XPO Q2 FY26 earnings call XPO

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.

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.

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.

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.

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.