Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q and other written reports and oral statements we make from time to time contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual future results, levels of activity, performance or achievements to be materially different from our expected future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report on Form 10-Q are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The following discussion should be read in conjunction with the Company’s unaudited Condensed Consolidated Financial Statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). Forward-looking statements set forth in this Quarterly Report on Form 10-Q speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.
Executive Summary
XPO, Inc., together with its subsidiaries (“XPO,” “we” or the “Company”), is a leading provider of freight transportation services, with company-specific avenues for value creation. We use our proprietary technology to move goods efficiently through our customers’ supply chains in North America and Europe. As of March 31, 2026, we had approximately 37,000 employees serving approximately 55,000 customers through 594 locations in 17 countries.
Our company has two reportable segments: North American Less-Than-Truckload (“LTL”), the largest component of our business, and European Transportation. Our North American LTL segment includes the results of our trailer manufacturing operation.
Within the tables presented, certain amounts may not add due to the use of rounded numbers. Unless otherwise indicated, percentages presented are calculated from the underlying numbers in millions.
North American LTL Segment
LTL in North America is a bedrock industry providing a critical service to the economy, with secular growth drivers, a favorable pricing environment and an established competitive landscape. XPO is one of the largest LTL networks in North America, with approximately 9% share of the U.S. market, estimated to be $52 billion in 2025.
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Our network serves approximately 37,000 shippers with critical geographic density and day-definite domestic services to approximately 99% of U.S. ZIP codes, as well as cross-border services to Mexico, Canada and the Caribbean. We operate the business to high service standards for on-time delivery and damage-free transport, while balancing our network to leverage our fixed costs. In 2025, we developed new linehaul models that use artificial intelligence (AI) to improve the efficiency of our freight flows, piloted routing innovations for pickup-and-delivery operations and continued to improve productivity with real-time labor analytics at the service center level. Our proprietary developments in intelligent automation and AI-enabled decision-making are directly enhancing profitability.
Our LTL business historically has generated a high return on invested capital and robust free cash flow, funding our ongoing investments in people, capacity and technology. For example, since implementing our growth plan in the fourth quarter of 2021, we have added more than 2,000 net new doors to our network, expanding our presence in high-growth markets while improving our operating ratio.
We have created a strategic growth opportunity by building more than 30% excess door capacity into our network. Additionally, we invest in advancing a host of XPO-specific initiatives that are largely independent of the macroeconomic environment. Our trailer manufacturing facility and commercial truck driver schools are self-reliant competitive advantages for our company, particularly when industry conditions make it difficult to source equipment or drivers.
This positions us to capture profitable market share gains and drive higher incremental margins when market conditions improve. LTL industry capacity is currently constrained below pre-pandemic levels in North America, and we believe that our combination of capacity and technology puts us in a unique position to respond quickly to rebounds in demand when the freight recession eases.
We expect our proprietary, AI-driven capabilities to become increasingly essential to how we operate, compete and create value in all these areas. For more information, see “Technology” below.
European Transportation Segment
XPO has a unique pan-European transportation platform with leading positions in key geographies and deep expertise in consumer, trade and industrial markets. We are the #1 full truckload broker and the #1 pallet network (LTL) provider in France; the #1 full truckload broker and the #1 LTL provider in Iberia (Spain and Portugal); and, in the U.K., we are a market leader in warehousing, a top-tier dedicated truckload provider and have the largest single-owner LTL network. Our extensive customer base includes many sector leaders that have long-tenured relationships with us.
Our full range of freight services in Europe encompasses dedicated truckload, LTL, full truckload brokerage, warehousing, managed transportation, last mile delivery, freight forwarding and, increasingly, multimodal solutions designed for specific customer needs. We use our proprietary technology to manage these services efficiently within our digital ecosystem in Europe.
The previously announced authorization by our Board of Directors to divest the European business remains in effect. There can be no assurance that the divestiture will occur, or of the terms or timing of a transaction.
Technology
One of the ways in which we deliver superior service to our customers is by empowering our employees with technology. Our industry is evolving, and customers want to de-risk their supply chains by forming relationships with reliable service providers that have invested in innovation.
We have built a highly scalable ecosystem on the cloud that deploys our software consistently across our operating footprint. In our North American LTL business, the caliber of our technology is mission-critical to our success; it optimizes pricing, linehaul, pickup-and-delivery and dock operations — the main components of the service we provide. We have been investing in proprietary AI technology and are implementing these initiatives across a number of high-impact applications where intelligent automation and better decision making are directly enhancing profitability. We see AI playing a major role in how we operate, price our services, compete, and create value over the long term.
