Xerox Holdings Corp. ( XRX ) shares tumbled sharply on Thursday after the company reported a wider-than-expected loss for the fiscal second quarter of 2025 and significantly lowered its full-year guidance, raising concerns about the pace and impact of its ongoing strategic overhaul.

The document management and technology services provider posted a modest 0.1% year-over-year decline in revenue to $1.58 billion, slightly ahead of the consensus estimate of $1.55 billion. On a constant currency basis, revenue fell 1.1%.

However, the company’s bottom line deeply missed Wall Street expectations, with an adjusted loss per share of 64 cents compared to analysts’ forecast of an 8-cent loss, triggering a steep sell-off in the stock.

Also Read: Xerox Misses Q1 Estimates In Seasonally Lowest Quarter, CEO Cites Macro And Trade Uncertainties

Second-quarter weakness was pronounced in the company’s equipment segment, where sales declined 5.6%. By contrast, post-sale revenue, which includes services, consumables, and financing, edged up 1.5%.

Gross margin contracted by 440 basis points to 28.6%. Equipment gross margin dropped dramatically by 1,050 basis points to 24.0%, while post-sale margin decreased by 260 basis points to 29.9%.

Adjusted operating income fell to $59 million from $85 million a year ago, with the operating margin narrowing by 170 basis points to 3.7%. Xerox ended the quarter with $449 million in cash and equivalents, but used $11 million in operating cash flow, a reversal from prior quarters that had seen positive free cash generation.

Chief Executive Officer Steve Bandrowczak attributed the company’s resilience in a volatile market to the early benefits of its Reinvention strategy, a multi-year transformation plan aimed at repositioning Xerox as a vertically integrated provider of workflow and technology solutions. A cornerstone of this plan is the acquisition of Lexmark, which Bandrowczak described as “an important milestone” in expanding Xerox’s IT and digital services capabilities.

“Our second quarter reflects the improved resiliency of financial results afforded by Reinvention,” Bandrowczak said in a statement. “Growth in IT and Digital Solutions helped deliver stable revenue, and a focus on costs preserved profitability amid a volatile operating landscape.”

Outlook

Looking ahead, however, the company struck a more cautious tone. Xerox lowered its full-year free cash flow guidance to $250 million, down sharply from the prior range of $350 million to $400 million.

It also cut its expected adjusted operating margin to 4.5%, below the previous forecast of at least 5.0%. The company now anticipates constant currency revenue growth of 16% to 17%, significantly above the earlier low single-digit outlook, largely reflecting the addition of Lexmark to its portfolio.

Despite management’s confidence in its long-term transformation, investors have yet to be convinced. Xerox shares have plummeted 51% year-to-date and have now missed consensus earnings estimates for four consecutive quarters. Revenue has fallen short in two of the last four.

The company said that the revised guidance includes Lexmark’s financial results beginning July 1 and reflects $30 to 35 million of expected tariff-related expenses, net of mitigation efforts, modest Lexmark-related synergies and a slightly more conservative Print equipment demand outlook amid ongoing tariff and government policy-related uncertainty.

Price Action: At last check Thursday, Xerox stock was trading down 21.7% at $4.09, reflecting deepening investor concern over both near-term execution risks and the viability of the company’s reinvention efforts.

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