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
Year Ended December 31,
(In millions, except percentages) 2025 2024 $ Change % Change
Selling, general and administrative expense 1,106 1,061 45 4 %
Depreciation and amortization expense 457 415 42 10 %
Transaction and integration costs 54 76 (22) (29) %
Restructuring costs and other 27 25 2 8 %
Regulatory matter and litigation expense 65 59 6 10 %
Net loss on divestiture of business 34 2 32 n/m
Other income (expense), net (8) 31 (39) n/m
Income tax expense (68) (8) (60) n/m
n/m - not meaningful
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:
Year Ended December 31,
(In millions, except percentages) 2025 2024 $ Change % Change
Net periodic pension income $ 19 $ 21 $ (2) (10) %
Foreign currency gain (loss):
Realized loss on foreign currency contracts (12) (5) (7) n/m
Unrealized gain (loss) on foreign currency contracts (7) 11 (18) n/m
Total foreign currency gain (loss) (23) 3 (26) n/m
Other income (expense), net $ (8) $ 31 $ (39) n/m
n/m - not meaningful
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Interest expense, net increased due to the debt incurred for the Wincanton Acquisition. Interest expense, net was as follows:
Year Ended December 31,
(In millions, except percentages) 2025 2024 $ Change % Change
Cross-currency swaps (35) (39) 4 (10) %
Interest income (7) (6) (1) 17 %
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 were higher, and we reached a settlement agreement with one of our domestic customers, resulting in a $59 million expense.
Income before income taxes for our foreign operations was $93 million for 2025, compared with $234 million in 2024. In 2025, we incurred a $65 million expense related to the settlement of a foreign regulatory matter and recorded a $34 million loss primarily due to a write-down loss on the divestment of certain grocery contracts.
Income tax expense was $68 million in 2025, compared with $8 million in 2024. Our effective tax rate was 65.4% in 2025 and 5.6% in 2024. The change in the Company’s effective tax rate was primarily driven by non-deductible regulatory matter and transaction costs in 2025 and the release of a valuation allowance in France in 2024.
The Organisation for Economic Co-operation and Development (“OECD”) has introduced the Pillar Two Global Anti-Base Erosion rules (“Pillar Two”), which generally imposes a 15% global minimum tax on multinational companies. While the Company expects to meet transitional safe harbor requirements in most jurisdictions, there are a limited number of jurisdictions where the Company expects Pillar Two taxes to apply. The income tax provision for the year ended December 31, 2025, includes the effects of Pillar Two taxes. This did not have a material impact on our fiscal 2024 or 2025 tax provision, and the Company continues to monitor Pillar Two developments, including the impact of the Side-by-Side Package published by the OECD on January 5, 2026, as it relates to the interplay between the U.S. international tax system and Pillar Two for U.S. headquartered companies.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The legislation includes reinstatement of favorable tax treatment for certain business provisions, including 100% bonus depreciation for qualified property placed in service after January 19, 2025, immediate expensing of domestic research and experimental costs, and revisions to the business interest expense limitations. The impact of OBBBA was limited to our current and deferred provision and did not have a material impact on the Company’s income tax expenses for the year ended December 31, 2025.
Liquidity and Capital Resources
Overview
Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facility and factoring programs.
Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions. The timing and magnitude of our new contract start-ups can vary and may positively or negatively impact our cash flows. We continually
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evaluate our liquidity requirements and capital structure in light of our operating needs, growth initiatives and capital resources.
As of December 31, 2025, we held cash and cash equivalents of $854 million and restricted cash of $3 million, and we have $794 million of borrowing capacity available, net of letters of credit under our revolving credit facility.
On February 18, 2025, our board of directors authorized and announced the repurchase of up to $500 million (the “Repurchase Plan”) of our common stock. The Repurchase Plan permits shares of common stock to be repurchased from time to time in management’s discretion, through a variety of methods, including a 10b5-1 trading plan, open market purchases, privately negotiated transactions or otherwise. The timing and number of shares of common stock repurchased will depend on a variety of factors, including price, general business and market conditions, alternative investment opportunities and funding considerations. We expect to fund any remaining repurchases with existing cash on hand, borrowings on our revolving credit facility, and/or other financing sources. The Repurchase Plan does not obligate the Company to repurchase any specific number of shares of common stock and may be suspended or discontinued at any time. As of December 31, 2025, the remaining authorization under the Repurchase Plan was $300 million.
We believe that our cash and cash equivalents on hand, cash flows generated by our operations, borrowings available under our revolving credit facility, the use of our factoring programs, and refinancing options available to us in the capital markets, will provide sufficient liquidity to operate our business and meet our obligations for at least the next twelve months and for the foreseeable future thereafter.
For additional information regarding our cash requirements from contractual obligations, indebtedness and lease obligations, and legal matters, see “Contractual Obligations” below.
Capital Expenditures
Our future capital spending includes fulfillment costs and investments in technology and automation to improve the speed and accuracy of order fulfillment and the resiliency of our supply chains. The level and the timing of the Company’s capital expenditures within these categories can vary as a result of a variety of factors outside our control, such as the timing of new contracts, availability of labor and materials and foreign currency fluctuations. We believe that we have significant discretion over the amount and timing of our capital expenditures as we are not subject to any agreement that would require significant capital expenditures on a designated schedule or upon the occurrence of designated events.
Financial Condition
The following table summarizes our asset and liability balances as of December 31, 2025 and 2024:
December 31,
(In millions, except percentages) 2025 2024 $ Change % Change
Current assets increased mainly due to higher cash balances from the issuance of long-term debt and increased accounts receivable, net of factoring. Current liabilities increased primarily due to accrued expenses and the current portion of our long-term debt. Additionally, both assets and liabilities increased due to foreign currency translation, specifically the strengthening of the British pound sterling and the Euro against the U.S. dollar compared to December 31, 2024.
