RXO, Inc. Q1 2025 Earnings: Navigating Challenges with Integration Gains and Last-Mile Momentum

RXO, Inc. (NYSE: RXO) delivered a mixed Q1 2025 earnings report, showcasing both operational progress and lingering headwinds in a turbulent freight market. While revenue surged to $1.4 billion—up 53% year-over-year—the company faces margin pressures and macroeconomic uncertainty. Let’s dissect the numbers and management’s strategic narrative to determine whether RXO’s long-term trajectory justifies investor optimism.
Financial Performance: Growth vs. Margin Struggles
The headline revenue growth—driven by acquisitions and complementary services—masks underlying challenges. Gross margin dipped to 16.0% from 17.4% in Q1 2024, reflecting higher costs in the brokerage segment. Adjusted EBITDA rose to $22 million (+47% YoY), but the adjusted EPS of -$0.03 underscores the squeeze between rising expenses and stagnant pricing power.
Segment Breakdown:
- Brokerage Revenue ($1.1B): Declining full truckload volume (-8% YoY) offset LTL’s 26% surge. The automotive sector’s $10M gross profit loss highlighted sector-specific risks.
- Complementary Services ($450M): Steady 8% growth, fueled by demand for value-added logistics solutions.
- Last Mile ($278M): A standout, with 20% revenue growth and 24% stop growth year-over-year. This segment’s expansion reflects RXO’s strategic focus on e-commerce and urban delivery networks.
Strategic Wins: Integration and Technology

The star of the quarter was RXO’s integration of Coyote Logistics. CEO Drew Wilkerson announced a milestone: Coyote’s operations are now fully migrated to RXO’s proprietary
Connect® platform. This consolidation is projected to deliver over $70M in synergies annually, exceeding earlier targets. Management emphasized that this move lowers costs, improves carrier coordination, and unlocks cross-selling opportunities.Technology investments also shone. AI-driven productivity tools boosted efficiency by 17% YoY, a trend RXO expects to accelerate. The RXO Connect® platform’s scalability is key here—it’s enabling real-time freight management, dynamic pricing, and predictive analytics, which could solidify RXO’s position as a tech-powered logistics leader.
Operational Challenges: Freight Market Volatility and Margin Pressures
The brokerage segment’s struggles are tied to broader industry headwinds. Full truckload demand remains soft, a reflection of slowing industrial activity and competitive pricing. Management admitted that “forecasting in this environment is tough,” with macroeconomic risks—like automotive production cuts—adding to near-term uncertainty.
Gross margin compression in brokerage (13.3%) versus 21% in complementary services highlights the segment’s vulnerability. RXO’s ability to offset this via last-mile and tech-driven efficiency gains will be critical.
Outlook and Risks
Guidance for Q2 2025 calls for $30–40M in Adjusted EBITDA, a modest improvement from Q1. However, brokerage gross margins are expected to stay between 13%–15%, underscoring the need for pricing discipline or volume recovery.
Risks remain:
1. GuruFocus Warnings: Five unspecified “warning signs” are flagged, possibly relating to debt, liquidity, or operational execution.
2. Leverage: While RXO’s net leverage ratio of 1.9x is manageable, further acquisitions or market downturns could strain its $575M liquidity cushion.
3. Macro Risks: A prolonged freight slump could delay margin recovery.
Conclusion: Long-Term Potential vs. Near-Term Pain
RXO’s Q1 results are a microcosm of its broader journey: a high-growth logistics giant navigating a cyclical industry. The integration of Coyote Logistics and RXO Connect®’s scalability position the company for $70M+ annual synergies, a figure that could rise further. Last-mile’s 24% stop growth and tech-driven productivity gains (17% YoY) suggest a path to margin expansion.
However, the stock’s valuation must account for current headwinds. With Q1’s EPS still negative and brokerage margins under pressure, investors should focus on whether RXO can stabilize truckload volumes and leverage its platform to command higher pricing.
Final Take: RXO is a buy for investors willing to bet on its long-term integration and tech-driven logistics model. Near-term volatility is inevitable, but the company’s scale, synergy progress, and last-mile dominance make it a contender to thrive in the next upcycle. Monitor Q2 execution and margin trends closely.
In conclusion, RXO’s Q1 results are a mixed bag—but the seeds of a stronger, tech-enabled logistics powerhouse are clearly taking root.
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