XRX: Lexmark-fueled rebound with a small-cap turnaround vibe

The thesis

Xerox (XRX) is trying to reinvent itself after buying Lexmark, and the first numbers look like a real shift rather than just talk. In Q1 2026, revenue jumped about 27% year over year to $1.85 billion, helped by Lexmark and stronger equipment and services sales.[1][3] Adjusted operating margin – basically how much they keep after day-to-day costs – improved to 3.9%, the first year-on-year margin increase in five quarters.[1][3] Management reaffirmed 2026 targets: more than $7.5 billion in sales, $450–$500 million in operating profit, and about $250 million in cash left after running the business.[1][3] They also raised around $404 million in a financing deal backed by patents and used it to chip away at debt, booking a $56 million gain.[2] For a roughly $0.4B market-cap stock trading around $3, this is a classic post-deal turnaround setup with cost cuts and new IT services, including security-focused offerings, as the main story.[1][2][6]

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💡 Why this matters

Most people know Xerox as the old-school copier name, but the world is shifting to cloud, managed IT, and safer networks instead of boxes of printers. Xerox is pushing into "IT as a Service" for small and mid-sized businesses, bundling hardware, support, and security so customers don’t have to be their own tech department.[6] If they can turn a shrinking print business into a steadier tech-and-services business, it’s a way to ride the broader trend of companies outsourcing IT and cybersecurity without paying big-tech prices. For everyday investors, that’s a chance to watch a legacy brand try to earn a second life in the digital era.[3][6]

▲ Catalysts

+ Q2 2026 earnings call expected around July 30, 2026, with updates on Lexmark integration and cost savings.[1][4][10]
+ Full-year 2026 guidance: revenue above $7.5B, operating profit $450–$500M, free cash flow about $250M.[3][5]
+ IT Solutions and Xerox IT as a Service push, targeting small-business tech and security needs launched in April 2026.[6]
+ Ongoing $450M IP-backed financing and debt reduction, including $101M of notes repurchased for $45M.[2]
+ Dividend declared May 20, 2026, with a forward yield around 3.2%, showing management still returning cash to shareholders.[6][10]

▼ Risks

! The company still loses money; Q1 2026 net loss was $105M and cash from operations was negative.[2][3]
! Debt and complex financing backed by patents add pressure if the turnaround stalls.[2][3]
! Core print and office equipment markets are shrinking and highly competitive against HP, Canon, and others.[3][6]
! Turnaround depends on hitting cost-cut targets and growing IT services; any stumble could hurt this penny-stock level name.[1][2][6]

🎯 One thing to take away

If you’re looking for a small, beat-up name with a real turnaround attempt behind it, Xerox (XRX) is worth a closer look, not a blind leap. The Lexmark deal has already shown up in the numbers: sales up about 27% in Q1 2026 and operating margins finally moving in the right direction after a long slump.[1][3] Management is talking about more than $7.5B in revenue this year and a few hundred million in operating profit, plus steady cost cuts and an IT services push aimed at small businesses.[1][3][6] The flip side: they’re still losing money, using creative financing tied to their patents, and fighting a shrinking printer market.[2][3] Treat it as a speculative, post-merger recovery story with real progress but very real risk, especially at penny-stock-like price levels.[1][2][10]

Data sources & methodology

All figures derive from official, public-domain government filings. Read our methodology for how we collect, process and score this data. See the methodology →

TZ Researched & published by TradesZ Research

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Not investment advice. We share research and analyses for educational purposes. Investing in stocks involves risk, including possible loss of capital. Always do your own research.