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    FDX
    Earnings call· Feb 2026(Q3 FY26)

    FEDEX Q3 FY26 earnings call FDX

    Mar 19, 2026 Source

    Executive summary

    FedEx Corporation Q3 FY26 — Strong FEC Performance Drives Raised FY26 Outlook

    FedEx delivered a strong third quarter, primarily driven by robust performance in its Federal Express Corporation (FEC) segment, which saw significant revenue and margin expansion. The company raised its full-year adjusted EPS guidance, reflecting sustained positive trends at FEC and disciplined capital allocation. Despite ongoing softness in the LTL market and costs associated with the FedEx Freight spin-off, management remains focused on strategic priorities like Network 2.0 and high-margin vertical growth, aiming for long-term value creation.

    Highlights

    5

    • Consolidated revenue increased 8% year-over-year, driven by yield and volume strength across package services.

    • Adjusted operating income increased 7% year-over-year, with adjusted EPS growing 16%.

    • Federal Express Corporation (FEC) grew revenue 10% and expanded adjusted operating margin by 50 basis points, marking its sixth consecutive quarter of margin expansion.

    • FY26 adjusted diluted EPS forecast raised to $19.30-$20.10, up from $17.80-$19.00.

    • Network 2.0 on track to have 65% of eligible volume flowing through optimized facilities by next peak, with $2 billion in cumulative savings expected by end of 2027.

    Concerns

    5

    • FedEx Freight revenue declined 5% due to lower shipments and continued LTL industry demand weakness.

    • FedEx Freight adjusted operating income declined $127 million year-over-year, impacted by market softness and approximately $60 million in separation-related costs.

    • MD-11 fleet grounding led to a $120 million headwind in adjusted operating income for Q3, with an expected additional headwind of up to $55 million in Q4.

    • Variable incentive compensation is expected to be an $800 million headwind for the full year FY26.

    • Q4 outlook includes an approximate $0.10 sequential and year-over-year headwind from higher share count and interest costs due to FedEx Freight's debt issuance.

    Guidance & targets

    18
    CategoryTargetConfidence
    FY26 Adjusted Diluted EPS
    $19.30 to $20.10
    high materiality
    High
    Q4 Adjusted EPS
    approximately $5.80
    medium materiality
    Medium
    FY26 Consolidated Revenue Growth
    6% to 6.5%
    high materiality
    High
    Q4 Consolidated Revenue Growth
    6% to 7.5%
    medium materiality
    Medium
    FY26 FEC Revenue Growth
    approximately 8%
    medium materiality
    High
    Q4 FEC Revenue Growth
    approximately 8%
    medium materiality
    Medium
    FY26 FedEx Freight Revenue Growth
    down low single digits
    medium materiality
    Medium
    Q4 FedEx Freight Revenue Growth
    flat to down slightly
    medium materiality
    Medium
    FY26 CapEx
    no more than $4.1 billion
    high materiality
    High
    Aircraft CapEx
    $1 billion or below
    medium materiality
    High
    FY26 Adjusted Free Cash Flow
    further upside
    high materiality
    Medium
    Adjusted Free Cash Flow Target
    $6 billion
    high materiality
    High
    2029 Adjusted EPS Target
    $25
    high materiality
    High
    FY26 FEC Volume-Related Revenue Net of Variable Costs
    $600 million tailwind
    medium materiality
    High
    FY26 FEC Yield
    $3.2 billion tailwind
    medium materiality
    High
    FY26 Base Expense Increase
    $1.6 billion
    medium materiality
    High
    FY26 FedEx Freight Adjusted Operating Income Decline
    $400 million
    medium materiality
    High
    FY26 Variable Incentive Compensation Headwind
    $800 million
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Consolidated
    Consolidated revenue was up 8% year-over-year, driven by yield and volume strength across nearly all package services. Adjusted operating income increased 7% year-over-year.
    		$22.1B8%——
    Federal Express Corporation (FEC)
    FEC grew revenue 10% and expanded adjusted operating margin by 50 basis points, marking its sixth consecutive quarter of margin expansion. This led to an 18% growth in adjusted operating income.
    Adjusted Operating Income Growth: 18%
    		—10%—50 bps margin expansion
    FedEx Freight
    FedEx Freight revenue declined 5%, pressured by lower shipments (down 6%) and ongoing LTL industry trends. Adjusted operating income declined $127 million year-over-year due to market softness and separation-related expenses. Revenue per shipment increased 1%.
    Shipments Decline: 6%Revenue per Shipment Increase: 1%
    		—-5%—-$127 million adjusted operating income
    FEC U.S. Domestic Package
    U.S. domestic package revenue grew 10%, marking the highest quarterly U.S. domestic revenue since FY22. Average daily U.S. domestic volume grew 5%, with U.S. domestic package yield increasing 5%.
    Average Daily U.S. Domestic Volume Growth: 5%U.S. Domestic Package Yield Increase: 5%
    		—10%——
    FEC International Export Package
    International export package revenue grew a strong 8%, with Europe and Asia-to-Europe lanes being key drivers. International export volumes inflected positively for the first time in FY26, up 2% year-over-year, and yield grew 6%.
    International Export Volume Growth: 2%International Export Package Yield Growth: 6%
    		—8%——
    FEC International Priority and Economy Freight
    International priority and economy freight revenue grew 14%, supported by the Tricolor strategy.
    		—14%——

