Finance receivables, net |
|
| 442 |
|
|
| 510 |
|
Inventories |
|
| 1,043 |
|
|
| 1,016 |
|
Other current assets |
|
| 492 |
|
|
| 362 |
|
Total current assets |
|
| 3,697 |
|
|
| 3,568 |
|
Finance receivables due after one year, net |
|
| 732 |
|
|
| 846 |
|
Equipment on operating leases, net |
|
| 283 |
|
|
| 299 |
|
Land, buildings and equipment, net |
|
| 378 |
|
|
| 390 |
|
Intangible assets, net |
|
| 857 |
|
|
| 921 |
|
Goodwill, net |
|
| 2,234 |
|
|
| 2,222 |
|
Deferred tax assets |
|
| 86 |
|
|
| 98 |
|
Other long-term assets |
|
| 1,457 |
|
|
| 1,479 |
|
Total Assets |
| $ | 9,724 |
|
| $ | 9,823 |
|
Liabilities and Equity |
|
|
|
| ||||
Short-term debt and current portion of long-term debt |
| $ | 70 |
|
| $ | 231 |
|
Financing liability – tariff receivables monetization |
|
| 90 |
|
|
| — |
|
Accounts payable |
|
| 1,456 |
|
|
| 1,498 |
|
Accrued compensation and benefits costs |
|
| 246 |
|
|
| 235 |
|
Accrued expenses and other current liabilities |
|
| 1,264 |
|
|
| 1,258 |
|
Total current liabilities |
|
| 3,126 |
|
|
| 3,222 |
|
Long-term debt |
|
| 4,153 |
|
|
| 4,016 |
|
Pension and other benefit liabilities |
|
| 1,027 |
|
|
| 1,068 |
|
Post-retirement medical benefits |
|
| 148 |
|
|
| 159 |
|
Other long-term liabilities |
|
| 716 |
|
|
| 685 |
|
Total Liabilities |
|
| 9,170 |
|
|
| 9,150 |
|
|
|
|
|
| ||||
Noncontrolling Interests |
|
| 10 |
|
|
| 10 |
|
|
|
|
|
| ||||
Convertible Preferred Stock |
|
| 214 |
|
|
| 214 |
|
|
|
|
|
| ||||
Common stock |
|
| 131 |
|
|
| 128 |
|
Additional paid-in capital |
|
| 1,200 |
|
|
| 1,183 |
|
Retained earnings |
|
| 2,326 |
|
|
| 2,444 |
|
Accumulated other comprehensive loss |
|
| (3,334 | ) |
|
| (3,311 | ) |
Xerox Holdings shareholders’ equity |
|
| 323 |
|
|
| 444 |
|
Noncontrolling interests |
|
| 7 |
|
|
| 5 |
|
Total Equity |
|
| 330 |
|
|
| 449 |
|
Total Liabilities and Equity |
| $ | 9,724 |
|
| $ | 9,823 |
|
|
|
|
|
| ||||
Shares of Common Stock Issued and Outstanding |
|
| 131,243 |
|
|
| 128,044 |
|
XEROX HOLDINGS CORPORATION | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||||||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||||
(in millions) |
| 2026 |
| 2025 |
| 2026 |
| 2025 | ||||||||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
| ||||||||
Net Income (Loss) |
| $ | 13 |
|
| $ | (106 | ) |
| $ | (92 | ) |
| $ | (196 | ) |
|
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 101 |
|
|
| 57 |
|
|
| 201 |
|
|
| 117 |
|
Provisions |
|
| 18 |
|
|
| 30 |
|
|
| 36 |
|
|
| 48 |
|
Net (gain) loss on early extinguishment of debt |
|
| (39 | ) |
|
| 4 |
|
|
| (95 | ) |
|
| 4 |
|
Net (gain) loss on sales of businesses and assets |
|
| — |
|
|
| (2 | ) |
|
| 2 |
|
|
| (5 | ) |
Divestitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
Stock-based compensation |
|
| 9 |
|
|
| 14 |
|
|
| 18 |
|
|
| 26 |
|
Restructuring and asset impairment charges |
|
| 21 |
|
|
| 11 |
|
|
| 65 |
|
|
| 10 |
|
Payments for restructurings |
|
| (19 | ) |
|
| (15 | ) |
|
| (40 | ) |
|
| (33 | ) |
Non-service retirement-related costs |
|
| 21 |
|
|
| 19 |
|
|
| 42 |
|
|
| 37 |
|
Contributions to retirement plans |
|
| (36 | ) |
|
| (33 | ) |
|
| (72 | ) |
|
| (67 | ) |
Decrease (increase) in accounts receivable and billed portion of finance receivables |
|
| 20 |
|
|
| (32 | ) |
|
| (86 | ) |
|
| (44 | ) |
Increase in inventories |
|
| (11 | ) |
|
| (23 | ) |
|
| (60 | ) |
|
| (160 | ) |
Increase in equipment on operating leases |
|
| (35 | ) |
|
