Revenue Trajectory and Adjusted1 Operating Income Improve; Higher Input Costs and Market Headwinds Weigh on Full-Year Outlook


Financial Summary
Q3 2026
NORWALK, Conn.--(BUSINESS WIRE)--Xerox Holdings Corporation (NASDAQ: XRX) today announced its 2026 third-quarter results.
“This quarter, Print equipment revenue grew and adjusted operating margin doubled as we continued to execute against our three priorities: stabilize revenue, increase profitability and reduce leverage,” said Louie Pastor, chief executive officer at Xerox. “We are seeing results in the areas where we have focused our execution, but the headwinds affecting our outlook have intensified, creating greater near-term pressure than we expected. As a result, we are lowering our full-year adjusted operating income and free cash flow guidance. We’re responding with actions and cost measures to mitigate these pressures, improve profitability, and preserve cash, including the suspension of our common and preferred dividends, while maintaining our focus on reducing debt.”
Progress Against Strategic Priorities
Q3 2026
Third-Quarter Key Financial Results
(in millions, except per share data) | Q3 2026 |
| Q3 2025 |
| B/(W) YOY |
Revenue | $1,868 |
| $1,961 |
| (4.7)% AC (4.5)% CC1 |
Gross Profit | $545 |
| $445 |
| $100 |
Gross Margin | 29.2% |
| 22.7% |
| 650 bps |
RD&E % | 3.0% |
| 3.8% |
| 80 bps |
SAG % | 20.0% |
| 24.3% |
| 430 bps |
Pre-Tax (Loss) | $(1,006) |
| $(300) |
| $(706) |
Pre-Tax (Loss) Margin | (53.9)% |
| (15.3)% |
| NM |
Gross Profit - Adjusted1 | $551 |
| $566 |
| $(15) |
Gross Margin - Adjusted1 | 29.5% |
| 28.9% |
| 60 bps |
Operating Income - Adjusted1 | $124 |
| $65 |
| $59 |
Operating Income Margin - Adjusted1 | 6.6% |
| 3.3% |
| 330 bps |
GAAP Diluted (Loss) per Share2 | $(7.73) |
| $(6.01) |
| $(1.72) |
Diluted Earnings Per Share - Adjusted1 | $0.02 |
| $0.20 |
| $(0.18) |
Third-Quarter Segment Results
(in millions) | Q3 2026 |
| Q3 2025 |
| B/(W) YOY |
Revenue |
|
|
|
|
|
Print and Other | $1,688 |
| $1,739 |
| (2.9)% |
IT Solutions | 187 |
| 226 |
| (17.3)% |
Intersegment Elimination3 | (7) |
| (4) |
| NM |
Total Revenue | $1,868 |
| $1,961 |
| (4.7)% |
Profit |
|
|
|
|
|
Print and Other | $136 |
| $64 |
| 112.5% |
IT Solutions | 8 |
| 18 |
| (55.6)% |
Corporate Other4 | (20) |
| (17) |
| 17.6% |
Total Profit | $124 |
| $65 |
| 90.8% |
_____________ | ||
| 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. | Third quarter 2026 includes an after-tax non-cash goodwill impairment charge of $955 million ($959 million pre-tax), or $6.87 per diluted share. Third quarter 2025 includes an inventory-related purchase accounting adjustment, related to the acquisition of Lexmark, of $85 million ($102 million pre-tax), or $0.67 per diluted share, as well as a tax expense charge of $467 million, or $3.69 per diluted share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability. | |
| 3. | Reflects primarily IT hardware, software solutions and services, sold by the IT Solutions segment to the Print and Other segment. | |
| 4. | 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
Non-GAAP Measures
This release refers to the following non-GAAP financial measures:
