v3.26.1
Stock-Based Compensation
 12 Months Ended
Dec. 31, 2025
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
(shares in thousands, unless otherwise noted)
We have a long-term incentive plan whereby eligible employees may be granted restricted stock units (RSUs), performance share units (PSUs) and stock options (SOs). We grant stock-based compensation awards in order to continue to attract and retain qualified employees and to better align employees' interests with those of our shareholders. Each of these awards is subject to settlement with newly issued shares of Xerox Holdings Corporation's common stock. At December 31, 2025 and 2024, 3 million and 5 million shares, respectively, were available for grant of awards.
Stock-based compensation expense was as follows:
Year Ended December 31,
202520242023
Stock-based compensation expense, pre-tax$45 $52 $54 
Income tax benefit recognized in earnings9 8 10 
Restricted Stock Units
Compensation expense for RSUs is based upon the grant-date market price and is recognized on a straight-line basis over the vesting period, based on management's estimate of the number of shares expected to vest. RSUs granted in 2025 vest one-third on the first anniversary of the grant date, with the remainder vesting in equal quarterly installments over the subsequent two years of service. RSUs granted in 2024 and 2023 vest ratably over three years, with one-third vesting on each anniversary of the grant date.
Performance Share Units
PSU awards are comprised of a performance-based component (Operating income) as well as a market-based component (Relative Total Shareholder Return (RTSR)). PSUs granted in 2025 and 2024 are entirely performance-based with an RTSR modifier - see Market-Based Component below. PSUs granted in 2023 are entirely market-based. The metrics and weightings are as follows:
Award Year (Metric Weighting)
Performance Metric202520242023
Operating income(1)
100 %— %— %
Operating income improvement(1)
— %100 %— %
Relative total shareholder return— %— %100 %
100 %100 %100 %
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(1)PSUs granted in 2025 and 2024 are performance-based and subject to an operating income metric and an RTSR modifier that may increase or decrease the number of shares that vest by up to 15% and 25%, respectively.
The measures are independent of each other and depending on the achievement of these metrics, a recipient of a PSU award is entitled to receive a number of shares equal to a percentage, ranging from 0% to 200% of the PSU award granted. All PSUs granted have a three-year cliff vesting from the date of grant.
In August 2025, the Board of Directors of Xerox Holdings Corporation approved a modification to the 2025 PSUs that increased the threshold, target, and maximum operating income performance levels to reflect the inclusion of Lexmark’s estimated operating income from the July 1, 2025 acquisition date through December 31, 2025.
Performance-Based Component: This PSU component vests contingent upon meeting predetermined annual and/or cumulative performance metrics. The 2025 PSU metric vests based on the achievement of a one-year predetermined operating income goal for fiscal year 2025. The 2024 PSU metric vests contingent upon meeting predetermined annual, as well as cumulative, operating income improvement goals established for four discrete performance periods (2024, 2025 and 2026) weighted 20%, respectively, and a three-year cumulative goal (2024-2026) weighted 40%. The fair value of this PSU component is determined using the grant-date market price for the underlying stock. Compensation expense is recognized on a straight-line basis over the three-year vesting period, based on management's estimate of the number of shares expected to vest and based on achievement of the applicable performance targets. If actual results exceed the stated targets, all plan participants have the potential to earn additional shares of common stock up to a maximum over-achievement of 100% of the original grant. If the stated targets are not met, any recognized compensation cost would be reversed.
Market-Based Component: The RTSR metric, included as part of the 2025 PSU, is based on Xerox Holdings Corporation's stock price appreciation, inclusive of dividends paid, measured over a three-year performance period (2025-2027). RTSR will be determined by ranking Xerox Holdings Corporation and the companies within the S&P 600 Information Technology Index, as approved by the Compensation and Human Capital Committee of the Board, from highest to lowest according to their respective TSRs, for the three-year performance period. Payout for this portion of the 2025 PSU will be determined based on the RTSR for the three-year measurement period, and based on this result, the RTSR modifier can increase or decrease the number of shares that ultimately vest by 15%. Final payout will be determined based on Xerox’s Operating income metric, and depending on the RTSR performance, a potential increase or decrease of 15%, with a maximum over-achievement of 100% of the original grant. The RTSR metric, included as part of the 2024 PSU, is based on Xerox Holdings Corporation's stock price appreciation, inclusive of dividends paid, measured over three equally weighted performance periods (2024, 2024-2025, and 2024-2026). RTSR will be determined by ranking Xerox Holdings Corporation and the companies within the S&P 600 Information Technology Index, as approved by the Compensation and Human Capital Committee of the Board, from highest to lowest according to their respective TSRs, for each of the three performance periods. Payout for this portion of the 2024 PSU will be determined based on the average RTSR of the three measurement periods, and based on these results, the RTSR modifier can increase or decrease the number of shares that ultimately vest by 25%. Final payout will be determined based on the cumulative results of the four individually weighted measurement periods of Xerox’s Operating income improvement metric, and depending on the RTSR performance, a potential increase or decrease of 25%, with a maximum over-achievement of 100% of the original grant. The RTSR metric, included as part of the 2023 PSU, is based on Xerox Holdings Corporation's stock price appreciation, inclusive of dividends paid, measured over three equally weighted performance periods (2023, 2023-2024, and 2023-2025). RTSR will be determined by ranking Xerox Holdings Corporation and the companies within two distinct market indices, as approved by the Compensation and Human Capital Committee of the Board, from highest to lowest according to their respective TSRs, for each of the three performance periods. Payout for the 2023 PSU will be determined based on the weighted average of Xerox Holdings Corporation's payout for each of the three performance periods. Payout for these portions of the PSU metrics will be determined based on total return targets. Since these metrics represent market conditions, Monte Carlo simulations were used to determine their respective grant-date fair values.
