Xerox cuts operating income outlook to $450–475 million after quarterly loss of $1 billion

Key Facts

Xerox posted a GAAP net loss of $1.015 billion, or $7.73 per share, in the third quarter of 2026, compared with a loss of $760 million, or $6.01 per share, a year earlier. The company said the loss included a non-cash goodwill impairment of $959 million before tax and $955 million after tax, equivalent to $6.87 per diluted share. By contrast, adjusted net income was $7 million, or $0.02 per share, down $20 million and $0.18 per share year over year. Adjusted earnings per share beat analysts’ estimate of a $0.10 loss by $0.12. The company reported results on October 29, while the cut to its annual outlook remained a drag despite the quarterly beat.

Revenue was $1.868 billion in the quarter ended September 30, down 4.7% from the year-earlier period, or 4.5% excluding currency effects. Revenue was slightly above the consensus estimate of $1.86 billion. Adjusted operating income rose to $124 million from $65 million a year earlier. The adjusted operating margin also widened to 6.6% from 3.3%, an increase of 330 basis points. This highlights the contrast between improved adjusted operating metrics and falling sales and a wider accounting loss.

Results varied across equipment, services and technology solutions. Equipment sales rose to $393 million, up 2.6%, while total equipment installations increased 9.0%, supported by growth in entry-level and high-end products. By contrast, after-sales revenue fell 4.5% to $1.295 billion. Xerox attributed the decline to lower revenue from equipment services, managed print services, supplies and leasing, along with lower financing revenue and fewer new financing originations. IT solutions revenue fell 17.3% to $187 million, with the company attributing most of the decline to the timing of large public-sector product deliveries in the prior year.

Xerox cut its 2026 adjusted operating income outlook to a range of $450–475 million, from $555–605 million. It also reduced its free cash flow outlook to $50–100 million from $250 million, while keeping its revenue outlook near $7.6 billion. The company attributed the operating income outlook reduction to higher-than-expected input costs, a shift in sales mix from mid-range to entry-level products, weaker market expectations and lower-than-expected IT solutions profits. It attributed the lower cash flow outlook to lower expected operating income and the delay of some receipts, including financing receivables and tariff fees, into 2027. Chief Executive Officer Louie Pastor said, "The pressures impacting our outlook have intensified, creating greater near-term pressure than we anticipated."

As part of measures to preserve cash and reduce debt, the company announced the suspension of dividends on its common and preferred stock. Its financing moves included an exchange of $174 million in principal amount of 5.50% notes due in 2028 for $121 million of 10.25% secured notes due in 2030, plus $9 million in equity. The steps come as the company seeks to preserve liquidity alongside a lower cash flow outlook. After the reduced annual outlook was announced, the stock fell 19.7% on October 29, according to Investing.com, despite the quarterly results beating analysts’ estimates. EL7 data showed the stock closing at $2.79 on October 28, compared with $2.54 on October 27; these prices do not represent trading during the session in which results were announced.

Xerox had announced that its earnings statement would be released on October 29 at 6:30 a.m. Eastern time, followed by a live results discussion at 8:00 a.m. the same day. The webcast time was included in the company’s announcement that it would present and discuss third-quarter results. Adjusted results and revenue topped analyst estimates, but weaker operating income and cash flow guidance was accompanied by a negative stock reaction. Quarterly figures combine growth in equipment sales and an improvement in the adjusted operating margin on one hand, with declines in after-sales and IT solutions revenue on the other. The dividend suspension and lower cash outlook also frame the company’s financial position as presented in its announcement.