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An LTL network of our scale has hundreds of thousands of activities underway at any given time, all managed on our technology. For the trailing 12 months ended March 31, 2026, we moved approximately 16 billion pounds of freight 775 million miles, including moving linehaul freight an average of 2.5 million miles a day.
With intelligent route-building, we can reduce empty miles in our linehaul network and improve load factor. Our proprietary optimization models analyze massive amounts of data including volume, capacity, and dimensions and generate instructions to maximize trailer utilization, reduce cost, and enhance service. We use our real-time visualization tools to drive efficiencies with pickups and deliveries and developed a robust pricing platform for contractual account management.
Consolidated Summary Financial Table
Three Months Ended March 31, Percent of Revenue Change
(Dollars in millions) 2026
2025
2026 2025 2026 vs. 2025
Revenue $ 2,096 $ 1,954 100.0 % 100.0 % 7.3 %
Salaries, wages and employee benefits 880 832 42.0 % 42.6 % 5.8 %
Purchased transportation 423 399 20.2 % 20.4 % 6.0 %
Fuel, operating expenses and supplies 423 393 20.2 % 20.1 % 7.6 %
Operating taxes and licenses 21 19 1.0 % 1.0 % 10.5 %
Insurance and claims 34 35 1.6 % 1.8 % (2.9) %
Gains on sales of property and equipment (1) (2) — % (0.1) % (50.0) %
Depreciation and amortization expense 131 123 6.3 % 6.3 % 6.5 %
Legal matters — (11) — % (0.6) % (100.0) %
Transaction and integration costs 2 3 0.1 % 0.2 % (33.3) %
Restructuring costs 9 12 0.4 % 0.6 % (25.0) %
Operating income 174 151 8.3 % 7.7 % 15.2 %
Other income (3) (1) (0.1) % (0.1) % 200.0 %
Debt extinguishment loss — 5 — % 0.3 % (100.0) %
Interest expense 53 56 2.5 % 2.9 % (5.4) %
Income before income tax provision 124 91 5.9 % 4.7 % 36.3 %
Income tax provision 23 22 1.1 % 1.1 % 4.5 %
Net income $ 101 $ 69 4.8 % 3.5 % 46.4 %
Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025
Our consolidated revenue for the first quarter of 2026 increased 7.3% to $2.1 billion, compared with the same quarter in 2025. Foreign currency movement increased revenue by approximately 4.4 percentage points in the first quarter of 2026. The increase in revenue during the first quarter of 2026 compared to the same period in 2025, after taking into effect the impact of foreign currency movements, primarily reflects higher revenue in our North American LTL segment, driven by higher yield and shipments per day and higher fuel surcharge revenue.
Salaries, wages and employee benefits includes compensation-related costs for our employees, including salaries, wages, incentive compensation, healthcare-related costs and payroll taxes, and covers drivers and dockworkers, operations and facility workers and employees in support roles and other positions. Salaries, wages and employee benefits for the first quarter of 2026 was $880 million, or 42.0% of revenue, compared with $832 million, or 42.6% of revenue, for the same quarter in 2025. The year-over-year decrease as a percentage of revenue primarily reflects productivity improvements enabled by our AI-driven optimization tools, partially offset by higher costs due to the insourcing of a greater proportion of linehaul from third-party transportation providers in our North American LTL segment and wage inflation.
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Purchased transportation includes costs of procuring third-party freight transportation. Purchased transportation for the first quarter of 2026 was $423 million, or 20.2% of revenue, compared with $399 million, or 20.4% of revenue, for the same quarter in 2025. The year-over-year decrease as a percentage of revenue primarily reflects the insourcing of a greater proportion of linehaul from third-party transportation providers in our North American LTL segment.
Fuel, operating expenses and supplies includes the cost of fuel purchased for use in our vehicles as well as related taxes, maintenance and lease costs for our equipment, including tractors and trailers, costs related to operating our owned and leased facilities, bad debt expense, third-party professional fees, information technology expenses and supplies expense. Fuel, operating expenses and supplies for the first quarter of 2026 was $423 million, or 20.2% of revenue, compared with $393 million, or 20.1% of revenue, for the same quarter in 2025. The year-over-year increase as a percentage of revenue primarily reflects higher fuel costs and higher weather-related costs in our North American LTL segment, partially offset by lower maintenance costs in our North American LTL segment.
Operating taxes and licenses includes tax expenses related to our vehicles and our owned and leased facilities as well as license expenses to operate our vehicles. Operating taxes and licenses for the first quarter of 2026 was $21 million, compared with $19 million for the same period in 2025.
