Is Xerox Stock Worth Buying as Cost Savings Clash With Print Decline?

XRX's cost cuts, margin gains and debt reduction bolster its turnaround, but shrinking print demand and high leverage keep execution risk elevated.

Arghyadeep Bose

3 min read

Xerox Holdings Corporation XRX is trying to turn cost discipline and debt reduction into a more durable earnings recovery even as its core print market keeps shrinking. Project Reinvention, Lexmark integration and a low valuation have improved the turnaround case, but the underlying revenue picture remains uneven.

The investment question is whether margin gains and deleveraging can outpace secular print pressure. Second-quarter 2026 results show progress on profitability and liquidity, while pro forma revenue declines and elevated leverage keep execution risk high.

Xerox Cost Savings Are Rebuilding Margins

Project Reinvention had delivered more than $500 million of cumulative run-rate gross cost savings by year-end 2025. Xerox also raised its Lexmark gross cost synergy target to at least $350 million, with half expected in 2026, giving management another lever to support profitability.

That progress showed up in second-quarter margins. Adjusted operating margin reached 10.6%, up 690 basis points year over year. Excluding the $105 million tariff-receivable benefit, margin was 5.1%, still 140 basis points higher year over year, showing improvement beyond the tariff-related benefit.

XRX's Cheap Valuation Comes With Balance-Sheet Risk

Valuation is a clear part of the appeal. XRX trades at 4.59X forward 12-month earnings per share, compared with 9.73X for the Zacks sub-industry. Its price-to-sales ratio is 0.05, adding another low valuation measure to the turnaround case.

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The discount comes with financial strain. Gross leverage was 5.9X and net leverage was 5.1X after the second quarter, down from 7X and 6X at the end of the first quarter. Non-financing interest expense rose 82% year over year to $100 million, keeping balance-sheet risk in focus.

Xerox's Growth Push Still Faces Print Pressure

Xerox's top line is projected to grow 7.9% year over year in 2026, helped by its strategic pivot and broader portfolio. Yet second-quarter reported growth was acquisition-driven, with pro forma revenues down 6.5%.

Print and Other revenue fell 6.1% on a pro forma basis, equipment revenue dropped 13% and IT Solutions revenue declined 8.9%. Those figures show that Lexmark has added scale without eliminating underlying pressure in Xerox's businesses.

The challenge is broader than Xerox. HP Inc. HPQ reported flat fiscal second-quarter 2026 Printing revenue and a 7% decline in hardware units. Canon Inc. CAJPY reported Printing at 54% of 2025 net sales and continues to offer office multifunction devices, laser printers and commercial printers.

XRX Deleveraging Improves Financial Flexibility

Xerox reduced total debt by $223 million during the second quarter. Management now expects year-end gross leverage below 5X and net leverage below 4X, which would further improve financial flexibility ahead of upcoming debt maturities.

Near-term liquidity has improved as well. The current ratio rose to about 1.18 from roughly 1.11 at year-end 2025, with current assets of $3.70 billion above current liabilities of $3.13 billion. The cushion is better, but leverage remains high enough that continued debt reduction is central to the turnaround.

XRX's Style Scores Support a Cautious Hold

XRX is a turnaround stock where the improvement case is visible but not complete. Cost savings, margin expansion and lower debt are moving in the right direction, while pro forma declines in print and IT Solutions keep the case dependent on execution rather than valuation alone.

XRX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It also has a Value Score of A, Growth Score of A, Momentum Score of A and VGM Score of A. Those Style Scores strengthen the quantitative profile, but they are designed to complement the Zacks Rank rather than override it.

For investors weighing buy, hold or wait, the Rank supports caution. The A scores keep XRX worth monitoring, while persistent print pressure, competition and leverage argue for clearer evidence that operating gains can be sustained before taking a more aggressive view.

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