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Xerox Stock Plunges 40.3% Despite Q3 Earnings and Revenues Beat
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Key Takeaways
Xerox tops Q3 earnings and revenue estimates, but shares tumble 40.3% following the results.
XRX's operating margin expands 330 basis points to 6.6%, aided by integration savings & lower expenses.
Xerox cuts 2026 profit & free cash flow forecasts amid rising costs, weaker print demand and IT challenges.
Xerox Holdings Corporation (XRX - Free Report) reported better-than-expected third-quarter 2026 results, with both earnings and revenues beating the Zacks Consensus Estimate.
XRX’s earnings of 6 cents per share beat the consensus estimate of a 7-cent loss by more than 100% and rose more than 100% from a year-ago quarter’s loss of 18 cents. The company provided third-quarter 2025 actual figure of 18-cent loss that includes tax effects associated with U.S. and U.K. losses for the same period.
Xerox Holdings Corporation Price, Consensus and EPS Surprise
Revenues of $1.87 billion beat the consensus mark by 0.2% but declined 4.7% year over year. Equipment revenue growth, integration synergies and cost savings supported profitability, while total equipment installations increased 9%.
However, investors were not impressed with the earnings beat and XRX provided lowered profit guidance for 2026, as the stock plunged 40.3% since the company released results on Oct. 29.
The company’s adjusted operating income is projected between $450 million and $475 million for 2026, down from the previous guidance of $555 million to $605 million.
Over the past year, XRX's shares have declined 49.9% against the industry's 7.2% gain and the Zacks S&P 500 composite’s 13.2% growth.
Image Source: Zacks Investment Research
XRX's Equipment Sales Gain Amid Market Challenges
Equipment sales revenues increased 2.6% year over year on a reported basis and 2.9% at constant currency to $393 million. Entry-level equipment revenues jumped 21%, while high-end production revenues climbed 14%. Mid-range equipment revenues declined 15%, reflecting changing customer preferences.
Post-sale revenues declined 4.5% on a reported basis and 4.4% at constant currency to $1.30 billion. Lower equipment service revenues, managed print services, supplies and financing revenues weighed on performance.
Management highlighted that equipment revenues recorded their first year-over-year organic growth since the second quarter of 2023. However, the shift toward entry-level products pressured profitability because these devices generate lower initial hardware margins.
Xerox's Print Business Benefits From Cost Savings
Print and Other segment revenues totaled $1.69 billion, down 2.9% year over year and 2.8% at constant currency. Despite lower revenues, segment profit surged 112.5% to $136 million from $64 million. Segment margin expanded 440 basis points to 8.1%.
Adjusted gross margin improved 60 basis points to 30.6%, supported by transformation savings, integration synergies, intellectual property licensing income and favorable supply pricing.
Entry-level installations increased 16%, while high-end installations climbed 13%. Mid-range installations declined 20%, reflecting the industrywide transition toward smaller devices. The company also announced three new production devices and a partnership with Xeikon to enter the packaging and labels market.
XRX's IT Solutions Business Faces Revenue Pressure
IT Solutions revenues declined 17.3% year over year to $187 million. Product revenues decreased 23% to $127 million, while services revenues fell 7% to $53 million. The decline reflected the timing of large prior-year public-sector product placements and slower sales conversion.
Segment profit dropped 55.6% to $8 million from $18 million, while segment margin contracted to 4.4% from 8.1%. Gross profit declined to $35 million from $44 million, affected by lower volume rebates and an unfavorable business mix.
Non-GAAP gross billings decreased 14% to $226 million. However, year-to-date gross billings and gross bookings increased 1% and 5%, respectively. Management noted that backlog increased 24%, supporting expectations for improved year-over-year performance in the fourth quarter.
Adjusted operating income increased to $124 million from $65 million a year earlier. Adjusted operating margin expanded 330 basis points to 6.6%, supported by integration savings, restructuring benefits and lower operating expenses.
Adjusted gross margin improved 60 basis points to 29.5%. The metric included $20 million of intellectual property licensing income, which contributed approximately 70 basis points. Higher memory and oil prices, unfavorable equipment mix and lower financing fees partly offset these benefits.
