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XPO, Inc. (XPO)·Q3 2025 Earnings Summary

Executive Summary

  • XPO delivered a clean beat vs consensus on revenue, adjusted EBITDA, and adjusted EPS in Q3, powered by outsized LTL margin execution and AI-driven productivity; GAAP EPS was depressed by a $35M pre‑Con‑way environmental charge, masking underlying strength . Versus S&P Global, revenue $2.111B vs $2.073B*, adj EBITDA $342M vs $334M*, adj EPS $1.07 vs $1.02* (all beats).
  • LTL adjusted OR improved 150 bps YoY to 82.7% with record LTL adj EBITDA ($308M), despite tonnage −6.1% and shipments/day −3.5%; yield ex‑fuel rose 5.9% YoY and sequentially for the 11th straight quarter .
  • Management set up Q4 for continued outperformance vs seasonality and reiterated a full‑year ~100 bps OR improvement; 2026 framed for further OR and earnings gains even without a macro recovery; incremental margins in an upturn guided to “comfortably above 40%” .
  • Cash flow and balance sheet improved: Q3 CFO $371M, net CapEx $150M, buybacks $50M, debt paydown $50M; cash ended at $335M; total liquidity ~$935M; net leverage 2.4x TTM adj EBITDA, down from 2.5x in Q2 .

What Went Well and What Went Wrong

  • What Went Well

    • Record LTL profitability: LTL adjusted OR to 82.7% (−150 bps YoY) and record LTL adj EBITDA of $308M; CEO: “We continued to exceed expectations… AI‑driven productivity improvements generated strong margin outperformance” .
    • Pricing power and mix: Yield ex‑fuel +5.9% YoY; 11th consecutive quarter of sequential growth in revenue/shipment ex‑fuel; increased mix of higher‑margin local accounts and premium services .
    • Structural cost progress: Purchased transportation fell to 5.9% of miles (company low); AI optimization cut empty miles ~12% and diversions >80%, improving productivity by 2.5 pts YoY in the quarter .

  • What Went Wrong

    • GAAP EPS optics: $35M pre‑Con‑way environmental charge (−$0.23 per share) reduced GAAP EPS to $0.68 despite underlying beats on adjusted measures .
    • Europe profitability: European adj EBITDA down to $38M (vs $44M LY) with operating loss of $2M, reflecting a tougher macro and cost pressure .
    • Volume headwinds: Tonnage/day −6.1% and shipments/day −3.5% YoY, still reflecting soft freight demand, though pricing/mix offset on margins .

Financial Results

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus*
Revenue ($USD Billions)$2.053 $2.080 $2.111 $2.073*
Adjusted EBITDA ($USD Millions)$333 $340 $342 $334.4*
Diluted EPS ($)$0.79 $0.89 $0.68 —
Adjusted Diluted EPS ($)$1.02 $1.05 $1.07 $1.016*
  • Non-GAAP note: Q3 included a $35M pre‑Con‑way environmental charge (after‑tax −$0.23) .
  • Cash flow and balance sheet: CFO $371M; net CapEx $150M; share repurchase $50M; term loan repayment $50M; cash $335M at quarter end .

Segment breakdown

SegmentMetricQ3 2024Q2 2025Q3 2025
North American LTLRevenue ($M)$1,251 $1,240 $1,255
Operating Income ($M)$188 $199 $208
Adjusted Operating Income ($M)$198 $211 $217
Adjusted EBITDA ($M)$284 $300 $308
Adjusted OR (%)84.2% 82.9% 82.7%
EuropeRevenue ($M)$803 $841 $857
Operating Income (Loss) ($M)$6 $11 $(2)
Adjusted Operating Income ($M)$13 $15 $9
Adjusted EBITDA ($M)$44 $44 $38

Key LTL KPIs

KPIQ3 2024Q2 2025Q3 2025
Shipments per day51,921 50,782 50,094
Pounds per day (000s)69,470 67,813 65,236
Revenue per shipment ex‑fuel ($)$319.75 $327.53 $330.48
Gross revenue per CWT ex‑fuel ($)$24.34 $24.99 $25.77
Adjusted OR (%)84.2% 82.9% 82.7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted OR (Company, LTL driver)FY 2025~+100 bps YoY (implied)Reiterates path to “deliver on our full year outlook of 100 bps of OR improvement” Maintained
Adjusted OR (LTL) seasonalityQ4 2025Typical +250 bps sequential deterioration (industry)Expect to “materially outperform seasonality”; implies only modest sequential OR increase vs typical +250 bps Raised vs seasonal norm
Yield ex‑fuelQ4 2025Not specifiedYoY growth “in a similar range” to Q3 (5.9%) Maintained/in‑line
CapEx as % of revenueFY 2025 and LT2024 ~15% baseline2025 down “a couple points” vs last year; LT 8–12% midpoint targeted Lower near‑term; LT reiterated
Free Cash FlowFY 2025Not specified“Grow north of $400M” YoY; more cash as CapEx moderates New/Positive
Europe EBITDA seasonalityQ4 2025Typical ~$10M sequential step‑downExpect to outperform typical step‑down Raised
Incremental margins in upturnLTNot specified“Comfortably above 40%” New/Positive
Strategic – EuropeLTConsider portfolio actionsGoal remains to sell Europe when value/timing are right and be pure‑play NA LTL Maintained strategic intent

