FEDEX Q4 FY26 earnings call FDX

FedEx closed FY26 growing consolidated revenue and adjusted operating income 8% each, with FEC growing revenue 9% and adjusted operating income 17% (+$940M) on nearly $7B of revenue growth — evidence of powerful operating leverage. FEC's 7.7% adjusted operating margin (+60 bps) was its best in four years. Consolidated adjusted OI rose $491M/8% despite a ~$400M Freight drag, and the company delivered $4.7B of adjusted free cash flow (+$800M) at nearly 100% conversion. Management stressed these results came despite significant global trade-policy headwinds and the grounding of the MD-11 fleet, of which 4 aircraft have safely returned to service with the full fleet targeted before peak.

FedEx is moving to a December 31 fiscal year-end and reorienting all forward commentary accordingly. Its next earnings release on October 28 will cover June–September 2026. Results will be resegmented into Express U.S. Domestic, Express International, and Corporate and Other. The company will finalize its CY25 adjusted EPS baseline in a mid-August 8-K containing recasted and resegmented CY24 and CY25 financials; a preliminary ~$15 CY25 adjusted EPS baseline (continuing operations, burdened with stranded costs) is being used for comparison. The June–December stub period is expected to deliver ~$11.30 of adjusted EPS, up 20%.

B2B services drove the majority of Q4 revenue growth, with commercial B2B up ~3.5% and improvement across all four key verticals — health care, automotive, aerospace and data center. Exiting FY26, health care transportation revenue was nearly $10B against an $80B-plus TAM, and FedEx launched FedEx Life Sciences plus a temperature-controlled Ireland-to-U.S. corridor. The AI/data-center space — described as a horizontal ecosystem spanning hyperscalers and supporting industrial/power infrastructure — delivered double-digit revenue growth and the highest growth rate of the four verticals, with APAC responsiveness a standout. SMB volume grew double digits, with mid-90s renewal rates and ~40% of U.S. micro/small business volume tendered at retail.

By month-end, about 45% of eligible volume flows through nearly 490 Network 2.0 optimized stations, rising to 65% before peak, after which implementation pauses until early 2027. FedEx remains on track for Network 2.0/One FedEx savings by end of CY26 and the full $2B by end of CY27, and exceeded its $1B FY26 transformation-related savings target. Europe delivered its 12th consecutive quarter of international revenue share gains, supported by a strategic investment to expand the Duiven, Netherlands road hub. The Tricolor strategy is driving international airfreight share gains in a ~$90B global market, with average daily pounds up 12%.

The CY26 bridge builds from a ~$5B CY25 adjusted OI starting point (including ~$350M stranded costs) to $5.8B at midpoint. Tailwinds: FEC volume-related revenue net of variable costs +$600M and FEC yield +$3.7B (excluding fuel surcharge and FX). Headwinds: base expense +$2.6B (wage/purchase-transportation inflation, net of structural cost reduction), variable compensation +$800M (of which only $100M is incremental to the remaining 7 months, all landing in Q3), and the pilot agreement +$200M. A $100M benefit comes from removing stranded costs. Most of the CY26 variable-comp headwind was already incurred in the first five months.

Under the new calendar, Q4 becomes the strongest seasonal quarter, absorbing the majority of transition-year adjusted operating income. June is expected to be very strong on an absolute basis (22 operating days, 5 Mondays) with the new pilot contract not yet effective. Q3 will traditionally be the weakest absolute quarter and will absorb the pilot-contract cost (effective June 29, hitting from July) plus the entire remaining $100M of variable-comp headwind, though underlying YoY momentum remains intact. International is seasonally weaker in late-summer months as Europe slows.

FedEx is navigating global trade-policy changes, Middle East geopolitical unrest and the IEEPA refund process. It began filing claims with CBP on behalf of customers in April and will begin passing refunds through to customers in August. On fuel, the surcharge resets weekly and offset higher fuel expense (in both the fuel and purchase-transportation lines); it was not a material driver of adjusted operating income. Fuel added roughly 5 points to Q4 FEC revenue and about 20 bps of margin dilution via the denominator — management noted margins would have been up YoY excluding fuel, and saw no demand destruction from elevated fuel prices.