Xerox Holdings Corp (XRX)

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Throughout the Management’s Discussion and Analysis (MD&A) that follows, references to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries, while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. References herein to “we,” “us,” “our,” and the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to "Xerox Holdings Corporation" refer to the stand-alone parent company and do not include its subsidiaries. References to "Xerox Corporation" refer to the stand-alone company and do not include its subsidiaries.

Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox Holdings' operations. Accordingly, the following MD&A primarily focuses on the operations of Xerox and is intended to help the reader understand Xerox's business and its results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, the Condensed Consolidated Financial Statements and the accompanying notes. Throughout this MD&A, references are made to various notes in the Condensed Consolidated Financial Statements which appear in Item 1 of this combined Quarterly Report on Form 10-Q (this Form 10-Q), and the information contained in such notes is incorporated by reference into the MD&A in the places where such references are made.

Xerox Holdings' other direct subsidiary is Xerox Ventures LLC, which holds an investment in Myriad Ventures Fund I LP (Myriad). Myriad is fully consolidated by Xerox Holdings. At June 30, 2026 and December 31, 2025 investments in Myriad were $50 million and $41 million, respectively. For ease of discussion, the following MD&A includes the results of Xerox Ventures LLC as they are immaterial to earnings and the balance sheet.

Our results include Lexmark International II, LLC (Lexmark) from July 1, 2025, the effective date of the Lexmark Acquisition. In order to provide a clearer comparison of our results to the prior year, we are also providing a discussion and analysis on a pro forma basis. See the “Pro Forma Basis” section below for further explanation and discussion of pro forma results. In addition, the following discussion includes references to "legacy Xerox", which reflects the financial results of Xerox, excluding the impact of the Lexmark Acquisition, as applicable.

Currency Impact

To understand the trends in the business, we believe that it is helpful to analyze the impact of changes in the translation of foreign currencies into U.S. Dollars on revenue and expenses. We refer to this analysis as "constant currency", "currency impact" or "the impact from currency". This impact is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate. This impact is calculated for all countries where the functional currency is the local country currency. We do not hedge the translation effect of revenues or expenses denominated in currencies where the local currency is the functional currency. Management believes the constant currency measure provides an additional perspective on revenue trends. Currency impact can be determined as the difference between actual growth rates and constant currency growth rates.

Overview

In the second quarter 2026, overall market trends remained stable compared to the prior year, with demand broadly consistent with recent quarters. The Supreme Court ruling on IEEPA tariffs provided a meaningful benefit to our cost structure in the second quarter 2026, which we recognized as a receivable and subsequently sold for $80 million in cash. However, ongoing tariff payments, combined with higher memory and oil prices, continue to present headwinds to our cost structure. To date, none of these factors have materially impacted overall demand, apart from certain international markets with exposure to the Middle East conflict.

Second quarter 2026 reflects the continued benefits of the Lexmark Acquisition and Xerox's transformation efforts. Pro forma1 gross margins expanded year-over-year for the second consecutive quarter, driven by integration synergies, cost discipline, and an increasingly unified operating model. These gains are complemented by new product launches under the unified Xerox brand, growing partner validation, and a more focused go-to-market approach which is collectively positioning the company for continued operational and financial improvement in the second half of 2026 and beyond.

Equipment sales of $387 million in the second quarter 2026 increased 15.2% in actual currency and 15.0% in constant currency2, as compared to the second quarter 2025. Second quarter 2026 equipment sales included a 33.1-percentage point benefit from the Lexmark Acquisition. Total equipment installations increased approximately 97.0% including the impact of the Lexmark Acquisition, partially offset by declines in legacy Xerox installations, primarily in the entry, and mid-range color equipment categories. Excluding the Lexmark Acquisition, equipment sales declined 17.9% in actual currency due to lower installations and a mix shift toward Entry products. On a pro

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forma1 basis, second quarter 2026 revenue declined 13.0%, primarily reflecting the impacts noted above, partially offset by modest growth from Lexmark.

Post sale revenue of $1,346 million in the second quarter 2026 increased 30.7% in actual currency and 29.7% in constant currency2, as compared to second quarter 2025, and included a 37.5-percentage point benefit from the Lexmark Acquisition. Excluding the Lexmark Acquisition, post sale revenue declined 6.8% in actual currency primarily reflecting lower equipment service revenue and managed print services. Post sale revenue was also adversely impacted by intentional reductions in non-strategic revenue, including the exit of certain production print manufacturing operations in prior years, as well as a decline in financing revenue reflecting the continued sales of finance receivables to our various funding affiliates and lower originations. On a pro forma1 basis, second quarter 2026 revenue decreased 3.9%, primarily reflecting the impacts noted above.