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Cash Flow Activity
Our cash flows from operating, investing and financing activities, as reflected in our Consolidated Statements of Cash Flows, were summarized as follows:
Year Ended December 31,
(In millions, except percentages) 2025 2024 $ Change % Change
Net cash provided by operating activities $ 434 $ 549 $ (115) (21) %
Net cash used in investing activities (196) (1,157) 961 (83) %
Net cash provided by financing activities 111 636 (525) (83) %
Effect of exchange rates on cash and cash equivalents 23 (13) 36 n/m
Net increase in cash, restricted cash and cash equivalents $ 372 $ 15 $ 357 n/m
n/m - not meaningful
Operating Activities
Cash flows from operating activities decreased by $115 million in 2025 compared to 2024. The decrease was due to lower net income adjusted for the net effect of non-cash items and increased working capital consumption in 2025.
Investing Activities
Investing activities used $196 million of cash in 2025 compared with $1.2 billion in 2024. In 2025, we used $324 million to purchase property and equipment, paid $24 million to settle net investment hedges, and received $149 million from the sale of property and equipment. In 2024, we used $863 million, net of cash received, to fund the Wincanton Acquisition, used $359 million to purchase property and equipment, received $61 million from the sale of property and equipment, and received $4 million from the settlement of net investment hedges.
Financing Activities
Financing activities generated $111 million of cash in 2025 compared with $636 million in 2024. In 2025, we received $577 million in proceeds from the issuance of long-term debt, used $200 million to repurchase shares of our common stock under the stock repurchase plan, used $180 million to repay debt, used $50 million to repay finance lease obligations, used $25 million to repay revolving credit facilities, used $9 million to pay employee taxes on net settlement of equity awards, and used $2 million to pay debt issuance costs. In 2024, we received $1.1 billion in proceeds from the issuance of long-term debt, used $286 million to repay debt, used $122 million to repay revolving credit facilities, used $45 million to repay finance lease obligations, used $9 million to pay debt issuance costs, and used $8 million to pay employee taxes on net settlement of equity awards.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations
As of December 31, 2025, our outstanding obligations included $2.8 billion in operating leases, $326 million in finance leases, and $2.8 billion in long-term debt, including the current portion. In addition, we have obligations under agreements to purchase goods or services entered into during the ordinary course of business, which are enforceable and legally binding.
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For additional information regarding our cash requirements for operating and finance leases, indebtedness, and commitments and contingencies, see Note 9. “Leases,” Note 10. “Debt and Financing Arrangements,” and Note 18. “Commitments and Contingencies” to the Consolidated Financial Statements.
Guaranteed Securities: Summarized Financial Information
The following information is provided to comply with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended for the €500 million 3.750% notes due 2030 issued by GXO Logistics Capital B.V. (“GXO Capital”), a subsidiary of the Company incorporated under the laws of the Netherlands. GXO Capital was incorporated on October 15, 2025.
The €500 million 3.750% notes due 2030 are fully and unconditionally guaranteed on an unsecured and unsubordinated basis by GXO Logistics, Inc. (“GXO”). The €500 million 3.750% notes due 2030 are not guaranteed by any of GXO’s or GXO Capital’s subsidiaries (all GXO subsidiaries other than GXO Capital are referred to herein as "non-guarantor subsidiaries"). Holders of the €500 million 3.750% notes due 2030 will have a direct claim only against GXO Capital, as issuer, and GXO, as guarantor.
The following tables set forth the summarized financial information as of and for the years ended December 31, 2025 and 2024 of GXO, and as of and for the period ended December 31, 2025, of GXO Capital, on a standalone basis, which does not include the consolidated impact of the assets, liabilities, and financial results of their subsidiaries except as noted on the tables below, nor does it include any impact of intercompany eliminations as there were no intercompany transactions between GXO and GXO Capital. This summarized financial information is not intended to present the financial position or results of operations of GXO or GXO Capital in accordance with U.S. generally accepted accounting principles (“GAAP”).
For additional information, see “Note 10. Debt and Financing Arrangements” to the Consolidated Financial Statements.
GXO
Summarized Results of Operations
Standalone and Unconsolidated (Unaudited)
Year Ended December 31,
Revenue $ — $ —
Costs and expenses 32 53
Operating loss (32) (53)
Dividend income and other income from non-guarantor subsidiaries 133 137
Other income (expense), net (15) 4
Interest expense, net (94) (72)
Income tax benefit 21 13
Net income attributable to GXO standalone $ 13 $ 29
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GXO
Summarized Assets and Liabilities
Standalone and Unconsolidated (Unaudited)
December 31,
Investments in non-guarantor subsidiaries 2,361 3,819
Notes receivable from non-guarantor subsidiaries 860 1
Other noncurrent assets 81 56
Accounts payable to non-guarantor subsidiaries $ 384 $ 268
Other current liabilities 93 59
Notes payable to non-guarantor subsidiaries 210 127
Other noncurrent liabilities 167 5
GXO Capital
Summarized Results of Operations
Standalone and Unconsolidated (Unaudited)
Year Ended
(In millions) December 31, 2025
Revenue $ —
Costs and expenses —
Operating income —
Interest expense, net (2)
Income tax (expense) benefit —
Loss attributable to GXO Capital standalone $ (2)
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GXO Capital
Summarized Assets and Liabilities
Standalone and Unconsolidated (Unaudited)
December 31,
Current assets $ 3
Investments in non-guarantor subsidiaries 2,350
Other noncurrent assets 1
Current liabilities $ 6
Long-term debt 580
Total liabilities $ 586
Critical Accounting Policies and Estimates
We prepare our Consolidated Financial Statements in accordance with GAAP. We make assumptions, estimates and judgments that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses. Material changes in these assumptions, estimates and/or judgments have the potential to materially alter our results of operations. We have identified the following accounting policies to be the most critical as they are important to our financial condition and results of operations and require significant judgment and estimates on the part of management in their application.
Business Combinations
We record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting. We allocate the fair value of purchase consideration to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to goodwill.
Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed. We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets. Significant assumptions utilized in the allocation of the purchase price related to intangible assets include future expected cash flows from acquired intangibles and discount rates.
Our estimates of fair value are based upon reasonable assumptions but are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. For additional information, see Note 5. “Acquisition and Divestiture” to the Consolidated Financial Statements.
