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XPO, Inc. (XPO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a broad-based beat vs consensus: adjusted EPS $1.05 vs $0.99*, revenue $2.08B vs $2.05B*, and adjusted EBITDA $340M vs $332M*; LTL adjusted OR improved to 82.9% (300 bps sequential) despite softer tonnage .
  • Management guided Q3 LTL OR to be “flattish” vs Q2 (an outperformance vs normal seasonality) and reiterated full-year ~100 bps OR improvement YoY; capex moderating with rising FCF and buybacks scaling from the $10M initiated in Q2 .
  • Pricing strength and cost levers drove margin expansion: yield ex fuel +6.1% YoY, purchased transportation down 53% YoY as outsourced linehaul miles fell to 6.8%; AI models reduced normalized linehaul miles low-to-mid single digits, empty miles double digits, and diversions ~80% .
  • Short-term catalysts: continued sequential pricing gains (Q3 and Q4), OR resilience vs seasonality, and AI-driven productivity; medium-term: network densification (new breakbulks), premium services (e.g., grocery consolidation) and buyback/deleveraging plan .

What Went Well and What Went Wrong

What Went Well

  • Strong beat on profitability and margins: adjusted EPS, revenue, and EBITDA all exceeded consensus; LTL adjusted OR improved to 82.9% with margin expansion against a soft freight backdrop .
    “We delivered strong results in the second quarter, with adjusted EBITDA of $340 million and adjusted diluted EPS of $1.05, both exceeding expectations.” — Mario Harik .
  • Pricing and cost execution: yield ex fuel +6.1% YoY; purchased transportation -53% YoY; outsourced linehaul miles down to a record 6.8% .
  • AI and network investments delivering tangible returns: AI cut normalized linehaul miles low-to-mid single digits and empty miles double digits; two large breakbulk service centers ramping, enabling density and efficiency .

What Went Wrong

  • Volume softness: shipments/day -5.1%, tonnage/day -6.7% YoY; June showed a steep deceleration before a partial July snapback; weight per shipment softness tied to macro/tariff uncertainty .
  • Europe margin pressure: adjusted EBITDA $44M vs $49M YoY; adjusted operating income $15M vs $19M YoY; adjusted EBITDA margin 5.2% vs 6.1% .
  • GAAP EPS down YoY (0.89 vs 1.25) due to lapping prior-year one-time tax benefit related to Europe, and higher insurance/DA; consolidated net income $106M vs $150M .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$1.921 $1.954 $2.080
GAAP Diluted EPS ($USD)$0.63 $0.58 $0.89
Adjusted Diluted EPS ($USD)$0.89 $0.73 $1.05
Adjusted EBITDA ($USD Millions)$303 $278 $340
Adjusted EBITDA Margin (%)15.8% 14.2% 16.3%
LTL Adjusted Operating Ratio (%)86.2% 85.9% 82.9%
Actual vs ConsensusQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$1.921 vs $1.916* → bold beat$1.954 vs $1.976* → bold miss$2.080 vs $2.048* → bold beat
Adjusted EPS ($USD)$0.89 vs $0.63* → bold beat$0.73 vs $0.65* → bold beat$1.05 vs $0.99* → bold beat
Adjusted EBITDA ($USD Millions)$303 vs $268* → bold beat$278 vs $272* → bold beat$340 vs $332* → bold beat
Values retrieved from S&P Global.*

Segment breakdown (Q2 2025 vs Q2 2024)

SegmentRevenue ($MM) Q2 2024Revenue ($MM) Q2 2025Operating Income ($MM) Q2 2024Operating Income ($MM) Q2 2025Adjusted EBITDA ($MM) Q2 2024Adjusted EBITDA ($MM) Q2 2025
North American LTL$1,272 $1,240 $203 $199 $297 $300
Europe Transportation$808 $841 $10 $11 $49 $44
Corporate——($16) ($11) ($3) ($4)
Total$2,079 $2,080 $197 $198 $343 $340