| (22 | ) |
|
| (67 | ) |
|
| (52 | ) |
Decrease in finance receivables |
|
| 91 |
|
|
| 84 |
|
|
| 157 |
|
|
| 212 |
|
(Increase) decrease in other current and long-term assets |
|
| (82 | ) |
|
| 32 |
|
|
| (120 | ) |
|
| 16 |
|
(Decrease) increase in accounts payable |
|
| (88 | ) |
|
| (64 | ) |
|
| (30 | ) |
|
| 25 |
|
Increase (decrease) in accrued compensation |
|
| 26 |
|
|
| (21 | ) |
|
| 18 |
|
|
| (51 | ) |
Increase (decrease) in other current and long-term liabilities |
|
| 15 |
|
|
| 8 |
|
|
| 6 |
|
|
| (40 | ) |
Net change in income tax assets and liabilities |
|
| (6 | ) |
|
| 37 |
|
|
| 6 |
|
|
| 35 |
|
Other operating, net |
|
| 18 |
|
|
| 11 |
|
|
| 4 |
|
|
| 22 |
|
Net cash provided by (used in) operating activities |
|
| 37 |
|
|
| (11 | ) |
|
| (107 | ) |
|
| (100 | ) |
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
| ||||||||
Cost of additions to land, buildings, equipment and software |
|
| (26 | ) |
|
| (19 | ) |
|
| (47 | ) |
|
| (39 | ) |
Proceeds from sales of businesses and assets |
|
| 6 |
|
|
| 3 |
|
|
| 8 |
|
|
| 30 |
|
Acquisitions, net of cash acquired |
|
| 19 |
|
|
| — |
|
|
| 19 |
|
|
| 1 |
|
Other investing, net |
|
| (8 | ) |
|
| (2 | ) |
|
| (13 | ) |
|
| (4 | ) |
Net cash used in investing activities |
|
| (9 | ) |
|
| (18 | ) |
|
| (33 | ) |
|
| (12 | ) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
| ||||||||
Net (payments) proceeds on debt |
|
| (185 | ) |
|
| 650 |
|
|
| 70 |
|
|
| 546 |
|
Tariff receivables monetization |
|
| 80 |
|
|
| — |
|
|
| 80 |
|
|
| — |
|
Dividends |
|
| (6 | ) |
|
| (19 | ) |
|
| (16 | ) |
|
| (58 | ) |
Other financing, net |
|
| (3 | ) |
|
| (13 | ) |
|
| (6 | ) |
|
| (29 | ) |
Net cash (used in) provided by financing activities |
|
| (114 | ) |
|
| 618 |
|
|
| 128 |
|
|
| 459 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| 1 |
|
|
| 6 |
|
|
| (1 | ) |
|
| 7 |
|
(Decrease) increase in cash, cash equivalents and restricted cash |
|
| (85 | ) |
|
| 595 |
|
|
| (13 | ) |
|
| 354 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
| 637 |
|
|
| 390 |
|
|
| 565 |
|
|
| 631 |
|
Cash, Cash Equivalents and Restricted Cash at End of Period |
| $ | 552 |
|
| $ | 985 |
|
| $ | 552 |
|
| $ | 985 |
|
Second Quarter 2026 Overview
In the second quarter of 2026, overall market trends remained stable compared to the prior year, with demand broadly consistent with recent quarters. The Supreme Court ruling on IEEPA tariffs provided a meaningful benefit to our cost structure in the second quarter of 2026, which we recognized as a receivable and subsequently sold for $80 million in cash. However, ongoing tariff payments, combined with higher memory and oil prices, continue to present headwinds to our cost structure. To date, none of these factors have materially impacted overall demand, apart from certain international markets with exposure to the Middle East conflict.
Second quarter 2026 reflects the continued benefits of the Lexmark acquisition and Xerox's transformation efforts. Pro forma1 gross margins expanded year-over-year for the second consecutive quarter, driven by integration synergies, cost discipline, and an increasingly unified operating model. These gains are complemented by new product launches under the unified Xerox brand, growing partner validation, and a more focused go-to-market approach which is collectively positioning the company for continued operational and financial improvement in the second half of 2026 and beyond.
