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Introduction & Market Context
Xerox Corp (NYSE:NASDAQ:XRX) reported its first quarter 2025 results on May 1, revealing continued challenges in its core print business while making progress on its strategic transformation toward IT solutions. The company’s stock, which has declined significantly over the past year, closed at $4.41 on April 30, 2025, near its 52-week low of $3.44 and far below its 52-week high of $14.81.
The Q1 results come after a disappointing Q4 2024, when Xerox missed analyst expectations for both revenue and earnings per share, resulting in a sharp stock decline. The company continues to navigate a challenging business environment while executing its reinvention strategy focused on operational simplification, strategic acquisitions, and balance sheet management.
Quarterly Performance Highlights
Xerox reported Q1 2025 revenue of $1.46 billion, representing a decrease of 3.0% at actual currency and 1.1% at constant currency compared to the same period last year. The company posted an adjusted operating margin of 1.5%, down from 2.2% in Q1 2024, reflecting ongoing pressure on profitability.
The financial results show a GAAP loss per share of $(0.75), an improvement from $(0.94) in Q1 2024, while adjusted earnings per share turned negative at $(0.06) compared to $0.06 in the prior year. Free cash flow deteriorated to $(109) million from $(89) million in Q1 2024.
As shown in the following summary of key financial measures:
Despite the challenging quarter, Xerox maintained its commitment to shareholder returns, distributing $39 million in dividends compared to $37 million in Q1 2024. The company’s overall financial performance reflects the ongoing transition in its business model and the impact of its reinvention initiatives.
Segment Performance Analysis
Xerox’s performance varied significantly across its two main business segments. The traditional Print & Other segment continued to decline, while the IT Solutions segment showed substantial growth.
The Print & Other segment, which still accounts for the majority of Xerox’s revenue, reported Q1 2025 revenue of $1.29 billion, a 9.4% decrease year-over-year. This segment achieved a gross profit of $406 million (31.4% margin) and a segment profit of $41 million (3.2% margin). The decline includes approximately 2.0% impact from reductions in non-strategic revenue and about 1.5% from other reinvention items.
The detailed breakdown of the Print & Other segment performance is illustrated here:
In contrast, the IT Solutions segment demonstrated strong growth, with Q1 2025 revenue of $164 million, representing a 121.6% increase year-over-year. This segment generated a gross profit of $28 million (17.1% margin) and a segment profit of $5 million (3.1% margin). The substantial revenue growth was primarily driven by the acquisition of ITsavvy (contributing approximately 130% to growth), partially offset by backlog growth impact of approximately (65%).
The IT Solutions segment’s performance details are shown below:
The stark contrast between the two segments highlights Xerox’s ongoing transition from a traditional print company to a more diversified technology and services provider.
Strategic Initiatives & Reinvention Progress
Xerox continues to execute its Reinvention plan, which focuses on commercial optimization and operational simplification. The company has identified more than $700 million in potential savings and synergies, with a significant portion already realized or in progress.
The Reinvention plan aims to stabilize revenue and improve profitability through cost reductions and a strategic shift in the revenue mix toward higher-growth IT solutions and digital services. Xerox reported that it has realized more than $100 million in gross cost savings in 2023 and more than $200 million in 2024, with a target to reach a run rate of at least $500 million by 2025/2026.
The following chart illustrates the progress and projections for Xerox’s Reinvention gross cost savings:
Xerox’s strategic priorities for 2025 include executing the Reinvention plan, realizing benefits from acquisitions, and strengthening the balance sheet. The company is focusing on increasing its share of clients’ technology spend, realizing cost synergies, and closing the Lexmark acquisition. Additionally, Xerox aims to optimize free cash flow generation, prioritize debt reduction, and maintain its shareholder dividend of $0.50 per share annually.
Lexmark Acquisition Update
A key element of Xerox’s transformation strategy is the pending acquisition of Lexmark, which the company expects to close by the end of June 2025. According to Xerox, the approval process is progressing as expected, and the acquisition is anticipated to provide more than $1 per share of adjusted EPS accretion.
Lexmark’s 2024 financial results show revenue of $2.25 billion (9% year-over-year growth), EBITDA of $291 million (24% year-over-year growth), and operating income of $235 million (39% year-over-year growth). Xerox expects to realize more than $250 million in cost synergies from the ITsavvy and Lexmark acquisitions combined.
The update on the Lexmark acquisition is summarized in this slide:
Xerox also addressed concerns about the potential impact of tariffs on the combined business, stating that it expects a limited tariff impact to branded product costs.
Financial Position & Cash Flow
Xerox’s financial position remains challenging, with significant debt levels and negative free cash flow in Q1 2025. The company reported total debt of $3.3 billion, core debt of $1.6 billion, and net core debt of $1.2 billion. The total debt to TTM adjusted EBITDA ratio stands at 6.1x, while the net core debt to TTM adjusted EBITDA ratio is 2.3x.
In April 2025, Xerox issued $400 million in First Lien Senior Secured Notes to refinance existing debt. The company’s debt maturity profile shows approximately $200 million of scheduled debt maturities remaining until August 2028.
The capital structure and debt maturity ladder are illustrated in the following slide:
Cash flow for Q1 2025 shows a pre-tax loss of $(67) million and cash used in operations of $(89) million. Investing activities provided $6 million, while financing activities used $(159) million, resulting in an ending cash position of $390 million. Free cash flow for the quarter was $(109) million.
Financial Outlook & Guidance
Despite the challenging Q1 results, Xerox maintained its full-year 2025 guidance, projecting revenue growth at a low single-digit rate in constant currency and an adjusted operating margin of at least 5.0%. The company expects free cash flow to be between $350 million and $400 million for the full year.
The guidance assumes benefits from the Reinvention program, modest improvement in the macroeconomic environment, and stabilization in the print market. It also factors in the expected close of the Lexmark acquisition by the end of June 2025.
The full-year guidance is summarized in this slide:
Xerox’s projection of improved performance for the remainder of 2025 contrasts with its Q1 results, suggesting that the company expects its strategic initiatives and cost-cutting measures to gain traction in the coming quarters. However, the significant gap between current performance and full-year targets highlights the execution challenges that lie ahead.
In conclusion, Xerox’s Q1 2025 results reflect a company in transition, with its traditional print business continuing to decline while its newer IT solutions segment shows promising growth. The success of the company’s transformation will depend on its ability to execute the Reinvention plan, successfully integrate acquisitions, and manage its substantial debt load while navigating a challenging market environment.
Full presentation:
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