Xerox (XRX) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue rose 22% year-over-year to $1.92 billion, driven by Lexmark acquisition and Print & Other segment strength, though pro forma revenue declined 6.5–7%.

• Adjusted operating income surged to $203 million, margin expanded to 10.6%, and net income turned positive at $13 million; adjusted net income reached $55 million.

• Debt was reduced by $223 million in Q2, improving gross and net leverage ratios to 5.9x and 5.1x, respectively.

• Full-year 2026 revenue guidance was raised to ~$7.6 billion, and adjusted operating income guidance increased to $555–$605 million.

• Lexmark integration synergy target increased to $350 million, with half expected in 2026 and the rest in 2027–2028.

Financial highlights

• Q2 revenue: $1.92 billion, up 22% year-over-year; pro forma revenue down 6.5–7%.

• Adjusted gross margin: 36.4%, up 610–710 basis points year-over-year, benefiting from a $105 million IEEPA tariff receivable.

• Adjusted operating margin: 10.6%, up 690 basis points year-over-year; 5.1% excluding tariff benefit.

• Adjusted EPS: $0.38, up from $(0.64) year-over-year; GAAP EPS: $0.07.

• Free cash flow: $11–$37 million for Q2, up $41–$48 million year-over-year.

Outlook and guidance

• 2026 revenue guidance raised to ~$7.6 billion, reflecting improved Print & Other outlook and Lexmark synergies.

• Adjusted operating income guidance increased to $555–$605 million, mainly due to tariff receivable recognition.

• Free cash flow guidance set at ~$250 million, including $80 million from the sale of IEEPA tariff receivables.

• Gross and net leverage expected to fall below 5x and 4x, respectively, by year-end 2026.