    Operational metrics

    20
    Adjusted Operating Income Growth
    7%YoY
    Q3 FY26

    Consolidated adjusted operating income growth.

    Adjusted EPS Growth
    16%YoY
    Q3 FY26

    Consolidated adjusted EPS growth.

    Adjusted EPS Benefit from Brazil Restructuring
    $0.41
    Q3 FY26

    One-time benefit due to favorable effective tax rate impact of $99 million related to business restructuring in Brazil.

    MD-11 Grounding Adjusted Operating Income Headwind
    $120 million
    Q3 FY26

    Due to higher operating costs and lost revenue from the grounding of the MD-11 fleet.

    MD-11 Grounding Adjusted Operating Income Headwind
    up to $55 millionYoY
    Q4 FY26

    Expected additional year-over-year headwind in Q4 as aircraft begin returning to service late in the quarter.

    FedEx Freight Separation-Related Costs (unadjusted)
    approximately $60 million
    Q3 FY26

    Primarily related to hiring and other necessary stand-alone public company costs, not adjusted out of results.

    Q4 EPS Headwind from Share Count and Interest Costs
    approximately $0.10sequential and YoY
    Q4 FY26

    Combined impact from higher share count (due to no incremental share repurchases) and higher interest costs (due to FedEx Freight's debt issuance).

    FY26 Adjusted Operating Income
    $6.5 billionup $300 million vs prior outlook
    FY26

    Midpoint scenario for the full year, up $300 million versus prior outlook.

    FY26 Cost Reduction Progress
    exceed $1 billion
    FY26

    Expected to exceed this year's $1 billion savings target due to favorable execution on structural cost-out initiatives.

    FY26 Expected Average Common Share Equivalent
    239 million shares
    FY26

    Based on Q4 common share equivalent assumption of approximately 242 million shares.

    FedEx Freight Debt Offering
    $3.7 billion
    January

    Successfully completed debt offering in January as an important milestone for the spin-off, with net proceeds intended to be dividended to FedEx Corp.

    B2B Services Contribution to Revenue Growth
    nearly half
    Q3 FY26

    Nearly half of Q3 revenue growth was driven by B2B services.

    U.S. Priority and Deferred Express Services Volume Growth
    7%
    Q3 FY26

    Supported by strategic focus on B2B verticals.

    International Export Volumes
    positiveup 2% YoY
    Q3 FY26

    Inflected positively for the first time in FY26, up 2% year-over-year, despite declines on the transpacific lane.

    Transpacific Outbound Purple-tail Capacity Reduction
    approximately 15%
    Q3 FY26

    Reduced in response to global trade policy changes.

    Transpacific Outbound White-tail Capacity Reduction
    approximately 25%
    Q3 FY26

    Reduced in response to global trade policy changes.

    European International Revenue Share Gains
    11th consecutive quarter
    Q3 FY26

    Achieved in Europe.

    France Ground Operations Station Count Reduction
    over 40%
    planned

    Part of efforts to simplify domestic footprint and optimize road network in France.

    General Rate Increase Capture Rate
    strong
    Q3 FY26

    Strong capture rate on the 5.9% general rate increase implemented in January.

