XPO, Inc. (XPO (XPO)) shares edged higher Thursday after the transportation giant delivered first-quarter results that left analysts pleasantly surprised. The company reported revenue of $2.096 billion, up 7.3% from a year ago and comfortably ahead of the $2.038 billion analysts were expecting. Adjusted earnings came in at $1.01 per share, beating the consensus estimate of 88 cents.

Adjusted net income rose to $121 million from $87 million in the same quarter last year. Operating income climbed to $174 million from $151 million, while adjusted EBITDA increased to $319 million from $278 million. The company also generated $183 million in operating cash flow and ended the quarter with $237 million in cash and equivalents. During the quarter, XPO repurchased $30 million worth of its own shares.

Operational Trends Show Gradual Improvement

On the operational side, shipments per day increased 3% year over year, driven by strength in local accounts and premium freight. However, weight per shipment declined 2.8%, keeping tonnage per day essentially flat at a 0.1% increase. The monthly trend is encouraging: shipments per day rose 1.2% in January, 3.0% in February, and 3.8% in March. For April, XPO expects tonnage to be about 1% lower than last year, but still ahead of typical seasonal patterns.

Segment Performance: North America Shines

In the North American less-than-truckload (LTL) segment, revenue rose 4.9% to $1.23 billion. Yield excluding fuel was up 4.0%, and shipments per day increased 3.0%. Tonnage per day edged up just 0.1%, but the segment's adjusted operating ratio improved to 83.9% — a 200-basis-point improvement from a year earlier. CEO Mario Harik said this significantly outperformed seasonal trends. Adjusted EBITDA for the segment jumped 16% to $290 million.

The European transportation segment reported revenue of $868 million, up 11% year over year. Adjusted EBITDA there rose slightly to $33 million from $32 million.

CEO: 'Greatest Upside Still Ahead'

Harik struck an optimistic tone in his commentary. "We're continuing to deliver robust incremental margins and industry-leading operating ratio improvement, with the greatest upside still ahead," he said. "We have a clear path to compounding earnings growth and accelerating free cash flow generation, with returns amplified as freight demand recovers."

Outlook: Pricing, AI, and a Target Operating Ratio in the 70s

Looking forward, XPO expects revenue per shipment, excluding fuel, to improve through 2026, supported by disciplined pricing and stronger demand trends. Management anticipates continued pricing momentum, margin expansion, and earnings growth. The company is targeting an LTL operating ratio in the 70s, driven by pricing execution, AI-led efficiency gains, network optimization, and structural cost reductions. XPO also expects strong multiyear free cash flow generation, which it plans to allocate toward share repurchases, debt reduction, and long-term shareholder returns.

Price Action

XPO shares were up 1.10% at $219.09 at the time of publication Thursday.