Insurance and claims includes costs related to vehicular and cargo claims for both purchased insurance and self-insurance programs. Insurance and claims for the first quarter of 2026 was $34 million, compared with $35 million for the same quarter in 2025.
Depreciation and amortization expense for the first quarter of 2026 was $131 million, compared with $123 million for the same quarter in 2025. The year-over-year increase primarily reflects the impact of capital investments in property, tractors and trailers in our North American LTL segment.
Legal matters for the first quarter of 2025 was a gain of $11 million, which reflects the settlement of claims against certain truck manufacturers related to purchases by our European Transportation segment covering periods prior to our acquisition of Norbert Dentressangle SA in 2015. There was no comparable gain or loss in the first quarter of 2026.
Transaction and integration costs for the first quarter of 2026 were $2 million, compared with $3 million for the same quarter in 2025.
Restructuring costs for the first quarter of 2026 were $9 million, compared with $12 million for the same quarter in 2025, which primarily related to restructuring actions in our European Transportation segment. We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. For more information, see Note 4—Restructuring Charges to our Condensed Consolidated Financial Statements.
Other income for the first quarter of 2026 was $3 million, compared with $1 million for the same quarter in 2025. The year-over-year increase primarily reflects a $2 million increase in net periodic pension income.
Debt extinguishment loss was not material for the first quarter of 2026, compared with $5 million for the same quarter in 2025, which related to the refinancing of our term loan facility.
Interest expense decreased to $53 million for the first quarter of 2026, compared with $56 million for the same quarter in 2025. The year-over-year decrease is primarily due to a lower average debt balance as well as lower interest rates on our variable rate debt.
Our effective income tax rates were 18.4% and 24.2% for the first quarters of 2026 and 2025, respectively. The effective income tax rates for the first quarter of 2026 and 2025 were based on forecasted full-year effective income tax rates, adjusted for discrete items that occurred within the periods presented. The decrease in our effective income tax rate for the first quarter of 2026 compared to the same period in 2025 was primarily driven by an increase in a discrete tax benefit from stock-based compensation and a change in estimate related to the discrete benefit associated with a legal entity reorganization in our European Transportation business that occurred in 2024. In the first quarter of 2026, the effective tax rate was impacted by discrete tax benefits of $11 million in the aggregate related to stock-based compensation and a change in estimate associated with the legal entity reorganization. In the first quarter of 2025, the effective tax rate was impacted by losses for which no tax benefit can be recognized and
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forecasted non-deductible executive compensation expense, partially offset by a discrete tax benefit of $5 million from stock-based compensation.
The remaining cash refund we expect to receive in connection with the legal entity reorganization in our European Transportation business is $6 million. This amount is expected to be received in 2026 or 2027.
Segment Financial Results
Our chief operating decision maker (“CODM”) regularly reviews financial information at the operating segment level to allocate resources to the segments and to assess their performance. For our North American LTL and European Transportation segments, our CODM evaluates segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), which we define as income before debt extinguishment loss, interest expense, income tax provision, depreciation and amortization expense, legal matters, transaction and integration costs, restructuring costs and other adjustments. Segment adjusted EBITDA includes an allocation of corporate costs. See Note 2—Segment Reporting to our Condensed Consolidated Financial Statements for further information and a reconciliation of adjusted EBITDA to consolidated net income.
North American Less-Than-Truckload Segment
Three Months Ended March 31, Percent of Revenue Change
(Dollars in millions) 2026 2025 2026 2025 2026 vs. 2025
Revenue $ 1,229 $ 1,172 100.0 % 100.0 % 4.9 %
Adjusted EBITDA (1)
290 250 23.6 % 21.3 % 16.0 %
Depreciation and amortization 97 90 7.9 % 7.7 % 7.8 %
(1) Percent of Revenue is calculated using the underlying unrounded amounts.
Revenue in our North American LTL segment increased 4.9% to $1.23 billion for the first quarter of 2026, compared with $1.17 billion for the same quarter in 2025. Revenue included fuel surcharge revenue of $201 million and $178 million, respectively, for the first quarters of 2026 and 2025. The increase in fuel surcharge revenue was primarily driven by higher diesel prices.
