XPO Cuts Costs, Expands Margins Despite Freight Slowdown

XPO, Inc. XPO reported second-quarter 2025 financial results on Thursday. Adjusted diluted earnings per share (EPS) of $1.05 exceeded the analyst consensus of $1.00.

Revenue reached $2.08 billion for the quarter, surpassing estimates of $2.06 billion and remaining flat year over year. XPO’s operating income for the second quarter of 2025 rose slightly to $198 million from $197 million in the same period last year.

On an adjusted basis, adjusted net income was $125 million for the quarter, compared to $135 million in the second quarter of 2024. Adjusted EBITDA for the second quarter was $340 million, a slight dip from $343 million in the prior year.

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XPO’s North American Less-Than-Truckload (LTL) segment demonstrated strong operational performance. LTL revenue was $1.24 billion, a 2.5% decrease from the second quarter of 2024, attributed to a 5.1% decline in shipments per day and a 6.7% drop in daily tonnage.

LTL segment achieved an adjusted operating ratio of 82.9%, a 30-basis-point improvement year-over-year, which CEO Mario Harik called “industry-best.” Yield, excluding fuel, increased by 6.1%, and revenue per shipment grew by 5.6%.

The company also significantly reduced purchased transportation expenses by 53% through insourcing linehaul miles. Adjusted EBITDA for the North American LTL segment increased 1.0% to $300 million.

The European Transportation segment reported revenue of $841 million, up 4.1% year-over-year. However, adjusted EBITDA for this segment declined to $44 million from $49 million in the prior year.

Net income for the quarter was $106 million, down from $150 million a year ago. This decline in diluted EPS to $0.89 from $1.25 in the prior-year period was largely due to XPO lapping a one-time tax benefit related to its European business a year ago.

XPO generated $247 million in operating cash flow and ended the quarter with $225 million in cash and cash equivalents.

“In our North American LTL business, we achieved an adjusted operating ratio of 82.9%, reflecting an industry-best year-over-year improvement of 30 basis points. While our tonnage declined in the soft freight environment, our world-class service culture drove above-market pricing growth and share gains with local customers,” Harik said in a statement.

“On the cost side, we reduced purchased transportation expense by 53% as we insourced linehaul miles to a record level. And we generated another gain in labor productivity, supported by our proprietary technology.” Harik continued, “We’re executing at a high level and consistently outperforming the industry, with a strategy that positions us to deliver long-term margin expansion and earnings growth,” he added.

Price Action: XPO shares are trading lower by 8.88% to $120.54 at last check Thursday.

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