GXO Logistics's (NYSE:GXO) Q2: Strong Sales

Contract logistics company GXO (NYSE:GXO) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 15.9% year on year to $3.30 billion. Guidance for next quarter’s revenue was better than expected at $3.31 billion at the midpoint, 0.7% above analysts’ estimates. Its non-GAAP profit of $0.57 per share was 2.3% above analysts’ consensus estimates.

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Company Overview

With notable customers such as Nike and Apple, GXO (NYSE:GXO) manages outsourced supply chains and warehousing for various companies.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, GXO Logistics’s 16.5% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. GXO Logistics’s annualized revenue growth of 15.7% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. GXO Logistics recent performance stands out, especially when considering many similar Air Freight and Logistics businesses faced declining sales because of cyclical headwinds.

GXO Logistics also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, GXO Logistics’s organic revenue averaged 2.3% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, GXO Logistics reported year-on-year revenue growth of 15.9%, and its $3.30 billion of revenue exceeded Wall Street’s estimates by 6.4%. Company management is currently guiding for a 5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.9% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges.

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Operating Margin

GXO Logistics’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 2.2% over the last five years. This profitability was lousy for an industrials business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, GXO Logistics’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. GXO Logistics’s performance was poor, but we noticed this is a broad theme as many similar Air Freight and Logistics companies saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction.

This quarter, GXO Logistics generated an operating margin profit margin of 2.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for GXO Logistics, its EPS declined by 2.2% annually over the last two years while its revenue grew by 15.7%. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into GXO Logistics’s earnings to better understand the drivers of its performance. While we mentioned earlier that GXO Logistics’s operating margin was flat this quarter, a two-year view shows its margin has declined by 1.4 percentage points. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, GXO Logistics reported adjusted EPS at $0.57, up from $0.55 in the same quarter last year. This print beat analysts’ estimates by 2.3%. Over the next 12 months, Wall Street expects GXO Logistics’s full-year EPS of $2.65 to grow 5%.

Key Takeaways from GXO Logistics’s Q2 Results

We were impressed by how significantly GXO Logistics blew past analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Looking ahead, EBITDA guidance beat expectations, which is icing on this quarter. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $49.50 immediately after reporting.

Indeed, GXO Logistics had a rock-solid quarterly earnings result, but is this stock a good investment here? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.