Xerox Struggles with Q2 Profit Drop Amid Tariffs

Xerox Struggles with Q2 Profit Drop Amid Tariffs

Xerox reported second-quarter 2025 revenue of $1.576 billion, down just 0.1% year-over-year, but adjusted operating income fell sharply by 31% to $59 million, as the company works through tariff-related headwinds and integration costs tied to its recent acquisition of Lexmark.

In its core Print & Other segment, total revenue declined by $128 million to $1.366 billion. Equipment sales dropped $20 million year-over-year, and post-sale revenue declined by $108 million.

Xerox attributed some of the quarterly softness to weakened print equipment demand in April and May, particularly among government and small-to-mid-sized clients, amid tariff uncertainty. However, demand normalized in June, with equipment sales growing at the second-fastest pace since early 2024.

The July acquisition of Lexmark is a major step in Xerox’s ongoing reinvention. The combined company now holds a top-three market share across all major print categories and gains expanded access to the growing A4 print segment and the Asia-Pacific market. The deal adds 43 product configurations to Xerox’s A4 lineup, while Lexmark gains access to Xerox’s A3 and high-end platforms.

Integration of Lexmark is also expected to improve profitability through supply chain efficiencies. Key initiatives include adopting Lexmark’s A3 platform and toner production, transitioning Lexmark toner to Xerox’s lower-cost technology, and using Lexmark’s manufacturing facility in Mexico to reduce exposure to tariffs.

Tariff expenses are a notable challenge. Xerox now expects to incur $30–35 million in tariff-related costs in 2025, higher than originally anticipated. This is due to a temporary 145% tariff on goods from China, higher transition costs related to relocating production to Mexico, and a cautious rollout of price increases. The company expects to recover these costs in 2026, assuming tariff rates stabilize.

Despite these pressures, Xerox continues to see strong momentum in its IT Solutions segment, bolstered by its 2024 acquisition of ITsavvy. Management expressed confidence that IT Solutions’ billings will grow at or above market rates in the second half of 2025.

Related:

• Xerox Completes Acquisition of Lexmark
• Xerox Confirms Management Details on Acquisition of Lexmark
• Xerox Provides Updates on Q1 Results and Tariff Impact
• Xerox to Acquire Lexmark from Ninestar
• Xerox Toner Faces More than Rumor Challenges

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