Analyst(s): Futurum Research
Publication Date: November 4, 2025
Xerox’s Q3 FY 2025 print hardware demand remained delayed by tariffs and government funding uncertainty, but page volumes and branded supplies held steady. IT Solutions delivered double-digit pro forma growth as the Lexmark integration moved ahead of plan, and synergy targets were raised.
What is Covered in this Article:
- Xerox’s Q3 FY 2025 financial results
- Lexmark integration accelerates synergy realization
- IT Solutions’ momentum and cross-sell expansion
- Channel and sales model optimization is underway
- Guidance and Final Thoughts
The News: Xerox Holdings Corporation (NASDAQ: XRX) reported Q3 FY 2025 revenue of $2.0 billion, up 28.3% year over year (YoY) or 27% in constant currency (cc), versus Wall Street consensus of $2 billion. Print and Other revenue was $1.7 billion (+20.6% YoY), and IT Solutions revenue was $226 million (+162.8% YoY). Adjusted operating income was $65 million (-18.8% YoY) with a 3.3% margin (-190 bps YoY). Adjusted net income was $27.0 million (Q3 FY 2024: $34 million) and adjusted EPS was $0.20 (Q3 FY 2024: $0.25).
“While continued macro volatility and near-term uncertainties on government funding decisions weighed on transactional print this quarter, consistent page volume trends and strong IT Solutions momentum reinforce our confidence that Reinvention will deliver durable productivity and long-term value,” said Steve Bandrowczak, chief executive officer at Xerox. “The combined Xerox and Lexmark team is aligning go-to-market structure, blending complementary portfolios, and standardizing operating processes to deliver broader solutions and deeper value.”
Xerox Q3 FY 2025 Earnings Cut Outlook as IT Solutions Grew
Analyst Take: Xerox’s quarter underscores a tale of two motions: transactional equipment demand remains deferred by tariffs and public sector funding uncertainty, while services-led offerings and IT Solutions continue to expand. Management is leveraging Lexmark integration to standardize platforms, consolidate operations, and drive go-to-market optimization at scale. The first 100 days yielded an additional $50 million of synergy opportunities (to at least $300 million), with organizational realignment already driving run-rate savings. The setup for 2026 centers on synergy capture, channel efficiency, and cross-sell flywheels across a ~200,000-client base.
Lexmark Integration and Operating Model Realignment
Integration is running ahead of plan, with synergy targets raised by $50 million to at least $300 million and more than 1,200 roles eliminated to support run-rate gross savings of over $125 million by year-end. Xerox is adopting Lexmark’s global business services (GBS), unified data governance, and captive capability centers (Philippines, Hungary, India) to centralize and streamline support and operations. The company elected to leverage and enhance Lexmark’s existing technology stack, which reduces change risk and accelerates benefits realization. Product plans include adopting Lexmark’s A3 platform, decreasing supplier reliance and service intensity, and a new Kyocera high-end OEM partnership to bolster competitiveness. Execution consistency on these levers should position gross margin and operating leverage for improvement through FY 2026.
IT Solutions Momentum and Cross-Sell Expansion
IT Solutions remains a growth vector, with pro forma revenue up 12.4% and pro forma billings up 27% YoY, while bookings rose 11% YoY in the quarter. Growth was reflected in public sector deployments (notably PCs and endpoints), sustained infrastructure and networking demand, and accelerating adoption of Microsoft Cloud services by providers. The migration of legacy Xerox IT Solutions ERP/CRM to the ITsavvy platform is complete in the U.S., enabling scale and cross-sell velocity. Year-to-date, sales activity of new IT Solutions to Xerox print clients exceeded $50 million across 150+ clients, with roughly $15 million converting to bookings in-quarter. Inside sales is scaling (San Antonio center) to 180 specialists over time, with AI-driven pipeline analytics and >30% year-to-date ESR growth across 27,000 transitioned accounts. With platform leverage and cross-sell traction building, IT Solutions should continue to outgrow underlying markets into FY 2026.
Channel and Sales Model Optimization, Portfolio Updates
Xerox is segmenting the combined Xerox–Lexmark client base by size and vertical to align coverage cost-to-serve with specialized offerings and partner routes. The company is expanding distribution through partners (e.g., Loffler in the Upper Midwest) to improve efficiency and margin, following Lexmark’s proven channel model. The inside sales motion supports scaled reach and productivity, with AI insights removing bottlenecks across the sales cycle and accelerating conversion. Portfolio updates included the IJP900 (re-entry to mid-volume inkjet) and two new Proficio digital color presses, intended to lift production print revenue in FY 2026. Management emphasized that page volumes and branded supplies are stable, reinforcing that equipment softness reflects delayed decisions rather than usage declines. With A3, produced by Lexmark, starting a limited rollout in Eastern Europe in Q4 and global scaling in FY 2026, service intensity and managed print services (MPS) margins are expected to improve over time.
Guidance and Final Thoughts
FY 2025 guidance was reduced to 13% cc revenue growth (prior: 16% to 17%), ~3.5% adjusted operating margin (prior: around 4.5%), and ~$150 million free cash flow (prior: ~$250 million), with tariffs and deferred equipment purchases pressuring the near term. For FY 2026, management outlined gross savings of $250–$300 million (resulting from reinvention and Lexmark synergies), partially offset by approximately $60 million from the wind-down of the finance receivable portfolio and approximately $100 million in incremental tariffs/product costs. Steady page volumes, accelerating IT Solutions, and integration synergies collectively support margin recovery by FY 2026, provided funding and tariff conditions stabilize. The integration playbook and coverage optimization will be key execution variables in the next 3–4 quarters.
See the full press release on Xerox’s Q3 FY 2025 financial results on the company website.
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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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