GXO (GXO) Q2 Revenue Jumps 16%

Core Insights - GXO Logistics reported strong Q2 2025 earnings with GAAP revenue of $3.30 billion, a 15.9% increase year-over-year, exceeding analyst estimates by $200 million [1][5] - Adjusted earnings per share (EPS) reached $0.57, surpassing expectations, while adjusted EBITDA margin decreased to 6.4% [1][7] - The company faced operational challenges with negative free cash flow of $(43) million, a significant decline from positive $31 million a year earlier [1][8] Financial Performance - GAAP revenue for Q2 2025 was $3,299 million, up from $2,846 million in Q2 2024, reflecting a 15.9% year-over-year growth [2] - Non-GAAP EPS was $0.57, a 3.6% increase from $0.55 in Q2 2024 [2] - Adjusted EBITDA was $212 million, up 13.4% from $187 million in the previous year [2] - Free cash flow (non-GAAP) fell to $(43) million from $31 million, marking a 238.7% decline [2][8] Business Overview - GXO Logistics specializes in contract logistics, focusing on distribution, warehousing, and supply chain automation for large customers across various industries [3] - The company is investing in technology-led efficiencies, including automation and AI platforms, to enhance productivity in warehouse management [4][10] Growth Drivers - Organic revenue growth reached 5.6% for Q2 2025, the fastest rate in nine quarters, with $307 million in new annualized business signed, a 13% increase year-over-year [6] - The sales pipeline stands at $2.4 billion, also up 13% year-over-year, indicating strong future growth potential [6] - The customer base is diversified, with no single client contributing more than 6% of revenue [12] Strategic Initiatives - The integration of Wincanton is a key focus, expected to deliver $58 million in annual cost synergies starting in late 2025 [4][11] - Management plans to monitor margin progression and the success of the Wincanton integration while maintaining a healthy sales pipeline [14] Future Outlook - Management raised its FY2025 adjusted EBITDA guidance to a range of $865 million to $885 million, with organic revenue growth expected between 3.5% and 6.5% [13] - The company anticipates adjusted EBITDA to free cash flow conversion to range from 25% to 35% [13] - Despite potential softening in U.S. consumer activity, the company expects to remain within its full-year guidance [14]