Xerox Q3 Loss Narrows to $760M Amid Revenue Surge, Lexmark Buy

TL;DR

**Xerox is making a risky bet on acquisitions to drive growth, but the massive debt increase is a red flag for shareholders.**

AI Summary

Xerox Holdings Corporation reported a significant net loss of $760 million for the three months ended September 30, 2025, an improvement from the $1,205 million net loss in the same period of 2024. Total revenues increased substantially to $1,961 million in Q3 2025 from $1,528 million in Q3 2024, driven by a surge in sales to $993 million from $588 million. However, costs and expenses also rose, reaching $2,261 million in Q3 2025 compared to $2,615 million in Q3 2024, with a notable absence of the $1,058 million goodwill impairment charge seen in 2024. The company completed the acquisition of Lexmark International II, LLC on July 1, 2025, which significantly impacted its financial structure, including a $674 million cash outflow for acquisitions. Long-term debt increased to $4,052 million as of September 30, 2025, from $2,814 million at December 31, 2024, while cash and cash equivalents decreased to $479 million from $576 million over the same period. The company also reclassified its reportable segments to 'Print and Other' and 'IT Solutions' to align with new strategic priorities.

Why It Matters

Xerox's narrowing net loss and significant revenue growth, particularly in sales, suggest a potential turnaround, but the substantial increase in long-term debt and a decrease in cash reserves post-Lexmark acquisition raise liquidity concerns for investors. The strategic shift to 'IT Solutions' indicates an attempt to diversify beyond its traditional print business, which could be crucial for long-term competitiveness against rivals like HP and Canon. Employees might see job security tied to the success of this new segment, while customers could benefit from an expanded service offering. The broader market will watch if this acquisition and strategic pivot can successfully revitalize a legacy tech giant in a rapidly evolving industry.

Risk Assessment

Risk Level: high — The risk level is high due to a significant net loss of $760 million in Q3 2025 and a substantial increase in long-term debt to $4,052 million from $2,814 million at year-end 2024. The $674 million cash outflow for acquisitions, specifically Lexmark, further strains liquidity, as cash and cash equivalents decreased by $97 million to $479 million.

Analyst Insight

Investors should closely monitor Xerox's integration of Lexmark and its ability to generate positive free cash flow to service its increased debt load. A wait-and-see approach is advisable until there's clear evidence of sustained profitability and debt reduction, given the high-risk profile.

Financial Highlights

revenue

$1,961 million

total Debt

$4,052 million

net Income

-$760 million

eps

-$6.01

cash Position

$479 million

revenue Growth

+28.3%

Revenue Breakdown

Key Numbers

• $760 million — Net Loss (for the three months ended September 30, 2025, an improvement from $1,205 million in Q3 2024)
• $1,961 million — Total Revenues (for the three months ended September 30, 2025, up from $1,528 million in Q3 2024)
• $993 million — Sales Revenue (for the three months ended September 30, 2025, significantly higher than $588 million in Q3 2024)
• $2,261 million — Total Costs and Expenses (for the three months ended September 30, 2025, down from $2,615 million in Q3 2024 due to absence of goodwill impairment)
• $1,058 million — Goodwill Impairment (charge in Q3 2024, absent in Q3 2025)
• $674 million — Acquisitions, net of cash acquired (cash outflow for the nine months ended September 30, 2025, primarily for Lexmark)
• $4,052 million — Long-term debt (as of September 30, 2025, an increase from $2,814 million at December 31, 2024)
• $479 million — Cash and cash equivalents (as of September 30, 2025, a decrease from $576 million at December 31, 2024)
• $6.01 — Basic Loss per Share (for the three months ended September 30, 2025, an improvement from $9.71 in Q3 2024)

Key Players & Entities

• Xerox Holdings Corporation (company) — registrant for 10-Q filing
• Lexmark International II, LLC (company) — acquired by Xerox Corporation on July 1, 2025
• Ninestar Group Company Limited (company) — seller of Lexmark International II, LLC
• SEC (regulator) — Securities and Exchange Commission
• Nasdaq Global Select Market (market) — exchange where Xerox Holdings Corporation Common Stock is registered
• Chief Executive Officer (person) — Chief Operating Decision Maker (CODM) for segment reporting
• Xerox Corporation (company) — primary direct operating subsidiary of Xerox Holdings Corporation