Equipment sales revenue of $387 million in the second quarter 2026 increased 15.2% in actual currency and 15.0% in constant currency2 compared to the second quarter 2025, and included a 33.1-percentage point benefit from the Lexmark acquisition. Total equipment installations increased 97.0%, including the impact of the Lexmark acquisition, partially offset by declines in legacy Xerox installations, primarily in entry black-and-white and mid-range color equipment categories. Excluding the Lexmark acquisition, equipment sales revenue declined 17.9% in actual currency due to lower installations and a mix shift toward Entry products. On a pro forma1 basis, second quarter 2026 equipment sales revenue declined 13.0%, primarily reflecting the impacts noted above, partially offset by modest growth from Lexmark.
Post sale revenue of $1,346 million in the second quarter 2026 increased 30.7% in actual currency and 29.7% in constant currency2, compared to the second quarter 2025, and included a 37.5-percentage point benefit from the Lexmark acquisition. Excluding the Lexmark acquisition, post sale revenue declined 6.8% in actual currency primarily reflecting lower equipment service revenue and managed print services. Post sale revenue was also adversely impacted by intentional reductions in non-strategic revenue, including the exit of certain production print manufacturing operations in prior years, as well as a decline in financing revenue reflecting the continued sales of finance receivables to our various funding affiliates and lower originations. On a pro forma1 basis, second quarter 2026 revenue decreased 3.9%, primarily reflecting the impacts noted above.
IT Solutions revenue of $189 million in the second quarter 2026 declined 10.0% in actual currency and 9.0% in constant currency2, compared to the second quarter 2025. The decline was primarily driven by a mix of revenue subject to net classifications and revenue deferrals.
Pre-tax income of $31 million for the second quarter 2026 increased by $91 million compared to a pre-tax (loss) of $(60) million in the second quarter 2025. Pre-tax income margin of 1.6% improved by 5.4-percentage points compared to second quarter 2025 pre-tax (loss) margin of (3.8)% and included a 3.8-percentage point benefit from the Lexmark acquisition. The improvement in the second quarter 2026 pre-tax income margin was primarily due to higher revenue and gross profit, including a 5.5-percentage point benefit related to the IEEPA tariff receivables, Transformation-related cost and productivity actions, as well as lower Other expenses (income), net. The decrease in Other expenses (income), net primarily reflects the early repayment of a portion of our 5.50% Senior Unsecured Notes due August 2028, as well as a portion of our 13.50% Senior Secured Notes due 2031, offset in part by the change in fair value of the warrant dividend liability. These benefits were partially offset by higher SAG and non-financing interest expense, as well as higher RD&E, Amortization of intangible assets and Restructuring and related costs, net driven by the Lexmark acquisition. On a pro forma1 basis second quarter 2026 pre-tax income margin improved by 4.1-percentage points primarily reflecting the impacts noted above.
Second quarter 2026 adjusted2 operating income margin of 10.6% increased by 6.9-percentage points compared to second quarter 2025, and included a 6.6-percentage point benefit related to the IEEPA tariff receivables and an approximate 2.0-percentage point benefit from the Lexmark acquisition. Excluding the impact of the IEEPA tariff receivables and the Lexmark acquisition, the decrease reflects lower revenue, including post sale revenue and equipment sales revenue, reflecting an unfavorable revenue mix, including lower outsourcing, service, rental, and other revenues, as well as higher incentive compensation, product cost increases and lower financing fees. These impacts were partially offset by lower SAG expenses as well as productivity and cost savings related to Transformation. On a pro forma1 basis second quarter 2026 adjusted2 operating margin increased by 5.4-percentage points primarily reflecting the impacts noted above, as well as the impact of the Lexmark acquisition.
For full-year 2026, we expect revenue of approximately $7.6 billion up from above $7.5 billion, adjusted2 operating income in the range of $555 million to $605 million up from $450 million to $500 million, and free cash flow2 of approximately $250 million. Free cash flow2 guidance reflects proceeds from the sale of IEEPA tariff receivables to a third party, which we expect to be reclassified into operating cash flow.
Contacts
Media Contact:
Justin Capella, Xerox, Justin.Capella@xerox.com
Investor Contact:
Greg Stein, Xerox, Greg.Stein@xerox.com
Read full story here
