GXO Logistics, Inc. (GXO)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other written reports and oral statements we make from time to time contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report on Form 10-Q are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 25, 2026 (the “2025 Form 10-K”), and the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Business Overview

GXO Logistics, Inc., together with its subsidiaries (“GXO,” the “Company,” “our” or “we”), is the largest pure-play contract logistics provider in the world and a foremost innovator in the industry. We provide our customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics, and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale. Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment goods arrive at our warehouses through fulfillment and distribution, and the management of returned products. Our customer base includes many blue-chip leaders across sectors with high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services.

Our business model is asset-light and historically resilient in cycles, with high returns, strong free cash flow, and visibility into revenue and earnings. The vast majority of our contracts with customers are long-term, and our warehouse lease arrangements generally align with the length of those contracts. The Company has both fixed-price contracts (closed-book or hybrid) and cost-plus contracts (open-book). Most of our customer contracts contain both fixed and variable components. The fixed component is typically designed to cover warehouse, technology, and equipment costs, while the variable component is determined based on expected volumes and associated labor costs. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent the Company’s actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit. Cost-plus contracts provide for the payment of allowable costs incurred during contract performance, plus a specified margin.

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Results of Operations

Three Months Ended June 30, 2026 compared with the Three Months Ended June 30, 2025

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Revenue for the three months ended June 30, 2026, increased by 4%, or $142 million, to $3.4 billion compared with $3.3 billion for the same period in 2025. The increase reflects growth in our business and $29 million of foreign currency movements for the three months ended June 30, 2026.

Direct operating expense for the three months ended June 30, 2026, increased by 4%, or $120 million, to $2.9 billion compared with $2.8 billion for the same period in 2025. As a percentage of revenue, Direct operating expense for the three months ended June 30, 2026, was 85.2% compared with 85.3% for the same period in 2025. The increase in Direct operating expense reflects growth in our business and $24 million of foreign currency movements for the three months ended June 30, 2026.

Selling, general and administrative expense for the three months ended June 30, 2026, increased by $23 million, to $295 million compared with $272 million for the same period in 2025. The increase reflects growth in our business.

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Other income (expense), net increased from expense to income, due to higher pension income and foreign currency gain on foreign currency contracts in the current period. Other income (expense), net was as follows:

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Interest expense, net was as follows:

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Six Months Ended June 30, 2026 compared with the Six Months Ended June 30, 2025

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Revenue for the six months ended June 30, 2026, increased by 7%, or $463 million, to $6.7 billion compared with $6.3 billion for the same period in 2025. The increase reflects growth in our business and $227 million of foreign currency movements for the six months ended June 30, 2026.

Direct operating expense for the six months ended June 30, 2026, increased by 7%, or $370 million, to $5.7 billion compared with $5.4 billion for the same period in 2025. As a percentage of revenue, Direct operating expense for the six months ended June 30, 2026, was 85.2% compared with 85.6% for the same period in 2025. The increase in Direct operating expense reflects growth in our business and $191 million of foreign currency movements for the six months ended June 30, 2026. For the six months ended June 30, 2026, we recorded a net benefit of $30 million, primarily in rent expense, from a real estate transaction that occurred in the fourth quarter of 2025, which resulted in an early termination of a lease. The increase in Direct operating expense before recognizing the real estate transaction was in line with our business growth.

Selling, general and administrative expense for the six months ended June 30, 2026, increased by $58 million, to $591 million compared with $533 million for the same period in 2025. The increase reflects growth in our business and $22 million of foreign currency movements for the six months ended June 30, 2026.

Transaction and integration costs for the six months ended June 30, 2026 and June 30, 2025, were $28 million and $36 million, respectively, and primarily related to the acquisition and integration of Wincanton.

Restructuring costs and other costs for the six months ended June 30, 2026 and June 30, 2025, were $8 million and $19 million, respectively. Restructuring costs primarily consisted of severanc

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report. This Form 10-K contains certain forward-looking statements that are intended to be covered by the safe harbors created by The Private Securities Litigation Reform Act of 1995. Please see “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Also, the following discussion and analysis of our financial condition and results of operations generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 financial condition and year-to-year comparisons between 2024 and 2023 are not included in this Annual Report and can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Business Overview

GXO Logistics, Inc., together with its subsidiaries (“GXO,” the “Company,” “our” or “we”), is the largest pure-play contract logistics provider in the world and a foremost innovator in the industry. We provide our customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale. Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment goods arrive at our warehouses through fulfillment and distribution, and the management of returned products. Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services.

We strive to provide all customers with consistent quality service and cutting-edge automation. We also collaborate with our largest customers on planning and forecasting and assist with network optimization, working with these customers to design or redesign their supply chains to meet specific goals, such as environmental, social and governance. Our multidisciplinary, consultative approach has led to many of our key customer relationships extending for years and expanding in scope.

