QXO Shares Fall 43% as Debt Doubles and Cash Outflows Widen
QXO, Inc. stock has declined 42.8% year to date, a sharper drop than the 17.1% decline in the Zacks Technology Services industry. The share price also lagged the Zacks Business Services sector and the S&P 500 Index. The Zacks Investment Research analysis attributes this underperformance to rising debt levels, increasing operating expenses, and substantial working capital needs that are weighing on profitability and cash generation.
QXO, Inc. stock has declined 42.8% year to date, a sharper drop than the 17.1% decline in the Zacks Technology Services industry. The share price also lagged the Zacks Business Services sector and the S&P 500 Index. The Zacks Investment Research analysis attributes this underperformance to rising debt levels, increasing operating expenses, and substantial working capital needs that are weighing on profitability and cash generation.
Long-term debt for QXO rose to $6.03 billion as of June 30, 2026, up from $3.06 billion at the end of 2025. This increase in leverage has driven up financing costs. Net interest expense reached $38 million in the second quarter of 2026, compared with $30 million in the same period a year earlier. For the first half of 2026, total interest expense stood at $69 million, a stark contrast to the net interest income of $26 million recorded in the prior-year period.
Operating costs have also surged as the company integrates acquired businesses. In the second quarter of 2026, selling, general and administrative expenses increased 42% year over year to $649 million. Depreciation expenses rose 107% to $56 million, while amortization costs climbed to $140 million from $80 million. Additionally, the company incurred $24 million in transformation costs during the quarter to simplify and optimize operations.
Cash flow remains a critical pressure point for QXO. Net cash used in operating activities reached $146 million in the first half of 2026, an increase from $138 million in the year-ago period. The company cited the Beacon and Kodiak acquisitions and seasonal timing in inventory purchases and customer collections as primary drivers for this widening cash outflow. These higher working capital requirements limit the internally generated cash available for debt reduction.
The acquisition-led growth strategy faces hurdles in converting scale into efficiency. While QXO is combining processes, employees, and technology following recent deals, expected benefits from the Beacon, Kodiak, and TopBuild acquisitions may take longer to materialize. Delays in integration or higher-than-expected costs could weigh on operating performance. The stock currently trades at a premium to industry peers with a forward 12-month price-to-earnings ratio of 23.25.
Earnings estimates have been revised downward over the past 30 days. Analysts now project earnings of 25 cents per share for 2026, implying a year-over-year decline of 26.5%, and 54 cents per share for 2027, representing 116% growth. This uneven trajectory reflects near-term profitability pressure against anticipated stronger growth later in the cycle. QXO competes with W.W. Grainger, Inc., SiteOne Landscape Supply, Inc., and Fastenal Company across the distribution market. Based on these factors, Zacks Investment Research assigns QXO a Rank #4 (Sell).