IT Solutions revenue of $189 million in the second quarter 2026 declined 10.0% in actual currency and 9.0% in constant currency2, as compared to the second quarter 2025. The decline was primarily driven by a mix of revenue subject to net classifications and revenue deferrals.

Pre-tax Income of $31 million for the second quarter 2026 increased by $91 million as compared to pre-tax (loss) of $(60) million in the second quarter 2025. Pre-tax margin of 1.6% for the second quarter 2026 improved by 5.4-percentage points as compared to the second quarter 2025 pre-tax (loss) of (3.8)% and included an approximate 5.5-percentage point benefit related to the IEEPA tariff receivables and a 3.8-percentage point benefit from the Lexmark Acquisition. On a pro forma1 basis, second quarter 2026 pre-tax income margin improved by 4.1-percentage points.

Second quarter 2026 adjusted2 operating income margin of 10.6% increased by 6.9-percentage points compared to second quarter 2025, and included a 6.6-percentage point benefit related to the IEEPA a tariff receivables, as well as an approximate 2.0-percentage point benefit from the Lexmark Acquisition. On a pro forma1 basis, second quarter 2026 adjusted2 operating income margin increased by 5.4-percentage points.

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(1)Refer to the "Pro Forma Basis" section for an explanation of this measure. Reflects the inclusion of Lexmark's estimated results from January 1, 2025 through June 30, 2025. Lexmark's actual results are included in Xerox's reported results beginning on July 1, 2025, the effective date of the acquisition.

(2)Refer to the “Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.

Recent Changes and Developments

Acquisition of Lexmark

On July 1, 2025, Xerox Corporation completed its previously announced acquisition of all of the issued and outstanding equity of Lexmark International II, LLC (Lexmark) from Ninestar Group Company Limited. Refer to Note 6 - Acquisition in the Condensed Consolidated Financial Statements for additional information regarding the Lexmark Acquisition.

Joint Venture Arrangement and Shared Services and License Agreement

In February 2026, Xerox Corporation and certain investors including certain funds and accounts managed by Angelo, Gordon & Co., L.P. (collectively, TPG) entered into a joint venture arrangement (the Joint Venture) pursuant to which TPG funded $405 million aggregate principal amount of senior secured term loans (the Term Loans) to, and purchased $45 million of Class A Units from, XRX Brandco Holdings LLC (IPCo Holdings) (the Joint Venture Financing).

Also in February 2026, in connection with the formation of the Joint Venture, Xerox Holdings, Xerox Corporation, IPCo Holdings and XRX Brandco LLC (IPCo) entered into a Shared Services and License Agreement (the SSLA), pursuant to which (i) Xerox Holdings agreed to provide certain services to IPCo Holdings and IPCo and (ii) IPCo granted licenses to the Contributed IP to Xerox Corporation and, at the election of Xerox Holdings, certain of its subsidiaries (collectively, the Licensees).

Refer to Note 1 - Basis of Presentation in the Condensed Consolidated Financial Statements for additional information regarding the Joint Venture Arrangement and the Shared Services and License Agreement, as well as to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding the Joint Venture Financing.

Warrant Dividend

In January 2026, the Board of Directors of Xerox Holdings Corporation approved a pro-rata distribution of warrants to holders of Xerox Holdings Corporation’s common stock, par value $1.00 per share, Series A Convertible Perpetual Voting Preferred Stock and 3.75% Convertible Senior Notes due 2030. Refer to Note 16 - Shareholders'

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Equity of Xerox Holdings in the Condensed Consolidated Financial Statements for additional information regarding the Warrant Dividend.

2026 Review

Total revenue of $1.92 billion for second quarter 2026 increased 22.0% from second quarter 2025, including a 31.6-percentage point benefit from the Lexmark Acquisition, as well as a 0.8-percentage point favorable impact from currency. On a pro forma1 basis total revenue declined 6.5%. Total revenue reflected the following:

•an increase of 30.7% in Post sale revenue, including a 37.5-percentage point benefit from the Lexmark Acquisition, as well as a 1.0-percentage point favorable impact from currency. On a pro forma1 basis post sale revenue declined 3.9%.

•an increase of 15.2% in Equipment sales revenue, including a 33.1-percentage point benefit from the Lexmark Acquisition, and a 0.2-percentage point favorable impact from currency. On a pro forma1 basis equipment sales revenue declined 13.0%.

•a decrease of 10.0% in IT Solutions revenue, including a 1.0-percentage point unfavorable impact from currency.

