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XPO sees greater demand from manufacturers
Freight market upcycle to accelerate, boost profits, executives say
Key Takeaways:
- XPO said July 30 demand from U.S. manufacturers is rising for the first time in three years, helping boost second-quarter shipments, revenue and profit.
- XPO’s adjusted operating ratio improved to 79.9 as profit rose 52.8% and North American LTL revenue increased 15.2%, signaling stronger freight conditions.
- Executives expect industrial demand and contract renewals to accelerate through 2026 and 2027 while network investments position XPO for further growth.
Demand for less-than-truckload shipping from U.S. manufacturers is on the rise for the first time in three years, XPO CEO Mario Harik said July 30, adding to freight market momentum driven in large part by truckload segment capacity constraints.
The upswing in demand was evident in XPO’s shipments and weight per shipment in the second quarter of 2026, boosting the company’s profit and revenue, Harik and fellow executives at the Greenwich, Conn.-based LTL-centric carrier told analysts.
XPO’s management team foresees industrial demand accelerating through the rest of 2026 and into 2027, based on a customer survey, with a corresponding upside boost for the company’s earnings and operating ratio.
A carrier’s OR provides insight on how well a company is balancing its costs and revenue generation. The lower the ratio, the better a company’s performance. XPO posted an adjusted operating ratio of 79.9 in Q2, compared with 82.9 in the year-ago period.
The carrier’s shipments per day in the most recent quarter climbed 2.8% to 52,229 from 50,782. XPO’s revenue per shipment excluding fuel surcharges rose 2.4% year over year to $335.27 from $327.53.
RELATED: XPO posts record Q1 earnings as OR improves
XPO’s North American LTL division posted a 15.2% increase in revenue to $1.43 billion in Q2 from $1.24 billion in the year-ago period.
Overall, the company generated revenue of $2.36 billion in Q2, an increase of 13.5% compared with $2.08 billion in the same period in 2025.
XPO reported a profit of $162 million in the most recent quarter, up 52.8% compared with $106 million in the same period 12 months earlier.
Survey says: upside
The company expects further upside, with the number of customers surveyed expecting an acceleration in the back half of the year double the percentage at the start of 2026.
“On the industrial side, what changed … is that we are seeing manufacturing starting to build momentum, and we haven’t seen that in more than three years, which is fantastic to see,” Harik said.
On the company’s first-quarter 2026 earnings call, the management team discussed the positives in the electricity and agriculture sectors, Harik said, but now manufacturers are starting to build momentum.
Chief Financial Officer Kyle Wismans told analysts the upswing in freight market confidence and rates is leading to an acceleration in contract renewals as shippers seek to lock in prices before the trend advances any further.
“We’re up in the mid- to high-single-digit range,” he said of contract renewals, adding that the rate environment was only going to improve for carriers.
XPO’s trend line in its weight per shipment is also boding well, said Chief Strategy Officer Ali Faghri, although in contrast to many of its peers, XPO’s average weight per shipment fell 1.8% year over year in Q2 to 1,311 pounds from 1,335 pounds.
“In the second quarter, our weight per shipment improved by about a point on a year-over-year basis relative to the first quarter, [and it] also outperformed seasonality as you move from Q1 into Q2. Now here more recently, we’ve seen weight for shipment improve even further. In the month of July, weight for shipment was flat on a year-over-year basis. That was also better than typical seasonality relative to July,” he told analysts.
Investment for the upcycle
With all those leading indicators turning positive, the management team said investments made during the longest freight market downturn in industry memory would allow XPO to take advantage of the upturn.
“A lot of the investments we’ve done, whether it’s in the South or the Southeast or the Southwest, were in areas where historically we had capacity constraints,” Harik said. “And now we are actually feeling great about where we are.”
Additions in Nashville, Tenn., Atlanta, Texas and the Midwest complemented XPO’s existing service center network, positioning the carrier to support customers in large markets during an upcycle, he said.
XPO has more than 300 service centers. Scale and density are vital in the LTL space, so an expansive terminal network is crucial. The company ranks No. 5 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 4 in the LTL arena.
XPO bought 28 service centers in the first Yellow real estate auction. The company paid $870 million for the 26 owned terminals and two leased properties. At the time Yellow sought court protection from its creditors, the company ranked No. 13 on the for-hire TT100 and No. 3 on the LTL list.
“The new terminals have been fantastic for us,” said Harik, adding: “And the reason why — because we already operate in all of the regions where we added those terminals. [Of] the ones we’ve added, around half of them were relocations when we went from a smaller terminal to a bigger terminal, and the other half were incremental adds in existing markets.”
