Inquired about the updated full-year margin target and the timeline to achieve the stated long-term LTL OR in the low 70s.

Mario Harik stated the full-year margin improvement is now expected to be at least 200 bps, exceeding the initial 100-150 bps target. He outlined a 5+ year runway to reach low 70s OR, driven by a double-digit pricing gap opportunity from service quality, premium services, and growth with small-to-medium customers. “We do expect to outperform our initial outlook... And we now expect full year margin improvement to be at least 200 basis points.”

Asked for expectations on volume and pricing for Q3, considering July's strong performance, and how this impacts OR progression.

Ali-Ahmad Faghri detailed July's tonnage growth of over 6% YoY, outperforming seasonality. He projected Q3 full-quarter tonnage to be in the mid-single-digit range YoY. Pricing (yield and revenue per shipment ex-fuel) is expected to increase sequentially in Q3 and Q4, with revenue per shipment ex-fuel accelerating more than previously expected. “July for us was up over 6% tonnage on a year-over-year basis... that would put full quarter tonnage for us up somewhere closer to that mid-single-digit range on a year-over-year basis.”

Inquired if strong July performance was due to smaller regional players struggling, truckload conversion to LTL, or other competitive factors.

Mario Harik attributed the performance to industry capacity reduction, early signs of industrial demand recovery, and XPO's market share gains from premium services and small-to-medium customers. He noted truckload rates are up over 40%, suggesting potential for truckload to LTL conversion. “We estimate to be somewhere in the low to mid-single digit total tonnage that has moved from SEL to truckload and we expect that to come back to the back half of the year or going into next year.”

XPO

XPO (XPO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Jul 30, 2026

Source: earnings call transcript

Executive summary

XPO Q2 FY26 — Record Performance Driven by LTL Operating Ratio Below 80% and Strong Volume Acceleration

XPO delivered record Q2 FY26 results, driven by strong LTL performance with an adjusted operating ratio below 80% and significant volume acceleration in July. The company's strategic investments in capacity, technology, and service quality are yielding substantial operating leverage and market share gains, reinforcing confidence in achieving long-term margin expansion and free cash flow generation. The European segment also showed strong growth, with acceleration expected in the second half of the year.

Highlights

Company-wide achieved record revenue, adjusted EBITDA, and adjusted diluted EPS.
North American LTL adjusted operating ratio improved by 300 basis points YoY to a new record of 79.9%.
Damage claims ratio reached its best historical level, remaining below 0.2% for the second consecutive quarter.
Productivity improved by nearly 2.5 points versus last year, exceeding the quarterly target of 1.5%.
Free cash flow is now expected to more than double for the full year 2026 compared to 2025.

Concerns

Fuel operating expense and supplies increased 24% or $53 million YoY due to higher fuel prices.
Salary, wages, and benefits expense increased 7% or $46 million YoY due to inflationary pressures.
The hiring market for drivers is tightening, particularly in the truckload space.

Guidance & targets

Category	Target	Timeline	Confidence
LTL Adjusted Operating Ratio	below 81% high materiality	Q3 · FY26	High
Full-year Margin Improvement	at least 200 basis points high materiality	Full-year 2026 · FY26	High
Full-year Tonnage Growth	up a few points medium materiality	Full-year 2026 · FY26	Medium
Free Cash Flow	more than double 2025 high materiality	Full-year 2026 · FY26	High
LTL Operating Ratio	low 70s or better high materiality	Long-term	High
Cumulative Free Cash Flow	billions of dollars high materiality	Coming years	High
European Adjusted EBITDA Growth	high teens medium materiality	Second half of the year · FY26	High
Weight per Shipment	inflect positive medium materiality	Entering 2027 · FY27	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
LTL Revenue increased 15% year-over-year, reflecting acceleration in both yield and volume growth. Adjusted EBITDA increased 27% excluding real estate gains. Adjusted operating income grew 36%. Adjusted operating ratio improved 300 bps YoY to a new company record, outperforming normal seasonality. Adjusted EBITDA: $390 millionAdjusted Operating Income: $287 millionAdjusted Operating Ratio: 79.9%Shipments per day: +2.8% YoYWeight per shipment: -1.8% YoYTonnage per day: +1% YoYYield, excluding fuel: +4.4% YoY	$1.4 billion	15%	—	27.4% adjusted EBITDA margin
European Transportation Achieved record revenue, marking the 10th consecutive quarter of growth on a constant currency basis. Adjusted EBITDA increased 9% year-over-year, with growth expected to accelerate in the second half of the year. Adjusted EBITDA: $48 millionAdjusted EBITDA growth: +9% YoY	Record	—	—	—
Corporate Reported an adjusted EBITDA loss of $4 million.	—	—	—	$4 million loss

Product announcements

Product	Type	Timeline	Details
Trailer loading technology	launch	H2 FY26

Risks & headwinds

Higher Fuel Prices Q2 FY26

Fuel operating expense and supplies increased 24% or $53 million YoY.

