FedEx (FDX) Q4 FY26 earnings call: guidance and Q&A

Why was fiscal Q4 growth lower than the acceleration expected over the coming calendar months, and what lingering costs work their way out?

Russ pointed to the Q4 FY26 variable-comp headwind dissipating to only $100M in the transition year, plus reset seasonality (Q4 becomes the strongest calendar quarter) and fewer headwinds ahead. The base business momentum on revenue and cost management underpins the 19% midpoint OI growth and 20% EPS growth.

“the variable compensation headwind we see in the fourth quarter of FY '26 that really dissipates. That becomes only a headwind of $100 million in the transition year”

asked by Christian Wetherbee · answered by Claude Russ

How much FEC margin improvement in CY26, and does the remaining stranded cost come out fully in CY27?

Russ confirmed margin improves YoY in both the calendar and transition periods, more in the transition year given the first-five-months variable-comp headwind. On stranded costs, from the $600M base ~$250M has been conveyed to Freight; of the $350M remaining, $100M comes out in CY26, with the remainder mitigated by the exit rate of CY27.

“I don't expect to be talking about stranded costs past CY '27. From an exit rate perspective of CY '27 is when we're confident we'll mitigate the remaining stranded cost.”

asked by Thomas Wadewitz · answered by Claude Russ

Is the $11.30 exit-rate acceleration just variable-comp timing or real underlying acceleration, and will the Board pursue a less-balanced approach to draw down cash?

Russ cited strong underlying revenue and expense momentum; June is very strong (22 days, 5 Mondays, pilot not yet started) while Q3 is seasonally weakest. On capital, he reaffirmed a balanced approach: 5% post-spin dividend increase, up to $1B buyback in remainder of CY26, funding the InPost investment (expected close CY26), and preserving the tax-free spin/leverage-neutral position — declining to give a playbook beyond CY26.

“we will also use a portion of this cash to fund our investment in InPost, which we expect to close during CY '26.”

asked by David Vernon · answered by Claude Russ

How much of the ~3.5% B2B commercial pickup was macro versus targeted verticals, and did AI-driven CapEx spend contribute?

Carere attributed it primarily to profitable market share from years of repivoting to core B2B. B2B was the majority of Q4 revenue growth and the brightest B2B quarter of the year, with improvement across all four key verticals. AI/data-center wins (especially out of Asia) contributed but gains were broadly distributed; some inventory buildup/restocking was also seen.

“In the quarter, B2B was the majority of our revenue growth. And actually, it was the brightest quarter within the fiscal year from a B2B perspective.”

asked by Jordan Alliger · answered by Brie Carere

How did fuel affect the quarter and how should we think about surcharge timing going forward?

Russ clarified the surcharge resets weekly (not biweekly) and worked as designed as prices rose in Q3/Q4 FY26; higher fuel revenue offset higher fuel and purchase-transportation expense, so fuel was not material to profit. Carere added there was no demand destruction from elevated fuel; Raj noted margins would have been up YoY excluding fuel.

“If we had taken the fuel surcharge out, our margin would have been up year-over-year rather than down year-over-year.”

asked by Brandon Oglenski · answered by Rajesh Subramaniam

Can the AI/data-center market be sized like the ~$10B health care TAM, and is it a higher-growth vertical?

Carere said they have begun sizing it but it behaves as a broad ecosystem rather than a definable vertical — customers span hyperscalers and industrial players supporting data-center build-outs. Across the industrial and AI base it is growing at the highest rate of all four verticals, with the commercial team responding at unprecedented speed.

“The growth rates are the highest in the -- all 4 of the verticals, I don't think entirely surprising.”

asked by Jonathan Chappell · answered by Brie Carere

Timing to sell the Freight stake, whether guidance includes Freight equity earnings, and whether price/cost is improving through the year?

Russ said the Freight stake will be monetized tax-efficiently within 24 months of the spin per IRS rules; it is excluded from guidance and will be marked to fair value each quarter. On the bridge, core business momentum (volume, yield, base expense) is consistent across the first five and remaining seven months — the noise is in the timing of headwinds (pilot contract, variable comp).

“we plan to monetize our stake in Freight in a tax-efficient manner within 24 months of the spin as required by the IRS.”

asked by Scott Group · answered by Claude Russ

How much did fuel weigh on margins, and why were incremental margins only ~8% on mid-teens revenue growth?

Russ said variable comp was the biggest impact; fuel's higher revenue in the denominator cost ~20 bps and, absent it, margin would have flipped from negative to positive YoY. He reiterated that both the calendar and transition-year margins will improve, at a higher rate in the transition year, reflecting business momentum.

“when you think about fuel, the higher fuel revenue does show up in the denominator... It was maybe 20-or-so basis points... but it would have flipped to positive versus the negative it was.”

asked by Richa Talwar · answered by Claude Russ

Is the network still running tight through Network 2.0 given ground economy and international-domestic declines, and what about contracts won during past labor disruption coming up for rebid?

Carere said the U.S. network runs at very high utilization even with the small ground-economy decline, since total volume is up. Europe is trading domestic for higher-yield intra-Europe volume (12 quarters of share gains). Renewal rates run in the mid-90s (higher in SMB); accounts won during past disruption came over gradually and renew at different times, so there is no single cliff.

“We run in the mid-90s from a renewal rate. I feel really confident about the partnerships we've built, about our value proposition. And so when customers come to FedEx, they stay.”

asked by Brian Ossenbeck · answered by Brie Carere