QXO: Maslow and materials

As with any investment, your capital is at risk.

At the bottom of Abraham Maslow’s ‘Hierarchy of Needs’, sitting alongside needs as basic as food and water, is shelter. Vital, yes, but could a company in the business of supplying roofs, windows, insulation and lumber really deserve a place in a concentrated portfolio of the world’s leading growth companies?

And yet QXO, the distributor of commercial and residential building materials, has the hallmarks of a potential outlier. Founded by Brad Jacobs in 2023, the company has jumped from zero revenue a year ago to approximately $12bn today, with the ambition to more than quadruple that figure to $50bn within the next decade. To quote the opening line from our 10-question research:

“If QXO achieves Brad Jacobs’ targets over the next decade, it will prove the most ambitious industrial rollup in history in terms of pace and scale.”

Let’s unpack and assemble why we believe QXO merits its position in the Long Term Global Growth portfolio.

Finding the architect

Vanishingly few people come close to matching Brad Jacobs’ track record in capital allocation. He has closed more than 500 acquisitions over four decades and has never raised a down round. The result? Extreme share price returns for several of his prior companies, despite operating in ostensibly prosaic industries such as equipment rental, logistics, and waste management. Few people have founded eight separate billion-dollar companies in their lifetimes. With QXO’s market capitalisation sitting at over $14bn at the time of writing, Jacobs has added a ninth.

Why should we have confidence in Jacobs’ ability to repeat his prior success with QXO? Crucially, it’s because the conditions and playbook are the same. Like the other industries he has operated in, the building supplies market is vast (estimated at $800bn across North America and Europe), fragmented (with an estimated 20,000 or more players), and endemically inefficient. On the latter point, building materials distribution remains spread across thousands of regional operators with outdated systems, still reliant on fax machines, phone orders, and human memory, with fewer than 20 percent of transactions occurring online. These are perfect conditions for Jacobs to repeat his playbook of “buy, integrate, and tech-enable”.

The core thesis for QXO is therefore a relatively simple one. Jacobs targets fragmented, operationally inefficient industries, acquires assets, and systematically improves them. Future value will therefore largely be inorganic: a combination of deal arbitrage, operational improvement, and the re-rating of acquired businesses within a larger, higher-quality consolidated entity. The return hurdle is demanding: a 30 to 40 percent five-year internal rate of return from every deal, underwritten by deal spread and high-probability operational improvement. Importantly, Jacobs is not betting on cyclical recovery or multiple expansion; this is instead a story of improving fundamentals.

Laying the foundations

The first of QXO’s acquisitions, Beacon, was completed in April 2025 and made QXO the second-largest distributor of roofing, waterproofing, and complementary building products in North America. Approximately 80 percent of Beacon's revenue comes from non-discretionary repair and remodel work: fixing leaks, repairing storm damage, and replacing ageing roofs. These are purchases that cannot be put off for long, providing a durable and relatively recession-resistant source of demand. 

Kodiak followed in early 2026, extending QXO into lumber, windows, doors, and trusses. Lumber is typically the first product purchased in a new build, giving QXO an early purchasing touchpoint in the construction cycle and an opportunity to deepen builder relationships from the outset.

Most recently, in April, QXO announced the acquisition of TopBuild, the largest distributor and installer of insulation in North America. Upon completion of all three transactions, QXO will hold the number one position in insulation and waterproofing, number two in roofing, and leading positions in key regions across lumber and broader building materials.

The cross-sell logic connecting these three businesses is compelling. A contractor working on a project may need roofing materials from Beacon, insulation from TopBuild, and lumber from Kodiak. Serving that contractor across all three categories from a single scaled platform creates advantages that none of the individual businesses could access alone: broader customer relationships, deeper demand visibility, stronger procurement leverage and more opportunities to attach adjacent products and services.

Filling the gaps

The operational inefficiencies that come with such acquisitions are striking. When QXO acquired Beacon, it found a business logging only 10 to 15 percent of purchases into its customer relationship management (CRM) system, offering 30 to 40 percent discounts on readily saleable products, and operating without a warehouse management system. That is remarkable for a wholesale-to-retail business where inventory turn is central to the model. Branch managers had no financial planning and analytical support. Salespeople were paid a flat commission on revenue, with little regard for margin.

By applying Jacobs’ playbook, QXO is taking action to address these operational gaps through pricing and sales optimisation, centralised procurement, warehouse systems, fleet and branch network rationalisation, and organisational simplification.

Installing the insulation

Building supplies distribution is structurally resistant to AI disruption. Physical products still need to be manufactured, stored, transported, and installed. Roofs need to be repaired. No large language model is going to patch a leak or frame a house. 

But this does not make QXO indifferent to AI. Quite the opposite. The immediate opportunity begins with basic digitisation: CRM system adoption, warehouse management systems, procurement centralisation, and better data. Once that infrastructure is in place, the opportunities for AI-driven pricing, inventory management and cross-selling could be significant. The goal is for every point-of-sale system to tell each salesperson what product to offer, at what price, and whether it is in stock.

Building the upside

This is primarily an inorganic growth story. For QXO to reach $50bn in revenue, our upside scenarios assume a continuing series of disciplined acquisitions. As each acquisition becomes more operationally efficient thanks to Jacobs’ playbook, QXO’s free cash flow rises and can be reinvested into ever more acquisitions.

We expect the early years to be dominated by heavy spending on acquisitions and high leverage, all while newly acquired businesses remain largely unoptimised. Returns are likely to only meaningfully improve in later years, assuming the acquisition programme begins to wind down as QXO approaches its target. At that stage, new capital being deployed would be relatively small, while margin continues expanding across a large revenue base.

At $50bn in revenue, QXO would be the largest building supplies company in North America, several times larger than the next competitor. And yet, it would still only represent a small share (estimated at about 12 percent) of the North American market with ample runway for future growth. However, QXO’s share price at the time of writing suggests the market believes the company will only deliver half of its stated revenue target. That gap between the market view and our upside thesis provides our opportunity.

In summary, roofing, windows, and lumber may not sound like the raw materials of an outlier. But in a fragmented, pre-digital industry, and in the hands of one of the most experienced capital allocators of his generation, the most basic needs may prove anything but basic.

Risk factors and important information

The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

This communication was produced and approved in April 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

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