_____________ | ||
| 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, including the current conflict between Russia and Ukraine; 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 Reinvention; 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 (LOSS) (UNAUDITED) | ||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
(in millions, except per-share data) |
|
| 2026 |
|
|
| 2025 |
|
|
| 2026 |
|
|
| 2025 |
|
Revenues |
|
|
|
|
|
|
|
| ||||||||
Sales |
| $ | 954 |
|
| $ | 993 |
|
| $ | 2,870 |
|
| $ | 2,215 |
|
Services, maintenance, rentals and other |
|
| 914 |
|
|
| 968 |
|
|
| 2,766 |
|
|
| 2,779 |
|
Total Revenues |
|
| 1,868 |
|
|
| 1,961 |
|
|
| 5,636 |
|
|
| 4,994 |
|
Costs and Expenses |
|
|
|
|
|
|
|
| ||||||||
Cost of sales |
|
| 652 |
|
|
| 788 |
|
|
| 1,831 |
|
|
| 1,650 |
|
Cost of services, maintenance, rentals and other |
|
| 671 |
|
|
| 728 |
|
|
| 2,023 |
|
|
| 2,022 |
|
Research, development and engineering expenses |
|
| 56 |
|
|
| 74 |
|
|
| 187 |
|
|
| 159 |
|
Selling, administrative and general expenses |
|
| 374 |
|
|
| 477 |
|
|
| 1,236 |
|
|
| 1,223 |
|
Goodwill impairment |
|
| 959 |
|
|
| — |
|
|
| 959 |
|
|
| — |
|
Restructuring and related costs, net |
|
| 14 |
|
|
| 59 |
|
|
| 82 |
|
|
| 68 |
|
Amortization of intangible assets |
|
| 31 |
|
|
| 30 |
|
|
| 91 |
|
|
| 50 |
|
Divestitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
Non-financing interest expense |
|
| 93 |
|
|
| 80 |
|
|
| 277 |
|
|
| 168 |
|
Other expenses (income), net |
|
| 24 |
|
|
| 25 |
|
|
| (2 | ) |
|
| 85 |
|
Total Costs and Expenses |
|
| 2,874 |
|
|
| 2,261 |
|
|
| 6,684 |
|
|
| 5,421 |
|
(Loss) before Income Taxes(1) |
|
| (1,006 | ) |
|
| (300 | ) |
|
| (1,048 | ) |
|
| (427 | ) |
Income tax expense |
|
| 9 |
|
|
| 460 |
|
|
| 59 |
|
|
| 529 |
|
Net (Loss) |
|
| (1,015 | ) |
|
| (760 | ) |
|
| (1,107 | ) |
|
| (956 | ) |
Less: Preferred stock dividends, net |
|
| (4 | ) |
|
| (4 | ) |
|
| (11 | ) |
|
| (11 | ) |
Net (Loss) attributable to Common Shareholders |
| $ | (1,019 | ) |
| $ | (764 | ) |
| $ | (1,118 | ) |
| $ | (967 | ) |
|
|
|
|
|
|
|
|
| ||||||||
Basic (Loss) per Share |
| $ | (7.73 | ) |
| $ | (6.01 | ) |
| $ | (8.57 | ) |
| $ | (7.67 | ) |
Diluted (Loss) per Share |
| $ | (7.73 | ) |
| $ | (6.01 | ) |
| $ | (8.57 | ) |
| $ | (7.67 | ) |
_____________ | ||
(1) | Referred to as "Pre-tax (loss)" throughout the remainder of this document. | |
XEROX HOLDINGS CORPORATION | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) (UNAUDITED) | ||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
(in millions) |
|
| 2026 |
|
|
| 2025 |
|
|
| 2026 |
|
|
| 2025 |
|
Net (Loss) |
| $ | (1,015 | ) |
| $ | (760 | ) |
| $ | (1,107 | ) |
| $ | (956 | ) |
|
|
|
|
|
|
|
|
| ||||||||
Other Comprehensive (Loss) Income, Net |
|
|
|
|
|
|
|
| ||||||||
Translation adjustments, net |
|
| (19 | ) |
|
| (42 | ) |
|
| (95 | ) |
|
| 292 |
|
Unrealized gains (losses), net |
|
| 3 |
|
|
| (2 | ) |
|
| 11 |
|
|
| (8 | ) |
Changes in defined benefit plans, net |
|
| 19 |
|
|
| 35 |
|
|
| 64 |
|
|
| (42 | ) |
Other Comprehensive Income (Loss), Net |
|
| 3 |
|
|
| (9 | ) |
|
| (20 | ) |
|
| 242 |
|
|
|
|
|
|
|
|
|
| ||||||||
Comprehensive (Loss), Net |
| $ | (1,012 | ) |
| $ | (769 | ) |
| $ | (1,127 | ) |
| $ | (714 | ) |
XEROX HOLDINGS CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
(in millions, except share data in thousands) |
| September 30, 2026 |
