GXO Q1 Earnings Call: Healthcare Wins, Tech Investment, and Guidance Reaffirmed

Contract logistics company GXO (NYSE: GXO) announced better-than-expected revenue in Q1 CY2025, with sales up 21.2% year on year to $2.98 billion. On the other hand, next quarter’s revenue guidance of $2.97 billion was less impressive, coming in 2.6% below analysts’ estimates. Its non-GAAP profit of $0.29 per share was 14.5% above analysts’ consensus estimates.

Is now the time to buy GXO? Find out in our full research report (it’s free).

StockStory’s Take

GXO’s first quarter results showcased notable expansion in healthcare contract logistics and sustained investment in automation and AI-driven warehouse solutions. CEO Malcolm Wilson emphasized the company’s landmark contract with the U.K. National Health Service, its largest ever, attributing it to an acquisition-led strategy targeting high-growth verticals. Management also cited positive impacts from new business in aerospace, defense, and industrial sectors, alongside rising customer satisfaction, which Wilson stated improved nearly 10% year-over-year. CFO Baris Oran highlighted that operational improvements, including productivity gains at new and existing facilities, meaningfully contributed to operating margins. While continental European operations showed strong momentum, U.K. volumes, initially soft due to new employment taxes, rebounded as the quarter progressed.

Looking ahead, GXO’s guidance is underpinned by expectations of steady organic growth and continued productivity improvements from technology initiatives. Management emphasized a strong sales pipeline, the ongoing integration of the Wincanton acquisition, and increased demand for outsourcing and automation as structural industry tailwinds. CEO Malcolm Wilson acknowledged the uncertain macroeconomic environment, noting, “In a normal environment, as a management team, definitely, we would have been raising our outlook for 2025... but I think it’s a prudent approach.” CFO Baris Oran explained their guidance assumes flat volumes year-over-year, with contingency planning for softer U.S. consumer-facing activity. The company is also focused on ramping cost savings from AI and automation projects throughout 2025, while continuing to diversify across verticals and geographies to mitigate risks.

Key Insights from Management’s Remarks

Management attributed GXO's strong first-quarter performance to several key strategic drivers, emphasizing significant expansion in the healthcare sector, ongoing adoption of advanced technology and automation, and disciplined execution of productivity initiatives. CEO Malcolm Wilson highlighted the landmark U.K. National Health Service contract as a pivotal win, underscoring the success of their acquisition strategy. CFO Baris Oran noted that these operational improvements, coupled with the faster-than-anticipated ramp-up of new facilities, contributed to beating adjusted EBITDA expectations. The company also stressed increased business diversification across new verticals and geographies, alongside steady progress on the Wincanton integration, as crucial elements underpinning their positive results and future outlook.

• Healthcare sector expansion: GXO secured its largest-ever contract with the U.K. National Health Service (~$2.5B lifetime value), starting Q3. This Clipper-driven win boosts a healthcare pipeline including Siemens Healthineers, targeting European and U.S. expansion.
• Wincanton integration progress: Wincanton is performing as expected. Post-CMA approval, integration is set for early summer, aiming for $58 million in cost synergies to improve margins, with the business trading well.
• Operational productivity gains: Faster ramp-up of new automated sites and productivity initiatives drove Q1 results. These benefits will accelerate through 2025 as impacts from prior customer realignments lessen, improving visibility.
• Tech and automation investment: Over 20 AI modules (replenishment, routing) are live, yielding initial Q1 cost savings. These savings will ramp up, alongside other automation projects like inventory cycle counting and inbound unloading.
• Customer base diversification & pipeline: The ex-Wincanton sales pipeline hit $2.5 billion (up 13% YoY). New wins show diversification: 41% new outsourcing, 39% automation, 42% e-commerce, with key customer expansions like Boeing.

Drivers of Future Performance

GXO’s forward-looking performance is expected to be driven by several key strategic pillars, prominently featuring sustained expansion within the high-growth healthcare vertical, continued realization of efficiencies from their significant investments in technology and automation, and the progressive unlocking of cost synergies from the Wincanton acquisition. While management expressed confidence in these drivers, they also maintained a cautious stance, acknowledging the prevailing macroeconomic uncertainty and its potential to influence customer demand and operational dynamics. The reaffirmed guidance reflects this balance, banking on contractual protections and business model resilience.

• Healthcare and new verticals: The ongoing ramp-up of major healthcare contracts, particularly the substantial NHS deal commencing in Q3, is expected to be a significant revenue contributor. Furthermore, GXO is actively pursuing and securing new business in other targeted verticals such as aerospace, defense, and industrial, aiming to further diversify its growth drivers and enhance overall business resilience.
• Wincanton synergy realization: The integration of Wincanton, anticipated to commence in early summer following CMA clearance, is projected to deliver $58 million in targeted cost synergies. Management expects these synergies to contribute to margin expansion as the integration process gathers momentum throughout the latter half of 2025 and beyond, improving overall group profitability.
• Automation and AI scaling: Continued expansion and maturation of AI and automation solutions across GXO's global network are anticipated to drive further productivity gains and reduce operational costs. The initial cost savings observed from over 20 live AI implementations in Q1 are expected to scale throughout 2025 as these tools are deployed more broadly and new automation technologies are introduced.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will be closely monitoring (1) the operational ramp and revenue contribution from the NHS healthcare contract, (2) the pace and financial impact of Wincanton integration and synergy realization, and (3) the scaling of AI and automation initiatives across additional sites. Progress in diversifying the sales pipeline and mitigating exposure to sector-specific or geographic risks will also be key indicators.

GXO Logistics currently trades at a forward P/E ratio of 16.6×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it’s free).

Now Could Be The Perfect Time To Invest In These Stocks

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.