# How CSX makes money

CXProWealth Business Lens · CSX (CSX) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-21 with the SEC (accession 0000277948-26-000040): https://www.sec.gov/Archives/edgar/data/277948/000027794826000040/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $4.0B (+17.4% on the year)
- Operating income: $1.6B (operating margin 39.1%)
- Net income: $1.1B (net margin 26.2%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $1.0B (25.5% of revenue)
- Cash conversion (operating cash flow / net income): 1.54x
- Capital expenditure: 14.8% of revenue

## Where the money goes (Q3 FY2026)

- Chemicals → Revenue: $790.0M
- Agricultural and Food Products → Revenue: $430.0M
- Automotive → Revenue: $325.0M
- Forest Products → Revenue: $277.0M
- Metals and Equipment → Revenue: $267.0M
- Minerals → Revenue: $246.0M
- Fertilizers → Revenue: $118.0M
- Intermodal → Revenue: $634.0M
- Coal → Revenue: $537.0M
- Trucking → Revenue: $227.0M
- Other → Revenue: $166.0M
- Revenue → Total Expense: $2.4B
- Total Expense → Labor and Fringe: $834.0M
- Total Expense → Purchased Services and Other: $657.0M
- Total Expense → Depreciation and Amortization: $413.0M
- Total Expense → Fuel: $451.0M
- Total Expense → Equipment and Other Rents: $92.0M
- Revenue → Operating Income: $1.6B
- Operating Income → Interest Expense: $207.0M
- Operating Income → Earnings Before Income Taxes: $1.4B
- Other Income - Net → Earnings Before Income Taxes: $21.0M
- Earnings Before Income Taxes → Income Tax Expense: $332.0M
- Earnings Before Income Taxes → Net Earnings: $1.1B

## Where the revenue comes from

### Products and services (Revenues - Schedule of Revenues Disaggregated by Lines of Business (Details))

| Member | Value | Share |
|---|---:|---:|
| Chemicals | $790.0M | 19.7% |
| Intermodal | $634.0M | 15.8% |
| Coal | $537.0M | 13.4% |
| Agricultural and Food Products | $430.0M | 10.7% |
| Automotive | $325.0M | 8.1% |
| Forest Products | $277.0M | 6.9% |
| Metals and Equipment | $267.0M | 6.6% |
| Minerals | $246.0M | 6.1% |
| Trucking | $227.0M | 5.7% |
| Other | $166.0M | 4.1% |
| Fertilizers | $118.0M | 2.9% |

The members sum to total revenue.

### Segments (Segment Reporting and Significant Expenses- Schedule of Segment Reporting Information (Details))

| Member | Value | Share |
|---|---:|---:|
| Rail Operations | $3.8B | 94.3% |
| Trucking Operations | $230.0M | 5.7% |

The members sum to total revenue.

### ConsolidationItems (Segment Reporting and Significant Expenses- Schedule of Segment Reporting Information (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating Segments | $3.8B | 94.3% |
| Eliminations | -$3.0M | -0.1% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | Q3 FY2026 | Of revenue |
|---|---:|---:|
| Revenue | $4.0B | 100% |
| Labor and Fringe | $834.0M | 20.8% |
| Purchased Services and Other | $657.0M | 16.4% |
| Depreciation and Amortization | $413.0M | 10.3% |
| Fuel | $451.0M | 11.2% |
| Equipment and Other Rents | $92.0M | 2.3% |
| Goodwill Impairment | $0 | 0.0% |
| **Total Expense** | $2.4B | 60.9% |
| **Operating Income** | $1.6B | 39.1% |
| Interest Expense | ($207.0M) | 5.2% |
| Other Income - Net | $21.0M | 0.5% |
| **Earnings Before Income Taxes** | $1.4B | 34.5% |
| Income Tax Expense | ($332.0M) | 8.3% |
| **Net Earnings** | $1.1B | 26.2% |
| Net Earnings Per Share, Basic (in dollars per share) | $1 | 0.0% |
| Net Earnings Per Share, Assuming Dilution (in dollars per share) | $1 | 0.0% |
| Average Shares Outstanding (in shares) | 1,849,000,000 |  |
| Average Shares Outstanding, Assuming Dilution (in shares) | 1,853,000,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2007 | $10.0B | $2.3B | $1.3B | $2.2B | -$1.8B | $411.0M |
| FY2008 | $11.3B | $2.8B | $1.4B | $2.9B | $1.7B | $1.2B |
| FY2009 | $9.0B | $2.3B | $1.1B | $2.0B | $1.4B | $613.0M |
| FY2010 | $10.6B | $3.1B | $1.6B | $3.3B | $1.8B | $1.4B |
| FY2011 | $11.8B | $3.5B | $1.9B | $3.5B | $2.3B | $1.2B |
| FY2012 | $11.8B | $3.5B | $1.9B | $2.9B | $2.3B | $605.0M |
| FY2013 | $12.0B | $3.5B | $1.9B | $3.3B | $2.3B | $954.0M |
| FY2014 | $12.7B | $3.6B | $1.9B | $3.3B | $2.4B | $894.0M |
| FY2015 | $11.8B | $3.6B | $2.0B | $3.4B | $2.6B | $808.0M |
| FY2016 | $11.1B | $3.4B | $1.7B | $3.0B | $2.4B | $643.0M |
| FY2017 | $11.4B | $3.7B | $5.5B | $3.5B | $2.0B | $1.4B |
| FY2018 | $12.3B | $4.9B | $3.3B | $4.6B | $1.7B | $2.9B |
| FY2019 | $11.9B | $5.0B | $3.3B | $4.9B | $1.7B | $3.2B |
| FY2020 | $10.6B | $4.4B | $2.8B | $4.3B | $1.6B | $2.6B |
| FY2021 | $12.5B | $5.6B | $3.8B | $5.1B | $1.8B | $3.3B |
| FY2022 | $14.9B | $6.0B | $4.1B | $5.5B | $2.1B | $3.4B |
| FY2023 | $14.7B | $5.5B | $3.7B | $5.5B | $2.3B | $3.3B |
| FY2024 | $14.5B | $5.2B | $3.5B | $5.2B | $2.5B | $2.7B |
| FY2025 | $14.1B | $4.5B | $2.9B | $4.6B | $2.9B | $1.7B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: -3.1% (year before -0.8%): slowing
- Operating income: -13.8% (year before -4.6%): slowing
- Net income: -16.7% (year before -5.4%): slowing
- Free cash flow: -37.0% (year before -16.5%): slowing