Evaluation of Goodwill
We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Goodwill is tested at the reporting unit level, which is an operating segment or one level below, on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not
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reduce the fair value of a reporting unit below its carrying value. We have three reporting units: i) Americas and Asia-Pacific, ii) United Kingdom and Ireland and iii) Continental Europe.
For each reporting unit, we first assess qualitative factors that are specific to the reporting unit as well as industry and macroeconomic factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The qualitative factors could include a significant change in the business climate, legal factors, operating performance indicators, competition or the sale or disposition of a significant portion of a reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
A quantitative goodwill impairment test, when performed, includes estimating the fair value of a reporting unit using the income and/or market approach. The income approach of determining fair value is based on the present value of estimated future cash flows, which requires us to make various assumptions, including assumptions about the timing and amount of future cash flows, growth rates and discount rates. The discount rates reflect management’s judgment and are based on a risk-adjusted weighted-average cost of capital utilizing industry market data of businesses similar to the reporting units. Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital and tax rates. Our forecasts also reflect expectations concerning future economic conditions, interest rates and other market data. The market approach of determining fair value is based on comparable market multiples for companies engaged in similar businesses, as well as recent transactions within our industry. We believe using these valuation techniques yields the most appropriate evidence of the reporting unit’s fair value.
Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods. Changes in assumptions or estimates could materially affect the estimate of the fair value of a reporting unit and therefore could affect the likelihood and amount of any potential impairment.
Employee Benefit Plans
We sponsor various retirement plans, with the most significant plans held in the U.K. (the “U.K. Retirement Plans”). Assumptions used in the accounting for these employee benefit plans include the discount rate and expected return on plan assets. Assumptions are determined based on company data and appropriate market indicators and are evaluated each year at December 31. The December 31, 2025 pension funded status and 2026 expense are affected by year-end 2025 assumptions. A change in any of these assumptions would have an effect on the net periodic pension cost reported in the Consolidated Financial Statements.
Sensitivity Analysis. The discount rate is determined based on the yield on a portfolio of high-quality bonds, constructed to provide cash flows necessary to meet our pension plans’ expected future benefit payments, as determined for the accumulated benefit obligation. A 50-basis-point decrease in the discount rate of the U.K. Retirement Plans would have resulted in an estimated increase in the accumulated benefit obligation of approximately $94 million in 2025. The expected return on plan assets assumption is derived from the current and expected asset allocation of the pension plan assets, and it considers historical and expected returns for various classes of plan assets. An increase or decrease of 50 basis points in the expected return on plan assets for the U.K. Retirement Plans would have decreased or increased our net periodic pension cost by approximately $9 million in 2026. For additional information, see Note 15. “Employee Benefit Plans” to the Consolidated Financial Statements.
New Accounting Standards
Information related to new accounting standards is included in Note 2. “Basis of Presentation and Significant Accounting Policies” to the Consolidated Financial Statements.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our market risk disclosures involve forward-looking statements. Actual results could differ materially from those projected in such forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of December 31, 2025, our long-term debt included $2.5 billion in fixed-rate notes and $275 million in a Secured Overnight Financing Rate (SOFR)-based variable-rate term loan, excluding finance leases and other debt. A hypothetical 1% increase in SOFR as of December 31, 2025, would have increased our interest expense by approximately $3 million.
Foreign Currency Exchange Rate Risk
A significant proportion of our net assets and income is in non-USD currencies. These are mainly the British pound sterling (“GBP”) and the Euro (“EUR”). We are exposed to currency risk from changes in the value of these currencies. Our foreign currency-denominated assets, liabilities, and cash flows are affected by such changes. If the EUR or GBP depreciates against the USD, it could adversely impact our financial results.
We entered into cross-currency swap agreements to manage our foreign currency exchange risk by effectively converting a portion of the fixed-rate USD-denominated debt, including interest payments, into fixed-rate EUR-denominated debt and a portion of the floating-rate USD-denominated loan, including interest payments, into floating-rate EUR-denominated debt.
We use foreign currency options contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or GBP as their functional currency.
As of December 31, 2025, a uniform 10% strengthening in the USD relative to the EUR and GBP would have decreased our net assets by $29 million and $96 million, respectively, net of foreign currency hedging. These theoretical calculations assume an instantaneous, parallel shift in the GBP and EUR rates.
See Note 11. “Fair Value Measurements and Financial Instruments” to the Consolidated Financial Statements for additional information.
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Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Page
Report of Independent Registered Public Accounting Firm 34
Consolidated Balance Sheets as of December 31, 2025 and 2024 39
Notes to Consolidated Financial Statements 43
Note 1 - Organization 43
Note 2 - Basis of Presentation and Significant Accounting Policies 43
Note 3 - Revenue Recognition 49
Note 4 - Segment Information 50
Note 5 - Acquisition and Divestiture 51
Note 6 - Goodwill 53
Note 7 - Intangible Assets 53
Note 8 - Property and Equipment 54
Note 9 - Leases 54
Note 10 - Debt and Financing Arrangements 56
Note 11 - Fair Value Measurements and Financial Instruments 58
Note 12 - Accrued Expenses 61
Note 13 - Stockholders’ Equity 61
Note 14 - Stock-Based Compensation 62
Note 15 - Employee Benefit Plans 65
Note 16 - Restructuring Costs and Other 67
Note 17 - Income Taxes 68
Note 18 - Commitments and Contingencies 73
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
GXO Logistics, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of GXO Logistics, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sufficiency of audit evidence over revenue from contracts with customers
As discussed in Notes 2 and 3 to the consolidated financial statements, revenue is recognized over the period in which services are provided under the terms of the Company’s contractual relationship with its customers. For the year ended December 31, 2025, the Company reported $13.2 billion of revenue.
