Xerox Holdings Corporation — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported revenue for Q3 2026 was $1.868 billion, a 4.7% decrease year-over-year (4.5% in constant currency).
• GAAP net loss was $(1,015) million, or $(7.73) per diluted share, compared to a net loss of $(760) million, or $(6.01) per share, in Q3 2025.
• Adjusted net income was $7 million, or $0.02 per share, down from $27 million, or $0.20 per share, in Q3 2025.
• Adjusted operating income was $124 million, up $59 million year-over-year, with an adjusted operating margin of 6.6%, an increase of 330 basis points.
• Operating cash flow was $30 million, down $86 million year-over-year.
• Free cash flow was $7 million, down $81 million year-over-year.
• Gross profit was $545 million (29.2% margin) compared to $445 million (22.7% margin) in the prior year period.
• Pre-tax loss was $(1,006) million, driven primarily by a $959 million non-cash goodwill impairment charge.
• Selling, administrative, and general (SAG) expenses were $374 million (20.0% of revenue), down from $477 million (24.3% of revenue) in the prior year.
• Research, development, and engineering (RD&E) expenses were $56 million (3.0% of revenue), down from $74 million (3.8% of revenue) in the prior year.

Guidance and Future Outlook:

• Updated full-year 2026 revenue guidance is approximately $7.6 billion.
• Updated full-year 2026 adjusted operating income guidance is $450 million to $475 million, down from the previous range of $555 million to $605 million.
• Updated full-year 2026 free cash flow guidance is $50 million to $100 million, down from $250 million.
• The downward revision to guidance reflects higher than expected input costs, a mix shift from Mid-range to Entry equipment, a weaker market outlook, and lower than expected IT Solutions profit.
• Free cash flow guidance reflects lower adjusted operating income and lower than expected proceeds from finance receivables and IEEPA tariff receivables, with some benefits pushed to 2027.

Business Segments and Product Lines:

• Print and Other Segment: Revenue was $1.688 billion, down 2.9% year-over-year. Segment profit was $136 million, up 112.5% year-over-year.
• IT Solutions Segment: Revenue was $187 million, down 17.3% year-over-year. Segment profit was $8 million, down 55.6% year-over-year.
• Equipment sales revenue grew 2.6% in actual currency (2.9% in constant currency) to $393 million, with total equipment installations increasing 9.0%.
• Entry equipment sales grew 20.9% year-over-year, while Mid-range equipment sales declined 15.2% year-over-year.
• Post-sale revenue was $1.295 billion, down 4.5% year-over-year, impacted by lower service, managed print services, supplies, rental revenue, and financing revenue.
• Announced three new Production devices at PRINTING United Expo.
• Announced a partnership with Xeikon to enter the Packaging and Labels market.
• Executed a $8 million non-cash debt reduction through a warrant program, retiring 2030 convertible notes.
• Announced an exchange of $174 million in 5.50% 2028 Senior Notes for $121 million of 10.25% 2030 Senior Secured Notes and $9 million in equity.

Market and Competitive Landscape:

• Overall market trends remained stable compared to the prior year, with demand broadly consistent with recent quarters.
• Revenue declines moderated by 180 basis points sequentially on a pro forma basis.
• Adjusted operating income margins expanded for the third consecutive quarter, driven by integration synergies, cost discipline, and a more unified operating model.
• The company continues to focus on stabilizing revenue, increasing profitability, and reducing leverage.

Risks and Challenges:

• Headwinds affecting the outlook have intensified, creating greater near-term pressure than expected.
• Future projections for the Print and Other reporting unit were lowered due to continued macro uncertainty and sustained memory price increases, resulting in the goodwill impairment charge.
• Risks include global macroeconomic conditions (inflation, recession, supply chain disruptions), higher interest rates, geopolitical conflicts, and competitive pressures.
• Risks related to the integration of the Lexmark business and realization of synergies.
• Risks associated with cyber security breaches, regulatory compliance, and pension funding requirements.

Management Commentary and Tone:

• CEO Louie Pastor stated that while results are being seen in areas of focus (stabilize revenue, increase profitability, reduce leverage), headwinds have intensified.
• Management is responding with actions and cost measures to mitigate pressures, improve profitability, and preserve cash.
• The tone indicates a shift to a defensive posture regarding cash flow and profitability due to external market pressures.

Other Key Points:

• The company suspended its common and preferred dividends to preserve cash and focus on debt reduction.
• Third quarter 2026 GAAP results included a $959 million pre-tax goodwill impairment charge ($955 million after-tax).
• Third quarter 2025 GAAP results included an inventory-related purchase accounting adjustment of $85 million and a tax expense charge of $467 million related to a deferred tax asset valuation allowance.
• Adjusted operating income guidance reflects a benefit from the recognition of a $105 million pre-tax IEEPA tariff receivable associated with a Supreme Court ruling.
• The benefit to free cash flow guidance from the sale of the IEEPA tariff receivable to a third party is $80 million.
• Cash and cash equivalents were $412 million as of September 30, 2026, down from $512 million as of December 31, 2025.
• Long-term debt was $4.063 billion as of September 30, 2026, up from $4.016 billion as of December 31, 2025.
• Xerox Holdings shareholders' deficit was $(683) million as of September 30, 2026, compared to equity of $444 million as of December 31, 2025.