Total revenue of $3.77 billion for the six months ended June 30, 2026 increased 24.2% as compared to the prior year period, including a 31.7-percentage point benefit from the Lexmark Acquisition, as well as a 1.8-percentage point favorable impact from currency. On a pro forma1 basis total revenue declined 5.1%. Total revenue reflected the following:

•an increase of 30.4% in Post sale revenue, including a 36.4-percentage point benefit from the Lexmark Acquisition, as well as a 2.3-percentage point favorable impact from currency. On a pro forma1 b

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Throughout the Management’s Discussion and Analysis (MD&A) that follows, references to "Xerox Holdings" refer to Xerox Holdings Corporation and its consolidated subsidiaries, while references to "Xerox" refer to Xerox Corporation and its consolidated subsidiaries or Xerox Holdings Corporation and its consolidated subsidiaries, as determined by the context. References herein to “we,” "us," “our,” or the “Company,” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to “Xerox Holdings Corporation” refer to the stand-alone parent company and do not include its subsidiaries. References to “Xerox Corporation” refer to the stand-alone company and do not include its subsidiaries.

Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox Holdings' operations. Accordingly, the following MD&A primarily focuses on the operations of Xerox and is intended to help the reader understand Xerox's business and its results of operations and financial condition. Throughout this combined Form 10-K, references are made to various notes in the Consolidated Financial Statements which appear in Part II, Item 8 of this combined Form 10-K, and the information contained in such notes is incorporated by reference into the MD&A in the places where such references are made.

Xerox Holdings' other direct subsidiary is Xerox Ventures LLC, which was established solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies. In January 2024, Myriad Ventures Fund I LP (Myriad) was established, and the investments held by Xerox Ventures LLC were transferred to Myriad, which will continue to be fully consolidated by Xerox Holdings. The investments are primarily equity or equity-linked and for less than 20% ownership. At December 31, 2025 and 2024 Xerox's investment in Myriad was $41 million and $40 million, respectively. The following discussion includes the results of Xerox Ventures LLC as they are immaterial to earnings and the balance sheet, and for ease of discussion.

Our results include Lexmark International II, LLC (Lexmark) from July 1, 2025, the effective date of the acquisition (the Lexmark Acquisition), as well as the results of ITsavvy LLC (ITsavvy), acquired on November 20, 2024. In order to provide a clearer comparison of our results to the prior year, we are also providing a discussion and analysis on a pro forma basis. See the “Pro Forma Basis” section below for further explanation and discussion of pro forma results. In addition, the following discussion includes references to "legacy Xerox", which reflects the financial results of Xerox, excluding the impact of the Lexmark Acquisition and ITsavvy, as applicable.

Executive Overview

2025 was a pivotal year for Reinvention, which is a multi-year strategy designed to transform the way Xerox operates. Its objectives are to strengthen our core business and improve financial flexibility enabling investments in solutions, initiatives, and capabilities that will position Xerox to gain share in existing markets and mix shift into higher growth verticals beyond print, delivering long-term, sustainable growth in revenue and profits. Total revenue for full year 2025 of $7.0 billion increased 12.9% reflecting a 15.5-percentage point benefit and 6.5-percentage point benefit from the Lexmark Acquisition and ITsavvy, respectively, as well as a 0.7-percentage point benefit from currency. On a pro forma1 basis total revenue declined 7.6%.

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(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITsavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.

Recent Changes and Developments

Acquisitions

On July 1, 2025, Xerox Corporation completed the acquisition of Lexmark International II, LLC (Lexmark) (the Lexmark Acquisition). The addition of Lexmark is intended to enhance Xerox's operational resilience and cost structure. Expected benefits include increased presence in the A4 color segment, entry into the APAC print market, potential reductions in product and tariff-related costs through the use of Lexmark’s manufacturing footprint, improved supply chain flexibility, and the ability to leverage Lexmark’s global capability centers and IT infrastructure to support customer satisfaction and operational efficiency. The combined company also offers a wider portfolio of offerings and services to Lexmark’s large customer base. During the year we also completed the integration of ITsavvy, forming our new Xerox IT Solutions organization (IT Solutions). IT Solutions meaningfully expands Xerox’s reach of the typical IT budget by providing additional offerings as well as opportunities that strengthen our relationship with existing clients. In 2025, growth of the IT Solutions business was driven primarily by ITsavvy as well as client demand for integrated infrastructure, cloud, security, and automation solutions.

Refer to Note 6 - Acquisitions and Divestitures in the Consolidated Financial Statements for additional information regarding our acquisitions and divestitures.