We identified the evaluation of the sufficiency of audit evidence over revenue from contracts with customers (revenue) as a critical audit matter. Subjective auditor judgment and IT professionals with specialized skills and knowledge were required to evaluate the sufficiency of audit evidence obtained over revenue due to the number and dispersion of warehouse management and other IT systems used in the processing and recording of revenue.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the processing and recording of revenue. We evaluated the design and tested the operating effectiveness of certain internal controls related to the processing and recording of revenue, including manual controls related to the examination of revenue contracts and detection of revenues recorded outside of expectations. We involved IT professionals with specialized skills and knowledge to test certain manual and automated controls, including general IT controls, over multiple relevant IT systems and information used in internal control. We compared certain revenue activity recorded during the year to cash received, adjusted for reconciling items. We evaluated the relevance and reliability of certain reconciling items to underlying documentation, including the changes in accounts receivable and deferred revenue. We examined a selection of revenue contracts and transactions to assess that revenue was recorded in accordance with the Company’s accounting policy. Additionally, for a sample of accrued revenue at year-end, we confirmed with the Company’s customers the amount of revenue billed subsequent to year-end and compared the result to the Company’s accounting records. We evaluated the
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sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.
/s/ KPMG LLP
We have served as the Company’s auditor since 2021.
New York, New York
February 25, 2026
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GXO Logistics, Inc.
Consolidated Statements of Operations
Year Ended December 31,
Selling, general and administrative expense 1,106 1,061 998
Depreciation and amortization expense 457 415 361
Transaction and integration costs 54 76 34
Restructuring costs and other 27 25 25
Regulatory matter and litigation expense 65 59 —
Net loss on divestiture of business 34 2 7
Other income (expense), net (8) 31 1
Income tax expense (68) (8) (33)
Net income attributable to Noncontrolling Interests (“NCI”) (4) (4) (4)
Net income attributable to GXO $ 32 $ 134 $ 229
Earnings per share
Weighted-average shares outstanding used in computation of earnings per share
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Comprehensive Income
Year Ended December 31,
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments 147 (34) 19
Cash flow hedges (3) (1) (2)
Fair value hedges (1) — —
Pension plans (31) (42) (1)
Other comprehensive income (loss), net of tax 112 (77) 16
Comprehensive income, net of tax 148 61 249
Less: Comprehensive income attributable to NCI 4 1 5
Comprehensive income attributable to GXO $ 144 $ 60 $ 244
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Balance Sheets
December 31,
(Dollars in millions, shares in thousands, except per share amounts) 2025 2024
ASSETS
Current assets
Cash and cash equivalents $ 854 $ 413
Accounts receivable, net of allowance of $15 and $15 2,028 1,799
Long-term assets
Intangible assets, net of accumulated amortization of $781 and $618 909 986
LIABILITIES AND EQUITY
Current liabilities
Current operating lease liabilities 745 647
Other current liabilities 434 385
Long-term liabilities
Long-term operating lease liabilities 2,044 1,898
Other long-term liabilities 709 623
Commitments and Contingencies (Note 18)
Stockholders’ Equity
Treasury stock, at cost; 5,356 and 0 shares, respectively (202) —
Additional Paid-In Capital (“APIC”) 2,667 2,629
Accumulated Other Comprehensive Income (Loss) (“AOCIL”) (201) (313)
Total stockholders’ equity before NCI 2,983 3,003
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization expense 457 415 361
Goodwill and intangibles write-down loss held for sale 25 — —
Stock-based compensation expense 47 39 35
Deferred tax benefit (29) (38) (41)
Changes in operating assets and liabilities
Accounts payable (61) 23 (3)
Accrued expenses and other liabilities 16 (93) (61)
Net cash provided by operating activities 434 549 558
Cash flows from investing activities:
Proceeds from sale of property and equipment 149 61 18
Acquisition of business, net of cash acquired — (863) (149)
Net investment hedges settlement (24) 4 (3)
Other 3 — (2)
Net cash used in investing activities (196) (1,157) (410)
Cash flows from financing activities:
Common stock repurchased (200) — —
Proceeds from long-term debt, net of issuance discount 577 1,096 —
Payments for debt issue costs (2) (9) —
Net borrowings under revolving credit facilities (25) (122) (18)
Repayments of finance lease obligations (50) (45) (29)
Taxes paid related to net share settlement of equity awards (9) (8) (12)
Net cash provided by (used in) financing activities 111 636 (186)
Effect of exchange rates on cash and cash equivalents 23 (13) 13
Cash, restricted cash and cash equivalents, beginning of year 485 470 495
Cash, restricted cash and cash equivalents, end of year $ 857 $ 485 $ 470
Reconciliation of cash, restricted cash and cash equivalents
Restricted Cash (included in Other current assets) 2 — —
Restricted cash (included in Other long-term assets) 1 72 2
Total cash, restricted cash and cash equivalents $ 857 $ 485 $ 470
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
Supplemental cash flow information:
Cash paid for interest, net $ 128 $ 97 $ 57
Cash paid for income taxes, net 59 43 84
Noncash financing activities:
Excise tax liability related to stock repurchases 2 — —
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Changes in Equity
Common Stock APIC RetainedEarnings AOCIL EquityBefore NCI NCI TotalEquity
(Shares in thousands, dollars in millions) Shares Amount Treasury stock
Other comprehensive income — — — — — 15 15 1 16
Stock-based compensation — — — 35 — — 35 — 35
Vesting of stock compensation awards 555 — — — — — — — —
Dividends to NCI — — — — — — — (4) (4)
Other comprehensive loss — — — — — (74) (74) (3) (77)
Stock-based compensation — — — 39 — — 39 — 39
Vesting of stock compensation awards 607 — — — — — — — —
Dividends to NCI — — — — — — — (3) (3)
Net income (loss) — — — — 32 — 32 4 36
Other comprehensive income — — — — — 112 112 — 112
Stock-based compensation — — — 47 — — 47 — 47
Vesting of stock compensation awards 587 — — — — — — — —
Dividends to NCI — — — — — — — (4) (4)
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Notes to Consolidated Financial Statements
1. Organization
Nature of Operations
GXO Logistics, Inc., together with its subsidiaries (“GXO” or the “Company”), is the largest pure-play contract logistics provider in the world. The Company provides its customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics, and other supply chain services differentiated by its ability to deliver technology-enabled, customized solutions at scale. GXO serves a broad range of customers across various industries, such as e-commerce, omnichannel retail, technology and consumer electronics, food and beverage, industrial and manufacturing, and consumer packaged goods, among others. The Company presents its operations in the Consolidated Financial Statements as one reportable segment.