We evaluate the revenue performance of our LTL business using several commonly used metrics, including tonnage (weight per day in pounds) and yield, which is a commonly used measure of LTL pricing trends. We measure yield using gross revenue per hundredweight, excluding fuel surcharges. Impacts on yield can include weight per shipment and length of haul, among other factors, while impacts on tonnage can include shipments per day and weight per shipment. The following table summarizes our key revenue metrics:
Three Months Ended March 31,
2026 2025 Change %
Pounds per day (thousands) 65,510 65,427 0.1 %
Shipments per day 49,834 48,400 3.0 %
Average weight per shipment (in pounds) 1,315 1,352 (2.8) %
Gross revenue per hundredweight, excluding
fuel surcharges
$ 25.71 $ 24.73 4.0 %
Percentages presented are calculated using the underlying unrounded amounts.
The year-over-year increase in revenue, excluding fuel surcharge revenue, for the first quarter of 2026 reflects higher yield, primarily related to our improvements in service quality and the benefit of numerous pricing initiatives. The increase in tonnage per day for the first quarter of 2026 reflects higher shipments per day partially offset by lower average weight per shipment.
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Adjusted EBITDA was $290 million for the first quarter of 2026, compared with $250 million for the same quarter in 2025. The increase in adjusted EBITDA reflects higher yield and shipments per day, higher fuel surcharge revenue, productivity improvements, lower purchased transportation, and lower vehicular insurance costs, partially offset by lower average weight per shipment, higher fuel costs and wage inflation.
Depreciation and amortization expense increased to $97 million in the first quarter of 2026 compared with $90 million for the same quarter in 2025, primarily due to the impact of capital investments in property, tractors and trailers.
European Transportation Segment
Three Months Ended March 31, Percent of Revenue Change
(Dollars in millions) 2026 2025 2026 2025 2026 vs. 2025
Revenue $ 868 $ 782 100.0 % 100.0 % 11.0 %
Adjusted EBITDA (1)
33 32 3.8 % 4.1 % 3.1 %
Depreciation and amortization 33 32 3.8 % 4.1 % 3.1 %
(1) Percent of Revenue is calculated using the underlying unrounded amounts.
Revenue in our European Transportation segment increased 11.0% to $868 million for the first quarter of 2026, compared with $782 million for the same quarter in 2025. Foreign currency movement increased revenue by approximately 10.9 percentage points in the first quarter of 2026. After taking into effect the impact of foreign currency movement, revenue was essentially flat in the first quarter of 2026 compared to the same period in 2025.
Adjusted EBITDA was $33 million for the first quarter of 2026, compared with $32 million for the same quarter in 2025.
Depreciation and amortization expense increased to $33 million in the first quarter of 2026, compared with $32 million for the same quarter in 2025.
Liquidity and Capital Resources
Our cash and cash equivalents balance was $237 million as of March 31, 2026, compared to $310 million as of December 31, 2025. Our principal existing sources of cash are: (i) cash generated from operations; (ii) borrowings available under our Revolving Credit Facility (as defined below); and (iii) proceeds from the issuance of other debt. As of March 31, 2026, we have approximately $600 million available to draw under our Revolving Credit Facility, after considering outstanding letters of credit of less than $1 million. Additionally, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we had issued $132 million in aggregate face amount of letters of credit as of March 31, 2026.
In February 2025, we terminated our Second Amended and Restated Revolving Credit Agreement, as amended, and entered into a Revolving Credit Agreement (the “Revolving Credit Agreement”). The Revolving Credit Agreement provides for revolving credit commitments in an aggregate amount of $600 million (the “Revolving Credit Facility”). See Note 6—Debt to our Condensed Consolidated Financial Statements for further information.
As of March 31, 2026, we had approximately $837 million of total liquidity. We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.
Trade Receivables Securitization and Factoring Programs
In our European Transportation business, we sell certain of our trade accounts receivable under securitization and factoring programs. We use trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for some of our customers. For more information, see Note 1—Description of Business and Basis of Presentation to our Condensed Consolidated Financial Statements.
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The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is €200 million (approximately $231 million as of March 31, 2026). As of March 31, 2026, less than €1 million (less than $1 million) was available under the program. Under the securitization program, we service the receivables we sell on behalf of the purchasers. In January 2026, the program was amended to extend the maturity date through March 2029.
