Xerox (XRX) Q1 2026 earnings summary

Executive summary

• Q1 2026 revenue rose 26.7% year-over-year to $1.85 billion, driven by the Lexmark acquisition and favorable currency impact, while pro forma revenue declined 3.7–4%.

• Adjusted operating margin increased by 240 basis points to 3.9%, reflecting cost discipline, transformation actions, and Lexmark synergies.

• Net loss was $(105) million GAAP, or $(0.84) per share; adjusted net loss was $(51) million, or $(0.43) per share.

• Lexmark integration is on track, with cumulative synergies expected to exceed $300 million by 2027.

• A $450 million IP joint venture was formed, enhancing liquidity and enabling opportunistic debt repurchases.

Financial highlights

• Q1 revenue: $1.85 billion, up 26.7% year-over-year (24% in constant currency); pro forma revenue down 3.7–4%.

• Adjusted gross margin: 29.7–30.3%, up 50–60 basis points year-over-year.

• Adjusted operating margin: 3.9%, up 240 basis points year-over-year.

• Free cash flow: use of $165 million in Q1, in line with seasonal expectations.

• Total debt at quarter-end: $4.4–$4.45 billion; cash and equivalents: $637 million.

Outlook and guidance

• 2026 revenue expected to exceed $7.5 billion, with adjusted operating income guidance of $450–$500 million.

• Free cash flow guidance: approximately $250 million for 2026, with over $400 million expected in the remainder of the year.

• Cost reductions of $250–$300 million anticipated in 2026, including $150–$200 million from integration synergies.

• Gross and net leverage expected to drop by 1.5 turns by year-end 2026.

• Guidance does not include potential tariff refunds from a recent Supreme Court ruling.