Xerox Holdings Corporation (NASDAQ:XRX) is one of the oversold tech stocks to invest in. On September 16, Xerox Holdings Corporation announced its reentry into the cut-sheet inkjet market with the introduction of the Xerox IJP900 Inkjet Press. The move marks the company’s return to the rapidly expanding mid-volume inkjet sector, offering a powerful, cost-effective color press. The IJP900 is engineered to support print service providers looking to profit from new applications like direct mail and transacti ...

Investment Rating - The report maintains a constructive outlook on shares of Amphenol Corp (APH), Dell Technologies (DELL), Corning Inc (GLW), Hewlett Packard Enterprise (HPE), and the memory/disk drive sector including Seagate Technology (STX), Western Digital Corp (WDC), and SanDisk Corp (SNDK) [4]. Core Insights - The upcoming Citi's 33rd annual Global Technology Conference will feature over 240 technology companies, focusing on updates regarding customer and enterprise demand dynamics, as well as supply chain conditions [1]. - Key investor questions include the impact of Generative AI on infrastructure spending, enterprise spending intentions, consumer spending trends, margin impacts from rising component costs, and capital allocation strategies [2][3]. Company Summaries - **Amphenol Corp (APH)**: Current price at $109.36 with a market cap of $133.52 billion. The target price is set at $125.00 with an expected share price return of 14.3% [7]. - **CDW Corp (CDW)**: Current price at $167.00 with a market cap of $21.89 billion. The target price is $200.00 with an expected share price return of 19.8% [7]. - **Corning Inc (GLW)**: Current price at $65.77 with a market cap of $56.34 billion. The target price is $72.00 with an expected share price return of 9.5% [7]. - **Dell Technologies (DELL)**: Current price at $130.84 with a market cap of $88.50 billion. The target price is $160.00 with an expected share price return of 22.3% [7]. - **Hewlett Packard Enterprise (HPE)**: Current price at $22.45 with a market cap of $29.46 billion. The target price is $25.00 with an expected share price return of 11.4% [7]. - **SanDisk Corp (SNDK)**: Current price at $46.37 with a market cap of $6.76 billion. The target price is $57.00 with an expected share price return of 22.9% [7]. - **Seagate Technology (STX)**: Current price at $159.19 with a market cap of $33.86 billion. The target price is $167.00 with an expected share price return of 4.9% [7]. - **Western Digital Corp (WDC)**: Current price at $76.97 with a market cap of $26.70 billion. The target price is $88.00 with an expected share price return of 14.3% [7].

Core Insights - The performance of Xerox Holdings Corporation's international operations is critical for understanding its financial resilience and growth potential [1][2][3] Revenue Performance - Xerox's total revenue for the recent quarter was $1.58 billion, reflecting a slight decline of 0.1% compared to the same quarter last year [4] - Revenue from Europe was $438 million, accounting for 27.8% of total revenue, which was a surprise decline of -10.62% from the expected $490.05 million [5] - Canada contributed $108 million, representing 6.9% of total revenue, with a surprise decline of -11.18% from the consensus estimate of $121.59 million [6] - Other International revenue was $100 million, making up 6.4% of total revenue, also showing a surprise decline of -11.87% from the expected $113.47 million [7] Future Projections - Analysts project that Xerox will achieve revenues of $2.05 billion in the current fiscal quarter, indicating a significant increase of 34.4% compared to the same quarter last year [8] - For the full year, total revenue is expected to reach $7.25 billion, which signifies a rise of 16.5% from the previous year [9] - Revenue contributions are anticipated to be 28.8% from Europe ($2.09 billion), 6.4% from Canada ($466.56 million), and 6.1% from Other International ($440.27 million) [9] Market Context - The reliance on international markets presents both opportunities and risks for Xerox, making it essential to monitor international revenue trends for forecasting the company's prospects [10] - The company's stock has seen a decline of 17.9% over the past four weeks, contrasting with a 1.9% increase in the Zacks S&P 500 composite [13] - Over the past three months, Xerox shares have decreased by 22.4%, while the S&P 500 has increased by 13% [13]