Non-financing interest expense increased to $93 million from $80 million. Meanwhile, the company recorded a GAAP net loss of $1.02 billion, including a $959 million non-cash goodwill impairment charge.
XRX's Cash Flow Weakens While Leverage Declines
Operating cash flow was $30 million compared with $116 million a year earlier. Free cash flow declined to $7 million from $88 million, primarily reflecting lower cash generation from finance receivables.
Cash and cash equivalents totaled $412 million at Sept. 30, 2026, compared with $512 million at year-end 2025. Total debt stood at approximately $4.22 billion.
Gross and net leverage improved to 5.4 times and 4.7 times, respectively, from 5.9 times and 5.1 times in the preceding quarter. Xerox also announced a debt exchange expected to reduce principal obligations by approximately $53 million.
Xerox’s 2026 Outlook for Other Items
For 2026, Xerox maintained its revenue guidance of approximately $7.6 billion, marginally higher than the Zacks Consensus Estimate of $7.59 billion for the same period.
However, free cash flow guidance was reduced to $50-$100 million from approximately $250 million. Management cited higher input costs, unfavorable equipment mix, weakening print market conditions and IT Solutions underperformance.
Memory and oil prices are expected to create an approximately $60 million operating income headwind in 2026. To preserve liquidity and support debt reduction, Xerox suspended its common and preferred dividends, a move expected to conserve approximately $28 million annually.
The company plans additional pricing actions, organizational simplification and procurement savings in 2027. Lexmark integration synergies are expected to provide approximately $100 million in incremental year-over-year savings next year.
Trane Technologies plc (TT - Free Report) reported better-than-expected third-quarter 2026 results. TT’s earnings per share of $4.86 outpaced the Zacks Consensus Estimate by 2.5% and increased 25.3% from the year-ago quarter. TT’s revenues of $6.76 billion surpassed the consensus estimate by 5% and improved 17.7% year over year.
ManpowerGroup (MAN - Free Report) posted mixed third-quarter 2026 results. MAN’s earnings of $1.01 per share matched the consensus mark and rose 21.7% from the year-ago quarter. MAN’s total revenues of $4.84 billion missed the consensus mark by 1.4% but increased 4.4% year over year.
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Xerox Stock Plunges 40.3% Despite Q3 Earnings and Revenues Beat
Key Takeaways
Xerox Holdings Corporation (XRX - Free Report) reported better-than-expected third-quarter 2026 results, with both earnings and revenues beating the Zacks Consensus Estimate.
XRX’s earnings of 6 cents per share beat the consensus estimate of a 7-cent loss by more than 100% and rose more than 100% from a year-ago quarter’s loss of 18 cents. The company provided third-quarter 2025 actual figure of 18-cent loss that includes tax effects associated with U.S. and U.K. losses for the same period.
Xerox Holdings Corporation Price, Consensus and EPS Surprise
Xerox Holdings Corporation price-consensus-eps-surprise-chart | Xerox Holdings Corporation Quote
Revenues of $1.87 billion beat the consensus mark by 0.2% but declined 4.7% year over year. Equipment revenue growth, integration synergies and cost savings supported profitability, while total equipment installations increased 9%.
However, investors were not impressed with the earnings beat and XRX provided lowered profit guidance for 2026, as the stock plunged 40.3% since the company released results on Oct. 29.
The company’s adjusted operating income is projected between $450 million and $475 million for 2026, down from the previous guidance of $555 million to $605 million.
Over the past year, XRX's shares have declined 49.9% against the industry's 7.2% gain and the Zacks S&P 500 composite’s 13.2% growth.
Image Source: Zacks Investment Research
XRX's Equipment Sales Gain Amid Market Challenges
Equipment sales revenues increased 2.6% year over year on a reported basis and 2.9% at constant currency to $393 million. Entry-level equipment revenues jumped 21%, while high-end production revenues climbed 14%. Mid-range equipment revenues declined 15%, reflecting changing customer preferences.
Post-sale revenues declined 4.5% on a reported basis and 4.4% at constant currency to $1.30 billion. Lower equipment service revenues, managed print services, supplies and financing revenues weighed on performance.
Management highlighted that equipment revenues recorded their first year-over-year organic growth since the second quarter of 2023. However, the shift toward entry-level products pressured profitability because these devices generate lower initial hardware margins.