    Fuel Surcharge Adjustment
    supported Q3 results
    Q3 FY26

    Adjustment to fuel surcharge put in place in December supported Q3 results.

    Industry KPIs

    13
    MetricValueDetails
    Smb b2b mixnearly half%
    Fleet actions$1 billion or belowUSD
    Long term targets$6 billionUSD
    Average daily volume5%%
    Healthcare vertical mix—
    Network reconfiguration35%%
    Revenue per piece yield5%%
    Fuel surcharge mechanicssupported Q3 results
    Tariff customs pass through—
    Amazon customer concentrationnot material
    Cost reduction program progress$2 billionUSD
    International trade lane trendspositive
    Workforce structural cost items$800 millionUSD

    Product announcements

    3
    ProductTypeDetails
    Dun & Bradstreet and FedEx Dataworks Retail Momentum Indexlaunch
    Scoop robotic package unloaderlaunch
    FedEx Returns+launch

    Deals & partnerships

    4
    InPostacquisition

    FedEx announced participation in a consortium making an offer for all shares of InPost, a European out-of-home delivery segment company. The transaction is expected to close in the second half of calendar year 2026. FedEx and InPost will not integrate operations and will remain competitors.

    Dun & Bradstreetstrategic collaboration

    Collaboration to launch the Dun & Bradstreet and FedEx Dataworks Retail Momentum Index, an early warning system for U.S. retail supply and demand. This marks the start of growing collaboration to develop additional joint insights for the market.

    Berkshire Greycollaboration

    Collaboration for the implementation of the Scoop robotic package unloader, an autonomous robotic system. Currently in pilot phase and expected to be further deployed later this calendar year.

    Dexteritycollaboration

    Collaboration providing robots for trailer loading. Currently in pilot phase and expected to be further deployed later this calendar year.

    Capital programs

    1
    Network 2.0 and One FedEx initiativesunderway$2 billion

    Benefit: cumulative savings

    Expected cumulative savings from Network 2.0 and associated One FedEx initiatives. Approximately 35% of eligible volume flows through optimized facilities by end of March, targeting 65% by next peak.

    Risks & headwinds

    7
    LTL industry demand weaknessQ3 FY26, Q4 FY26, FY26

    FedEx Freight revenue declined 5% YoY in Q3; FY26 revenue expected down low single digits YoY; Q4 revenue flat to down slightly.

    Mitigation: Prioritizing revenue quality, sequential increases in revenue per shipment, dedicated LTL sales force hiring complete, focus on customer experience and disciplined pricing.

    FedEx Freight separation-related expensesQ3 FY26, Q4 FY26

    Approximately $60 million in Q3 FY26 (unadjusted); expected to continue in Q4 FY26.

    Mitigation: Costs are for building IT infrastructure and talent for the spin-off, viewed as necessary for long-term stockholder value creation.

    MD-11 fleet groundingQ3 FY26, Q4 FY26

    $120 million adjusted operating income headwind in Q3 FY26; up to $55 million additional YoY headwind in Q4 FY26.

    Mitigation: Network adjustments and operational mitigation by pilots, network planning, and flight operations teams; aircraft planned to begin returning to service late in Q4.

    Global trade policy changesOngoing

    Continued revenue and profit headwinds (offset by transformation-related savings). Transpacific outbound Purple-tail capacity reduced by ~15%, White-tail by ~25%.

    Mitigation: Flexing air network, reallocating capacity to Asia-Europe and intra-Asia lanes, transformation-related savings.

    Higher variable incentive compensationFY26

    $800 million headwind for FY26.

    Mitigation: Reflects commitment to rewarding employees for strong performance.

    Higher share count and interest costsQ4 FY26

    Approximate $0.10 sequential and year-over-year headwind in Q4 FY26.

    Mitigation: Result of no incremental share repurchases in Q4 and higher interest costs from FedEx Freight's debt issuance. Share repurchases planned beyond FY26 to offset dilution.

    Middle East conflictQ4 FY26

    Modest headwind tied to business impact in the region.

    Mitigation: Closely monitoring the situation, implemented contingencies, operating in alignment with local authorities, network adjustments to move traffic around conflict zones.

    Q&A highlights

    8

    How is FedEx adjusting its network due to the Iran conflict, and what is the potential profit headwind for Q4?