```markdown [Part I — Financial Information](index=4&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Xerox Holdings Corporation and Xerox Corporation for the quarterly period ended June 30, 2025, including statements of income, balance sheets, and cash flows, reflecting key events such as segment changes, new debt issuance for the Lexmark acquisition, and a valuation allowance against deferred tax assets [Xerox Holdings Corporation Condensed Consolidated Financial Statements](index=4&type=section&id=Xerox%20Holdings%20Corporation%20Condensed%20Consolidated%20Financial%20Statements) Xerox Holdings Corp. Statement of (Loss) Income Highlights (Unaudited) | Metric (in millions, except per-share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $1,576 | $1,578 | $3,033 | $3,080 | | **(Loss) Income before Income Taxes** | $(60) | $25 | $(127) | $(125) | | **Net (Loss) Income** | $(106) | $18 | $(196) | $(95) | | **Net (Loss) Income attributable to Common Shareholders** | $(109) | $15 | $(203) | $(102) | | **Diluted (Loss) Income per Share** | $(0.87) | $0.11 | $(1.62) | $(0.83) | Xerox Holdings Corp. Balance Sheet Highlights (Unaudited) | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $449 | $576 | | Total current assets | $3,543 | $2,935 | | **Total Assets** | **$8,874** | **$8,365** | | Short-term debt and current portion of long-term debt | $458 | $585 | | Long-term debt | $3,484 | $2,814 | | **Total Liabilities** | **$7,523** | **$7,061** | | **Total Equity** | **$1,127** | **$1,080** | Xerox Holdings Corp. Cash Flow Highlights (Unaudited) | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(100) | $44 | | Net cash used in investing activities | $(12) | $(19) | | Net cash provided by (used in) financing activities | $459 | $(75) | [Xerox Corporation Condensed Consolidated Financial Statements](index=8&type=section&id=Xerox%20Corporation%20Condensed%20Consolidated%20Financial%20Statements) Xerox Corp. Statement of (Loss) Income Highlights (Unaudited) | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $1,576 | $1,578 | $3,033 | $3,080 | | **(Loss) Income before Income Taxes** | $(58) | $26 | $(122) | $(124) | | **Net (Loss) Income** | $(104) | $19 | $(191) | $(94) | Xerox Corp. Balance Sheet Highlights (Unaudited) | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$8,832** | **$8,324** | | **Total Liabilities** | **$7,510** | **$7,018** | | **Total Equity** | **$1,312** | **$1,296** | Xerox Corp. Cash Flow Highlights (Unaudited) | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(100) | $44 | | Net cash used in investing activities | $(12) | $(19) | | Net cash provided by (used in) financing activities | $459 | $(75) | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - In Q1 2025, the company changed its reportable segments from 'Print and Other' and 'Xerox Financial Services (XFS)' to two new segments: **'Print and Other'** and **'IT Solutions'**. This change aligns reporting with how the CEO allocates resources and assesses performance. Prior period results have been restated to conform to the new structure[39](index=39&type=chunk)[65](index=65&type=chunk) - A valuation allowance of approximately **$59 million** was recorded in Q1 2025, primarily against certain U.S. deferred tax assets, due to changes in tax planning strategies making their realization not more-likely-than-not[48](index=48&type=chunk) - In April 2025, Xerox Corporation issued **$400 million** of **10.250%** Senior Secured First Lien Notes due 2030 and **$400 million** of **13.500%** Senior Secured Second Lien Notes due 2031. An additional **$100 million** of the Second Lien Notes were issued in May 2025. Proceeds were used to fund the Lexmark acquisition, redeem 2025 Senior Notes, and repay other debt[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - On July 1, 2025, subsequent to the reporting period, Xerox completed its acquisition of Lexmark International II, LLC for approximately **$841 million** in cash and the assumption of **$327 million** in debt[202](index=202&type=chunk) - The annual dividend on common shares was reduced twice in 2025: first from **$1.00** to **$0.50** per share in Q1, and then further to **$0.10** per share in Q2[183](index=183&type=chunk)[193](index=193&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting revenue stability and adjusted operating income supported by its 'Reinvention' strategy, with Q2 2025 total revenue flat year-over-year at $1.58 billion, a pre-tax loss of $60 million, and details on segment performance, liquidity, and the Lexmark acquisition [Overview](index=47&type=section&id=Overview) - Q2 2025 results demonstrated resilience due to the company's **'Reinvention' strategy**, which shifted the revenue mix towards higher-growth businesses and simplified the operating structure[216](index=216&type=chunk) Q2 2025 Performance