Executive Summary

Revenue of $1.58B was roughly flat year over year and modestly above Street; adjusted EPS of $(0.64) missed consensus amid tariff-related costs, higher interest expense, and an unusually high adjusted tax rate . Revenue beat vs consensus; EPS and EBITDA missed (see Estimates Context).*
FY25 guidance was reset post-Lexmark: revenue growth raised to 16–17% CC, adjusted operating margin trimmed to ~4.5% (from ≥5.0%), and free cash flow lowered to ~$250M, reflecting $30–$35M tariff headwinds and $50–$75M synergy implementation costs .
Strategic catalysts: Lexmark integration (synergies now “more than $250M”), re-entry into cut-sheet inkjet via Kyocera, and focus on debt paydown; dividend reduced to $0.025, underscoring deleveraging priorities .
June demand recovered after April–May softness driven by tariff uncertainty; IT Solutions strength (cloud enablement/cross-sell) stabilized revenue mix .

What Went Well and What Went Wrong

What Went Well

IT Solutions strength and cross-sell momentum stabilized revenue; “Growth in IT and Digital Solutions helped deliver stable revenue” and “strong demand for cloud-enablement services” offset print softness .
Lexmark integration plan advanced; cost synergies raised to “more than $250M” within two years; management expects improved competitive position, A4 exposure, APAC distribution lift, and managed print optimization .
Re-entry into fast-growing cut-sheet inkjet via Kyocera partnership broadens production portfolio and enhances ecosystem-led differentiation .

What Went Wrong

Tariffs pressured margins and demand; Q2 included ~$22M interest/financing charges tied to acquisition funding and $28M non-deductible tax expense, and CFO cited adjusted tax rate of 528% for Q2 .
Print equipment demand softened in April–May; total equipment installations fell ~12% YoY; gross margin contracted 440 bps YoY; adjusted operating margin fell 170 bps YoY .
Free cash flow was a use of $(30)M in Q2, partly due to delayed sale of ~$100M European finance receivables; FCF guidance cut given higher cash tariff outlays and synergy implementation costs .

Financial Results

Quarterly Summary vs Prior Periods

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Billions)	$1.613	$1.457	$1.576
GAAP Diluted EPS ($)	$(0.20)	$(0.75)	$(0.87)
Adjusted EPS ($)	$0.36	$(0.06)	$(0.64)
Adjusted Operating Margin (%)	6.4%	1.5%	3.7%

Segment Breakdown (Q2 2025 vs Q2 2024)

Segment	Revenue Q2 2025 ($USD Millions)	Revenue Q2 2024 ($USD Millions)	Segment Profit Q2 2025 ($USD Millions)	Segment Profit Q2 2024 ($USD Millions)
Print and Other	$1,366	$1,494	$65	$107
IT Solutions	$213	$84	$10	$1
Corporate Other	—	—	$(16)	$(23)
Total	$1,576	$1,578	$59	$85

KPIs and Margin Drivers

KPI	Q4 2024	Q1 2025	Q2 2025
Equipment Sales ($USD Millions)	$393	$284	$336
Post-sale Revenue ($USD Millions)	$1,220	$1,173	$1,240
Total Gross Margin (%)	31.1%	29.2%	28.6%
Operating Cash Flow ($USD Millions)	$351	$(89)	$(11)
Free Cash Flow ($USD Millions)	$334	$(109)	$(30)

Notable non-GAAP adjustments in Q2: inventory-related impacts (exit of production print manufacturing), restructuring, amortization of intangibles, transaction-related costs, commitment fees, loss on early extinguishment of debt, and Lexmark escrow interest .

Guidance Changes

Metric	Period	Previous Guidance (Q1 2025)	Current Guidance (Q2 2025)	Change
Revenue Growth (Constant Currency)	FY 2025	Low single-digit growth	16–17% growth	Raised
Adjusted Operating Margin (%)	FY 2025	≥5.0%	~4.5%	Lowered
Free Cash Flow ($USD Millions)	FY 2025	$350–$400	~$250	Lowered
Tariff expenses (net, P&L)	FY 2025	~$50M scenario-based (May 1 tariffs)	$30–$35M net	Clarified/lowered vs prior scenario
Cash tariff outlays ($USD Millions)	FY 2025	Not specified	$60–$65	New detail
Synergy implementation cash ($USD Millions)	FY 2025	Not specified	$50–$75	New detail