Mitigation:In-sourcing strategy is performing as planned, reducing exposure to truckload rate volatility.

Wage and Benefit Inflation Q2 FY26

Expense for salary, wages, and benefits increased 7% or $46 million YoY.

Mitigation:Productivity initiatives (2.5 points improvement) helped mitigate the impact; continued management of labor adjusted to freight volume.

Tightening Driver Market Current

Hiring market for drivers is tightening, partly due to capacity going out in the truckload space.

Mitigation:XPO's benefits and compensation packages, young fleet (sub 4 years average truck age), and over 130 driver training schools support successful hiring efforts in needed markets.

What to watch in Q3 FY26

LTL Operating Ratio

Q3 FY26

Current 79.9% in Q2 FY26

Target Below 81% in Q3 FY26

Why it matters

Verifying the LTL OR remains below 81% in Q3 FY26 will confirm continued margin expansion and outperformance of normal seasonality, which is crucial for the company's long-term OR goals.

We do expect another strong quarter for margin performance here in the third quarter... for abroad to be below 81% here in the third quarter.

Find out whether XPO delivers this. Inve re-checks your case every morning.

Q&A highlights

Asked for parameters on accelerating earnings for Q3 and how the massive AI-driven improvements (50% damage reduction, 40% load quality increase) translate to expense savings.

Mario Harik guided for Q3 OR to be below 81%, outperforming normal seasonality, driven by price, volumes, and cost efficiency. He explained the AI trailer loading technology, noting its real-time feedback for dock workers and its role in productivity improvements.

“We do expect another strong quarter for margin performance here in the third quarter... for abroad to be below 81% here in the third quarter.”

asked by Ken Hoexter · answered by Mario Harik

2 min read 5 chapters

Detailed narrative

LTL Operational Excellence and Margin Expansion

XPO achieved a record LTL adjusted operating ratio of 79.9% in Q2 FY26, marking a 300 basis point improvement year-over-year and significantly outperforming normal seasonality. This strong performance was supported by a damage claims ratio below 0.2% for the second consecutive quarter, the best in company history, reflecting disciplined execution and strategic investments in capacity and proprietary technology.

The company has improved its OR by nearly 800 basis points over the past three years.

Technology-Driven Productivity Gains

The company's proprietary technology continues to drive significant productivity improvements. Workforce planning technology improved productivity by nearly 2.5 points versus last year, exceeding the quarterly target of 1.5%. Route optimization is now used in over two-thirds of operations, leading to fewer miles and more stops per hour.

A pilot of AI-powered trailer loading technology showed impressive results, reducing damages by 50% and improving load quality by over 40%, with a network-wide rollout planned for the second half of the year.

Accelerating Volume and Strong Pricing Trends

LTL volumes strengthened throughout Q2 FY26, with shipments per day increasing from 0.2% YoY in April to 5.1% in June, and tonnage per day improving from a 1.5% decline to a 4% increase over the same period. July saw further acceleration, with both shipments and tonnage per day estimated to be up over 6% YoY.

Pricing remained a key strength, with yield excluding fuel increasing 4.4% YoY, supported by accelerating contract renewal pricing in the mid-to-high single-digit range. The company expects revenue per shipment ex-fuel to accelerate more than previously expected in Q3 and Q4.

Strategic Capacity and Workforce Management

Since 2021, XPO has proactively invested in its network, increasing its trailer fleet by over 30%, tractor count by over 20%, and expanding door capacity by 15%. This provides substantial runway for volume growth. The company's headcount is only slightly down over the last few years, and it can handle an additional low to mid-single-digit percentage of shipments with the existing workforce.

Proactive hiring efforts are underway in some markets, supported by improved employee retention and over 130 driver training schools.

European Segment Outperformance and Strategic Outlook

The European transportation segment delivered its tenth consecutive quarter of constant currency revenue growth, with adjusted EBITDA increasing 9% year-over-year in Q2 FY26. The company anticipates this growth to accelerate to high teens in the second half of the year, driven by similar strategies to the US, including cost control, sales expansion, and new vertical penetration.

While the long-term goal is to sell the business, XPO remains patient to achieve the right price, intending to use proceeds to accelerate capital returns to shareholders.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.