| December 31, 2025 | ||||
Assets |
|
|
|
| ||||
Cash and cash equivalents |
| $ | 412 |
|
| $ | 512 |
|
Accounts receivable, net |
|
| 1,153 |
|
|
| 1,122 |
|
Billed portion of finance receivables, net |
|
| 36 |
|
|
| 46 |
|
Finance receivables, net |
|
| 438 |
|
|
| 510 |
|
Inventories |
|
| 1,063 |
|
|
| 1,016 |
|
Other current assets |
|
| 536 |
|
|
| 362 |
|
Total current assets |
|
| 3,638 |
|
|
| 3,568 |
|
Finance receivables due after one year, net |
|
| 735 |
|
|
| 846 |
|
Equipment on operating leases, net |
|
| 272 |
|
|
| 299 |
|
Land, buildings and equipment, net |
|
| 365 |
|
|
| 390 |
|
Intangible assets, net |
|
| 827 |
|
|
| 921 |
|
Goodwill, net |
|
| 1,273 |
|
|
| 2,222 |
|
Deferred tax assets |
|
| 68 |
|
|
| 98 |
|
Other long-term assets |
|
| 1,449 |
|
|
| 1,479 |
|
Total Assets |
| $ | 8,627 |
|
| $ | 9,823 |
|
Liabilities and (Deficit) Equity |
|
|
|
| ||||
Short-term debt and current portion of long-term debt |
| $ | 157 |
|
| $ | 231 |
|
Financing liability – tariff receivables monetization |
|
| 81 |
|
|
| — |
|
Accounts payable |
|
| 1,484 |
|
|
| 1,498 |
|
Accrued compensation and benefits costs |
|
| 217 |
|
|
| 235 |
|
Accrued expenses and other current liabilities |
|
| 1,262 |
|
|
| 1,258 |
|
Total current liabilities |
|
| 3,201 |
|
|
| 3,222 |
|
Long-term debt |
|
| 4,063 |
|
|
| 4,016 |
|
Pension and other benefit liabilities |
|
| 989 |
|
|
| 1,068 |
|
Post-retirement medical benefits |
|
| 146 |
|
|
| 159 |
|
Other long-term liabilities |
|
| 681 |
|
|
| 685 |
|
Total Liabilities |
|
| 9,080 |
|
|
| 9,150 |
|
|
|
|
|
| ||||
Noncontrolling Interests |
|
| 10 |
|
|
| 10 |
|
|
|
|
|
| ||||
Convertible Preferred Stock |
|
| 214 |
|
|
| 214 |
|
|
|
|
|
| ||||
Common stock |
|
| 133 |
|
|
| 128 |
|
Additional paid-in capital |
|
| 1,212 |
|
|
| 1,183 |
|
Retained earnings |
|
| 1,303 |
|
|
| 2,444 |
|
Accumulated other comprehensive (loss) |
|
| (3,331 | ) |
|
| (3,311 | ) |
Xerox Holdings shareholders’ (deficit) equity |
|
| (683 | ) |
|
| 444 |
|
Noncontrolling interests |
|
| 6 |
|
|
| 5 |
|
Total (Deficit) Equity |
|
| (677 | ) |
|
| 449 |
|
Total Liabilities and (Deficit) Equity |
| $ | 8,627 |
|
| $ | 9,823 |
|
|
|
|
|
| ||||
Shares of Common Stock Issued and Outstanding |
|
| 132,694 |
|
|
| 128,044 |
|
XEROX HOLDINGS CORPORATION | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
(in millions) |
|
| 2026 |
|
|
| 2025 |
|
|
| 2026 |
|
|
| 2025 |
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
| ||||||||
Net (Loss) |
| $ | (1,015 | ) |
| $ | (760 | ) |
| $ | (1,107 | ) |
| $ | (956 | ) |
|
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile Net (loss) to Net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 95 |
|
|
| 107 |
|
|
| 296 |
|
|
| 224 |
|
Provisions |
|
| 13 |
|
|
| 19 |
|
|
| 49 |
|
|
| 67 |
|
Net (gain) loss on early extinguishment of debt |
|
| (5 | ) |
|
| — |
|
|
| (100 | ) |
|
| 4 |
|
Inventory-related purchase accounting adjustment - noncash |
|
| — |
|
|
| 102 |
|
|
| — |
|
|
| 102 |
|
Effective settlement of a pre-existing relationship between Lexmark and Xerox |
|
| — |
|
|
| (43 | ) |
|
| — |
|
|
| (43 | ) |
Net (gain) loss on sales of businesses and assets |
|
| (1 | ) |
|
| (1 | ) |
|
| 1 |
|
|
| (6 | ) |
Divestitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
Stock-based compensation |