## Operating figures stated in the filing

- Rail network route miles: 20,000 route-miles (as of 2026-09-30). "provides an important link to the transportation supply chain through its approximately 20,000 route-mile rail network and serves major population centers in 26 states east of the Mississippi River" (Item 1. FINANCIAL STATEMENTS)
- States served: 26 states (as of 2026-09-30). "provides an important link to the transportation supply chain through its approximately 20,000 route-mile rail network and serves major population centers in 26 states east of the Mississippi River" (Item 1. FINANCIAL STATEMENTS)

## Key insights

### Operating profit rose by more dollars than revenue

Revenue rose to $4.02B from $3.59B, yet operating income gained more, rising to $1.57B from $1.09B, because total expense fell 2.1%.

Revenue grew 12.0% to $4.02B while total expense fell 2.1% to $2.45B, so expense dropped from 69.7% of revenue a year earlier to 60.9%. Operating income rose 44.4% to $1.57B, an operating margin of 39.1% against 30.3%. Net earnings rose 51.6% to $1.05B. _(from the filing)_
Part of the fall in expense is a base effect. The year-earlier quarter carried a $164M goodwill impairment on Quality Carriers, the trucking unit, equal to 15.1% of that quarter's operating income, and this quarter carried none. Without that charge, the remaining cost lines rose rather than fell, but far more slowly than revenue. _(from the filing)_
The operating lines explain the rest. Purchased services and other fell 10.0% to $657M from $730M, and depreciation and amortization fell 2.6% to $413M. Labor and fringe, the largest cost, rose 2.3% to $834M, so its share of revenue fell 1.96 points to 20.8%. _(from the filing)_
Below operating income, interest expense was nearly flat at $207M against $210M, so it took 13.2% of operating income against 19.3% a year earlier. That is one reason net earnings grew faster than operating income. _(from the filing)_
In our reading this is the operating leverage of a fixed network: track, dispatch and much of the crew cost are already paid for, so added revenue lands mostly in operating income. The same arithmetic runs in reverse when volumes fall. _(analysis)_

### Fuel cost jumped 60.5%, and the margin still widened

Fuel rose to $451M, 11.2% of revenue against 7.8%, yet the operating margin gained 8.8 points, which puts weight on surcharge recovery.

Fuel expense rose 60.5% to $451M from $281M, the only cost line that grew faster than revenue. A year earlier fuel was well below depreciation and amortization ($281M against $424M); this quarter it was above it ($451M against $413M). _(from the filing)_
The filing states that "Fuel surcharge revenue is included in the individual markets." It does not report how much surcharge revenue the quarter carried, so the 12.0% revenue growth mixes volume, price and fuel recovery in proportions the figures cannot separate. _(from the filing)_
Surcharge revenue largely passes a cost through, so it adds revenue with little margin attached. In our reading, a margin that widened while fuel climbed came from the rest of the business, and the reported revenue growth probably overstates growth in the underlying haul. _(analysis)_
Rail fuel surcharges generally reset from published fuel prices after a delay, so a fast rise in diesel tends to squeeze a quarter and a fall tends to flatter one. Reading the coming margins next to fuel expense separates the network's own gain from the fuel cycle. _(analysis)_

### Capital spending eased, and free cash nearly matched earnings

Capex took 36.7% of operating cash flow against 54.6% a year earlier, so free cash flow of $1.02B reached 97.3% of net earnings.

