Analyst(s): Alex Smith
Publication Date: August 4, 2025
Xerox delivered steady results in Q2 FY 2025, driven by strength in IT and Digital Solutions. Reinvention efforts and operational simplification helped cushion the impact of softness in Print and ongoing macro headwinds.
What is Covered in this Article:
- Xerox’s Q2 FY 2025 financial results
- Decline in Print revenue amid ongoing volume and tariff pressure
- Surge in IT Solutions revenue driven by ITsavvy and cloud infrastructure demand
- Strategic benefits and integration roadmap following Lexmark acquisition
- Full-year guidance on revenue, margin, free cash flow, and deleveraging targets
The News: Xerox Holdings Corporation (NASDAQ: XRX) reported Q2 FY 2025 revenue of $1.58 billion (+2% above consensus estimates), down 0.1% year-on-year (YoY) and 1.1% YoY in constant currency (cc). Print and Other segment revenue declined 8.6% YoY to $1.4 billion, while IT Solutions revenue more than doubled YoY to $213 million, driven by the inclusion of ITsavvy, in addition to strong organic growth within its legacy business. Adjusted operating income fell to $59 million (Q2 FY 2024: $85 million; consensus: $64 million), with an adjusted margin of 3.7%, down 170 basis points YoY. Adjusted net loss was $77 million, or $0.64 per share (consensus: earnings per share: $0.07), versus adjusted earnings of $41 million, or $0.29 per share, a year ago.
“Our second quarter reflects the improved resiliency of financial results afforded by Reinvention. Growth in IT and Digital Solutions helped deliver stable revenue, and a focus on costs preserved profitability amid a volatile operating landscape,” said Steve Bandrowczak, CEO of Xerox. “In the second half of the year, we’re focused on executing Reinvention through the integration of Lexmark, laying the foundation for growth in revenue, adjusted operating income and free cash flow in 2026.”
Xerox Q2 FY 2025 Results Show Stability as IT Solutions Revenue Surges
Analyst Take: Xerox’s Q2 FY 2025 results highlight a transitional quarter as the company continues executing its Reinvention strategy and begins integrating Lexmark. IT and Digital Solutions revenue now makes up over 10% of total revenue, reflecting meaningful progress in Xerox’s shift toward higher-growth, margin-accretive businesses. Despite Print headwinds and increased tariff pressure, Xerox maintained operational stability through tight cost control, structural simplification, and early synergies from its recent acquisitions.
Print Headwinds Persist Amid Tariff Drag and Weak Volume
Print and Other segment revenue declined 8.6% YoY to $1.4 billion, reflecting persistent pressure from lower equipment and post-sale revenue. Equipment installations were down 12%, impacted by lower entry-level installations (-14%) due partly to backlog changes in mono devices, mid-range installation declines (-6%) (despite continued strength in PrimeLink C9200 series), and intentional exits in certain high-end product segments. Post-sale revenue fell 9.5% YoY in actual currency (-10.5% YoY in cc), primarily from lower supplies and page volumes. Management anticipates approximately $30-35 million in tariff-related expenses in FY 2025, net of mitigation, due to temporarily elevated tariff rates (145%) on goods sourced from China and higher transition costs moving production from China to Mexico, though these impacts are expected to be recovered in FY 2026. Management remains focused on executing strategic cost actions and leveraging new product introductions to support Print performance in the H2 FY 2025.
IT Solutions Momentum Accelerates on ITsavvy Contributions
IT Solutions revenue more than doubled YoY to $213 million, driven by contributions from ITsavvy and strong organic growth within its legacy business. Gross billings rose 8% YoY (Q1 FY 2025 growth: 0.4% YoY), with PC and Microsoft Cloud infrastructure driving the majority of demand. Segment profit improved by $9 million, aided by better product mix and cost execution. Gross margin expanded to 16.4% (+90 basis points YoY), indicating improved quality of revenue due to ITsavvy. Xerox also reported increased cross-sell traction: over 80 Xerox Print clients contributed to a $50 million IT Solutions pipeline in the quarter. IT remains a core element of Xerox’s Reinvention strategy and a long-term engine for growth, with further upside as cross-sell efforts scale across its expansive Print client base of 200,000+.
Lexmark Integration to Drive Scale, Margin Expansion, and Geographic Reach
Xerox completed the Lexmark acquisition on July 1 and now begins integration. The deal positions Xerox as a top player across all major Print categories and adds more than 40 A4 configurations to the portfolio. Xerox will now begin selling high-end A3 products in the APAC market for the first time, leveraging Lexmark’s distribution footprint. Integration plans include adopting Lexmark’s A3 platform, migrating toner to Xerox’s lower-cost technology, and transitioning controller technology. Total synergies are expected to exceed $250 million over two years, with benefits spanning cost, revenue, and working capital. The Mexico-based manufacturing facility inherited from Lexmark is expected to help offset ongoing tariff exposure by shifting production away from China.
Guidance and Final Thoughts
Xerox expects 16-17% revenue growth in cc and an adjusted operating margin of 4.5% in FY 2025. Free cash flow is now expected at ~$250 million, below the original $350-400 million guide, reflecting ~$60-65 million in cash tariff costs and $50-75 million in one-time synergy implementation expenses. Xerox also plans to reduce gross leverage from 5.4x to ~3x as debt reduction is now the top capital allocation priority. Revenue momentum from IT Solutions, synergy gains from the Lexmark acquisition, and a clear deleveraging roadmap support management’s confidence in execution through FY 2025.
See the complete Q2 FY 2025 earnings press release on the Xerox investor relations website here.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
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Author Information
Alex is Vice President & Practice Lead, Ecosystems, Channels, & Marketplaces at the Futurum Group. He is responsible for establishing and maintaining the Channels Research program as part of the overall Futurum GTM and Channels Practice. This includes overseeing the channel data rollout in the Futurum Intelligence Platform, primary research activities such as research boards and surveys, delivering thought-leading research reports, and advising clients on their indirect go-to-market strategies. Alex also supports the overall operations of the Futurum Research Business Unit, including P&L segmentation, sales and marketing alignment, and budget planning.
Prior to joining Futurum, Alex was VP of Channels & Enterprise Research at Canalys where he led a multi-million dollar research organization with more than 20 analysts. He played an integral role in helping the Canalys research organization migrate into Omdia after having been acquired in 2023. He is an accomplished research leader, as well as an expert in indirect go-to-market strategies. He has delivered numerous keynotes at partner-facing conferences.
Alex is based in Portland, Oregon, but has lived in numerous places, including California, Canada, Saudi Arabia, Thailand, and the UK. He has a Bachelor in Commerce and Finance Major from Dalhousie University, Halifax Canada.