The Company became a standalone publicly traded company on August 2, 2021, when XPO, Inc. spun off the Company to GXO’s stockholders and GXO’s common stock, par value of $0.01 per share, began trading independently on the New York Stock Exchange under the ticker symbol “GXO”. GXO was incorporated as a Delaware corporation in February 2021.
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The Company’s Consolidated Financial Statements include the accounts of GXO Logistics, Inc. and its majority-owned subsidiaries and variable interest entities where the Company is the primary beneficiary. The Company has eliminated intercompany accounts and transactions. Certain amounts reported for prior years have been reclassified to conform to the current year’s presentation.
Use of Estimates
The preparation of Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires the use of estimates, judgments and assumptions that affect the reported amounts in the Consolidated Financial Statements and accompanying notes. The Company bases its estimates and judgments on historical information and on various other assumptions that it believes are reasonable under the circumstances. GAAP requires the Company to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, income taxes, loss contingencies, defined benefit plans, valuation of long-lived assets including goodwill and intangible assets and their associated estimated useful lives, collectability of accounts receivable and the fair value of financial instruments. Actual results may vary from those estimates.
Significant Accounting Policies
Cash, Restricted Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less on the date of purchase to be cash equivalents. Restricted cash relates to deposits in connection with the ordinary conduct of
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business. Restricted cash is recorded in Other current assets and Other long-term assets on the Consolidated Balance Sheets.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable represents the Company’s unconditional right to receive consideration from its customers. The Company records accounts receivable at the contractual amount and records an allowance for doubtful accounts for the amount it estimates it may not collect. In determining the allowance for doubtful accounts, the Company considers historical collection experience, the age of the accounts receivable balances, the credit quality and risk of its customers, any specific customer collection issues, current economic conditions and other factors that may impact its customers’ ability to pay. The Company writes off accounts receivable balances once the receivables are no longer deemed collectible.
The roll forward of the allowance for doubtful accounts was as follows:
Year Ended December 31,
Beginning balance $ 15 $ 11 $ 12
Provisions charged to expense 5 16 10
Write-offs, less recoveries, and foreign exchange translation (5) (12) (11)
Property and Equipment
Property and equipment, which includes assets recorded under finance leases, are stated at cost less accumulated depreciation or, in the case of property and equipment acquired in a business combination, at fair value at the date of acquisition. Maintenance and repair expenditures are charged to expenses as incurred.
For internally developed computer software, all costs incurred during the planning and evaluation stages are expensed as incurred. Software development costs are capitalized once the preliminary project stage is complete, and it is probable that the project will be completed and the software will be used to perform the intended function.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the remaining lease term, whichever is shorter. Land and assets held within construction in progress are not depreciated.
The estimated useful lives of property and equipment are described below:
Estimated Useful Life
Buildings 40 years
Leasehold improvements Shorter of useful life or term of lease
Warehouse equipment, fleet and other 3 to 15 years
Technology and automated systems 3 to 15 years
Computer equipment 1 to 5 years
Internal-use software 1 to 5 years
Leases
The Company has entered into noncancelable operating and finance leases primarily for real estate and warehouse equipment. The Company determines whether an arrangement is a lease at inception and, if so, whether that lease meets the classification criteria for a finance or an operating lease at the commencement date.
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For leases with terms greater than 12 months, the Company recognizes lease assets and lease liabilities at lease commencement based on the present value of lease payments over the lease term. For most of the Company’s leases, the implicit rate cannot be readily determined and, as a result, the Company uses the incremental borrowing rates at the commencement date to determine the present value of future lease payments.
For leases that include fixed rental payments for both the use of the asset (“lease costs”) as well as for other occupancy or service costs relating to the asset (“non-lease costs”), the Company generally includes both the lease costs and non-lease costs as a single lease component in the measurement of the lease asset and lease liability. Certain lease agreements include rental payments based on changes in the consumer price index (“CPI”) or fair market value. Lease liabilities are not remeasured due to changes in the CPI or fair market value; instead, such changes are treated as variable costs and are excluded from the measurement of the right-of-use asset and lease liability. These payments are recognized in the period in which the related obligation is incurred.
Lease agreements may include rent escalation clauses, renewal or termination options, rent holidays, and certain landlord incentives, such as tenant improvement allowances. Lease expense is recognized on a straight-line basis over the noncancelable lease term and renewal periods that are considered reasonably certain. Incentives received from a landlord are included as a reduction to the lease asset and are included within operating activities on the Consolidated Statement of Cash Flows.
Goodwill and Intangible Assets
The Company records goodwill as the excess of the consideration transferred over the fair value of net assets acquired in business combinations. Goodwill is tested for impairment at the reporting unit level, which is an operating segment, or one level below. The Company has three reporting units: i) Americas and Asia-Pacific, ii) United Kingdom and Ireland and iii) Continental Europe. The Company measures goodwill impairment, if any, as the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill.
The Company performed its annual goodwill impairment test on November 1. The review of goodwill impairment consists of either using a qualitative approach to determine whether it is more likely than not that the fair value of the assets is less than their respective carrying values or a one-step quantitative impairment test. In performing the qualitative assessment, the Company considers many factors in evaluating whether the carrying value of goodwill may not be recoverable, including declines in the Company’s stock price, market capitalization of the Company and macroeconomic conditions. If, based on the results of the qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, additional quantitative impairment testing is performed. The quantitative test requires that the carrying value of each reporting unit be compared with its estimated fair value. If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). The Company uses the income approach and/or a market-based approach to determine the reporting units’ fair values. The determination of discounted cash flows used in the income approach requires significant estimates and assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.
The Company’s intangible assets consist of customer relationships, trade names, trademarks, and developed technology which are amortized on a straight-line basis or over the period the economic benefits are expected to be realized. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Impairment of Long-lived Assets
The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If an impairment indicator is present, the Company evaluates recoverability by comparing the carrying amount of the asset group to the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group. If the assets are impaired, an impairment loss is measured as the amount by which the carrying amount of the asset group
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exceeds the fair value of the asset. The Company estimates fair value using the expected future cash flows discounted at a rate consistent with the risks associated with the recovery of the asset.