Operating cash flow rose to $1.62B from $1.34B while capital spending fell to $593M from $730M, 14.8% of revenue against 20.4%. Free cash flow rose to $1.02B from $607M, 25.5% of revenue, and reached 97.3% of net earnings against 87.5% a year earlier. _(from the filing)_
The quarter follows a heavy year. In FY2025 capital spending reached $2.90B, 20.6% of revenue and 62.9% of operating cash flow, and free cash flow was $1.71B against $3.41B in FY2022. This quarter's 36.7% share is close to FY2018's 37.6%, when capex was $1.75B. _(from the filing)_
Average diluted shares fell to 1,853M from 1,867M as part of the cash went to share repurchases, and diluted earnings per share rose to $0.57 from $0.37, faster than net earnings. _(from the filing)_
Whether this is a new level or a pause matters for cash more than any single margin move. Track, bridges and locomotives wear on a schedule, so spending deferred now tends to return later. Lower depreciation fits either reading; the company's capital plan for next year is what would settle it. _(analysis)_

### Competitive edge

- **A 20,000-mile network that is hard to duplicate** CSX reaches major population centers in 26 states east of the Mississippi, and that fixed network turned 12.0% revenue growth into 44.4% operating income growth.
- **No single market carries more than 19.7% of revenue** Chemicals, the largest market, is 19.7% of revenue, intermodal 15.8% and coal 13.4%, so no one customer industry sets the result.
- **Feeder services bring shippers without track onto rail** Terminals, drayage, Transflo and a trucking unit reach shippers off the line, and intermodal, the market closest to trucking, grew 20.3% to $634M.

### What to watch

- **Fuel recovery runs behind fuel cost** Fuel is now 11.2% of revenue against 7.8% a year earlier, and the filing names fuel prices, surcharges and fuel availability as risks.
- **Coal revenue rests on prices CSX does not set** Coal is $537M, 13.4% of revenue, and the filing ties it to natural gas prices and the seaborne coal market, neither within the company's control.
- **Environmental cleanup costs the filing says could be substantial** CSX is a potentially responsible party at many contaminated sites and indemnifies Pharmacia on the Lower Passaic River, where allocation and litigation continue.

## Investor view

**Revenue rose 12.0% on a cost base that shrank: the operating leverage a fixed rail network gives CSX**

### How it makes money

CSX sells freight movement over a rail network of approximately 20,000 route miles that reaches major population centers in 26 states east of the Mississippi River. It earned $4.02B of revenue this quarter, and 94.3% of it, $3.79B, came from rail operations. The rest, $230M, is Quality Carriers, which the filing calls "the largest provider of bulk liquid chemicals truck transportation in North America." _(from the filing)_
Revenue is spread across many markets rather than resting on one. Chemicals is the largest at $790M, 19.7% of revenue, followed by intermodal containers and trailers at $634M (15.8%) and coal at $537M (13.4%). Agricultural and food products, automotive, forest products, metals and equipment, minerals and fertilizers make up most of the rest. The filing states that "Fuel surcharge revenue is included in the individual markets", so each market's revenue moves partly with fuel prices. _(from the filing)_
The company reports costs by nature, not as a cost of goods sold, so there is no gross margin to read. Labor and fringe is the largest line at $834M, 20.8% of revenue, then purchased services and other at $657M (16.4%), fuel at $451M (11.2%) and depreciation and amortization at $413M (10.3%). After these, $1.57B of operating income remained, an operating margin of 39.1%, and net earnings were $1.05B, 26.2% of revenue. _(from the filing)_
Around the line-haul business sit units that feed it: intermodal terminals and drayage, automotive distribution centers, and Transflo, which "connects non-rail served customers to the many benefits of rail by transferring products from rail to trucks." They bring shippers without a rail siding onto the network. Operations produced $1.62B of cash this quarter; $593M went to capital spending, leaving $1.02B of free cash flow, 25.5% of revenue. _(from the filing)_

