Analyst(s): Futurum Research
Publication Date: February 2, 2026
Xerox’s Q4 FY 2025 update highlights integration-led execution from Lexmark and ITsavvy, stabilizing print usage, and a higher 2026 pipeline despite macro pressures. Management flagged DRAM inflation and tariff dynamics as near-term constraints while reinforcing cost actions, synergy capture, and balance-sheet priorities.
What is Covered in this Article:
- Xerox’s Q4 FY 2025 financial results
- Lexmark and ITsavvy integration synergies
- IT Solutions momentum amid memory cost volatility
- AI-enabled operations and reinvention execution
- Guidance and Final Thoughts
The News: Xerox (NASDAQ: XRX) reported Q4 FY 2025 revenue of $2.0B, up 25.7% year over year (YoY) versus a $2.1B consensus. Print and Other revenue was $1.9B, up 24.9% YoY, and IT Solutions revenue was $158 million, up 38.6% YoY. Adjusted operating income (AOI) was $102 million, with adjusted operating margin of 5.0% (down 1.4 percentage points YoY). Adjusted loss per share (EPS) was $0.10 versus adjusted EPS of $0.36 in the prior-year period.
“The Lexmark integration is advancing ahead of plan, and the teams are delivering tangible synergies,” said Steve Bandrowczak, chief executive officer at Xerox. “These efforts contributed to a better-than-expected operating income and free cash flow performance this quarter. As demand trends begin to stabilize, we’re seeing new opportunities emerge, leading to a pipeline that is larger than it was this time last year.”
Xerox Q4 FY 2025 Earnings Reflect Integration Progress Amid Headwinds
Analyst Take: Xerox’s quarter underscores progress on integration and operating discipline while macro factors—tariffs, DRAM inflation, and public-sector procurement delays—weighed on revenue and margins. The combination with Lexmark and ITsavvy broadened the portfolio and routes to market, with early commercial wins (e.g., Morrisons) and channel partnerships (e.g., RJ Young) demonstrating a clearer enterprise and retail value proposition. IT Solutions’ pro forma bookings and billings gains, alongside margin expansion, indicate a healthier mix and services trajectory despite hardware cost volatility. Internal reinvention, the AI Center of Excellence, and Global Business Services (GBS) centralization are supporting productivity, service quality, and cash conversion improvements.
Integration Synergies and Route-to-Market Expansion
Xerox emphasized accelerating commercial synergies from Lexmark and ITsavvy, including a unified brand for IT Solutions and a cohesive go-to-market motion. Management cited a global joint win at Morrisons that spans Lexmark MPS, Xerox production print, cloud print management, and Go Inspire’s Go360 marketing platform. Early channel response to Lexmark-produced A3 devices—rolled out in Eastern Europe—highlights serviceability and reliability improvements with a broader 2026 global rollout planned. The RJ Young partnership expands reach for office technology and managed services in the U.S., reinforcing the dealer ecosystem pathway. These motions, combined with a higher pipeline and improved cancellations/renewals in FY 2025, suggest expanding cross-sell density across the 200,000-customer base. Together, these factors indicate the integration is translating into tangible commercial traction.
IT Solutions Momentum Amid DRAM Inflation
Despite DRAM-driven cost inflation and deal delays late in the quarter, IT Solutions posted 13% YoY growth in pro forma gross billings and 8% growth in bookings. Segment gross margin reached 22.7% and segment margin 5.8%, supported by the full-quarter inclusion of ITsavvy and cost structure actions. Xerox is mitigating hardware cost volatility via consumption models (e.g., HPE GreenLake, Dell APEX) and by extending maintenance to lengthen asset life for clients. Velocity-channel performance was described as “very strong,” with backlog building and pro forma profits improving meaningfully. Management expects modest DRAM impact in print during H1 FY 2026 and a larger availability/pricing impact in H2 FY 2026, with mitigations focused on mix and lifecycle services. The setup signals resilience in services and a more diversified margin base as hardware volatility persists.
Reinvention, AI-Enabled Operations, and Cost Discipline
Xerox’s reinvention program and Enterprise Transformation Office are centralizing execution and cost synergy delivery, with a cumulative run-rate gross cost synergy target of at least $300 million from Lexmark. Internally, Xerox launched an AI Center of Excellence and deployed AI-powered service agents across XPS U.S. and LATAM to improve first-contact resolution and lower cost per interaction. Using Microsoft Copilot Studio and advanced data science, the company reduced outstanding AR and automated over $10 million in credit hold actions, improving cash discipline. AI-driven analytics for supplies are identifying potential counterfeit/third-party activity across hundreds of thousands of cartridges, strengthening channel integrity. The company aims for more than $200 million improvement in adjusted operating income (AOI) in FY 2026, blending integration synergies ($150–$200 million) and reinvention savings (approximately $100 million). These initiatives point to operational leverage and improved predictability as 2026 progresses.
Guidance and Final Thoughts
For FY 2026, Xerox guides revenue above $7.5B (consensus estimate $7.9B), AOI of $450–$500 million, and free cash flow around $250 million. Headwinds include forward-flow dynamics at Xerox Financial Services (approximately $50 million revenue and $40 million AOI headwinds), DRAM cost inflation, and first-half tariff costs that are expected to turn to tailwinds as A3 production shifts in-house in the second half. The company targets deleveraging toward roughly 3x trailing-12-month EBITDA on a medium-term basis and highlighted a special pro rata warrant distribution to support balance sheet flexibility. Execution risk remains tied to macro policy uncertainty and memory markets, but synergy capture, AI-enabled productivity, and a fuller IT Solutions stack support AOI expansion.
See the full press release on Xerox’s Q4 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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