Term Loan Facility
In February 2025, we amended our Senior Secured Term Loan Credit Agreement (“Amended Term Loan Credit Agreement”). Pursuant to the amendment, the lenders provided the company (a) a term loan B facility in an aggregate principal amount of $700 million, maturing on May 24, 2028 (the “Refinancing Term Loan B-2 Facility”), and (b) a term loan B facility in an aggregate principal amount of $400 million, maturing on February 1, 2031 (the “Refinancing Term Loan B-3 Facility” and together with the Refinancing Term Loan B-2 Facility, the “Refinancing Term Loan Facilities”). The proceeds of the Refinancing Term Loan Facilities were used to refinance our existing term loans. We recorded a debt extinguishment loss of $5 million in the first quarter of 2025 due to this refinancing. Subsequently, in the second half of 2025, we used cash on hand to repay $115 million of outstanding principal under the Refinancing Term Loan B-2 Facility, which was scheduled to mature in 2028.
During the quarter ended March 31, 2026, we used cash on hand to repay $30 million of outstanding principal under this loan. In April 2026, we used cash on hand to repay an additional $70 million of outstanding principal under this loan, including $45 million classified within Short-term borrowings and current maturities of long-term debt as of March 31, 2026. The debt extinguishment losses recorded in connection with the repayments were not material.
The weighted average interest rate of our term loans was approximately 5.42% as of March 31, 2026.
Share Repurchases
In March 2025, our Board of Directors authorized repurchases of up to $750 million of our common stock. The repurchase authorization permits us to purchase shares in both the open market and in private transactions, with the timing and number of shares dependent on a variety of factors, including price, general business and market conditions, alternative investment opportunities and funding considerations. We retire common shares that we repurchase upon settlement. The share repurchase program has no expiration date and may be utilized over time, with no obligation to repurchase any specific number of shares. We may suspend or discontinue this program at any time. This plan replaced our previous share repurchase plan, authorized in February 2019.
In the first quarter of 2026, we repurchased 156 thousand shares of common stock with an aggregate value of $30 million at an average price of $192.19 per share. The share repurchases were funded by cash on hand. There were no share repurchases during the first quarter of 2025. As of March 31, 2026, our remaining share repurchase authorization was $595 million, reflecting $155 million of cumulative repurchases to date under the program.
Loan Covenants and Compliance
As of March 31, 2026, we were in compliance with the covenants and other provisions of our debt agreements. Any failure to comply with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.
Sources and Uses of Cash
Three Months Ended March 31,
(In millions) 2026 2025
Net cash provided by operating activities $ 183 $ 142
Net cash used in investing activities (107) (191)
Net cash used in financing activities (147) (30)
During the three months ended March 31, 2026, we generated cash from operating activities of $183 million. We used cash during the period primarily to: (i) purchase property and equipment of $111 million; (ii) make net payments of $88 million related to tax withholding obligations in connection with the vesting of stock compensation
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awards; (iii) repurchase common stock of $30 million; and (iv) repay $30 million of outstanding principal under the Refinancing Term Loan B-2 Facility.
During the three months ended March 31, 2025, we generated cash from operating activities of $142 million. We used cash during this period primarily to: (i) purchase property and equipment of $199 million and (ii) make net payments of $47 million related to tax withholding obligations in connection with the vesting of stock compensation awards.
Cash flows from operating activities for the three months ended March 31, 2026 increased by $41 million, compared with the same period in 2025. The increase primarily reflects higher net income of $32 million in the first three months of 2026, compared with the same period in 2025.
Investing activities used $107 million of cash in the three months ended March 31, 2026 and $191 million of cash in the three months ended March 31, 2025. During the three months ended March 31, 2026, we used $111 million to purchase property and equipment, as compared to a $199 million usage of cash in the same period in 2025. The decrease is due to planned reductions in capital expenditures in 2026 compared to 2025.
Financing activities used $147 million of cash in the three months ended March 31, 2026 and $30 million of cash in the three months ended March 31, 2025. The primary uses of cash from financing activities during the first three months of 2026 were $88 million to make net payments for tax withholdings on vested stock compensation awards, $30 million to repurchase common stock, $30 million to repay outstanding principal under the Refinancing Term Loan B-2 Facility, which was scheduled to mature in 2028, and $20 million used to repay borrowings, primarily related to finance lease obligations. The primary uses of cash from financing activities during the first three months of 2025 were $47 million to make net payments for tax withholdings on vested stock compensation awards and $18 million used to repay borrowings, primarily related to finance lease obligations. The primary source of cash from financing activities during the first three months of 2026 was $20 million of proceeds from bank overdrafts, compared to $38 million in the same period of 2025.
There were no material changes to our December 31, 2025 contractual obligations during the three months ended March 31, 2026. We anticipate full year gross capital expenditures to be between $500 million and $600 million in 2026, funded by cash on hand, cash generated from operations and available liquidity.
New Accounting Standards
Information related to new accounting standards is included in Note 1—Description of Business and Basis of Presentation to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.