### What shifted

Revenue grew 12.0% to $4.02B from $3.59B a year earlier, while total expense fell 2.1% to $2.45B from $2.50B. Expense dropped from 69.7% of revenue to 60.9%, and operating income rose 44.4% to $1.57B. The operating margin of 39.1% compares with 30.3% a year earlier and with 36.0% in the first quarter of this year. _(from the filing)_
Part of the gain is a base effect: the year-earlier quarter carried a $164M goodwill impairment on Quality Carriers, the trucking unit, and this quarter carried none. The rest came from the operating lines. Purchased services and other fell 10.0% to $657M from $730M, 4.0 points less of revenue, and labor and fringe rose 2.3% to $834M, slower than revenue, so its share fell 1.96 points to 20.8%. _(from the filing)_
Fuel moved the other way. Fuel expense rose 60.5% to $451M from $281M, the fastest rise of any cost line, and took 11.2% of revenue against 7.8% a year earlier. The filing books fuel surcharge revenue inside each market, so the market revenue figures include the recovery of part of this cost. _(from the filing)_
Intermodal grew fastest among the large markets, up 20.3% to $634M, adding 1.1 points of revenue share. Metals and equipment rose 19.2% and chemicals 13.3%. Fertilizers was the only market to shrink, down 6.35% to $118M, and automotive grew a slower 6.2%. Coal rose 9.6% to $537M but slipped 0.29 points as a share of revenue. _(from the filing)_
Capital spending fell to $593M from $730M a year earlier, 14.8% of revenue against 20.4%, after a heavy FY2025 in which capex reached $2.90B, 20.6% of that year's revenue. With operating cash flow up to $1.62B from $1.34B, free cash flow rose to $1.02B from $607M. Net earnings rose 51.6% to $1.05B, and diluted earnings per share rose to $0.57 from $0.37 on 1,853M average diluted shares against 1,867M. _(from the filing)_

### Risks in the filing

Regulation and law. The company names legislative and regulatory changes touching rail, the environment, hazardous materials, taxation and trade, initiatives to further regulate the rail industry, and passenger and high speed rail activity in capacity-constrained areas that could limit when freight can move. It also names litigation over fuel surcharges, rates, personal injuries and occupational illness. The fuel surcharge antitrust cases, decided for the railroads, are under appeal. _(from the filing)_
Demand and competition. Results depend on economic, political and trade conditions, including tariffs, on competition from trucking, and on consolidation or financial distress among transportation companies. Coal carries two named exposures: natural gas prices, which affect coal-fired electricity generation, and the global supply and price of seaborne coal, which drives the export coal market. _(from the filing)_
Operations and cost. The filing names fuel prices, surcharges and fuel availability; severe weather and other natural events; the safety risks of moving hazardous materials; cybersecurity incidents; the loss of key people or difficulty hiring; and insurance that may not stay available at commercially reasonable rates. The company retains large layers of property and casualty risk itself before outside coverage begins. _(from the filing)_
Environmental liabilities. The company is a potentially responsible party at many contaminated sites under the Superfund law, where liability can be joint and several regardless of fault, and it says plainly: "These costs could be substantial." It is also indemnifying Pharmacia, formerly Monsanto, over cleanup of the Lower Passaic River in New Jersey, where allocation and litigation continue. _(from the filing)_
Of these, the numbers already show fuel: fuel expense rose faster than any other cost line this quarter and the margin still widened, which puts weight on surcharge recovery. The trucking exposure has a visible trace too: the goodwill impairment on Quality Carriers a year ago acknowledged that the acquired unit was worth less than its carrying value. Coal's share of revenue edged down even as its revenue grew. _(analysis)_

## Founder view: mechanisms

### A fixed network turns volume into margin

A railroad's largest costs, track, locomotives, crews on scheduled trains and the depreciation of the network, do not scale one for one with the freight it carries. Once the network runs, an extra carload rides on trains, track and dispatch already paid for. When revenue rises and the operation holds its cost base, most of the new revenue falls to operating income. The same leverage works in reverse when volumes drop. _(analysis)_

### Fuel cost passed through by surcharge

CSX prices its freight with a fuel surcharge that moves with fuel prices and books that surcharge inside each market's revenue. Its largest volatile input is therefore partly passed to customers rather than absorbed. The company keeps the margin it earns on the haul and shares the risk of the commodity it burns, with a delay between the cost and its recovery. _(analysis)_

### Feeder services bring non-rail shippers onto the rail

Rail only serves shippers next to the track. CSX wraps the line-haul with units that reach the rest: intermodal terminals and drayage for containers, Transflo terminals that move product from rail to truck, automotive distribution centers, and a bulk chemicals trucking company. Each widens the set of customers who can buy the core service, and the core is where the margin sits. _(analysis)_

### Heavy reinvestment, then cash

A railroad has to keep spending on track, bridges, signals and rolling stock to keep the network safe and fast. That spending runs in cycles: a heavy period of renewal or expansion, then a period when the network runs on what was built and capital spending eases. Free cash flow swings with the cycle more than earnings do, and the company returns part of it through dividends and share repurchases. _(analysis)_

## Member research

Signed-in members read, on the page: what CSX's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- CSX 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/277948/000027794826000040/ (2026-10-21)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02