For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference.
Revenue Recognition
The Company generates revenue by providing logistics services for its customers, including warehousing and distribution, order fulfillment, reverse logistics, packaging and labeling, factory and aftermarket support and inventory management ranging from a few months to a few years. Generally, the Company’s contracts provide the customer an integrated service that includes two or more services, including but not limited to facility and equipment costs, construction, repair and maintenance services and labor. For these contracts, the Company does not consider the services to be distinct within the context of the contract when the separate scopes of work combine into a single commercial objective or capability for the customer. Accordingly, the Company generally identifies one performance obligation in its contracts, which is a series of distinct services that remain substantially the same over time and possess the same pattern of transfer.
Revenue is recognized using the series guidance over the period in which services are provided under the terms of the Company’s contractual relationships with its customers. The transaction price is based on the amount specified in the contract with the customer and contains fixed and variable consideration. In general, the fixed consideration in a contract represents reimbursement for warehouse, technology and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract. The variable consideration is comprised of cost reimbursement based on the costs incurred, per-unit pricing is determined based on units provided and time and materials pricing is based on the hours of services provided. The variable consideration component is recognized over time based on the level of activity. Generally, pricing can be adjusted based on contractual provisions related to achieving agreed-upon performance metrics, changes in volumes, services and market conditions. Revenue relating to these pricing adjustments is estimated and included in the consideration if it is probable that a significant revenue reversal will not occur in the future. The estimate of variable consideration is determined by the expected value or most likely amount method and factors in current, past and forecasted experience with the customer. Customers are billed based on terms specified in the revenue contract and they pay us according to approved payment terms.
Contract Assets and Liabilities
Contract assets consist of two components: customer acquisition costs and costs to fulfill a contract. The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract in advance of revenue recognition, such as certain labor, third-party service and related product costs. These costs are recognized as an asset if the Company expects to recover them. Contract assets are recognized consistent with the transfer of the underlying performance obligations to the customer based on the specific contracts to which they relate. Contract assets are amortized to Direct operating expense in the Consolidated Statements of Operations over the contract term.
Contract liabilities represent the Company’s obligation to transfer services to a customer for which the Company has received consideration or the amount that is due from the customer.
Derivative Instruments
The Company records all its derivative financial instruments on the Consolidated Balance Sheets as assets or liabilities measured at fair value. For derivatives designated as a hedge, and effective as part of a hedge transaction, the effective portion of the gain or loss on the hedging derivative instrument is reported as a component of other comprehensive income or as a basis adjustment to the underlying hedged item and reclassified to earnings in the year in which the hedged item affects earnings. The effective portion of the gain or loss on hedges of foreign net investments is generally not reclassified to earnings unless the net investment is disposed. To the extent derivatives
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do not qualify or are not designated as hedges, or are ineffective, their changes in fair value are recorded in earnings immediately, which may subject the Company to increased earnings volatility.
Stock-Based Compensation
The Company accounts for stock-based compensation based on the equity instrument’s grant date fair value. Stock compensation expense is recognized over the requisite service period of the award, based on the grant date fair value, which is generally the vesting term. For grants of stock options, the Company determines the fair value based on the Black-Scholes option-pricing model. For grants of restricted stock units (“RSU”) subject to service-based vesting conditions, the Company establishes the fair value based on the market price on the date of the grant. For grants of awards subject to both market-based and performance-based vesting conditions (“PSU”), the Company determines the fair value based on a Monte Carlo simulation model. The Company accounts for forfeitures as they occur.
Earnings per Share
Basic earnings per share (“EPS”) is based upon net earnings available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that were outstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive. Anti-dilutive shares were immaterial for the years ended December 31, 2025, 2024 and 2023.
Defined Benefit Plans
The Company calculates its employer-sponsored retirement plan obligations using various actuarial assumptions and methodologies. Assumptions include discount rates, expected long-term rate of return on plan assets, mortality rates and other factors. The assumptions used in recording the projected benefit obligation and fair value of plan assets represent the Company’s best estimates based on available information regarding historical experience and factors that may cause future expectations to differ. The Company’s obligation and future expense amounts could be materially impacted by differences in experience or changes in assumptions.
The Company determines the net periodic benefit cost of the plans using assumptions regarding the projected benefit obligation and the fair value of the plan assets as of the beginning of the year. Net periodic benefit cost is recorded in Other income, net in the Consolidated Statement of Operations. The Company calculates the funded status of the defined benefit plan as the difference between the projected benefit obligation and the fair value of the plan assets.
The impact of plan amendments, actuarial gains and losses and prior-service costs are recorded in AOCIL and are generally amortized as a component of net periodic benefit cost over the remaining service period of the active employees covered by the defined benefit pension plans. Cumulative gains and losses over 10% of the greater of the beginning of year benefit obligation or fair value of the plan assets are amortized over the expected average life expectancy.
Income Taxes
The Company accounts for income taxes using the asset and liability method on a legal entity and jurisdictional basis, under which the Company recognizes the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Consolidated Financial Statements or tax returns. The calculation of the annual effective tax rate relies on several factors including pre-tax earnings, various jurisdiction statutory tax rates, tax credits, uncertain tax positions, valuation allowances and differences between tax laws and accounting laws. The effective tax rate in any financial statement period may be materially impacted by changes in the blend and/or level of earnings by individual taxing jurisdictions.
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If the Company considers that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, presuming an examination by a taxing authority with full knowledge of all relevant information, the Company recognizes all or a portion of the benefit. Valuation allowances are established when it is more likely than not that the Company’s deferred tax assets will not be realized based on all available evidence.
The Company uses judgments and estimates in evaluating its tax positions. The Company’s tax returns are subject to examination by U.S. Federal, state and local and foreign taxing jurisdictions. The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years. The Company recognizes tax benefits from uncertain tax positions only if based on the technical merits of the position it is more likely than not that the tax positions will be sustained upon audit. The Company adjusts these tax liabilities, including related interest and penalties, based on the current facts and circumstances. The Company reports tax-related interest and penalties as a component of income tax expense.
