Xerox 2025 Q1 Earnings Narrowed Losses Despite Revenue Decline

Xerox (XRX) reported its fiscal 2025 Q1 earnings on May 12th, 2025. The company experienced a 3.0% decline in revenue to $1.46 billion, falling short of expectations for $1.50 billion. Despite the revenue miss, Xerox narrowed its net loss to $90 million, a 20.4% improvement from the previous year. The company maintained its guidance for low single-digit revenue growth in constant currency and adjusted operating margin of at least 5.0%, with free cash flow between $350 million and $400 million.

Revenue

Xerox reported a total revenue of $1.46 billion for Q1 2025, marking a 3.0% decrease from the previous year. The segment breakdown revealed that sales contributed $557 million, while services, maintenance, rentals, and other activities generated $900 million. This comprehensive performance depicts a balanced revenue contribution from both sales and service-related operations.

Earnings/Net Income

Xerox narrowed its losses to $0.75 per share in Q1 2025, compared to a $0.94 loss per share in Q1 2024. The net loss was reduced to $90 million, showing a 20.4% improvement from the $113 million loss in the previous year. Despite the narrowing of losses, the EPS remains unfavorable for shareholders.

Price Action

Post-Earnings Price Action Review

The strategy of buying Xerox (XRX) shares following a revenue miss and holding for 30 days proved detrimental. A backtest of this approach resulted in significant losses, amounting to -77.87% with an excess return of -102.65%. The compound annual growth rate for this strategy was -34.14%, coupled with a high maximum drawdown of -87.04% and a Sharpe ratio of -0.75, indicating increased risk compared to the benchmark. The volatility stood at 45.69%, highlighting the strategy's instability. This analysis suggests that investors should exercise caution when considering holding Xerox shares under such conditions, as the risks outweigh potential benefits.

CEO Commentary

"In a quarter marked by increasing levels of macroeconomic and trade policy uncertainty, our team remained focused on what we can control: the balanced execution of our Reinvention and delivering client success," said Steve Bandrowczak, Chief Executive Officer at Xerox. "Improved sales productivity, the successful integration of ITsavvy and other Reinvention-enabled operating efficiencies drove momentum in revenue and positive adjusted operating income in our seasonally lowest quarter. Reinvention is delivering improved operating predictability and sales momentum, positioning Xerox well for long-term growth in revenue and adjusted operating income."

Guidance

Xerox expects low single-digit revenue growth in constant currency for 2025. The company guides for an adjusted operating margin of at least 5.0% and anticipates free cash flow to range between $350 million and $400 million. Guidance does not account for the pending acquisition of Lexmark and excludes potential adverse effects from tariff and trade policy changes.

Additional News

In recent developments, Xerox is progressing with its acquisition of Lexmark, having secured key regulatory approvals, including HSR clearance in the US and anti-trust clearance in the UK and Canada. The company anticipates final approvals in Q2 2025. Additionally, Xerox updated its reportable segments to align with strategic growth goals, now focusing on Print and Other, and IT Solutions. These changes reflect Xerox's ongoing adaptation to market demands and strategic integration of recent acquisitions. Lastly, Xerox announced a webcast to discuss its 2025 first-quarter results, highlighting its commitment to transparent communication with stakeholders.