FAQ

Risk Factors

• Increased Debt Load [high — financial]: Long-term debt has risen significantly to $4,052 million as of September 30, 2025, from $2,814 million at December 31, 2024. This increase is likely due to financing the acquisition of Lexmark International II, LLC, which could strain future cash flows and increase interest expenses.
• Reduced Cash Position [medium — financial]: Cash and cash equivalents have decreased to $479 million as of September 30, 2025, from $576 million at December 31, 2024. This reduction, coupled with significant acquisition outflows of $674 million, may limit the company's financial flexibility for future investments or unexpected operational needs.
• Integration of Lexmark Acquisition [high — operational]: The successful integration of Lexmark International II, LLC, acquired on July 1, 2025, is critical. Failure to achieve expected synergies or facing operational disruptions during integration could negatively impact financial performance and strategic objectives.
• Segment Reclassification Impact [medium — market]: The reclassification of reportable segments to 'Print and Other' and 'IT Solutions' aims to align with new strategic priorities. However, this change could make it more challenging for investors to track performance of legacy businesses and understand the true drivers of growth and profitability.
• Persistent Net Losses [high — financial]: Despite an improvement from the prior year, Xerox reported a net loss of $760 million for Q3 2025. Continued net losses, even if narrowing, indicate ongoing profitability challenges that could erode shareholder value if not addressed.
• Rising Costs and Expenses [medium — operational]: While total costs and expenses decreased to $2,261 million in Q3 2025 from $2,615 million in Q3 2024, this was largely due to the absence of a $1,058 million goodwill impairment charge in the prior year. Underlying operational costs, excluding impairments, may still be a concern.

Industry Context

The document printing and IT solutions industry is highly competitive and undergoing significant transformation. Companies like Xerox are navigating shifts towards digital services, managed print services, and cloud-based solutions. The ongoing consolidation, exemplified by Xerox's acquisition of Lexmark, indicates a trend towards scale and diversification to compete effectively against larger players and adapt to evolving customer needs.

Regulatory Implications

Xerox operates in a regulated environment, particularly concerning financial reporting standards (GAAP) and potentially data privacy if IT solutions involve handling sensitive customer information. Compliance with SEC reporting requirements is paramount, and any misstatements or failures in internal controls could lead to regulatory scrutiny and penalties.

What Investors Should Do

1. Monitor the integration progress and synergy realization of the Lexmark acquisition closely, as this is a key driver of future performance and debt servicing capacity.
2. Analyze the underlying operational cost structure, excluding one-off items like goodwill impairment, to assess the true profitability trends in the 'Print and Other' and 'IT Solutions' segments.
3. Evaluate the company's ability to manage its increased debt load ($4,052 million) and maintain adequate liquidity, given the reduced cash position ($479 million) post-acquisition.
4. Assess the strategic rationale and execution of the segment reclassification to 'Print and Other' and 'IT Solutions' to understand future growth drivers and potential risks.

Key Dates

• 2025-07-01: Acquisition of Lexmark International II, LLC completed — Significantly impacts the company's financial structure, revenue base, and debt levels. Investors will monitor integration success and synergy realization.
• 2025-09-30: End of Q3 2025 — Reporting period for the condensed consolidated financial statements, showing a reduced net loss and increased revenues, but also higher debt and lower cash.
• 2024-09-30: End of Q3 2024 — Prior year comparison period, notable for a large goodwill impairment charge of $1,058 million which impacted net loss.
• 2024-12-31: End of Fiscal Year 2024 — Baseline for comparison of debt and cash positions at the start of the reporting period.

Glossary

Goodwill impairment

A charge taken when the carrying value of goodwill on a company's balance sheet exceeds its fair value, indicating a loss in value of an acquired business. (The absence of a $1,058 million goodwill impairment charge in Q3 2025 significantly improved the net loss compared to Q3 2024, but it masks underlying operational performance.)

Acquisitions, net of cash acquired

The total cost of acquired businesses minus the cash and cash equivalents of the acquired entities. It represents the net cash outflow for M&A activities. (A $674 million outflow for acquisitions in the nine months ended September 30, 2025, primarily for Lexmark, highlights the significant strategic investments made by Xerox.)

Condensed Consolidated Statements of Loss

A summary of a company's revenues, expenses, and net income or loss over a specific period, presented in a simplified format for interim financial reports. (This document provides the core profitability figures, showing a reduced net loss for Q3 2025 compared to Q3 2024.)

Condensed Consolidated Balance Sheets

A snapshot of a company's assets, liabilities, and equity at a specific point in time, presented in a simplified format for interim financial reports. (This statement reveals the impact of the Lexmark acquisition on Xerox's debt and cash levels as of September 30, 2025.)

Reportable segments

The distinct business units or divisions of a company that are reported separately in financial statements due to their differing operations and financial results. (Xerox has reclassified its segments to 'Print and Other' and 'IT Solutions' to reflect new strategic priorities, impacting how investors view business unit performance.)

Year-Over-Year Comparison

Compared to the prior year's third quarter, Xerox has shown a significant improvement in its net loss, reducing it from $1,205 million to $760 million. This is largely attributable to the absence of a substantial $1,058 million goodwill impairment charge in the current period. Total revenues have also seen a robust increase of 28.3% to $1,961 million, driven by a surge in sales revenue, likely due to the recent acquisition of Lexmark. However, this growth comes with increased long-term debt ($4,052 million vs. $2,814 million) and a lower cash position ($479 million vs. $576 million), indicating a more leveraged financial structure.

