XPO (NYSE:XPO) executives highlighted what they described as continued margin expansion and operational progress in a soft freight market, pointing to service improvements, pricing gains, and technology-driven efficiency initiatives as key contributors during the company’s fourth-quarter 2025 earnings call.
Fourth-quarter results and LTL margin expansion
Chairman and CEO Mario Harik said XPO delivered fourth-quarter adjusted EBITDA of $312 million and adjusted diluted EPS of $0.88. Excluding real estate gains in both periods, adjusted EBITDA increased 11% year-over-year and adjusted EPS increased 18%, he said.
Service, capacity, and pricing cited as key levers
Management repeatedly tied commercial performance to customer service improvements. Harik said damages were reduced and service quality improved to new company records in 2025, attributing the results to better network balancing, fewer freight rehandles, and tighter service-center operating processes. He said stronger service has translated to higher prices and market share gains.
Harik also said XPO invested ahead of an upcycle, creating more than 30% excess door capacity. He described this as providing flexibility to operate efficiently in the current environment and respond quickly in a recovery. On equipment, he said the company’s average tractor age ended the year at 3.7 years, which helped lower maintenance cost per mile to the lowest level in company history.
Pricing was another focal point. Harik said XPO grew full-year yield excluding fuel by 6% and improved revenue per shipment in every quarter for the third consecutive year, with local customers and premium services contributing to above-market pricing growth. Chief Strategy Officer Ali Faghri said fourth-quarter yield excluding fuel rose 5.2% year-over-year, and revenue per shipment has increased sequentially for 12 consecutive quarters.
Technology and cost efficiency initiatives
Executives described productivity and reduced purchased transportation as major drivers of cost efficiency. Harik said productivity improved roughly 1.5 points for the year, accelerating in the second half after technology rollouts using AI for planning, freight flow management, and network operations. He said the company completed a pilot of AI-driven route optimization for pickup and delivery and is expanding the internally developed technology to nearly half of service centers during the quarter, targeting improvements across a cost category he described as nearly $900 million.
On purchased transportation, Harik said XPO exited the year with outsourced miles at 5.1% of total miles, the lowest level in company history. CFO Kyle Wismans said fourth-quarter purchased transportation expense fell 46%, or $20 million, as the company continued insourcing linehaul miles and optimizing the network, describing the change as a structural cost reduction that could support stronger incremental margins as truckload rates rise.
Responding to a question on productivity expectations, Harik said the company expects a low single-digit improvement in productivity in 2026, while noting potential upside to mid-single digit based on rollout momentum. He also outlined per-point profit sensitivities discussed on the call, including approximately $16 million per year for each point of linehaul improvement, about $9 million per year for each point of pickup-and-delivery efficiency improvement, and about $4 million per year for each point of dock productivity improvement.
Segment detail: volumes, mix shift, and Europe
Faghri said LTL shipments per day declined 1.6% year-over-year in the quarter, weight per shipment fell 3%, and tonnage per day decreased 4.5%, reflecting what he called ongoing softness in the industrial sector. He said local shipments have risen to about 25% of revenue from 20% a few years ago, while premium services increased to about 12% of revenue from less than 10% previously.
Management also provided month-by-month LTL trends for the quarter, with tonnage down 3.8% in October, 5.4% in November, and 4.5% in December compared with the prior year. Faghri said January tonnage was roughly flat year-over-year, outperforming normal seasonality, though the company estimated a major winter storm had about a three-point impact on January tonnage.
In Europe, Faghri said revenue increased 11% year-over-year and adjusted EBITDA increased 19%. He said the European business posted its eighth consecutive quarter of constant-currency revenue growth.
Outlook, capital allocation, and balance sheet
Management provided planning assumptions and discussed expected margin progression. Harik said the company expects another year of margin improvement and earnings growth in 2026, and projected LTL operating ratio improvement of 100 to 150 basis points for the full year, assuming no meaningful macro recovery. He added that if the freight market strengthens, the company would expect upside due to operating leverage.
For first-quarter seasonality, Harik said XPO typically sees operating ratio deteriorate about 50 basis points sequentially from the fourth quarter to the first quarter over the long term, but said the company expects to outperform normal seasonality and expects operating ratio to improve sequentially from Q4 into Q1. Faghri said rolling normal seasonality from January would imply full-year tonnage roughly flat year-over-year, which would support the company’s operating ratio improvement outlook.
Wismans reported fourth-quarter revenue of $2 billion, up 5% year-over-year, with LTL revenue of $1.2 billion, up 1% as higher yield offset lower volumes. He said salary, wage, and benefits expense decreased 1% (down $7 million), while depreciation rose 11% (up $9 million) due to equipment and capacity investments. GAAP operating income was $143 million, net income was $59 million, and diluted EPS was $0.50; Wismans noted net income included $14 million of gains on real estate and equipment and $33 million of restructuring expense that he said was primarily tied to previously granted equity awards related to a transition in board leadership.
On cash flow and liquidity, Wismans said XPO generated $226 million of cash flow from operating activities in the quarter and deployed $84 million of net capital expenditures. The company ended the quarter with $310 million of cash after repurchasing $65 million of stock and paying down $65 million on its term loan facility, and total liquidity was $910 million including borrowing capacity, he said. Net leverage at year-end was 2.4x trailing 12-month adjusted EBITDA, down from 2.5x in 2024 and about 3.0x in 2023.
For 2026 planning assumptions, Wismans said the company expects:
- Total company gross capital expenditures of $500-$600 million
- Interest expense of $205-$215 million
- Pension income of approximately $14 million
- An adjusted effective tax rate of 24%-25%
- Diluted share count of approximately 118 million shares
On incremental margins in an upcycle, Wismans said the company expects to be “comfortably above 40%,” citing yield initiatives, mix shift, structural cost reductions, lower third-party linehaul spend, and ongoing AI-driven productivity improvements.
About XPO (NYSE:XPO)
XPO Logistics, Inc is a global provider of transportation and logistics services, offering a broad portfolio of solutions designed to optimize supply chains for businesses of all sizes. The company’s operations span freight brokerage, less-than-truckload (LTL) shipping, full truckload transportation, last-mile delivery, contract logistics and global forwarding. XPO aims to leverage advanced technology and operational expertise to drive efficiency, visibility and reliability across end-to-end supply-chain networks.
In its freight brokerage segment, XPO connects shippers to a network of carriers through digital platforms that facilitate rate comparisons, booking, tracking and settlement.
