Xerox Holdings Corp. Q2 Results: Net Profit Turns Positive
Xerox Holdings Corp. delivered a strong Q2 performance with adjusted EPS of $0.38, beating loss estimates. Revenue hit $1.92 billion, aided by a $105M tariff benefit. The stock surged 27% due to a short squeeze, with 32% of the float previously sold short.
*this image is generated using AI for illustrative purposes only.
Xerox Holdings Corp. (NASDAQ: XRX) reported second-quarter results on Thursday that exceeded Wall Street estimates for both earnings and revenue, triggering a nearly 27% surge in its stock price. The rally was amplified by a short squeeze, as 32% of the public float was sold short, indicating substantial bearish positioning that reversed sharply following the positive data.
The company’s GAAP net income turned positive at $13 million, or $0.07 per share, compared with a loss of $106 million, or $0.87 per share, in the prior-year period. Adjusted earnings per share came in at $0.38, significantly beating the analyst consensus estimate for a loss of $0.14 per share. This turnaround was supported by improved operational profitability and a one-time pre-tax benefit of $105 million related to the recognition of IEEPA tariff receivables following a recent U.S. Supreme Court ruling.
Financial Performance
Revenue increased to $1.92 billion from $1.58 billion a year earlier, surpassing the Street estimate of $1.90 billion. However, on a pro forma basis that includes Lexmark in the prior-year comparison, revenue declined 6.5%. Adjusted operating income rose to $203 million from $59 million, while the adjusted operating margin expanded to 10.6% from 3.7%.
| Metric | Current Quarter | Prior Year | Change |
|---|---|---|---|
| Revenue | $1.92 billion | $1.58 billion | +21.5% |
| Adjusted EPS | $0.38 | ($0.14) est. | Beat |
| GAAP Net Income | $13 million | ($106 million) | Turnaround |
| Adj. Op. Income | $203 million | $59 million | +244% |
| Adj. Op. Margin | 10.6% | 3.7% | +690 bps |
Segment performance showed divergence, with the Print and Other segment generating $1.73 billion in revenue. In contrast, IT Solutions revenue declined to $194 million from $213 million a year earlier. Cash flow metrics also improved, with operating cash flow rising to $37 million from a use of $11 million, and free cash flow increasing to $11 million from negative $30 million.
Balance Sheet and Outlook
Xerox ended the quarter with $495 million in cash and cash equivalents, down from $512 million as of Dec. 31, 2025. Total debt, including the current portion, stood at $4.22 billion, compared with $4.25 billion at the end of 2025. Chief Executive Officer Louie Pastor stated that the company made progress on stabilizing revenue, increasing profitability, and reducing leverage. The company also increased its Lexmark gross cost synergy target by $50 million to at least $350 million during the quarter.
For fiscal 2026, Xerox expects revenue of approximately $7.6 billion, slightly below analysts’ estimate of $7.61 billion. The company raised its adjusted operating income outlook to a range of $555 million to $605 million from its prior forecast of $450 million to $500 million and reiterated free cash flow guidance of about $250 million.
What the Numbers Show
The significant beat on adjusted earnings was partially driven by non-operational factors. While operational margins improved substantially, the inclusion of a $105 million pre-tax tariff benefit highlights the impact of regulatory developments on bottom-line results. Investors should note that pro forma revenue actually declined 6.5%, suggesting that top-line growth remains pressured despite the strong headline revenue figure driven by year-over-year base effects and integration benefits.
How sustainable is Xerox's adjusted operating margin expansion given that pro forma revenue actually declined 6.5% year-over-year?
What specific operational strategies is Xerox implementing to reverse the revenue decline in its IT Solutions segment?
Will the one-time $105 million IEEPA tariff benefit create unrealistic earnings expectations for future quarters without similar regulatory windfalls?
20
Access 50+ Readymade Screeners 
Use 200+ Custom Filters 
Get Full Market Insights 