Foreign Currency Translation and Transactions
The assets and liabilities of the Company’s foreign subsidiaries that use their local currency as their functional currency are translated to U.S. dollars (“USD”) using the exchange rate prevailing at each balance sheet date, with balance sheet currency translation adjustments recorded in AOCIL in the Consolidated Balance Sheets. The Company converts foreign currency transactions recognized in the Consolidated Statements of Operations to USD by applying the exchange rate prevailing on the date of the transaction. Gains and losses arising from foreign currency transactions and the effects of remeasuring monetary assets and liabilities are recorded in Other income, net in the Consolidated Statements of Operations.
Adoption of New Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for expanded disclosures primarily related to income taxes paid and the rate reconciliation. The amendments are effective prospectively for annual periods beginning after December 15, 2024. The ASU 2023-09 did not have a material impact on the Company’s results of operations, financial position or cash flows, other than additional disclosure requirements. The Company has retrospectively adopted and presented comparative periods in conformity with the new standard. See Note 17. “Income Taxes.”
Accounting Pronouncements Issued But Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard requires all public companies to disclose more detailed information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods. This standard is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The Company does not expect this standard to have a material impact on its results of operations, financial position or cash flows, and is currently evaluating the impact of adopting this standard on its disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles- Goodwill and Other- Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this Update remove all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when certain capitalization criteria are met. The ASU also supersedes guidance on website development costs. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of this standard on its results of operations, financial position or cash flows, and the impact of adopting this standard on its disclosures.
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3. Revenue Recognition
Revenue disaggregated by geographical area was as follows:
Year Ended December 31,
The Company’s revenue can also be disaggregated by various verticals, reflecting the customers’ principal industry. Revenue disaggregated by industry was as follows:
Year Ended December 31,
Contract Balances
The contract asset and contract liability balances from contracts with customers were as follows:
December 31,
Contract assets and contract costs included in:
Other current assets $ 36 $ 37
Total contract assets $ 271 $ 233
Contract liabilities included in:
Other current liabilities $ 279 $ 272
Other long-term liabilities 101 128
Total contract liabilities $ 380 $ 400
Revenue recognized included the following:
Year Ended December 31,
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4. Segment Information
The Company is organized geographically into three operating segments: i) Americas and Asia-Pacific, ii) United Kingdom and Ireland, and iii) Continental Europe. The Company’s reporting unit results are regularly provided to the chief operating decision maker (“CODM”). The CODM is our Chief Executive Officer, who assesses the Company’s performance and allocates resources.
The CODM evaluates the Company’s performance and allocates resources primarily based on adjusted earnings before interest, taxes, depreciation and amortization, adjusted for transaction and integration costs, restructuring costs and other, regulatory matter and litigation expense, net loss on divestiture of business, and unrealized gain/loss on foreign currency contracts (“Adjusted EBITDA”). The CODM uses Adjusted EBITDA to communicate performance targets to the segment managers, allocate resources to the segments, and to monitor segment performance. Additionally, the CODM considers the performance of this measure against planned and forecasted amounts to make investing and resource allocation decisions. The actual results are used in assessing performance of the Company and in establishing management’s compensation.
For disclosure purposes, we aggregate these three operating segments into one reportable segment due to the similar nature of their operations and economic characteristics.
The Company’s segment results were as follows:
Year Ended December 31,
Selling, general and administrative expense(1) 1,029 996 931
Other (income) expense, net(2)(4) 1 (20) 4
Less:
Amortization of intangible assets acquired 119 108 71
Transaction and integration costs 54 76 34
Restructuring costs and other 27 25 25
Regulatory matter and litigation expense 65 59 —
Net loss on divestiture of business 34 2 7
Unrealized (gain) loss on foreign currency contracts(4) 7 (11) (5)
Income tax expense (68) (8) (33)
(1) Excludes unallocated corporate expenses.
(2) Other (income) expense, net excluding unrealized (gain) loss on foreign currency contracts.
(3) Corporate expenses include unallocated costs related to corporate functions such as salaries and benefits, rent, and professional fees which are recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations.
(4) Included in Other income/expense, net in the Consolidated Statements of Operations.
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Long-lived assets geographic information
The Company’s long-lived assets for this disclosure are defined as Property and equipment, net of accumulated depreciation, plus operating lease assets. The Company’s long-lived assets by geographic region were as follows:
December 31,
(1) Europe exclusive of the United Kingdom.
(2) Includes Asia, Latin America and Canada.
5. Acquisition and Divestiture
On April 29, 2024, the Company completed the acquisition of Wincanton plc (now “Wincanton Limited”) for a total consideration of £762 million ($958 million as of the acquisition date) (the “Wincanton Acquisition”). The Wincanton Acquisition was subject to review by the U.K. Competition and Markets Authority (the “CMA”).
On June 19, 2025, the CMA approved the Wincanton Acquisition, subject to the divestment of certain grocery contracts in the U.K. (the “Wincanton Divestment”). In the fourth quarter of 2025, the Company met the held-for-sale criteria for the anticipated Wincanton Divestment and recorded a $37 million write-down loss, including $4 million of goodwill, $21 million of customer relationships, and $12 million fair value adjustment. Assets and liabilities held for sale were not material and are included in Other current assets and Other current liabilities, respectively, in the Consolidated Balance Sheets. The Company expects to complete the Wincanton Divestment in 2026.
In connection with the Wincanton Acquisition, the Company incurred transaction costs of $48 million and $61 million for the years ended December 31, 2025 and 2024, respectively, which were included in Transaction and integration costs in the Consolidated Statements of Operations.