A summary of Xerox Holding's key valuation input assumptions used in the Monte Carlo simulation relative to awards granted were as follows:
2025 Award2024 Award2023 Award
Term3 years3 years3 years
Risk-free interest rate(1)
3.92 %4.20 %3.80 %
Volatility(2)
47.92 %42.88 %52.21 %
Weighted average fair value(3)
$5.15 $18.29 $23.00 
____________
(1)The risk-free interest rate was based on the zero-coupon U.S. Treasury yield curve on the valuation date, with a maturity matched to the performance period.
(2)Volatility is derived from historical stock prices as well as implied volatility when appropriate and available.
(3)The weighted average of fair values used to record compensation expense as determined by the Monte Carlo simulation.
Our RTSR metrics are compared against total return targets to determine the payout as follows:
202520242023
Payout Percentage
Percentile Ranking Return Targets(1)
Percentile Ranking Return Targets(1)
Percentile Ranking Return Targets(1)
200%n/an/a
75th and above
100%n/an/a50th
50%n/an/a25th
25%n/a
75th and above
n/a
15%
75th and above
n/an/a
0%50th50th
Below 25th
(15)%25th and belown/an/a
(25)%n/a25th and belown/a
____________
(1)For performance between the levels described above, the degree of vesting is interpolated on a linear basis.
Compensation expense for the market-based component of the PSU awards is recognized on a straight-line basis over the vesting period based on the fair value determined by the Monte Carlo simulation and, except in cases of employee forfeiture, cannot be reversed regardless of performance.
Note: With respect to all stock-based compensation programs, Management’s estimate of the number of shares expected to vest at the time of grant reflects an estimate for forfeitures based on our historical forfeiture rate to date. Should actual forfeitures differ from management’s estimate, the activity will be reflected in a subsequent period. In addition, RSUs, PSUs and SOs awarded to employees who are retirement-eligible at the date of grant, become retirement-eligible during the vesting period, or are terminated not-for-cause (e.g., as part of a restructuring initiative), vest based on service provided from the date of grant to the date of separation.
Summary of Stock-based Compensation Activity
 202520242023
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Restricted Stock Units
Outstanding at January 16,314 $15.48 4,672 $18.46 3,221 $23.16 
Granted(1)
8,951 5.51 4,159 14.09 3,382 16.56 
Vested(2,370)17.78 (2,030)19.04 (1,593)23.73 
Forfeited(973)8.20 (487)17.27 (338)19.27 
Outstanding at December 3111,922 8.13 6,314 15.48 4,672 18.46 
Performance Shares
Outstanding at January 12,066 $21.59 2,039 $24.18 1,729 $28.38 
Granted(1)
1,912 4.46 1,243 13.89 940 22.97 
Vested — — — — — — 
Forfeited/Expired (1,560)15.67 (1,216)17.67 (630)33.86 
Outstanding at December 312,418 11.87 2,066 21.59 2,039 24.18 
____________
(1)RSUs and PSUs granted in 2025 reflect a higher number of shares granted, primarily due to a lower average grant-date fair value of the Company’s common stock.
Unrecognized compensation cost related to non-vested stock-based awards at December 31, 2025 was as follows:
AwardsUnrecognized CompensationRemaining Weighted-Average Vesting Period (Years)
Restricted Stock Units$50 1.8
Performance Shares5 2.0
Stock Options(1)
2 1.0
Total$57 
____________
(1)Reflects CareAR SOs granted in May 2022.
The aggregate intrinsic value of outstanding stock-based awards was as follows:
AwardsDecember 31, 2025
Restricted Stock Units$28 
Performance Shares6 
The intrinsic value and actual tax benefit realized for all vested and exercised stock-based awards was as follows:
 December 31, 2025December 31, 2024December 31, 2023
AwardsTotal Intrinsic ValueTax BenefitTotal Intrinsic ValueTax BenefitTotal Intrinsic ValueTax Benefit
Restricted Stock Units$18 $3 $31 $4 $25 $5 
Performance Share Units— — — — — —