The most dramatic growth in demand in recent years has been in e-commerce and related sectors, including omnichannel retail and other direct-to-consumer channels. We expect to attract new customers and expand the services we provide to existing customers through new projects; thus earning more of their logistics spending. We use technology to manage advanced automation, labor productivity, sustainability, safety and the complex flow of goods within sophisticated warehouse environments.

Our business model is asset-light and historically resilient in cycles, with high returns, strong free cash flow and visibility into revenue and earnings. The vast majority of our contracts with customers are long-term in nature, and our warehouse lease arrangements generally align with contract length. The Company has both fixed-price contracts (closed book or hybrid contracts) and cost-plus contracts (open book contracts). Most of our customer contracts contain both fixed and variable components. The fixed component is typically designed to cover warehouse, technology and equipment costs, while the variable component is determined based on expected volumes and associated labor costs. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent the Company’s actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit. Cost-plus contracts provide for the payment of allowable costs incurred during the performance of the contract plus a specified margin.

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Acquisition

In April 2024, the Company completed the acquisition of Wincanton plc (now “Wincanton Limited”), a U.K. logistics provider specializing in both warehousing and transportation solutions (“the Wincanton Acquisition”). The Wincanton Acquisition was subject to review by the U.K. Competition and Markets Authority (the “CMA”). In June 2025, the CMA approved the Wincanton Acquisition, subject to the divestment of certain grocery contracts in the U.K. We expect to complete the Wincanton Divestment in 2026.

Due to the acquisition of Wincanton in 2024, comparisons in our results of operations between 2025 and 2024 are less meaningful. For additional information regarding our acquisitions, see Note 5. “Acquisition and Divestiture” to the Consolidated Financial Statements.

Results of Operations

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Revenue for 2025 increased by 13%, or $1.5 billion, to $13.2 billion, up from $11.7 billion in 2024. The increase primarily reflects $655 million from the Wincanton Acquisition and growth in our business from new contract implementations and pricing. Favorable foreign currency movements increased revenue by $352 million in 2025.

Direct operating expense comprises both fixed and variable costs and include operating expenses related to our warehouse operations, including personnel costs, rent expenses, utility costs, equipment maintenance and repair costs, transportation costs, costs of materials and supplies, and information technology expenses. Direct operating expense for 2025 increased by 14%, or $1.3 billion, to $11.2 billion, up from $9.9 billion in 2024. The increase primarily reflects $595 million from the Wincanton Acquisition and higher personnel and temporary labor costs driven by business growth. As a percentage of revenue, direct operating expense was 84.9% in 2025 and 84.1% in 2024.

Selling, general and administrative expense (“SG&A”) primarily consists of salary and benefit costs for executive and certain administrative functions, professional fees, bad-debt expense and legal costs. SG&A for 2025 increased by 4%, or $45 million, to $1,106 million, up from $1,061 million in 2024. The increase was primarily driven by the Wincanton Acquisition and higher personnel costs.

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Depreciation and amortization expense for 2025 increased by $42 million, to $457 million, up from $415 million in 2024. Amortization expense totaled $119 million and $108 million in 2025 and 2024, respectively. Depreciation and amortization expense increased primarily due to the Wincanton Acquisition.

Transaction and integration costs totaled $54 million in 2025, compared with $76 million in 2024. Transaction and integration costs in 2025 primarily included $48 million related to the Wincanton Acquisition. Transaction and integration costs in 2024 primarily included $61 million related to the Wincanton Acquisition and $8 million for the PFSweb, Inc. integration.

We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. These costs are primarily related to severance, including projects to optimize human resources, finance and information technology activities, and are not associated with customer attrition. Restructuring costs and other were $27 million for 2025, compared with $25 million for 2024. Restructuring costs and other in 2025 consisted of severance paid to exiting individuals from the Company’s leadership team and severance paid as part of an initiative to optimize corporate expenses. Restructuring costs and other for 2024 related to a restructuring plan designed to centralize certain finance, human resource and IT functions from regional teams.

Regulatory matter and litigation expense totaled $65 million in 2025, compared with $59 million in 2024. In 2025, we recorded $65 million of expense related to a regulatory matter regarding the deductibility of value-added tax payments we made to certain third-party service providers, which were challenged by the Italian authorities. In 2024, we recorded $59 million of litigation expense related to a settlement agreement with one of our customers.

Net loss on divestiture of business in 2025 and 2024 was $34 million and $2 million, respectively. In 2025, net loss on divestiture of business was primarily due to the write-down of certain grocery contract assets planned to be divested in 2026 as required under the CMA approval we received in 2025.

Other income (expense), net decreased from income to expense, primarily due to foreign currency loss on foreign currency contracts.

Other income (expense), net was as follows:

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24

Interest expense, net increased due to the debt incurred for the Wincanton Acquisition. Interest expense, net was as follows:

Income before income taxes for 2025 decreased by $42 million, to $104 million, compared with $146 million in 2024. The decrease was mainly driven by increased Other expense, net and Interest expense, net, partially offset by increased Operating income in 2025.

Income before income taxes for our domestic operations was $11 million for 2025, compared with an $88 million loss in 2024. In 2024, our transaction and integration costs

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