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The final fair value of assets acquired and liabilities assumed at the acquisition date was:
(In millions)
ASSETS
Current assets
Cash and cash equivalents $ 90
Accounts receivable 238
Other current assets 65
Total current assets 393
Long-term assets
Property and equipment 128
Operating lease assets 177
Intangible assets(1) 532
Other long-term assets 152
Total long-term assets 989
LIABILITIES
Current liabilities
Accounts payable $ 67
Accrued expenses 293
Current debt 7
Current operating lease liabilities 41
Other current liabilities 147
Total current liabilities 555
Long-term liabilities
Long-term debt 215
Long-term operating lease liabilities 136
Other long-term liabilities 240
Total long-term liabilities 591
Total liabilities $ 1,146
Net assets purchased $ 236
Purchase price $ 958
Goodwill recorded(2) $ 722
(1) The Company acquired $532 million of intangible assets, comprised of customer relationships, trade names, and intellectual property with weighted-average useful lives of 12.5 years.
(2) Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill acquired was recorded in the United Kingdom and Ireland reporting unit and was primarily attributed to anticipated synergies. The Company does not expect the goodwill recognized in connection with the Wincanton Acquisition to be deductible for income tax purposes.
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6. Goodwill
The following tables present the changes in goodwill for the years ended December 31, 2025 and 2024.
(In millions)
Foreign exchange translation(2) (72)
Acquisition(1) (4)
Wincanton Divestment(3) (4)
Foreign exchange translation(2) 240
(1) In 2024, includes $726 million and $4 million for the preliminary purchase price allocation for the Wincanton Acquisition and adjustments to the purchase price allocation for the PFSweb, Inc. acquisition, respectively. In 2025, includes $4 million reduction for the purchase price allocation of the Wincanton Acquisition.
(2) Changes to goodwill amounts resulting from foreign currency translation after the acquisition date are presented as the impact of foreign exchange translation.
(3) For additional information see note 5.
As of December 31, 2025 and 2024, there were $4 million and zero accumulated goodwill impairment losses, respectively.
7. Intangible Assets
The following table summarizes identifiable intangible assets subject to amortization:
Intangible asset amortization expense was $119 million, $108 million and $71 million for the years ended December 31, 2025, 2024 and 2023, respectively. In addition, in connection with the Wincanton Divestment (see note 5), $21 million of customer relationships were impaired in 2025.
Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows:
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8. Property and Equipment
The following table summarizes property and equipment:
December 31,
Land, buildings and leasehold improvements $ 589 $ 515
Warehouse equipment, fleet and other 1,279 1,113
Technology and automated systems 582 531
Total property and equipment, gross 3,277 2,892
Less: accumulated depreciation and amortization (2,126) (1,732)
Total property and equipment, net $ 1,151 $ 1,160
Depreciation of property and equipment was $338 million, $307 million and $290 million for the years ended December 31, 2025, 2024 and 2023, respectively.
9. Leases
The components of lease cost recorded in the Consolidated Statements of Operations were as follows:
Year Ended December 31,
Operating leases:
Finance leases:
Amortization of the right-of-use assets $ 36 $ 30 $ 30
Interest on the lease liabilities 18 10 5
Total finance lease cost $ 54 $ 40 $ 35
Total operating and finance lease cost $ 1,372 $ 1,225 $ 1,140
(1) Operating lease cost is primarily included in Direct operating expense in the Consolidated Statements of Operations.
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The following amounts were recorded in the Consolidated Balance Sheets related to leases:
December 31,
Operating leases:
Current operating lease liabilities $ 745 $ 647
Long-term operating lease liabilities 2,044 1,898
Total operating lease liabilities $ 2,789 $ 2,545
Finance leases:
Property and equipment, net $ 306 $ 239
Current debt $ 45 $ 39
Total finance lease liabilities $ 326 $ 276
Supplemental cash flow information related to leases was as follows:
Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 876 $ 791 $ 696
Operating cash flows for finance leases 18 10 5
Financing cash flows for finance leases 50 45 29
Right-of-use assets obtained in exchange for lease liabilities:
Supplemental weighted-average information for leases was as follows:
December 31,
Weighted-average remaining lease term
Operating leases 5.5 years 5.6 years
Finance leases 16.6 years 24.1 years
Weighted-average discount rate
Operating leases 5.1 % 4.9 %
Finance leases 5.6 % 5.4 %
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Maturities of lease liabilities as of December 31, 2025 were as follows:
(In millions) Finance Leases Operating Leases
Present value of lease liabilities $ 326 $ 2,789
As of December 31, 2025, the Company had operating leases that have not yet commenced with future undiscounted lease payments of approximately $176 million. These operating leases will begin in 2026 and 2027, with initial lease terms ranging from four to ten years.
10. Debt and Financing Arrangements
The following table summarizes the carrying value of the Company’s debt:
December 31,
(In millions, except percentages) Rate(1) 2025 2024
Three-Year Term Loan due 2025(7) —% — 50
Finance leases and other debt Various 327 303
(1) Interest rates as of December 31, 2025.
(2) Net of unamortized discount and debt issuance costs of zero and $1 million, as of December 31, 2025 and 2024, respectively.
(3) Net of unamortized discount and debt issuance costs of $6 million and $7 million as of December 31, 2025 and 2024, respectively.
(4) Net of unamortized discount and debt issuance costs of $2 million and $3 million as of December 31, 2025 and 2024, respectively.
(5) Net of unamortized discount and debt issuance costs of $9 million and $10 million as of December 31, 2025 and 2024, respectively.
(6) Net of unamortized discount and debt issuance costs of $7 million, as of December 31, 2025.
(7) In May 2025, the Company repaid the remaining $50 million of the Three- Year Term Loan due 2025.
(8) Net of unamortized debt issuance costs of zero and $1 million, as of December 31, 2025 and 2024, respectively.
(9) In November 2025, the Company repaid $125 million of the Five Year Term Loan due 2027.
(10) As of December 31, 2025, current debt includes $400 million of Unsecured notes due 2026.
Euro Unsecured Notes
In November 2025, GXO Logistics Capital B.V., a wholly owned, indirect consolidated subsidiary of the Company (the “Issuer”), issued €500 million (approximately $580 million) of 3.750% notes due 2030 at a discount to par at a price of 99.776% (the “EUR Unsecured notes due 2030”). The EUR Unsecured notes due 2030 accrue interest at 3.750% per year, and mature on November 24, 2030. Interest on the EUR Unsecured notes due 2030 is payable annually in arrears on November 24 of each year, beginning on November 24, 2026. The EUR Unsecured notes due
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