Xerox Releases First-Quarter Results

Returns to year-over-year adjusted¹ operating margin growth with 240 basis points expansion; revenue trajectory improved and liquidity strengthened in Q1

Financial Summary

Q1 2026

• Revenue of $1.85 billion, up 26.7 percent, or 23.6 percent in constant currency¹. On a pro forma² basis, revenue is down 3.7 percent.
• GAAP net (loss) of $(105) million, or $(0.84) per share, down $15 million or $0.09 per share, year-over-year, respectively.
• Normalized Adjusted³ net (loss) of $(10) million, or $(0.11) per share, down $3 million or $0.02 per share, year-over-year, respectively.
• Adjusted¹ net (loss) of $(51) million, or $(0.43) per share, down $47 million or $0.37 per share, year-over-year, respectively.
• Adjusted¹ operating income of $72 million, up $50 million year-over-year.
• Adjusted¹ operating margin of 3.9 percent, up 240 basis points year-over-year.
• Operating cash flow of $(144) million, down $55 million year-over year, reflecting expected Q1 seasonality.
• Free cash flow¹ of $(165) million, down $56 million year-over-year. Full-year free cash flow guidance of approximately $250 million is unchanged, implying greater than $400 million of cash generation over the remaining three quarters.

NORWALK, Conn.--(BUSINESS WIRE)--Xerox Holdings Corporation (NASDAQ: XRX) today announced its 2026 first-quarter results.

“This quarter’s results demonstrated tangible progress as revenue and profit trajectory improved, adjusted¹ operating margin expanded, and we further enhanced our liquidity,” said Louie Pastor, chief executive officer at Xerox. “When I took this role, I was unequivocal that we must be clear about our priorities — stabilize revenue, increase profitability and reduce leverage — and establish credibility by executing on them one quarter at a time. I am genuinely optimistic about the future of this business and confident we are closer to an inflection point than the external narrative suggests. Reaffirming our 2026 guidance reflects that confidence.”

Strategic Milestones

Q1 2026

• Lexmark synergies on plan; reaffirm at least $300 million of integration synergies
• Print sales pipeline materially higher vs. this time last year
• Production Installs increased 31% year-over-year, partly fueled by the Proficio launch
• Q1 IT Solutions bookings and billings growth of 32% and 21%, respectively
• Raised $450 million through a newly formed IP joint venture with TPG Angelo Gordon
• Repurchased $101 million face value of 2028 Senior Notes

First-Quarter Key Financial Results

First-Quarter Segment Results

2026 Guidance ¹

• Revenue: Above $7.5 billion
• Adjusted ² Operating Income: $450-$500 million
• Free cash flow²: ~ $250 million

Non-GAAP Measures

This release refers to the following non-GAAP financial measures:

• Adjusted² 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.
• Adjusted ² 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 (income) expenses, net from pre-tax loss and margin.
• Constant currency (CC) revenue change, which excludes the effects of currency translation.
• Free cash flow ², which is operating cash flow less capital expenditures.

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.

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First Quarter 2026 Overview

In the first quarter of 2026, overall market trends improved compared to 2025, when demand was affected by DOGE-related spending reductions, tariff uncertainty, and the government shutdown. The February 2026 Supreme Court ruling on tariffs is expected to have a net positive impact on Xerox’s cost structure. However, those benefits are expected to be slightly more than offset by higher memory prices, and oil prices. To date, none of these factors have impacted overall demand, apart from certain international markets with exposure to the Middle East conflict.

First quarter 2026 reflects the benefits of the Lexmark acquisition and Xerox’s Transformation¹ efforts. These gains are complemented by a more unified go-to-market model, increasing partner validation, and strategic initiatives to enhance long-term profitability, positioning the company for sustained operational and financial improvements.

Equipment sales of $378 million in the first quarter 2026 increased 33.1% in actual currency and 30.7% in constant currency², compared to the first quarter 2025, and included a 38.0-percentage point benefit from the Lexmark acquisition. Total equipment installations increased 98.0%, including the impact of the Lexmark acquisition, partially offset by declines in legacy Xerox installations, primarily in the entry-and mid-range color equipment categories. Excluding the Lexmark acquisition, equipment sales declined 4.9% in actual currency due to lower installations, partially offset by entry market lead generation initiatives. On a pro forma³ basis, first quarter 2026 equipment sales revenue declined 2.3%, primarily reflecting the impacts noted above, partially offset by modest growth from Lexmark.

Post sale revenue of $1,314 million in the first quarter 2026 increased 30.1% in actual currency and 26.5% in constant currency², compared to the first quarter 2025, and included a 35.3-percentage point benefit from the Lexmark acquisition. Excluding the Lexmark acquisition, post sale revenue declined 5.2% 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 forma³ basis, first quarter 2026 revenue decreased 3.8%, primarily reflecting the impacts noted above.

IT Solutions revenue of $154 million in the first quarter 2026 declined 5.5% in actual currency and 6.2% in constant currency², compared to the first quarter 2025. The decline was primarily driven by a mix of revenue subject to net classifications, revenue deferrals and impacts from component cost increases.

Pre-tax (loss) of $(73) million for the first quarter 2026 increased by $6 million compared to pre-tax (loss) of $(67) million in the first quarter 2025. Pre-tax (loss) margin of (4.0)% improved 0.6-percentage points compared to first quarter 2025 pre-tax (loss) margin of (4.6)% and included a 2.3-percentage point benefit from the Lexmark acquisition. The improvement in the first quarter 2026 pre-tax (loss) margin was primarily due to higher revenue and gross profit, including Transformation-related¹ cost reductions, productivity actions, and lower Other (income) expenses, net. The decrease in Other (income) expenses, net reflects a gain on the early repayment of a portion of the 2028 Senior Unsecured Notes in the first quarter 2026, and the absence of commitment fees incurred in the first quarter 2025 related to borrowings in support of the Lexmark acquisition. These benefits were partially offset by higher Restructuring and related costs, net and higher Amortization of intangible assets, SAG and RD&E, driven by the Lexmark acquisition. On a pro forma³ basis first quarter 2026 pre-tax (loss) margin improved by 1.7-percentage points primarily reflecting the impacts noted above.

First quarter 2026 adjusted² operating income margin of 3.9% increased by 2.4-percentage points compared to first quarter 2025, and included an approximate 3.0-percentage point benefit from the Lexmark acquisition. The increase primarily reflects productivity and cost savings related to Transformation actions, and the benefit of the Lexmark acquisition. These benefits were partially offset by lower legacy Xerox revenue, as well as reduced gross profit, reflecting product cost increases and an unfavorable revenue mix, including declines in managed print services and equipment service revenue. On a pro forma³ basis first quarter 2026 adjusted² operating margin increased by 0.2-percentage points primarily reflecting the impacts noted above, as well as the impact of the Lexmark acquisition.

For full-year 2026, we continue to expect revenue above $7.5 billion in constant currency², adjusted² operating income in the range of $450 million to $500 million, and free cash flow² of approximately $250 million. Free cash flow² guidance reflects higher interest expense related to funding from the Joint Venture Financing arrangement entered into with TPG in the first quarter of 2026, partially offset by a reduction in capital expenditures and improvements in working capital and other items. The remainder of our guidance assumptions remain unchanged.

Financial Review

Revenues

Media Contact:
Justin Capella, Xerox, Justin.Capella@xerox.com

Investor Contact:
Greg Stein, Xerox, Greg.Stein@xerox.com