|
| 11 |
|
|
| 7 |
|
|
| 29 |
|
|
| 33 |
|
Goodwill impairment |
|
| 959 |
|
|
| — |
|
|
| 959 |
|
|
| — |
|
Restructuring and asset impairment charges |
|
| 13 |
|
|
| 59 |
|
|
| 78 |
|
|
| 69 |
|
Payments for restructurings |
|
| (20 | ) |
|
| (8 | ) |
|
| (60 | ) |
|
| (41 | ) |
Non-service retirement-related costs |
|
| 21 |
|
|
| 20 |
|
|
| 63 |
|
|
| 57 |
|
Contributions to retirement plans |
|
| (46 | ) |
|
| (56 | ) |
|
| (118 | ) |
|
| (123 | ) |
Decrease (increase) in accounts receivable and billed portion of finance receivables |
|
| 34 |
|
|
| 3 |
|
|
| (52 | ) |
|
| (41 | ) |
(Increase) decrease in inventories |
|
| (37 | ) |
|
| 37 |
|
|
| (97 | ) |
|
| (123 | ) |
Increase in equipment on operating leases |
|
| (25 | ) |
|
| (36 | ) |
|
| (92 | ) |
|
| (88 | ) |
(Increase) decrease in finance receivables |
|
| (5 | ) |
|
| 126 |
|
|
| 152 |
|
|
| 338 |
|
Decrease (increase) in other current and long-term assets |
|
| 42 |
|
|
| (12 | ) |
|
| (78 | ) |
|
| 4 |
|
Increase (decrease) in accounts payable |
|
| 30 |
|
|
| (21 | ) |
|
| — |
|
|
| 4 |
|
(Decrease) increase in accrued compensation |
|
| (28 | ) |
|
| 12 |
|
|
| (10 | ) |
|
| (39 | ) |
(Decrease) increase in other current and long-term liabilities |
|
| (7 | ) |
|
| 98 |
|
|
| (1 | ) |
|
| 58 |
|
Net change in income tax assets and liabilities |
|
| (1 | ) |
|
| 444 |
|
|
| 5 |
|
|
| 479 |
|
Other operating, net |
|
| 2 |
|
|
| 19 |
|
|
| 6 |
|
|
| 41 |
|
Net cash provided by (used in) operating activities |
|
| 30 |
|
|
| 116 |
|
|
| (77 | ) |
|
| 16 |
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
| ||||||||
Cost of additions to land, buildings, equipment and software |
|
| (23 | ) |
|
| (28 | ) |
|
| (70 | ) |
|
| (67 | ) |
Proceeds from sales of businesses and assets |
|
| 2 |
|
|
| 26 |
|
|
| 10 |
|
|
| 56 |
|
Acquisitions, net of cash acquired |
|
| — |
|
|
| (675 | ) |
|
| 19 |
|
|
| (674 | ) |
Other investing, net |
|
| (3 | ) |
|
| (5 | ) |
|
| (16 | ) |
|
| (9 | ) |
Net cash used in investing activities |
|
| (24 | ) |
|
| (682 | ) |
|
| (57 | ) |
|
| (694 | ) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
| ||||||||
Net (payments) proceeds on debt |
|
| (2 | ) |
|
| 124 |
|
|
| 68 |
|
|
| 670 |
|
Tariff monetization financing, net |
|
| (14 | ) |
|
| — |
|
|
| 66 |
|
|
| — |
|
Dividends |
|
| (8 | ) |
|
| (7 | ) |
|
| (24 | ) |
|
| (65 | ) |
Other financing, net |
|
| (3 | ) |
|
| 1 |
|
|
| (9 | ) |
|
| (28 | ) |
Net cash (used in) provided by financing activities |
|
| (27 | ) |
|
| 118 |
|
|
| 101 |
|
|
| 577 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (1 | ) |
|
| (2 | ) |
|
| (2 | ) |
|
| 5 |
|
Decrease in cash, cash equivalents and restricted cash |
|
| (22 | ) |
|
| (450 | ) |
|
| (35 | ) |
|
| (96 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| 552 |
|
|
| 985 |
|
|
| 565 |
|
|
| 631 |
|
Cash, Cash Equivalents and Restricted Cash at End of Period |
| $ | 530 |
|
| $ | 535 |
|
| $ | 530 |
|
| $ | 535 |
|
Third Quarter 2026 Overview
In the third quarter of 2026, overall market trends remained stable compared to the prior year, with demand broadly consistent with recent quarters. Despite a difficult backdrop, we continue to make progress on our three priorities - stabilize revenue, increase profitability, and reduce leverage.