vs. Q2 2024 | Metric | Q2 2025 | Change vs. Q2 2024 | Key Drivers | | :--- | :--- | :--- | :--- | | Equipment Sales | $336M | -5.6% (-6.7% CC) | Lower installations amid tariff uncertainty. | | Post-Sale Revenue | $1.2B | +1.5% (+0.5% CC) | 10.6 ppt benefit from ITsavvy acquisition. | | Pre-tax Loss | $(60)M | -$85M | Lower gross profit, higher interest expense. | | Adjusted Operating Income | $59M | -$26M | Lower gross profit, partially offset by cost savings. | - The acquisition of Lexmark was completed on July 1, 2025. The company expects the acquisition to be accretive to **adjusted earnings** and **EPS**, with no material impact from proposed U.S. tariffs due to Lexmark's manufacturing facility in Mexico[220](index=220&type=chunk) - 2025 guidance was updated to include the Lexmark acquisition, with expected revenue growth of **16%-17%** in constant currency. However, operating cash flow guidance was lowered to approximately **$345 million** due to higher tariff expenses and synergy implementation costs[232](index=232&type=chunk) [Financial Review](index=51&type=section&id=Financial%20Review) Revenue Breakdown (in millions) | Revenue Line | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Equipment sales | $336 | $356 | (5.6)% | $620 | $646 | (4.0)% | | Post sale revenue | $1,240 | $1,222 | 1.5% | $2,413 | $2,434 | (0.9)% | | **Total Revenue** | **$1,576** | **$1,578** | **(0.1)%** | **$3,033** | **$3,080** | **(1.5)%** | Key Financial Ratios | Ratio | Q2 2025 | Q2 2024 | Change (pts) | H1 2025 | H1 2024 | Change (pts) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Gross Margin | 28.6% | 33.0% | (4.4) | 28.9% | 31.3% | (2.4) | | RD&E as a % of Revenue | 2.7% | 3.2% | 0.5 | 2.8% | 3.2% | 0.4 | | SAG as a % of Revenue | 23.4% | 24.9% | 1.5 | 24.6% | 25.6% | 1.0 | | Pre-tax (Loss) Income Margin | (3.8)% | 1.6% | (5.4) | (4.2)% | (4.1)% | (0.1) | | Adjusted Operating Margin | 3.7% | 5.4% | (1.7) | 2.7% | 3.8% | (1.1) | - Q2 2025 gross margin declined by **4.4 percentage points** to **28.6%**, primarily due to unfavorable product mix, tariff and product-related cost increases (**2.0 ppt** adverse impact), and the impact of the ITsavvy acquisition (**1.0 ppt** adverse impact)[247](index=247&type=chunk) - Worldwide employment decreased by approximately **200 people** since year-end 2024 to **16,600** as of June 30, 2025, mainly due to the company's Reinvention and workforce reduction initiatives[267](index=267&type=chunk) [Capital Resources and Liquidity](index=66&type=section&id=Capital%20Resources%20and%20Liquidity) Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(100) | $44 | | Net cash used in investing activities | $(12) | $(19) | | Net cash provided by (used in) financing activities | $459 | $(75) | | **Increase (decrease) in cash** | **$354** | **$(66)** | - The **$144 million decrease** in operating cash flow for H1 2025 compared to H1 2024 was primarily driven by lower net proceeds from finance receivable sales and lower profitability, partially offset by favorable timing of working capital payments[229](index=229&type=chunk)[323](index=323&type=chunk) - Total cash, cash equivalents, and restricted cash increased to **$985 million** at June 30, 2025, from **$631 million** at year-end 2024. This includes **$492 million** in restricted cash from debt proceeds for the Lexmark acquisition, which was released on July 1, 2025[322](index=322&type=chunk) Debt Breakdown (in millions) | Debt Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Financing debt | $1,635 | $1,741 | | Core debt | $2,307 | $1,658 | | **Total Debt** | **$3,942** | **$3,399** | [Non-GAAP Financial Measures](index=70&type=section&id=Non-GAAP%20Financial%20Measures) - The company uses non-GAAP measures such as **Adjusted Net Income**, **Adjusted EPS**, and **Adjusted Operating Income** to provide investors with a better understanding of business trends. These measures exclude items like restructuring costs, amortization of intangible assets, non-service retirement costs, and other discrete or unusual items[345](index=345&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk) Reconciliation of Reported to Adjusted Net (Loss) Income (in millions) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Reported Net (Loss) Income** | **$(106)** | **$18** | **$(196)** | **$(95)** | | Adjustments | $29 | $23 | $115 | $147 | | **Adjusted Net (Loss) Income** | **$(77)** | **$41** | **$(81)** | **$52** | Reconciliation of Pre-tax (Loss) Income to Adjusted Operating Income (in millions) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Pre-tax (loss) income** | **$(60)** | **$25** | **$(127)** | **$(125)** | | Adjustments | $119 | $60 | $208 | $243 | | **Adjusted Operating Income** | **$59** | **$85** | **$81** | **$118** | [Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from foreign currency exchange rates and interest rates through operating activities and derivative financial instruments, used solely for risk management, not speculation - The company is exposed to market risk from **foreign currency exchange rates** (primarily Euro, U.K. Pound Sterling, Japanese Yen) and **interest rates**[341](index=341&type=chunk) - Derivative instruments like **interest rate swaps**, **caps**, and **foreign currency contracts** are used to hedge economic exposures and reduce earnings volatility, not for trading or speculative purposes[341](index=341&type=chunk) [Controls and Procedures](index=75&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified during the last fiscal quarter - Management of both Xerox Holdings Corporation and Xerox Corporation concluded that their respective **disclosure controls and procedures were effective** as of the end of the period covered by the report (June 30, 2025)[367](index=367&type=chunk)[368](index=368&type=chunk) - There were no changes in **internal control over financial reporting** during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[369](index=369&type=chunk)[370](index=370&type=chunk) [Part II — Other Information](index=76&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) [Legal Proceedings](index=76&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including unreserved tax contingencies in Brazil totaling $345 million and a shareholder derivative lawsuit that has reached a preliminarily approved settlement - The company faces numerous governmental assessments in Brazil related to indirect taxes, with an unreserved tax contingency of **$345 million** as of June 30, 2025, up from **$305 million** at year-end 2024. Management believes the likelihood of loss is remote[196](index=196&type=chunk) - The shareholder derivative lawsuit, Miami Firefighters' Relief & Pension Fund v. Icahn, et al., has reached a settlement which has received **preliminary court approval**[197](index=197&type=chunk)[198](index=198&type=chunk) [Risk Factors](index=76&type=section&id=Item%201A.%20Risk%20Factors) This section introduces new risk factors related to the Lexmark acquisition, including difficulties in realizing synergies, integration challenges, and adverse effects of increased indebtedness on financial flexibility - A new risk factor is the potential inability to realize anticipated **synergies**, **cost-savings**, and **revenue benefits** from the Lexmark acquisition due to various assumptions and potential offsetting costs[373](index=373&type=chunk)[374](index=374&type=chunk) - The company may face significant difficulties integrating Lexmark's business, which is a complex process involving different operations (like **hardware manufacturing**), systems, and corporate cultures, potentially disrupting business and limiting expected benefits[377](index=377&type=chunk)[382](index=382&type=chunk) - The company's level of indebtedness has increased significantly post-acquisition, which could adversely affect financial condition by diverting cash flow to service debt, limiting flexibility due to covenants, and increasing vulnerability to adverse economic conditions[383](index=383&type=chunk)[394](index=394&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, Xerox Holdings Corporation made no open-market repurchases but repurchased 5,942 shares for tax-withholding requirements of stock compensation programs - There were no open-market repurchases of Xerox Holdings Corporation's Common Stock during Q2 2025 under the **board-authorized program**[388](index=388&type=chunk) - The company repurchased **5,942 shares** during the quarter through a net-settlement feature of its stock compensation programs to satisfy employee tax-withholding requirements[389](index=389&type=chunk) ```

Group 1 - The article discusses the investment approach towards Xerox, emphasizing a fundamentals-based value investing strategy that prioritizes long-term durability and affordability over low multiples [1] - The author highlights the misconception that low multiple stocks are inherently cheap, advocating for a focus on companies with steady long-term growth and strong balance sheets [1] - It is noted that while investing in successful companies carries risks, there are scenarios where the potential for growth diminishes the immediate importance of price [1]