Key LTL KPIs

KPIQ4 2024Q1 2025Q2 2025
Shipments per day49,109 48,400 50,782
Tonnage per day (‘000 lbs)65,433 65,427 67,813
Avg weight per shipment (lbs)1,332 1,352 1,335
Revenue per shipment ex fuel ($)$316.05 $325.74 $327.53
Gross revenue per cwt ex fuel ($)$23.94 $24.73 $24.99
Purchased transportation ($MM)$44 $37 $32
Purchased transportation YoY (%)-47.0% -52.6% -52.9%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
LTL OR (adjusted) sequential trendQ3 2025Normal seasonality implies OR worsens by 200–250 bpsQ3 OR “flattish” vs Q2 (outperforming normal seasonality) bold raised
LTL OR YoY (adjusted)FY 2025~100 bps improvement (communicated in prior quarter)Reiterated ~100 bps improvement for FY 2025 maintained
Yield ex fuelQ3–Q4 2025Strong renewalsSequential improvement in Q3 and Q4; YoY at/above Q2 bold raised
Revenue per shipmentQ3–Q4 2025Sequential improvement trendSequential increases in Q3 and Q4 maintained/raised
Tonnage YoYFY 2025Soft volumesFull-year tonnage down mid-single digits clarified lower
Capex2H 2025 onwardElevated for network buildModerating; expect higher FCF conversion lowered
Leverage targetLong-term1–2xReaffirmed; paid down $50M term loans in July maintained with execution
Share repurchases2H 2025 / 2026AuthorizedInitiated $10M in Q2; plan to scale with FCF bold raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesProductivity gains and OR improvement; insourcing linehaul to best levels AI reduced normalized linehaul miles low-to-mid single digits; empty miles double digits; diversions ~80%; pilots in P&D and dock bold accelerating
Pricing/yield disciplineYield ex fuel +6.3% (Q4); +6.9% (Q1) Yield ex fuel +6.1%; sequential pricing gains expected Q3/Q4 strong/consistent
Local channel & premium servicesLocal SMB growth; premium services expansion Local shipments up high single digits; ramping grocery consolidation offering; accessorials targeted to 15% of revenue bold expanding
Linehaul insourcing & PT costPT down 47% (Q4), 53% (Q1) PT down 53% YoY; outsourced miles 6.8%, aiming mid-single digits bold improving
EuropeQ4 adjusted EBITDA $27M (down YoY); Q1 $32M (down YoY) Q2 revenue +4% YoY; adjusted EBITDA $44M (down YoY) but sequentially up ~38% mixed; sequentially better
NMFC/NMFTA classification—Implementation July 19; no material pricing impact; XPO dimensions >90% of freight neutral
Macro/tariffs—June deceleration; weight per shipment impacted by macro/tariff uncertainty; July slightly better than seasonality cautious

Management Commentary

  • “We delivered strong yield growth, realized cost savings throughout the network, and deepened our competitive edge through world-class service and technology.” — Mario Harik .
  • “Our adjusted diluted EPS of $1.05 exceeded expectations and our North American LTL business continued to outperform the industry.” — Mario Harik .
  • “Our third-party carrier expense declined 53% year over year as we insource more linehaul miles. This resulted in $36 million in savings for the quarter.” — Kyle Wismans .
  • “Our new AI-powered linehaul models are driving additional savings, reducing normalized linehaul miles by 3%, empty miles by over 10%, and freight diversions by more than 80%.” — Mario Harik .
  • “We expect our sequential pricing gains to continue through the rest of the year.” — Kyle Wismans .

Q&A Highlights

  • OR outlook: Q3 OR expected “flattish” vs Q2 despite normal seasonal pressure; full-year ~100 bps OR improvement reiterated even with mid-single-digit tonnage decline .
  • Grocery consolidation: ~$1B market; XPO underrepresented today with early wins; ramp expected in 2H; premium services add to yield via accessorials .
  • Europe: sequential adjusted EBITDA outperformance vs seasonality; strength in UK and Central Europe; pipeline trending higher YoY .
  • NMFC implementation: expected immaterial pricing impact; XPO communicates proactively; data collection robust (>90% dimensioned freight) .
  • Capital allocation: capex moderating, FCF rising; leverage target 1–2x; buybacks to scale with FCF after $10M in Q2; paid down $50M of term loans .

Estimates Context

  • Q2 2025 beats: adjusted EPS $1.05 vs $0.99*, revenue $2.08B vs $2.05B*, adjusted EBITDA $340M vs $332M*; continue momentum from Q4 and Q1 beats on profitability .
  • Implied revisions: Street likely to lift 2H pricing yield assumptions, LTL margin trajectory (OR/EBITDA margin), and FCF conversion given capex moderation and AI productivity; Europe likely to see modest sequential improvement expectations.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Positive margin trajectory: OR resilience vs seasonality and AI-enabled cost/productivity gains are driving sustained margin expansion in a soft cycle; expect continued sequential pricing gains in Q3/Q4 .
  • Self-help continues to compound: linehaul insourcing shields against truckload rate upcycles; premium services and local SMB mix raise yield and accessorial revenue toward the 15% target .
  • Capital deployment turning supportive: capex moderating, leverage heading to 1–2x, buybacks scaling with growing FCF; initial $10M repurchased in Q2 and term loan paydown underway .
  • Near-term stock catalysts: consistent estimate beats, Q3 OR outperformance vs seasonality, AI proof points and premium service wins (e.g., grocery consolidation) .
  • Watch risks: volume softness and macro/tariff uncertainty affecting weight per shipment; Europe margins remain pressured even as sequential trends improve .
  • Trend analysis supports thesis: Q4→Q1→Q2 shows pricing power and cost discipline with EBITDA margin rising to 16.3% and LTL OR improving to 82.9% .
  • Execution credibility: management’s consistent delivery on yield, OR, and insourcing targets plus transparent guidance framework enhances confidence in multi-year margin expansion .