Business Context and Reporting Period
This summary covers the Form 10-Q for Xerox Holdings Corporation and Xerox Corporation for the quarterly period ended June 30, 2026. The filing reflects the consolidated results of the company, including the impact of the Lexmark Acquisition (completed July 1, 2025) and a new Joint Venture arrangement with TPG regarding intellectual property (IPCo Holdings) finalized in February 2026. The company operates two primary segments: Print and Other and IT Solutions.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenues | $1,922 million | $1,576 million | $3,768 million | $3,033 million |
| Net Income (Loss) | $13 million | $(106) million | $(92) million | $(196) million |
| Diluted EPS | $0.07 | $(0.87) | $(0.77) | $(1.62) |
| Pre-Tax Income (Loss) | $31 million | $(60) million | $(42) million | $(127) million |
| Adjusted Operating Income | $203 million | $59 million | $275 million | $81 million |
| Adjusted Operating Margin | 10.6% | 3.7% | 7.3% | 2.7% |
| Cash and Cash Equivalents | $495 million | $512 million (Dec 31, 2025) | $495 million | $512 million (Dec 31, 2025) |
| Total Debt | $4,223 million | $4,247 million (Dec 31, 2025) | $4,223 million | $4,247 million (Dec 31, 2025) |
| Operating Cash Flow | Not reported for Q2 | Not reported for Q2 | $(107) million | $(100) million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 22.0% in Q2 2026 and 24.2% YTD 2026 compared to the prior year. This growth is primarily driven by the Lexmark Acquisition, which contributed a 31.6 percentage point benefit in Q2. On a pro forma basis (excluding Lexmark impact), revenue declined 6.5% in Q2.
- Profitability Turnaround: The company returned to net income in Q2 2026 ($13 million) from a net loss of $106 million in Q2 2025. This improvement was significantly aided by a $105 million reduction in Cost of Sales due to the recovery of IEEPA tariffs (subsequently monetized for $80 million cash) and a $95 million gain on the early extinguishment of debt.
- Segment Performance:
- Print and Other: Revenue increased 26.9% in Q2, driven by Lexmark. Equipment sales rose 15.2%, while post-sale revenue grew 30.7%.
- IT Solutions: Revenue declined 10.0% in Q2 due to revenue deferrals and mix shifts.
- Cost Structure: Restructuring and related costs increased to $23 million in Q2 2026 (from $10 million in Q2 2025) as part of ongoing transformation and integration efforts. Non-financing interest expense rose to $100 million due to higher interest rates and new debt from the Joint Venture and Lexmark financing.
Guidance, Outlook, and Risks
- Outlook Revision: Management lowered its full-year 2026 operating cash flow guidance to approximately $340 million (previously $350 million). This decrease reflects higher restructuring expenses, increased interest costs from the Joint Venture financing, and lower-than-expected working capital performance.
- Joint Venture Impact: The new IP Joint Venture (IPCo Holdings) introduced $450 million in new debt (Term Loans and Class A Units) with interest rates tied to SOFR plus significant margins (8.125% and 11.875%). This increases the company's interest burden.
- Key Risks:
- Legacy Decline: Excluding Lexmark, legacy Xerox equipment sales and post-sale revenue continue to decline due to lower installations and unfavorable mix shifts.
- Macro Headwinds: Ongoing tariff payments (excluding the recovered IEEPA tariffs), higher memory and oil prices, and geopolitical uncertainties (specifically Middle East conflict) present cost and demand risks.
- Liquidity: While the company maintains approximately $276 million in net availability under its ABL facility, access to capital markets remains dependent on credit ratings and market conditions.
Investor Verification Checklist
- Pro Forma Trends: Verify the sustainability of revenue growth by analyzing the pro forma decline (6.5% in Q2) to understand the underlying organic performance of the legacy business.
- Debt Servicing: Assess the impact of the new Joint Venture debt ($450 million) and the associated high interest margins on future cash flows and leverage ratios.
- Tariff Monetization: Confirm the timing and certainty of the remaining tariff refunds and the associated $90 million financing liability recorded for the monetization transaction.
- Restructuring Execution: Monitor the execution of the "Transformation" program, specifically the $154 million restructuring reserve and the associated headcount reductions (approx. 1,255 for YTD 2026).
- IT Solutions Decline: Investigate the reasons behind the continued revenue decline in the IT Solutions segment (down 10% in Q2) and its impact on overall margin mix.