Contract logistics company GXO (NYSE: GXO) met Wall Streets revenue expectations in Q3 CY2025, with sales up 7.5% year on year to $3.40 billion. On the other hand, next quarter’s revenue guidance of $3.41 billion was less impressive, coming in 3.2% below analysts’ estimates. Its non-GAAP profit of $0.79 per share was in line with analysts’ consensus estimates.

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Patrick Kelleher, chief executive officer of GXO, said, “We delivered record revenue in the third quarter, as well as double-digit adjusted EBITDA growth, underscoring the strength and resilience of GXO’s business model. New business wins rose 24% year over year, and our commercial pipeline, which stands strong at $2.3 billion, is geographically diversified and scaling in high-growth sectors. The integration of Wincanton is progressing swiftly, with synergy realization on track, and as we approach year-end, we’re pleased to reaffirm our full-year guidance.

Company Overview

With notable customers such as Nike and Apple, GXO (NYSE: GXO) manages outsourced supply chains and warehousing for various companies.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, GXO Logistics grew its sales at an incredible 16.6% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. GXO Logistics’s annualized revenue growth of 15.7% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. GXO Logistics recent performance stands out, especially when considering many similar Air Freight and Logistics businesses faced declining sales because of cyclical headwinds.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, GXO Logistics’s organic revenue averaged 2.5% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, GXO Logistics grew its revenue by 7.5% year on year, and its $3.40 billion of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.7% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

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Operating Margin

GXO Logistics’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 2.3% over the last five years. This profitability was lousy for an industrials business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, GXO Logistics’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. GXO Logistics’s performance was poor, but we noticed this is a broad theme as many similar Air Freight and Logistics companies saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction.

This quarter, GXO Logistics generated an operating margin profit margin of 3.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

GXO Logistics’s full-year EPS grew at a decent 9.7% compounded annual growth rate over the last four years, better than the broader industrials sector.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Sadly for GXO Logistics, its EPS declined by 1.1% annually over the last two years while its revenue grew by 15.7%. This tells us the company became less profitable on a per-share basis as it expanded.

In Q3, GXO Logistics reported adjusted EPS of $0.79, in line with the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects GXO Logistics’s full-year EPS of $2.65 to grow 12.7%.

Key Takeaways from GXO Logistics’s Q3 Results

It was encouraging to see GXO Logistics beat analysts’ EBITDA expectations this quarter. On the other hand, its revenue guidance for next quarter missed and its organic revenue fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 2.3% to $54.10 immediately following the results.

Big picture, is GXO Logistics a buy here and now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.