Third quarter 2026 reflects the continued benefits of the Lexmark acquisition and Xerox's transformation efforts. Revenue declines moderated by 180 basis points sequentially on a pro forma1 basis. Adjusted2 operating income margins expanded year-over-year for the third 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. We also reduced leverage further in the quarter.
Equipment sales revenue of $393 million in the third quarter 2026 increased 2.6% in actual currency and 2.9% in constant currency2, compared to the third quarter 2025. Total equipment installations increased 9.0% driven by growth in Entry and High-end categories.
Post sale revenue of $1,295 million in the third quarter 2026 decreased 4.5% in actual currency and 4.4% in constant currency2, compared to the third quarter 2025. The decline in constant currency2 primarily reflects lower equipment service revenue and managed print services, as well as lower supplies and rental revenue. Post sale revenue was also adversely impacted by a decline in financing revenue reflecting the continued sales of finance receivables to our various funding affiliates and lower originations.
IT Solutions revenue of $180 million in the third quarter 2026 declined 18.9% in actual currency and 18.5% in constant currency2, compared to the third quarter 2025. The decrease primarily reflects the timing of large prior-year public sector product placements.
Pre-tax (loss) of $(1,006) million for the third quarter 2026 decreased by $706 million compared to a pre-tax (loss) of $(300) million in the third quarter 2025. Third quarter 2026 includes a pre-tax, non-cash goodwill impairment charge of $959 million ($955 million after-tax) or $6.87 per share. During the third quarter 2026, we lowered our future projections for the Print and Other reporting unit due to continued macro uncertainty and sustained memory price increases. These factors, and their resulting effect on discounted future cash flows, reduced the valuation of the Print and Other segment, resulting in a goodwill impairment charge in the third quarter 2026. Pre-tax (loss) margin of (53.9)% decreased by 38.6-percentage points compared to third quarter 2025 pre-tax (loss) margin of (15.3)%. The decrease in the third quarter 2026 pre-tax (loss) margin was primarily driven by the goodwill impairment charge as well as lower revenue, excluding a licensing agreement, and higher non-financing interest expense. These impacts were partially offset by higher gross profit, including a favorable impact resulting from the prior year purchase accounting adjustment related to the Lexmark acquisition, benefits from Transformation-related cost and productivity actions, and lower tariff-related costs. The improvement also reflected lower Selling, administrative and general expenses, primarily due to Transformation-related cost and productivity actions, lower incentive compensation expense and lower bad debt expense, as well as lower Restructuring and related costs, net, and Research, development and engineering expenses, reflecting Transformation-related cost and productivity actions.
Third quarter 2026 adjusted2 operating income margin of 6.6% increased by 3.3-percentage points compared to third quarter 2025. The increase reflects higher gross profit and lower Selling, administrative and general expenses, both of which are attributable to the factors discussed above. These benefits were partially offset by lower revenue and product cost increases.
