Quick brief on a post Amazon-scare (GXO)

On the 4th of May, early this week, Amazon announced the release of its Amazon Supply Chain Services (ASCS), in the likes of AWS, monetizing excess logistics capacity built up over the years by opening its full-stack of freight/shipping services to third-party businesses. Notably, some big companies have hopped on board already, with P&G, 3M, and AEO already lodging itself onto ASCS.

Meanwhile, the trucking and logistics got slaughtered across the board, UPS, Fedex and CHRW declining ~10% by midday. If that sounded bad, two major casualties that were hit extremely hard were GXO and FWRD, both down something like ~20% on the day. A number of trucking names have recovered most of the dip on the back of 1) knee-jerk Amazon news generally being a buy-the-dip opportunity, 2) good earnings releases in the subsequent days. RXO is one that really took off right from the bottom.

First, let’s lay out some background facts.

1. Amazon, in 2025, became the largest domestic parcel carrier in the US. Amazon had already built a large footprint of 200+ fulfillment centers across America, thousands of trailers and had shipped billions of parcels since inception.

2. There will be losers. Clearly with P&G and 3M shifting their supply-chain over to ASCS, the argument of sticky-relationships doesn’t fully hold.

3. ASCS will be very price competitive. Amazon doesn’t need this to be a profit center.

Still, there are nuances to this that I feel the market has not appreciated and feared.

There has been a few times in recent history whereby an the Amazon scare led to panic dumps for incumbent stocks. For example, the acquisition of Whole Foods in 2017 obliterated grocery stocks though as we now know, Amazon never dominated grocery in the way the market feared.

Likewise, when Amazon acquired PillPack in 2018, CVS and Walgreens crashed. Again, knee-jerk indiscriminate selling at least for CVS.

Those are of course quite different in that Amazon was acquiring capabilities rather than monetizing spare capacity of which AWS is analogous. But even then, AWS shares the market with Azure and GCP - part of the reason being different end-users may find competing services more suited/appealing to their needs.

GXO in particular, is trading below its last Friday closing price, prior to the ASCS news, despite generally fundamentally positive developments since (in my view, and we can debate on that).

For legacy readers of the blog, massive mea culpa on FWRD - this dog has been a huge mistake of mine. I’ll perhaps do a reflection on some other post. I’m generally trying to stay away from risk-arbs going forward - not only have average returns on this strategy been negative for me, it has also been extremely costly, opportunity cost wise. I plan to make some revamps and move higher up the quality curve though still looking for interesting angles to find value.

In this article, I’m going to briefly discuss GXO.

GXO

GXO, the world’s largest pure-play contract logistics provider. It operates some of the world’s most sophisticated tech-enabled warehousing globally. Revenues are well diversified across sectors and geographies. Given ASCS, you can see why GXO was sold off on that news. It had just reported results a day ago and results were good, with the stock reacting positively

Nevertheless, the stock has gained some but is still trading below last Friday’s closing price of around ~$56. It’s at $51-52 now give and take so it’s not a massive spread but we’ve hopped past a good earnings report already and have gotten massive clarity on Amazon’s impact on the firm, as well as how the firm has shaped and will shape up fundamentally going forward. If the ASCS news had not dropped on Monday, I won’t be surprised if GXO hopped into the 60s.

Then again, did ASCS really change anything fundamental about GXO?

Analysts were very demanding on the call regarding this. As per their recent Q1 call, Patrick laid out the positive side of things -

1. 3PL is a big market. Amazon validates and also likely expands the market (just like AWS did).

2. Competing companies may not prefer disclosing their IP and processes onto ASCS.

3. GXO is able to offer bespoke solutions rather than one-size fit all.

4. ACSC was built for (implied) retail and so industrial logistics such as aerospace, defense etc., may not be affected.

GXO and Amazon overlap is also just under 6% of total businesses. Assuming GXO cedes half of this overlapping segment to Amazon, that’s just a mere 3% of revenues.

Importantly, GXO’s contracts are five years on average with churn rates less than 5%.

For 1Q26, GXO continued to see LSD organic growth of ~4.1%. The firm continued to win new contracts and as per the 1Q26 call, 40% of new wins were in “strategic growth verticals, aerospace and defense, industrial, life sciences and technology, particularly data centers” and with the sales pipeline accelerating, “up 20% from the fourth quarter”.

Guidance had also been raised a sliver and GXO expects around ~$955m of EBITDA for the full year. At $51 per share, with an EV of around ~8bn, the stock trades at 8.6x EBITDA.

There’s been no recent insider transactions but there was an average-sized buy in November last year at somewhere near current share prices.

The stock touched a 52w high of $67 sometime in mid-February. Average multiples over the last few years had been in the low to mid-teens so there is room for re-rating. This VIC short thesis pinned GXO at 9x EBITDA; the stock currently trades under that.

GXO also is slightly negative correlated to robotics and AI - which is ironic as GXO has been building robotic-automated warehouses featuring humanoids etc - nevertheless, the negative correlation could serve as a good diversifier to an AI-heavy port.