Key Financial Figures

• $1 — rox Holdings Corporation Common Stock, $1 par value XRX Nasdaq Global Select Mark

Filing Documents

• xrx-20250930.htm (10-Q) — 4887KB
• ex31a1-xeroxholdingsx93025.htm (EX-31.(A)(1)) — 10KB
• ex31a2-xeroxcorpx93025ceoc.htm (EX-31.(A)(2)) — 10KB
• ex31b1-xeroxholdingsx93025.htm (EX-31.(B)(1)) — 10KB
• ex31b2-xeroxcorpx93025cfoc.htm (EX-31.(B)(2)) — 10KB
• ex32a-xeroxholdingsx93025s.htm (EX-32.(A)) — 7KB
• ex32b-xeroxcorpx93025soxce.htm (EX-32.(B)) — 7KB
• xrx-20250930_g1.jpg (GRAPHIC) — 344KB
• 0001770450-25-000037.txt ( ) — 23933KB
• xrx-20250930.xsd (EX-101.SCH) — 96KB
• xrx-20250930_cal.xml (EX-101.CAL) — 139KB
• xrx-20250930_def.xml (EX-101.DEF) — 601KB
• xrx-20250930_lab.xml (EX-101.LAB) — 1063KB
• xrx-20250930_pre.xml (EX-101.PRE) — 874KB
• xrx-20250930_htm.xml (XML) — 5188KB

— Financial Information

Part I — Financial Information Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 3 Xerox Holdings Corporation Condensed Consolidated Statements of Loss 3 Xerox Holdings Corporation Condensed Consolidated Statements of Comprehensive Loss 4 Xerox Holdings Corporation Condensed Consolidated Balance Sheets 5 Xerox Holdings Corporation Condensed Consolidated Statements of Cash Flows 6 Xerox Corporation Condensed Consolidated Statements of Loss 7 Xerox Corporation Condensed Consolidated Statements of Comprehensive Loss 8 Xerox Corporation Condensed Consolidated Balance Sheets 9 Xerox Corporation Condensed Consolidated Statements of Cash Flows 10 Notes to Condensed Consolidated Financial Statements 11 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 50 Capital Resources and Liquidity 73 Financial Risk Management 76 Non-GAAP Financial Measures 77 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 90 Item 4.

Controls and Procedures

Controls and Procedures 90

— Other Information

Part II — Other Information Item 1.

Legal Proceedings

Legal Proceedings 91 Item 1A.

Risk Factors

Risk Factors 91 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 91 Item 3. Defaults Upon Senior Securities 91 Item 4. Mine Safety Disclosures 91 Item 5. Other Information 92 Item 6. Exhibits 93

Signatures

Signatures 94 For additional information about Xerox Holdings Corporation and Xerox Corporation and access to our Annual Reports to Shareholders and SEC filings, free of charge, please visit our website at www.xerox.com/investor. The content of our website is not incorporated by reference into this combined Form 10-Q unless expressly noted. Xerox 2025 Form 10-Q 2

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

— FINANCIAL STATEMENTS

ITEM 1 — FINANCIAL STATEMENTS XEROX HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in millions, except per-share data) 2025 2024 2025 2024 Revenues Sales $ 993 $ 588 $ 2,215 $ 1,722 Services, maintenance, rentals and other (1) 968 940 2,779 2,886 Total Revenues 1,961 1,528 4,994 4,608 Costs and Expenses Cost of sales 788 390 1,650 1,117 Cost of services, maintenance, rentals and other (1) 728 643 2,022 2,033 Research, development and engineering expenses 74 45 159 144 Selling, administrative and general expenses 477 370 1,223 1,160 Goodwill impairment — 1,058 — 1,058 Restructuring and related costs, net 59 56 68 107 Amortization of intangible assets 30 10 50 30 Divestitures — — ( 4 ) 51 Other expenses, net 105 43 253 120 Total Costs and Expenses 2,261 2,615 5,421 5,820 Loss before Income Taxes ( 300 ) ( 1,087 ) ( 427 ) ( 1,212 ) Income tax expense 460 118 529 88 Net Loss ( 760 ) ( 1,205 ) ( 956 ) ( 1,300 ) Less: Preferred stock dividends, net ( 4 ) ( 4 ) ( 11 ) ( 11 ) Net Loss attributable to Common Shareholders $ ( 764 ) $ ( 1,209 ) $ ( 967 ) $ ( 1,311 ) Basic Loss per Share $ ( 6.01 ) $ ( 9.71 ) $ ( 7.67 ) $ ( 10.55 ) Diluted Loss per Share $ ( 6.01 ) $ ( 9.71 ) $ ( 7.67 ) $ ( 10.55 ) _____________ (1) In 2025, certain reclassifications were made within the Condensed Consolidated Statement of Loss to the prior periods in order to conform to the current period reporting. Refer to the Segments section of Note 1 - Basis of Presentation for additional information. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 3 XEROX HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2025 2024 2025 2024 Net Loss $ ( 760 ) $ ( 1,205 ) $ ( 956 ) $ ( 1,300 )

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