Core Insights - Xerox Holdings (XRX) reported disappointing second-quarter 2025 results, with both earnings and revenues falling short of the Zacks Consensus Estimate [1][3] - The company's shares have declined 2.8% since the earnings release on July 31, and have depreciated 59.5% over the past year [1][3] Financial Performance - Xerox reported a quarterly adjusted loss of $0.64 per share, missing the consensus estimate of $0.10, and a significant decrease from the previous year's profit [3][7] - Revenues totaled $1.58 billion, which was 0.8% below the consensus estimate and a decline of 0.13% year-over-year [3][7] - Post-sale revenues were $1.24 billion, up 1.5% year-over-year but below the estimate of $1.27 billion [4] - Equipment sales decreased by 5.6% year-over-year to $336 million, slightly exceeding the estimate of $330.9 million [4] - The Print and Other segment's revenues fell 8.6% year-over-year to $1.37 billion, missing the estimate of $1.46 billion [4] Operating Metrics - Adjusted operating income was $59 million, down 30.6% year-over-year, with an adjusted operating margin of 3.7%, a decrease of 170 basis points [8] - Negative free cash flow was reported at $30 million, with cash and cash equivalents at $449 million, down from $576 million at the end of 2024 [9] Future Guidance - For 2025, Xerox anticipates revenue growth of 16%-17% at constant currency, with an adjusted operating margin projected at approximately 4.5% [10] - The company expects free cash flow to be around $250 million and operating cash flow to be approximately $345 million, with capital expenditures anticipated at $95 million [10]

Core Insights - Xerox Holdings Corporation reported revenue of $1.58 billion for the quarter ended June 2025, a slight decrease of 0.1% year-over-year, with an EPS of -$0.64 compared to $0.29 in the same quarter last year, indicating a significant decline in profitability [1] - The reported revenue fell short of the Zacks Consensus Estimate of $1.59 billion, resulting in a revenue surprise of -0.75%, while the EPS surprise was -740% against a consensus estimate of $0.10 [1] Revenue Breakdown - Equipment sales generated $336 million, slightly above the estimated $333.08 million, but down 5.6% from the previous year [4] - Service, maintenance, and rental revenues totaled $911 million, below the estimated $946.8 million, reflecting a 1.9% decline year-over-year [4] - Post-sale revenue from supplies, paper, and other sales was $176 million, significantly lower than the estimated $268.33 million [4] - Total sales revenue reached $665 million, exceeding the estimated $601.41 million, marking an 8.8% increase compared to the year-ago quarter [4] - Post-sale revenue was reported at $1.24 billion, slightly below the estimated $1.25 billion [4] Equipment Sales Performance - High-end equipment sales were $44 million, below the average estimate of $50.55 million, representing a year-over-year decline of 26.7% [4] - Mid-range equipment sales remained stable at $235 million, matching the average estimate of $219.84 million with no change year-over-year [4] - Entry-level equipment sales were $51 million, below the estimated $53.73 million, reflecting an 8.9% decrease from the previous year [4] - Other equipment sales increased to $6 million, surpassing the average estimate of $5.21 million, showing a year-over-year growth of 20% [4] Stock Performance - Xerox shares have returned -9.2% over the past month, contrasting with the Zacks S&P 500 composite's increase of 2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was approximately $1.58 billion, roughly flat year-over-year in actual currency, and declined 1.1% in constant currency [5][28] - Adjusted operating income margin was 3.7%, down 170 basis points year-over-year [5][30] - Free cash flow was a use of $30 million, reflecting a delay in the sale of large portfolio finance receivables [5][40] - Adjusted loss per share was $0.64, a decline of $0.93 year-over-year, primarily due to an unfavorable tax rate [5][33] Business Line Data and Key Metrics Changes - Equipment sales declined 5.6% in actual currency and 6.7% in constant currency, with total equipment installations down 12% [34] - IT Solutions revenue and gross profit increased more than 150% year-over-year, driven by the inclusion of IT Savvy [37] - Print post-sale revenue declined 9.5% in actual currency and 10.5% in constant currency, reflecting lower supplies and page volumes [35] Market Data and Key Metrics Changes - The Lexmark acquisition is expected to enhance Xerox's position in the print market, particularly in the A4 segment, which is experiencing growth [13][16] - Xerox is now a top three player in each major print category, with nearly half of print