Earnings Call Themes & Trends

TopicQ1 2025 (Q-2)Q2 2025 (Q-1)Q3 2025 (Current)Trend
AI/Tech productivityCost efficiency gains; linehaul insourcing; sequential OR better than seasonality Further productivity gains; PT expense −53%; continued insourcing AI cut empty miles ~12%, diversions >80%; +2.5 pts productivity; route/dock AI rolling out Accelerating impact
Pricing/YieldYield ex‑fuel +6.9%; 9th straight seq rev/ship ex‑fuel up Yield ex‑fuel +6.1%; seq growth continued Yield ex‑fuel +5.9%; 11th straight seq rev/ship ex‑fuel up; premium/local mix helping Durable above‑market
Volume/TonnageTonnage/day −7.5% Tonnage/day −6.7% Tonnage/day −6.1%; Oct tracking ~−3% YoY Gradual stabilization
LTL Margins/ORAdj OR 85.9% (seq improvement) Adj OR 82.9% (YoY −30 bps) Adj OR 82.7% (YoY −150 bps); record LTL adj EBITDA Expanding at trough
EuropeModest profit; macro soft ADJ EBITDA $44M; macro soft ADJ EBITDA $38M; outperformance vs seasonality expected Q4; intent to divest long‑term Mixed; strategic optionality
Capital allocationCFO $142M; net CapEx $191M CFO $247M; net CapEx $191M CFO $371M; net CapEx $150M; $50M buybacks; $50M debt paydown; liquidity ~$935M; net leverage 2.4x Improving FCF, delevering

Management Commentary

  • “We continued to exceed expectations… delivering adjusted EBITDA of $342 million and adjusted diluted EPS of $1.07… A combination of profitable share gains in the local channel and AI‑driven productivity improvements generated strong margin outperformance” — CEO, Mario Harik .
  • “We improved our adjusted operating ratio by 150 basis points to 82.7%, significantly outperforming seasonality… our eleventh consecutive quarter of sequential growth in revenue per shipment, excluding fuel” — CEO .
  • “Outsourced miles [purchased transportation] to 5.9% of total miles, the lowest… down from 25% a few years ago… AI‑driven optimization… reduced empty miles by 12%… productivity improved 2.5 pts” — Management remarks .
  • “Incremental margins [in an upturn] comfortably above 40%… 30% excess door capacity positions us to capture profitable share as the cycle turns” — Management .

Q&A Highlights

  • Seasonality and Q4 setup: Expect to “materially outperform seasonality” with only a modest sequential OR increase vs typical ~+250 bps; full‑year +100 bps OR improvement on track; 2026 poised for further OR and earnings gains even absent macro recovery .
  • Incremental margins in an upcycle: “Comfortably above 40%,” driven by yield, reduced sensitivity to rising TL rates, excess capacity, and AI‑enabled productivity .
  • Pricing durability: Multi‑year runway via accessorial mix (target 15% of revenue; ~12% as of last quarter), higher mix of local SMB (goal 30% vs ~25% now), and closing an ~11‑point price gap to best‑in‑class over time .
  • Demand tone: October tonnage ~−3% YoY; customers broadly neutral near‑term but more optimistic for 2026; industry capacity remains tighter than pre‑COVID/pre‑Yellow, supporting pricing discipline .
  • Europe: Outperforming seasonality into Q4; management’s long‑term goal remains to sell the business when timing/value are right to become a pure‑play NA LTL .

Estimates Context

Metric (Q3 2025)ActualS&P Global Consensus*Surprise
Revenue ($B)$2.111 $2.073*+$0.038B / +1.8%
Adjusted EBITDA ($M)$342 $334.4*+$7.6M / +2.3%
Adjusted Diluted EPS ($)$1.07 $1.02*+$0.05 / +4.9%
GAAP Diluted EPS ($)$0.68 n/an/a
  • Prior quarters vs consensus: Q2 adj EPS $1.05 vs $0.99*; Q1 adj EPS $0.73 vs $0.65*; revenue beats in Q2 and slight miss in Q1 .
  • Implications: Expect upward revisions to Q4 and FY25 margin assumptions given reiterated seasonality outperformance and sustained pricing momentum; GAAP EPS optics may remain noisy due to one‑time items (e.g., environmental/legal) .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality of beat: Underlying operations were stronger than GAAP EPS implies; all key adjusted metrics beat consensus, with LTL margins at a record level — a clear positive for the stock’s quality of earnings narrative .
  • Margin flywheel: Above‑market yield, richer mix (local/premium), and AI‑driven productivity are compounding and largely cycle‑independent, setting up continued OR expansion into Q4 and 2026 .
  • Upcycle torque: With purchased transportation minimized and 30% excess capacity, incremental margins “comfortably above 40%” in a recovery point to outsized earnings sensitivity when volumes inflect .
  • Cash generation improving: CapEx moderating from ~15% of revenue; FCF set to grow “north of $400M” this year; leverage easing to 2.4x — supports buybacks/deleveraging optionality .
  • Watch Europe: Profitability remains soft near‑term; management’s stated goal remains divestiture when valuations/timing align — a potential catalyst to sharpen the pure‑play LTL story .
  • Near‑term trading: Positive setup into Q4 on continued seasonality outperformance and yield resilience; any macro stabilization could add upside to volume and incrementals .

Appendix: Additional Data Points

  • Legal/one‑time items: Q3 2025 pre‑Con‑way environmental matter $35M (after‑tax −$0.23) vs Q3 2024 +$9M gain (+$0.06) on past investment .
  • Liquidity and leverage: ~$935M liquidity at Q3 end; net leverage 2.4x TTM adj EBITDA vs 2.5x in Q2 .

Notes:

  • All company figures are from XPO’s Q3 2025 8‑K/press release and earnings call transcript – –.
  • Prior quarter comparisons from Q1/Q2 2025 8‑Ks – –.
  • Consensus values marked with an asterisk are from S&P Global and are provided without document citations.