"The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP Inc," Xerox said in a statement on Tuesday.
Xerox will not nominate candidates to HP's board, and has withdrawn its offer.
"We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future," HP said in a statement.
Xerox had previously led a hostile takeover bid of HP which would combine the two legendary tech giants. HP had rejected Xerox's proposals. In February, Xerox raised its offer to $24 per share, which would value HP at about $34 billion.
However, since Xerox sweetened its bid, the COVID-19 coronavirus outbreak spread around the world and has created economic uncertainty, which led to Xerox ceasing its pursuit of the transaction. HP is a larger company and is more highly valued than Xerox.
HP announced last year that it planned to cut between 7,000 and 9,000 jobs by the end of 2022 to save $1 billion per year. In February, Xerox said that it had met with HP's shareholders to discuss the potential "synergies" from a combination. In its statement about dropping its bid, Xerox said that HP used "delay tactics" while negotiating.
Activist investor Carl Icahn owns a 10.6% stake in Xerox and bought a $1.2 billion stake in HP last year. He was pushing for the merger.
HP shares were flat after dropping more than 1% after hours on the news, while Xerox shares barely moved after rising more than 5% during regular trading.