Xerox (XRX) is mulling "reinvention" as Trump tariffs start to bite

Things are likely to get worse before they get better for Xerox Holdings Corporation (XRX).

Last quarter, Xerox brought in $1.5 billion in revenue, 3% less than the same time last year. Profit margins slipped to 1.5%, and the company reported a loss of 6 cents per share — 12 cents worse than in early 2024.

Xerox also burned through $109 million in cash during the quarter, compared to an $89 million outflow a year ago.

The bigger concern, however, is what’s coming next. On its latest earnings call, Xerox said it expects President Trump’s tariffs to cut $50 million from its 2025 operating income.

“If China tariffs are reduced from 145% to 60%, we think we can offset the hit through a mix of price hikes, added fees, and shifting production to other regions,” said President and COO John Bruno.

He added that cost cuts tied to the company’s broader restructuring plan — known internally as “Reinvention” — would also help soften the blow.

Announced in February, that reinvention plan focuses on stabilizing the print business, cutting overhead, and expanding into new areas of revenue.

‘A very fluid environment’

Bruno said Xerox’s current exposure to reciprocal tariffs (outside of China) is under 10% of its total cost of sales.

Tariff-related costs on products imported from China, he added, are expected to fall to the low-single-digit percentage range by year-end as the company shifts production elsewhere.

“This is a very fluid environment, and financial impacts are difficult to forecast,” Bruno said. “We will do our best to share further forecasted impacts and our mitigation plans as they evolve.”

Despite falling short of analyst expectations, Xerox shared some bright spots from last quarter.

Equipment installations rose 24% — its third straight quarter of double-digit growth — and the company reduced its total debt by $100 million in Q1.

Xerox also completed two major acquisitions last year: it acquired ITsavvy in October to expand into IT services, and agreed to buy Lexmark in December for $1.5 billion to strengthen its core printing business.

Lexmark, a U.S.-based printer manufacturer owned by China’s Ninestar Corp., is still awaiting regulatory approval in both the U.S. and China.

But investors aren’t waiting around for Xerox’s “reinvention” to pay off. The stock is down 37.8% this year and has tumbled 60.7% over the past 12 months.