Investing.com – The past few days have been a rollercoaster for GXO Logistics, one of the world's leading contract logistics providers.

On Monday, the company's stock was caught in a sharp sector-wide sell-off after Amazon announced it was launching Amazon Supply Chain Services, expanding its logistics network to third-party shippers beyond its marketplace sellers.

As swift as the drop was, GXO stock has been on a steady recovery path since, helped in no small part by yet another strong quarterly report, released the very next day, on Tuesday, May 5th.

To get a better idea of threats and opportunities for the company and the broader industry, Investing.com had a change to sit down with Patrick Kelleher, GXO's CEO.

Amazon is 'Yesterday's News'

When asked about the potential implications of Amazon entering logistics business, GXO's head appeared more amused than worried.

Amazon is "yesterday's news," Kelleher joked, arguing that the two companies have fundamentally different offerings. GXO builds bespoke, client-tailored "automated, robotic, strategic solutions," while Amazon is pushing a volume-first model "to fill its existing infrastructure."

"Amazon is selling access to its supply chain, whereas GXO builds custom solutions for our customers," Kelleher said on the company's recent post-Q1 earnings call. "The more complex the supply chain, the more bespoke really matters."

GXO's CEO did acknowledge a small overlap with Amazon's FBA product through GXO Direct, the company's shared-use e-commerce offering. "We will compete," he said, but noted that GXO Direct accounts for just under 6% of total revenue and primarily serves high-end brands that require value-added services like custom packaging, etching, and white-glove handling. The segment grew 5% in the first quarter.

More broadly, Kelleher stressed that the outsource logistics market remains vast and underpenetrated. He estimates the total addressable market at roughly half a trillion dollars, with only about 30% currently outsourced. "The market is too big. A new entrant is not a threat," he said.

Another Beat and Raise

On Tuesday, May 5th, GXO reported another strong quarter. The company’s Q1 EPS stood at $0.50, far ahead of analyst estimates of $0.37. Revenue grew 11% year-over-year to hit $3.3 billion, also above the $3.22 billion estimate.

The company raised its full-year EBITDA guidance to between $935 million and $975 million, and said its sales pipeline hit record $2.7 billion.

Speaking about the Q1 performance, Kelleher said the company continues to prioritize organic growth and is seeing "great traction." He added that he still has his sights set on eventually returning to "mid-teens" organic growth.

"We've done a great job on cutting costs," Kelleher said, allowing GXO to offer solutions at as competitive a price as ever while still expanding margins. Adjusted EBITDA margin came in at 6.1% in Q1, up 60 basis points year over year. Management has pointed to the "GXO Way," a new global operational framework for standardizing best practices, and the rollout of its proprietary AI-powered warehouse platform, GXO IQ, as key margin levers.

GXO IQ was deployed at several new sites during the quarter, with a target of more than 50 locations by year-end.

Defense and Government Business

Back in February, GXO announced the formation of a Defense Advisory Board to guide its expansion into aerospace and defense logistics.

Kelleher reiterated that this is a major strategic priority and confirmed the company is actively pursuing U.S. government contracts. He noted that GXO is already working with the U.K. government and its National Health Service.

Aerospace and defense was GXO's largest contract win of Q1, and the company also launched the Taurus Defense Supply Chain Alliance in the U.K., in partnership with companies like Maersk and Accenture.

Physical AI

GXO continues to press its technology advantage.

Kelleher said the company now has fully autonomous forklifts that were developed "on time" and are now "production ready." A fleet of autonomous mobile robots is operating in the Netherlands, and the company recently launched its first auto-load solution in Europe.

Additionally, GXO has 45 humanoids and plans to launch more pilots across the U.S. and Europe later this year.

Kelleher is targeting a return on investment from physical AI by 2028. "Our first-mover advantage is real, and we are building on it," he said on the earnings call.

M&A Possible, But Not Imminent

GXO has has done major acqisitions in the past, most notaby with its £762 million takeover of Wincanton in March 2024.

When asked about potential new deals, Kelleher indicated the he is still "open to M&A" in 2026 and 2027, but nothing is imminent.

With $794 million of cash on hand, GXO has a robust balance sheet and may consider acquisitions in North America or other strategically important geographies, but the company's key focus remains organic growth, Kelleher stipulated.

Tense Geopolitics Are Good for Business

GXO has been largely unaffected by the U.S. and Israel's war against Iran, Kelleher said, as the company has almost no exposure to the region.

Importantly, he noted that global tensions and supply chain disruptions have historically been catalysts for outsourcing. When companies are forced to redesign their logistics networks, they turn to providers who can deliver speed, quality, and scale at competitive costs.

In Kelleher's view, GXO is positioned to offer exactly that.