Xerox Holdings Corp (NASDAQ:XRX) Q3 2025 Earnings: EPS Beats, Revenue Misses, and Guidance Cut Sparks Sell-Off

Xerox Holdings Corp (NASDAQ:XRX) reported its third-quarter 2025 financial results, revealing a mixed performance against analyst expectations. The company's earnings per share surpassed estimates, while revenue fell short of projections, leading to a significant pre-market sell-off.

Earnings and Revenue Performance

Xerox reported non-GAAP earnings per share of $0.20 for the third quarter, which exceeded the analyst consensus estimate of $0.1252. This represents a positive earnings surprise of approximately 60%. However, the company's revenue of $1.96 billion fell below the estimated $2.06 billion, marking a revenue miss of roughly 4.6%.

Key financial metrics from the quarter include:

• Reported Revenue: $1.96 billion
• Analyst Revenue Estimate: $2.06 billion
• Reported Non-GAAP EPS: $0.20
• Analyst EPS Estimate: $0.1252

The company's GAAP results were significantly impacted by several one-time items, including a $102 million inventory-related purchase accounting adjustment from the Lexmark acquisition and a $467 million tax expense related to a valuation allowance on deferred tax assets. This resulted in a GAAP diluted loss per share of $(6.01).

Market Reaction and Strategic Context

The market reacted negatively to the report, with shares declining over 12% in pre-market trading. This sharp drop appears to be primarily driven by the revenue miss and the company's downward revision of its full-year guidance. The market's focus on the top-line shortfall and cautious outlook seems to have overshadowed the better-than-expected bottom-line performance.

The quarterly results and the company's strategic narrative are heavily influenced by its recent acquisition of Lexmark, which was completed on July 1, 2025. CEO Steve Bandrowczak emphasized that the integration is "ahead of plan," with identified cost synergies now forecasted to be at least $300 million, an increase of $50 million from previous targets. The company also highlighted strong double-digit growth in its IT Solutions segment.

Updated 2025 Guidance

Xerox provided a revised outlook for the full year 2025, which notably falls below both its previous expectations and current analyst estimates.

The company's updated guidance includes:

• Revenue Growth: Approximately 13% in constant currency (down from previous guidance of 16-17%).
• Adjusted Operating Margin: Approximately 3.5% (down from previous guidance of around 4.5%).
• Free Cash Flow: Approximately $150 million (down from previous guidance of around $250 million).

This revised guidance compares to analyst estimates for the full year 2025, which projected revenue of $7.04 billion and EPS of $0.21. The lowered outlook reflects the macroeconomic challenges and near-term uncertainties cited by management, particularly affecting transactional print revenue.

Segment Performance and Strategic Shifts

The company's performance was segmented into Print and Other, and the rapidly growing IT Solutions. The Print and Other segment saw a profit decline of 37.9% year-over-year to $64 million, pressured by macroeconomic factors. In contrast, the IT Solutions segment, bolstered by acquisitions, reported a profit of $18 million, a significant increase from a negligible amount in the prior year. This underscores the company's ongoing strategic pivot towards higher-growth IT services.

Conclusion

Xerox's third-quarter results present a complex picture of successful cost management and EPS outperformance juxtaposed with revenue pressures and a more cautious near-term financial outlook. The market's negative reaction suggests investors are prioritizing the top-line miss and guidance reduction over the positive earnings surprise and strategic progress with the Lexmark integration. The company's ability to navigate a challenging macroeconomic environment while realizing the promised benefits of its acquisitions will be critical to rebuilding investor confidence.

For a detailed look at historical earnings and future analyst estimates for Xerox, you can review the data here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, nor does it recommend buying or selling any securities. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.