Document technology company Xerox (NASDAQ: XRX) reported Q2 CY2026 results exceeding the market’s revenue expectations, with sales up 22% year on year to $1.92 billion. The company expects the full year’s revenue to be around $7.6 billion, close to analysts’ estimates. Its non-GAAP profit of $0.38 per share was significantly above analysts’ consensus estimates.

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Company Overview

Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ: XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $7.76 billion in revenue over the past 12 months, Xerox is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. To accelerate sales, Xerox likely needs to optimize its pricing or lean into new offerings and international expansion.

As you can see below, Xerox grew its sales at a sluggish 1.5% compounded annual growth rate over the last five years. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Xerox’s annualized revenue growth of 9.3% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, Services, Maintenance, Rental Revenue. Over the last two years, Xerox’s Services, Maintenance, Rental Revenue revenue averaged 30.6% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company’s performance.

This quarter, Xerox reported robust year-on-year revenue growth of 22%, and its $1.92 billion of revenue topped Wall Street estimates by 1.2%.

Looking ahead, sell-side analysts expect revenue to decline by 3.1% over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and suggests its products and services will face some demand challenges.

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Adjusted Operating Margin

Xerox’s adjusted operating margin has generally stayed the same over the last 12 months, averaging 4.3% over the last five years. This profitability was lousy for a business services business and caused by its suboptimal cost structure.

Looking at the trend in its profitability, Xerox’s adjusted operating margin might have fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Xerox generated an adjusted operating margin profit margin of 2.1%, down 1.7 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Xerox, its EPS declined by 50.9% annually over the last five years while its revenue grew by 1.5%. However, its adjusted operating margin didn’t change during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Xerox, its two-year annual EPS declines of 79.9% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, Xerox reported adjusted EPS of $0.38, up from negative $0.64 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Key Takeaways from Xerox’s Q2 Results

It was good to see Xerox beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 20.3% to $3.24 immediately after reporting.

Xerox put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).