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Segments

During the first quarter of 2025, the Company updated its determination of reportable segments to align with a change in how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth and Reinvention strategies. As such, it was determined that there are two reportable segments - Print and Other, and IT Solutions. Prior to this change, the Company had two reportable segments - Print and Other, and Xerox Financial Services (XFS). As a result of this change, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments. As noted above, Lexmark was acquired during the third quarter of 2025. The results of Lexmark are included in the Print and Other segment. Refer to Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information regarding this change.

Our Reinvention efforts are focused on Operational Simplification, and Commercial Optimization and Growth. During 2025, we made significant progress across each priority.

•Operational Simplification

–Achieved cumulative run-rate gross cost savings of more than $500 million through year-end 2025, including Integration savings

–Eliminated duplicative systems, implemented more efficient systems and processes, and enhanced efficiency in procurement, warehousing, inventory management and demand planning

–Launched tools focused on digital transformation

•Commercial Optimization and Growth:

–Re-entered the growing mid-volume Production inkjet market through partnerships, with the launch of IJP900 and Proficio products

–Launched Inside Sales operations in U.S. and Canada

–Invested in partner programs and customer initiatives

–Integrated ITsavvy, enhancing Xerox’s IT Solutions offering and expanding Total Addressable Market (TAM) of Xerox's offerings

–Closed the Lexmark Acquisition, providing greater exposure to growing Print markets

Business Overview

With annual revenues of approximately $7.0 billion, we are a leading global provider of digital print technology and related services, software and solutions. Our business spans five primary offerings areas: Workplace Solutions, Production Solutions, Xerox Services, Xerox Financial Services (XFS), all of which are included in the Print and Other segment, and IT Solutions.

•Workplace Solutions is comprised of two strategic product groups, Entry and Mid-Range, much of which share common solutions, apps and ConnectKey® software. Workplace Solutions revenues include the sale of products (captured primarily as equipment sales) as well as software, supplies and the associated technical service and financing of those products through XFS (captured as post sale revenue).

•Production Solutions includes high-end solutions designed for customers in the graphic communications, in-plant and production print environments with high-volume printing requirements. Our broad portfolio of presses and solutions provides black-and-white and full-color, as well as on-demand printing across a wide range of applications. Production Solutions revenues include the sale of products (captured primarily in equipment sales) as well as, software, supplies and the associated technical service and financing of those products (captured as post sale revenue).

•Xerox® Services includes a continuum of solutions and services that helps our customers optimize their physical print and digital information infrastructures, apply automation and simplification to maximize productivity, and ensure the highest levels of security. Our primary offerings in this area are Managed Print Services1 (MPS), Capture & Content Services (CCS) and Customer Engagement Services (CES). CCS and CES encompass a range of Digital Services that leverage our software capabilities in Workflow Automation, Personalization and Communication Software, Content Management Solutions, and Digitization Services.

•XFS is a global financing solutions business and currently offers financing for direct channel customer purchases of Xerox equipment and solutions through bundled lease agreements and lease financing to end-user customers who purchase Xerox equipment and solutions through our indirect channels.

•IT Solutions provides clients of all sizes integrated IT infrastructure solutions, delivering business outcomes through its suite of Device Lifecycle Solutions, and Managed IT Services. The IT Solutions business leverages its professional services and engineering capabilities, along with an extensive partner ecosystem to design, develop and deliver comprehensive Network and Security Solutions, and Infrastructure and Cloud Solutions.

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(1)Includes revenues from service, maintenance and rentals. IT Solutions and digital services are not included in managed print services.

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Headquartered in Norwalk, Connecticut, with approximately 22,900 employees, Xerox serves customers globally in North America, Europe, Latin America, Brazil, APAC, the Middle East, Africa and India. We have a broad and diverse base of customers by both geography and industry, ranging from small and mid-sized clients to printing production companies, governmental entities, educational institutions and Fortune 1000 corporations. Our business does not depend upon a single customer, or a few customers. The loss of a single customer would not have a material adverse effect on our business. In 2025, approximately 43% of our revenue was generated outside the United States.

Post Sale Based Business Model

In 2025, 79% of our total revenue was post-sale-based and is comprised, in part, of managed print services1, supplies and financing. These revenue streams generally follow equipment placements and provide stability to our revenue and cash flows. Key indicators of future post sale revenue include installs of printers and multifunction devices, the number and type of machines in the field (MIF), page volumes, revenue per page, and the type and nature of related software and ancillary services provided to customers. Post sale revenue also includes revenues from IT Solutions, comprised of IT hardware and associated services revenues, Digital services, as well as gains, commissions, and servicing revenue associated with the sale of finance receivables.

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(1)Includes revenues from service, maintenance and rentals. IT Solutions and digital services are not included in managed print services.

Financial Overview

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