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Reinvention & cost savings	Double-digit OpEx reductions; simplified model; ITsavvy integration started	Continued OpEx discipline; adjusted OI $59M; June demand recovery; AOI $4M below low-end guidance	Improving execution; cost savings ongoing
Lexmark integration & synergies	Announced intent; expected accretion; regulatory progress	Synergies increased to >$250M; APAC distribution; A4 exposure; managed print optimization	Positive; scope widened
Tariffs & pricing	Scenario-based ~$50M Op income impact; mitigation plan	$30–$35M net P&L; $60–$65M cash; price increases implemented; April–May softness	Headwind in H2; mitigation ramping
IT Solutions momentum	ITsavvy acquisition and backlog growth	Strong cloud enablement demand; cross-sell pipeline >$50M; low single-digit penetration of print clients	Accelerating
Production print strategy	Exit certain high-end manufacturing; portfolio simplification	Kyocera CSIJ partnership to re-enter growth segment; ecosystem-led offering	Strategic repositioning
Capital allocation & leverage	Deleveraging focus; FCF generation in Q4	Debt reduction priority; pro forma leverage reduced; dividend cut to $0.025	Deleveraging continues

Management Commentary

“Growth in IT and Digital Solutions helped deliver stable revenue, and a focus on costs preserved profitability amid a volatile operating landscape” — Steve Bandrowczak, CEO .
“We now expect cost synergies associated with the Lexmark acquisition to total more than $250 million… realizable within the next two years” — John Bruno, President & COO .
“Adjusted operating margin of 3.7% was 170 basis points lower year-over-year… nearly 100 bps of the decline reflected tariff charges… and adverse currency impacts” — Mirlanda Gecaj, CFO .

Q&A Highlights

Demand dynamics: April–May softness driven by tariff uncertainty and funding “pause”; June recovered; no pipeline cancellations — CEO .
Pricing actions: Implemented price increases to offset tariffs; contractual price increases faced pushback; recovery expected to take into 2026 — COO .
IT Solutions penetration: Sub-5% penetration of legacy print client base; >$50M pipeline; significant cross-sell runway — COO .
Lexmark 2026 outlook: Revenue relatively flat vs market decline; ~80% annuity base; A4 strength — CFO .
Margin guidance drivers: Tariff costs and timing of reinvention initiatives lowered FY25 adjusted operating margin to ~4.5% — CFO .

Estimates Context

Metric (Q2 2025)	Consensus Estimate	Actual	Surprise
Revenue ($USD Billions)	$1.546*	$1.576	Beat
Primary EPS (Adjusted) ($)	$0.07*	$(0.64)	Miss
EBITDA ($USD Millions)	$105*	$72*	Miss

Values retrieved from S&P Global.*

Implications: Expect downward revisions to EPS/EBITDA, while revenue resilience and post-Lexmark guidance reset may temper top-line concerns.

Key Takeaways for Investors

Revenue beat with adjusted EPS miss reflects tariffs, higher interest expense, and tax rate anomalies; margin compression (adj GM −420 bps YoY, adj OI margin 3.7%) warrants caution near term .
Guidance reset raises FY25 growth via Lexmark while prudently lowering margins/FCF; monitor execution of >$250M synergies and tariff mitigation to re-expand margins .
IT Solutions strength and cross-sell runway (sub-5% penetration, >$50M pipeline) provide a structural mix shift tailwind to stabilize revenue .
Production print strategy pivot (Kyocera CSIJ) targets higher-growth segments, supporting long-term competitiveness and ecosystem-led differentiation .
Balance sheet strategy: debt paydown prioritized; pro forma leverage reduced; dividend cut signals focus on deleveraging and investment in integration .
Near-term trading: watch tariff policy updates and price pass-through pace; Q3 FCF expected to benefit from finance receivables sales timing, with seasonally strongest Q4 .
Medium-term thesis: reinvention plus Lexmark integration can drive revenue stabilization and margin recovery into 2026 as tariff impacts recede and synergies ramp .

Citations: Press release/8-K and call transcript data throughout:

Xerox Holdings Corp (XRX)·Q2 2025 Earnings Summary