For full-year 2026, we expect revenue of approximately $7.6 billion, adjusted2 operating income in the range of $450 million to $475 million, down from $555 million to $605 million, and free cash flow2 of approximately $50 to $100 million, down from $250 million. Updated adjusted2 operating income guidance reflects higher than expected input costs, mix shift from Mid-range to Entry, a weaker market outlook, and lower than expected IT Solutions profit. Updated free cash flow2 guidance reflects lower adjusted2 operating income and lower than expected finance receivable and IEEPA tariff receivable proceeds, as some of these benefits get pushed out to 2027. In October 2026, we announced the exchange of $174 million aggregate principal amount of 5.50% Senior Notes due 2028 for $121 million aggregate principal amount of 10.25% Senior Secured Notes due 2030 and $9 million of equity.
_____________ | ||
(1) |
| To better understand the trends in our business, comparisons of third quarter 2026 results to third quarter 2025 reflect Xerox’s reported results for both periods. Comparisons of second quarter 2026 results to second quarter 2025 are based on pro forma second quarter 2025 results, which include the estimated results of Lexmark for the period 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. |
(2) |
| Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure. |
Financial Review | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
|
| Three Months Ended September 30, |
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|
| % of Total Revenue | ||||||||||||
(in millions) |
|
| 2026 |
|
|
| 2025 |
|
| % Change |
| CC % Change |
| 2026 |
| 2025 | ||||
Equipment sales |
| $ | 393 |
|
| $ | 383 |
|
| 2.6 | % |
| 2.9 | % |
| 21 | % |
| 20 | % |
Post sale revenue(1) |
|
| 1,295 |
|
|
| 1,356 |
|
| (4.5 | )% |
| (4.4 | )% |
| 69 | % |
| 69 | % |
IT Solutions(2) |
|
| 180 |
|
|
| 222 |
|
| (18.9 | )% |
| (18.5 | )% |
| 10 | % |
| 11 | % |
Total Revenue |
| $ | 1,868 |
|
| $ | 1,961 |
|
| (4.7 | )% |
| (4.5 | )% |
| 100 | % |
| 100 | % |
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Reconciliation to Condensed Consolidated Statements of (Loss): | ||||||||||||||||||||
Equipment sales |
| $ | 393 |
|
| $ | 383 |
|
| 2.6 | % |
| 2.9 | % |
|
|
|
| ||
Supplies, paper and other sales(1) |
|
| 434 |
|
|
| 445 |
|
| (2.5 | )% |
| (2.9 | )% |
|
|
|
| ||
IT Products(2) |
|
| 127 |
|
|
| 165 |
|
| (23.0 | )% |
| (22.4 | )% |
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| ||
Sales |
| $ | 954 |
|
| $ | 993 |
|
| (3.9 | )% |
| (3.9 | )% |
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Services, maintenance, rentals and other(1) |
| $ | 806 |
|
| $ | 840 |
|
| (4.0 | )% |
| (3.6 | )% |
|
|
|
| ||
Xerox Financial Services(1) |
|
| 55 |
|
|
| 71 |
|
| (22.5 | )% |
| (22.5 | )% |
|
|
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| ||
IT Services(2) |
|
| 53 |
|
|
| 57 |
|
| (7.0 | )% |
| (7.0 | )% |
|
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Services, maintenance, rentals and other |
| $ | 914 |
|
| $ | 968 |
|
| (5.6 | )% |
| (5.2 | )% |
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Segments(3) |
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Print and Other |
| $ | 1,688 |
|
| $ | 1,739 |
|
| (2.9 | )% |
| (2.8 | )% |
| 90 | % |
| 89 | % |
IT Solutions |
|
| 187 |
|
|
| 226 |
|
| (17.3 | )% |
| (16.8 | )% |
| 10 | % |
| 11 | % |
Intersegment elimination (4) |
|
| (7 | ) |
|
| (4 | ) |
| NM |
|
| NM |
|
| — | % |
| — | % |
Total Revenue |
| $ | 1,868 |
|
| $ | 1,961 |
|
| (4.7 | )% |
| (4.5 | )% |
| 100 | % |
| 100 | % |
Media Contact:
Justin Capella, Xerox, Justin.Capella@xerox.com
Investor Contact:
Greg Stein, Xerox, Greg.Stein@xerox.com
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