Analysis GXO
GXO added $195 million in sales. Direct costs rose $207 million.
Organic growth accelerated, but the additional operating costs exceeded the extra revenue. Our comparison explains the margin squeeze and why net income still rose.
GXO Logistics is winning more work. Turning that work into a larger profit proved harder in the third quarter: revenue rose 5.7% to $3.59 billion, while GAAP operating income fell to $96 million from $118 million a year earlier.
The warehouse and fulfillment operator reported organic revenue growth of 6.4%, its fastest in more than three years. That measure removes currency movements. Growth accelerated from 3.4% in the second quarter.
Research by Ticker Byline shows that GXO added $195 million of quarterly revenue while direct operating expenses increased $207 million. Transaction and integration costs rose another $12 million. Those comparisons help explain why stronger sales have yet to produce a stronger operating margin.
| Measure | 2026 | 2025 |
|---|---|---|
| Revenue | $3,590 | $3,395 |
| Direct operating expenses | $3,064 | $2,857 |
| GAAP operating income | $96 | $118 |
| Adjusted EBITDA | $251 | $251 |
| Adjusted EBITDA margin | 7.0% | 7.4% |
Other expenses moved in both directions: selling and administrative costs were unchanged, depreciation and amortization fell $3 million, and a divestiture added a $1 million loss. Together, the income-statement changes account for the $22 million operating-profit decline.
Adjusted EBITDA, which removes interest, taxes, depreciation, amortization and selected other items, stayed at $251 million. That left less adjusted profit per sales dollar: a 7.0% margin, down from 7.4%.
Why net income still rose
GXO nevertheless reported higher GAAP net income: $65 million, up from $60 million. Income before taxes fell $16 million, but income tax expense fell $21 million, to $7 million. Adjusted diluted earnings per share also increased, to $0.89 from $0.79.
Cash flow presents a different comparison. Quarterly operating cash flow fell to $156 million from $232 million, but the first nine months were nearly unchanged at $263 million versus $264 million.
Free cash flow fell to $85 million from $187 million. The measure subtracts capital spending and adds property-sale proceeds. Sales brought in $3 million versus $99 million, while capital spending fell to $74 million from $144 million. The prior-year filing says nine-month capital spending included buying property that was sold for $90 million in Q3.
More contracts, the same annual forecast
There is fresh business to support growth. GXO reported $375 million of new contract wins, up 34%, and a record $3.1 billion sales pipeline. The contract wins describe annualized sales, while the pipeline covers potential business.
The company retained its full-year forecast of $945 million to $965 million in adjusted EBITDA and $2.95 to $3.15 in adjusted diluted EPS, the ranges set in August. Its November 16 investor day gives management an opportunity to explain how its productivity initiatives will turn the stronger sales momentum into better margins. Our GXO company profile tracks the financial history and the targets still to be tested.