    Raj Subramaniam stated that the team has done a remarkable job managing the network and moving traffic around the conflict zone. The Middle East is a relatively small part of total revenue, and the outlook assumes a modest headwind. Fuel is part of their pricing strategy, and the net fuel impact for FEC in Q4 is expected to be muted.

    “The Middle East itself is a relatively small part of our total revenue. And so we'll obviously monitor these trends as we go forward. I'll just add on to this. I know there's a comment maybe people are thinking about fuel as well. I would just say that fuel is part of our pricing strategy and our net fuel impact, especially at FEC is expected to be relatively muted for FEC for the fourth quarter.”

    asked by Ariel Rosa · answered by Rajesh Subramaniam

    3 min read6 chapters

    Detailed Narrative

    01

    Strong Q3 Performance and FY26 Outlook Raise

    FedEx reported strong Q3 FY26 results, with consolidated revenue up 8% year-over-year and adjusted operating income increasing 7%. This performance was largely driven by Federal Express Corporation (FEC), which saw 10% revenue growth and a 50 basis point expansion in adjusted operating margin, marking its sixth consecutive quarter of margin expansion. Consequently, the company raised its FY26 adjusted diluted EPS forecast to $19.30-$20.10, up from the prior range of $17.80-$19.00, reflecting sustained positive trends at FEC and disciplined capital allocation.

    02

    Network 2.0 and Operational Efficiency

    The transformation to one integrated intelligent network is progressing, with approximately 35% of eligible volume flowing through nearly 400 Network 2.0 optimized facilities by the end of March. The company remains on track to achieve 65% eligible volume flow by the next peak season and expects $2 billion in cumulative savings from Network 2.0 and associated One FedEx initiatives by the end of 2027. Early wins from Network 2.0 and new technology tools, such as the unload trailer prioritization tool, contributed to an exceptionally profitable peak season, which management views as a structural shift in peak profitability.

    03

    Strategic Focus on High-Margin Verticals and B2B Growth

    FedEx's commercial strategy to move up the value chain is yielding results, with nearly half of Q3 revenue growth driven by B2B services. This focus on high-margin verticals, including healthcare, has been a key enabler of increased profitability. The company is enhancing its offerings in pharma and expanding its sales team's focus on ground commercial products, including automotive and data center verticals, to capture further B2B opportunities. International export volumes also inflected positively, up 2% year-over-year, driven by targeted capacity reallocation to Asia-Europe and intra-Asia lanes.

    04

    FedEx Freight Performance and Spin-off Progress

    FedEx Freight's revenue declined 5% in Q3, pressured by lower shipments and ongoing LTL industry demand weakness. Adjusted operating income for the segment decreased by $127 million year-over-year, including approximately $60 million in separation-related costs for the planned spin-off. Despite these headwinds, FedEx Freight is prioritizing revenue quality, with sequential increases in revenue per shipment and contractual price increases. The planned June 1, 2026 spin-off remains on track, with FedEx Freight successfully completing a $3.7 billion debt offering in January.

    05

    Digital Intelligence and Physical AI Initiatives

    FedEx is leveraging digital intelligence and physical AI to enhance operations and create new services. The company introduced the unload trailer prioritization tool, using real-time data for yard operations. A strategic collaboration with Dun & Bradstreet will launch the Retail Momentum Index, an early warning system for U.S. retail supply and demand, starting this spring. Additionally, FedEx is piloting autonomous robotic systems from Berkshire Grey (Scoop robotic package unloader) and Dexterity (trailer loading robots), with further deployment expected later this calendar year, aiming to improve safety and efficiency.

    06

    International Network Adjustments and European Transformation

    In response to global trade policy changes, FedEx reduced transpacific outbound Purple and White-tail capacity by approximately 15% and 25%, respectively. Capacity was reallocated to Asia to Europe and intra-Asia lanes, which are driving strong revenue growth. The company is also transforming its ground operations in France, optimizing its hub-and-spoke network with fewer, better-placed hubs and reducing its station count by over 40%. FedEx also announced participation in a consortium to make an offer for InPost, a European out-of-home delivery company, expecting the transaction to be accretive to earnings in year one after close.

    AI-generated summary of the company’s earnings call. Not investment advice.