Xerox's Print Business Benefits From Cost Savings
Print and Other segment revenues totaled $1.69 billion, down 2.9% year over year and 2.8% at constant currency. Despite lower revenues, segment profit surged 112.5% to $136 million from $64 million. Segment margin expanded 440 basis points to 8.1%.
Adjusted gross margin improved 60 basis points to 30.6%, supported by transformation savings, integration synergies, intellectual property licensing income and favorable supply pricing.
Entry-level installations increased 16%, while high-end installations climbed 13%. Mid-range installations declined 20%, reflecting the industrywide transition toward smaller devices. The company also announced three new production devices and a partnership with Xeikon to enter the packaging and labels market.
XRX's IT Solutions Business Faces Revenue Pressure
IT Solutions revenues declined 17.3% year over year to $187 million. Product revenues decreased 23% to $127 million, while services revenues fell 7% to $53 million. The decline reflected the timing of large prior-year public-sector product placements and slower sales conversion.
Segment profit dropped 55.6% to $8 million from $18 million, while segment margin contracted to 4.4% from 8.1%. Gross profit declined to $35 million from $44 million, affected by lower volume rebates and an unfavorable business mix.
Non-GAAP gross billings decreased 14% to $226 million. However, year-to-date gross billings and gross bookings increased 1% and 5%, respectively. Management noted that backlog increased 24%, supporting expectations for improved year-over-year performance in the fourth quarter.
Xerox's Operating Margins Improve Despite Headwinds
Adjusted operating income increased to $124 million from $65 million a year earlier. Adjusted operating margin expanded 330 basis points to 6.6%, supported by integration savings, restructuring benefits and lower operating expenses.
Adjusted gross margin improved 60 basis points to 29.5%. The metric included $20 million of intellectual property licensing income, which contributed approximately 70 basis points. Higher memory and oil prices, unfavorable equipment mix and lower financing fees partly offset these benefits.
Non-financing interest expense increased to $93 million from $80 million. Meanwhile, the company recorded a GAAP net loss of $1.02 billion, including a $959 million non-cash goodwill impairment charge.
XRX's Cash Flow Weakens While Leverage Declines
Operating cash flow was $30 million compared with $116 million a year earlier. Free cash flow declined to $7 million from $88 million, primarily reflecting lower cash generation from finance receivables.
Cash and cash equivalents totaled $412 million at Sept. 30, 2026, compared with $512 million at year-end 2025. Total debt stood at approximately $4.22 billion.
Gross and net leverage improved to 5.4 times and 4.7 times, respectively, from 5.9 times and 5.1 times in the preceding quarter. Xerox also announced a debt exchange expected to reduce principal obligations by approximately $53 million.
Xerox’s 2026 Outlook for Other Items
For 2026, Xerox maintained its revenue guidance of approximately $7.6 billion, marginally higher than the Zacks Consensus Estimate of $7.59 billion for the same period.
However, free cash flow guidance was reduced to $50-$100 million from approximately $250 million. Management cited higher input costs, unfavorable equipment mix, weakening print market conditions and IT Solutions underperformance.
Memory and oil prices are expected to create an approximately $60 million operating income headwind in 2026. To preserve liquidity and support debt reduction, Xerox suspended its common and preferred dividends, a move expected to conserve approximately $28 million annually.
The company plans additional pricing actions, organizational simplification and procurement savings in 2027. Lexmark integration synergies are expected to provide approximately $100 million in incremental year-over-year savings next year.
Xerox currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Earnings Snapshots
Trane Technologies plc (TT - Free Report) reported better-than-expected third-quarter 2026 results. TT’s earnings per share of $4.86 outpaced the Zacks Consensus Estimate by 2.5% and increased 25.3% from the year-ago quarter. TT’s revenues of $6.76 billion surpassed the consensus estimate by 5% and improved 17.7% year over year.
ManpowerGroup (MAN - Free Report) posted mixed third-quarter 2026 results. MAN’s earnings of $1.01 per share matched the consensus mark and rose 21.7% from the year-ago quarter. MAN’s total revenues of $4.84 billion missed the consensus mark by 1.4% but increased 4.4% year over year.