The description in the Unix System 5 administrator's reference manual, the X/Open Portability Guide, and the System V Interface Definition is:
xargs — construct argument list(s) and execute command
These pre-date by years Wolfram Roesler's 1993 Unix Acronym List which calls it "extended arguments". As does Gordon A. Moffet's xargs
clone published in 1986 whose manual says:
xargs — execute a command with many arguments
However: Whilst the System 5 doco and the clone doco might lead one to conclude that yes "x" relates to "execute", "extend" per Wolfram Roesler's Unix Acronym List is in fact more likely the case. Herb Gellis's own commentary on the subject implies that xe wrote it to extend the then limit of 512 bytes on filename expansion in the Mashey shell.
Herb Gellis is apparently still alive. You could ask xem. ☺
findutils
manual.x
just for euphony ;-)