RXO's Q2 Performance: A Strategic Playbook for Profitability Amid a Soft Freight Market

In a freight market defined by headwinds, RXO (NYSE: RXO) has demonstrated a rare blend of operational resilience and strategic foresight. The company's Q2 2025 results, while reflecting the broader industry's challenges, underscore its ability to navigate a soft freight environment through disciplined margin management, complementary service expansion, and the accelerating value of its Coyote Logistics acquisition. For investors, RXO's playbook offers a compelling case study in how to outperform in a sector where many peers are struggling to maintain profitability.

Operational Resilience: Balancing Volume and Margin Pressures

RXO's Q2 2025 revenue of $1.419 billion—a 52% year-over-year increase—highlights its ability to scale despite a 12% decline in full truckload (FTL) volume. The 1% overall brokerage volume growth, driven by a 45% surge in less-than-truckload (LTL) demand, illustrates the company's strategic pivot toward higher-margin segments. While the brokerage gross margin dipped to 14.4% from 19.0% in Q2 2024, this decline was tempered by cost efficiencies from the Coyote integration. The 14.4% margin remains robust compared to industry peers, reflecting RXO's focus on tech-enabled operations and carrier coverage optimization.

The company's guidance for Q3 2025—projecting brokerage gross margins between 13.5% and 15.0%—signals a measured approach to pricing and cost control. This cautious optimism is justified: RXO's unified carrier coverage operations, now fully migrated to the RXO Connect® platform, are unlocking scale efficiencies. These include reduced cost-of-purchased-transportation (COT) expenses and streamlined procurement processes, which should stabilize margins as the integration matures.

Coyote Acquisition: A Catalyst for Long-Term Value

The Coyote Logistics acquisition, completed in 2024, has emerged as a cornerstone of RXO's growth strategy. By Q2 2025, the integration had already delivered $50 million in annualized operating expense synergies, with $70 million in total cash synergies now expected. These savings stem from technology integration, process streamlining, and the elimination of redundancies—a testament to the company's disciplined execution.

The acquisition's impact extends beyond cost savings. Coyote's complementary services, such as managed transportation and last-mile delivery, have become critical growth drivers. Last Mile, for instance, achieved 24% year-over-year stop growth in Q1 2025, accelerating to 17% in Q2. This segment's gross margin of 21.0% (Q1 2025) outperforms the brokerage segment, offering a buffer against freight market volatility. Meanwhile, managed transportation's $2 billion freight-under-management pipeline signals strong demand for RXO's value-added solutions.

Growth Catalysts: Tech-Enabled Scale and Market Positioning

RXO's strategic focus on technology and innovation is a key differentiator. The RXO Connect® platform, now central to its operations, has enhanced capacity management and customer relationships. By leveraging data analytics and automation, the company is improving load matching and reducing idle time—a critical advantage in a fragmented industry.

Moreover, RXO's asset-light model and tech-enabled services position it to capitalize on secular trends like e-commerce-driven last-mile demand. The company's 17% year-over-year growth in last-mile stops (Q2 2025) aligns with broader market tailwinds, suggesting that complementary services could become a larger portion of its revenue mix over time.

Investment Implications: Navigating the Near Term for Long-Term Gains

While RXO's Q2 net loss of $9 million and adjusted EBITDA margin of 2.7% highlight near-term challenges, these figures must be viewed through the lens of integration costs and market conditions. The company's adjusted EBITDA of $38 million in Q2 2025—up from $28 million in Q2 2024—demonstrates progress. With technology integration expected to be complete by late Q3 2025, investors can anticipate margin expansion and cost savings to accelerate.

For long-term investors, RXO's strategic playbook—combining operational discipline, complementary service growth, and acquisition-driven scale—offers a compelling case. The company's ability to maintain a 14.4% brokerage margin in a soft market, while expanding higher-margin services, suggests it is well-positioned to outperform peers as the sector stabilizes.

Conclusion: A Model for Resilience

RXO's Q2 2025 results are a testament to its strategic agility. By leveraging the Coyote acquisition to enhance scale, diversify revenue streams, and optimize margins, the company has created a durable competitive advantage. While the freight market remains challenging, RXO's focus on tech-enabled solutions and complementary services provides a clear path to profitability. For investors seeking exposure to a logistics company with a proven ability to adapt, RXO's stock represents a compelling opportunity—particularly as integration synergies and market tailwinds begin to fully materialize.