revenue generated from A4 device sales [14] Company Strategy and Development Direction - The Lexmark acquisition is a key part of Xerox's reinvention strategy, aimed at enhancing client value and expanding IT solutions and digital services [4][10] - The company is focused on operational simplification, commercial optimization, and growth, with a target of achieving double-digit adjusted operating income margins [12][24] - The integration of Lexmark is expected to yield more than $250 million in cost synergies within two years [10][20] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging operating environment due to tariff-driven uncertainty and a brief period of softer demand for print equipment [6][28] - The outlook for the second half of 2025 includes conservatism due to potential demand fluctuations and tariff impacts [43][44] - The company expects revenue growth of 16% to 17% in constant currency for the full year, including Lexmark's contribution [43] Other Important Information - The adjusted tax rate for the quarter was 528%, significantly higher than the previous year's 25.5%, reflecting changes in tax deductibility [32] - The company reduced its dividend to prioritize debt repayment following the Lexmark acquisition [11] Q&A Session Summary Question: What caused the slowdown in June and July? - Management clarified that the slowdown was primarily due to funding-related issues and tariff uncertainties, with no cancellations in the pipeline, just delays [56][58] Question: Was the IT Savvy growth entirely responsible for the IT Solutions segment's performance? - Management confirmed that the 150% growth was driven by IT Savvy, while the legacy IT Solutions business experienced a decline [62][64] Question: What is the outlook for Lexmark's revenue in 2026? - Management indicated that Lexmark's revenue is expected to be flat, which is better than the industry average decline, due to its strong position in the A4 market [82][84] Question: Why is the operating margin outlook for 2025 lower than previously expected? - The decline in operating margin is attributed to conservatism in equipment demand outlook and the impact of prior reinvention initiatives [84]

Core Insights - Xerox Holdings Corporation reported a quarterly loss of $0.64 per share, significantly missing the Zacks Consensus Estimate of $0.1, representing an earnings surprise of -740.00% [1] - The company posted revenues of $1.58 billion for the quarter ended June 2025, which was a 0.75% miss against the Zacks Consensus Estimate, with no year-over-year revenue growth [2] - Xerox shares have declined approximately 38.1% year-to-date, contrasting with the S&P 500's gain of 8.2% [3] Company Performance - Over the last four quarters, Xerox has consistently failed to meet consensus EPS estimates, with only one instance of surpassing revenue expectations [2] - The current consensus EPS estimate for the upcoming quarter is $0.31 on revenues of $1.55 billion, and for the current fiscal year, it is $0.75 on revenues of $6.23 billion [7] - The estimate revisions trend for Xerox was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Office Supplies industry, to which Xerox belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Xerox's stock performance [5]

Financial Performance - Revenue remained relatively stable at $1.58 billion, reflecting a (0.1)% change at actual currency (AC) and a (1.1)% change at constant currency (CC) [6] - Adjusted operating margin increased from 3.7% to 5.4% [7] - Free cash flow was $(30) million, compared to $115 million in the previous year [8] - Adjusted earnings per share (EPS) improved to $0.29 from $(0.64) [10] Strategic Initiatives and Acquisitions - The company acquired Lexmark in July 2025, expecting to drive operating efficiencies and increase competitiveness in the A4 print segment [13] - The acquisition of ITsavvy doubled IT Solutions (ITS) revenue and enhanced the ITS offering [13] - The company expects to realize more than $250 million of total synergies within two years of the Lexmark transaction close [23] Segment Results - Print & Other segment revenue decreased by (8.6)% AC and (9.7)% CC to $1.366 billion [37] - IT Solutions segment revenue increased significantly by 153.6% AC and 152.4% CC to $213 million, driven by the acquisition of ITsavvy [40] Guidance and Outlook - The company expects Lexmark to contribute around $1 billion of revenue and $100 to $110 million of adjusted operating income in 2025 [34] - Free cash flow guidance for 2025 was revised to approximately $250 million, reflecting tariff expenses and accelerated Lexmark synergy implementation costs [34]