GXO Logistics, Inc. (GXO) Earnings

Management highlights

### Five-Year Independent Public Company Milestone - Management marked five years as an independent public company, noting that foundational investments, new leadership, and an updated strategic agenda are now delivering tangible results, with momentum building in the early stages of the new strategy. ### Commercial Progress - Q2 2026 was GXO's strongest commercial quarter in three years, with $410 million in new business wins, up more than 30% year-over-year. - First half 2026 new wins reached nearly $640 million, up ~20% year-over-year, with over $1 billion of incremental new 2026 revenue secured to date, providing strong full-year visibility. - Post-Q2, the total sales pipeline rebounded to a record $2.7 billion, with a deeper mix of larger, more complex opportunities in strategic growth verticals and with top global customers. - Commercial momentum has continued into Q3 2026, with expected significant year-over-year growth in wins, driven particularly by demand from data center and aerospace and defense customers. Notable Q2 wins include expanded relationships with Nike, Marks & Spencer, PepsiCo, Raytheon, Boeing, and a major hyperscaler technology contract, the quarter's largest win. ### Strategic Priorities Execution 1. **Commercial Excellence & Go-To-Market Overhaul** - Shifted focus to higher-margin, complex, fast-growing strategic B2B verticals with a combined $230 billion addressable market, while continuing to invest and grow in core consumer verticals. - Moved from a regional account management model to a globally integrated customer success model focused on growing with existing global customers, improving alignment around customer needs. - First half 2026 strategic vertical wins are running at nearly three times the 2025 pace, with the sharpest growth seen in North America, where Q2 pipeline is up 34% year-over-year and first half wins are up 85% year-over-year. 2. **Operational Discipline (The GXO Way)** - Standardizing global operational practices from previously regional frameworks, including deploying a common global labor management system, a unified global operating dashboard for consistent KPI tracking, and consolidating regional procurement to leverage enterprise scale. - WinCAN (Wincanton) integration is 90% complete, and the company remains on track to deliver $60 million in annual run-rate cost synergies by the end of 2026. 3. **AI and Automation Scale-Up (GXO IQ)** - GXO IQ, the company's proprietary AI platform, moved from launch to scaled deployment in Q2 2026, and is on track to be deployed at approximately 50 sites by the end of 2026. - AI is packaged into repeatable product waves focused on forecasting, replenishment, and pick optimization, rather than custom-built per site. - The company will deploy 20,000 robots across its network in 2026, with humanoid robots still in pilot testing (zero in full production this year, with ROI expected to be achieved in approximately two years). ### Balance Sheet and Capital Allocation - Ended Q2 2026 with $769 million in cash and a strong investment-grade balance sheet, with net leverage of 2.6x, down from 3.0x year-over-year. - Post-quarter, the company repaid $400 million in maturing bonds using cash on hand, and has resumed share repurchases, with $21 million in buybacks completed year-to-date and approximately $280 million remaining under the current authorization.

Guidance

• Management maintained the full-year 2026 organic revenue growth guidance range at 4% to 5%, with midpoints of all guidance ranges unchanged from prior estimates. • The full-year 2026 adjusted EBITDA guidance range was tightened to $945 million to $965 million. • The full-year 2026 adjusted dilutive EPS guidance range was narrowed to $2.95 to $3.15. • Full-year 2026 free cash flow conversion guidance was maintained at 30% to 40%. • Management confirmed visibility for accelerating organic growth in 2027, supported by $353 million in already secured 2027 incremental revenue, stronger pipeline, and ongoing commercial momentum.

Segment performance

GXO is organized by geographic regions and strategic growth verticals, rather than distinct product segments. For Q2 2026, overall company revenue was $3.4 billion, representing 4% year-over-year growth and 3.4% organic growth, with broad-based contributions across all regions. Adjusted EBITDA was $219 million, for an adjusted EBITDA margin of 6.4%, flat year-over-year. Operating cash flow was $76 million, with positive free cash flow of $12 million, a meaningful improvement year-over-year. 40% of new business wins in Q2 2026 came from the four strategic growth verticals (aerospace and defense, technology and data centers, industrials, life sciences), which make up 27% of the total $2.7 billion sales pipeline by value. Core consumer-facing retail, e-commerce, and CPG verticals account for approximately 70% of total revenue, and contributed 60% of year-to-date new business wins.

Risks & headwinds

• Forward-looking statements are inherently uncertain, and actual results may differ materially due to factors including fluctuations in foreign exchange rates, changes in global economic conditions, shifts in consumer demand and spending, labor market constraints, global supply chain disruptions, inflationary pressures, and other factors detailed in the company's SEC filings. • Full-scale rollout of the standardized GXO Way operating model takes time given the company's large size and geographically distributed site network, so margin improvements from operational initiatives are not expected to fully materialize until 2027 and beyond. • Growth execution depends on recruiting and training sufficient operational and leadership talent ahead of new business implementations to successfully ramp new contracts. • Humanoid robotics have not yet delivered positive ROI for production deployment, with commercial viability not expected for approximately two years.

Analyst Q&A

• Q: What changes to GXO's go-to-market strategy over the past year have driven the recent strong commercial momentum, especially in new target verticals? /

  A: The core changes are twofold: first, a deliberate shift in focus to complex, regulated B2B strategic verticals (aerospace and defense, technology/data centers, industrials), which leverages GXO's existing strengths in precision, complex supply chain execution that GXO was previously underweighting. Second, the company increased focus on growing with existing customers via the new globally integrated customer success model, while remaining competitive for RFP wins from competitors and continuing to capture new outsourcing volume. This combination of targeting the right verticals and the right customer segments has driven accelerating growth.

• Q: What are the key drivers of expected margin expansion in the back half of 2026 and into 2027, beyond Wincanton synergies? /

  A: Sequential margin expansion in H2 2026 will be driven by higher seasonal revenue volumes from new contract ramps. Beyond that, standardized operational tools from the GXO Way (common KPIs dashboards, unified labor management, consolidated enterprise procurement) will unlock consistent efficiency gains across the network. GXO's leadership notes that moving from regional to global procurement alone creates meaningful cost reduction opportunities, and margin improvement will start to become visible in Q4 2026 before accelerating in 2027. More details will be shared at the November Investor Day.

• Q: How does the strategic shift to higher-complexity B2B verticals impact long-term margins, and what is the outlook for humanoid robot deployment? /

  A: Complex B2B verticals command structurally higher margins than legacy core verticals, so growing the share of B2B in the overall business mix will directly drive long-term margin improvement. For 2026, zero humanoid robots will be deployed in production, though GXO has completed 45 pilots with more launching soon. Positive ROI for humanoid deployment has not yet been achieved, and management expects production deployment to be 2 years out.

• Q: What is GXO's priority for capital allocation going forward, especially after resuming share buybacks? /

  A: The first capital priority is organic investment to grow the business, followed by further balance sheet deleveraging. Given management's view that GXO stock is undervalued at current prices, the company will continue opportunistic share repurchases in the back half of 2026, with $280 million remaining under the existing authorization. A more detailed capital allocation plan will be shared at the November Investor Day.

• Q: How should we think about the long-term overall margin opportunity for GXO? /

  A: Management confirms there is substantial margin improvement opportunity, noting that GXO currently lags peer contract logistics providers in EBITDA and EBIT margins, and is fully focused on closing that gap. All new business won today is margin-accretive to existing operations. Management will share a detailed path to margin improvement at the November 16 Investor Day, with a goal of reaching peer-competitive margin levels over the medium term.