FDX FedEx 10-Q 2026-09-30 section summaries

FedEx — transition period ended September 30, 2026

Operating results and segment performance

FedEx’s fiscal year-end changed from May 31 to December 31; the four-month transition period and recast prior-period comparisons are therefore not full-year results. The June 1 spin-off of FedEx Freight also means Freight is presented as discontinued operations and excluded from continuing-operation and segment results.

For the three months ended September 30, revenue increased 11.9% to $22.855B from $20.432B. Operating expenses rose to $21.788B from $19.460B, including higher salaries and benefits ($7.434B from $7.078B), purchased transportation ($6.455B from $5.419B) and fuel ($1.270B from $774M). Operating income grew to $1.067B from $972M. For the four-month period, revenue was $30.642B from $26.894B, operating expenses were $29.031B from $25.765B, and operating income was $1.611B from $1.129B.

Domestic U.S. ground package remained the largest service category: $9.545B from $8.748B for the quarter and $12.844B from $11.526B for four months. International package revenue was $5.513B from $4.894B for the quarter and $7.388B from $6.441B for four months; international freight was $1.442B from $1.126B and $1.921B from $1.505B, respectively.

Earnings quality and cash flow

Quarterly net income fell to $290M from $920M; continuing-operations income was $290M from $645M, while the prior-year quarter included $275M from discontinued operations. The quarter included a $1.238B loss on the retained Freight investment, partly offset by $661M of other non-operating income. Four-month net income was $5.331B from $1.137B, primarily reflecting a $3.254B gain on that investment and a $627M gain on early debt extinguishment, rather than comparable operating growth. Four-month other non-operating income was $860M from $82M; net interest expense declined to $89M from $166M. Continuing-operations diluted EPS was $1.21 from $2.73 for the quarter and $22.21 from $3.14 for four months.

Four-month operating cash flow was $2.496B from $2.488B, while capital expenditures were $1.035B from $815M. Operating cash flow included a $793M outflow from accounts payable and other liabilities. Cash declined $5.350B to $7.961B. Investing cash outflow was $3.553B, including a $2.501B equity-method investment purchase; financing cash outflow was $4.240B. Debt principal payments of $5.748B exceeded $3.909B of debt issuance, and FedEx repurchased $2.000B of common stock.

Spin-off, balance sheet and capital

FedEx distributed 80.1% of FedEx Freight on June 1, retaining 19.9%; it expects to monetize the retained stake within 12 months, subject to market conditions. The retained stake’s carrying value was $3.3B at September 30. Its fair-value changes drove a $3.3B cumulative four-month unrealized gain but a $1.2B quarterly unrealized loss; the four-month effective tax rate was 5.4% from 28.6%, partly because the gain was nontaxable. The distribution was tax-free for U.S. federal tax purposes, with no gain or loss recognized, and increased retained earnings by $464M.

At September 30, total assets were $92.926B, versus $98.937B at May 31; equity was $34.568B, versus $31.647B. Cash was $7.961B from $13.060B, and long-term debt less current portion was $17.304B from $18.808B. “Goodwill and other assets” was a combined $11.329B from $11.508B; goodwill and other intangible assets were not separately disclosed in the summarized information. Shares issued remained 318M, while treasury shares rose from 78M to 84M, reducing estimated shares outstanding from 240M to 234M.

Long-term debt, including current maturities and excluding finance leases, had $17.6B carrying value and $16.0B estimated fair value at September 30, versus $19.2B carrying value and $17.3B fair value at May 31; its annualized weighted-average interest rate was 3.75%. FedEx issued $1.1B of 5.750% notes due 2036, €1.1B of 4.000% notes due 2030 and €900M of 4.625% notes due 2034. It repurchased $4.858B principal of notes in July, funded with cash and the approximately $4.1B Freight dividend. The $3.5B of committed credit facilities were undrawn, with no commercial paper outstanding; debt/adjusted EBITDA was 1.9x against a 3.5x covenant limit.

Business developments and risks

FedEx paid €2.2B for a 37% equity-method interest in Lux TopCo, connected to InPost; no equity-method earnings were recognized during the period. It completed its prior $5.0B repurchase authorization and had $4.3B remaining under a new $5.0B program. The newly ratified pilots’ agreement took effect June 29, with an initial 40% pay-rate increase and a $625M one-time payment paid in the September quarter. Four-month restructuring expense was $200M from $87M, and accrued restructuring liabilities were $270M at September 30.

FedEx had submitted $4.6B of IEEPA tariff refund claims by September 30, received approximately $3.3B in cash refunds, and recorded estimated customer refund obligations of $2.7B. Amounts and timing remain uncertain amid CBP processing and legal developments; related litigation and collection uncertainty could have a material impact. The company also cited higher bad-debt write-offs, with economic conditions including tariffs contributing; its allowance for credit losses declined to $277M from $371M at June 1 after provisions, write-offs and recoveries.

On October 1, FedEx sold FedEx Supply Chain to CMA CGM Group for $1.4B cash proceeds, net of approximately $35M of direct transaction expenses. At September 30, related held-for-sale assets included $375M current and $292M noncurrent assets, with $222M current and $181M noncurrent liabilities.

Reporting changes and consolidated performance

FedEx completed the spin-off of FedEx Freight on June 1, 2026, retaining a 19.9% ownership interest. Freight is presented as discontinued operations for all periods; results below are for continuing operations. FedEx reorganized its reporting segments into Express U.S. Domestic and Express International and changed its fiscal year-end from May 31 to December 31. The current reporting periods are therefore the three and four months ended September 30, 2026.

For the three-month period, revenue was $22.855B versus $20.432B, operating income was $1.067B versus $972M, and operating margin was 4.7% versus 4.8%. For the four-month period, revenue was $30.642B versus $26.894B, operating income was $1.611B versus $1.129B, and margin was 5.3% versus 4.2%. Growth reflected higher base rates, fuel surcharges, and U.S. domestic package volumes, partly offset by higher purchased transportation, wages, and fuel costs. The four-month comparison also benefited from one additional operating day.

Continuing-operations net income for the three-month period fell to $290M from $645M, and diluted EPS was $1.21 versus $2.73. For the four-month period, net income rose to $5.331B from $746M and diluted EPS to $22.21 from $3.14. The current four-month result includes a $3.254B gain associated with FedEx’s retained Freight investment; the non-taxable gain reduced the effective tax rate to 5.4% from 28.6%. In the three-month period, the effective tax rate was 31.6% versus 29.4%, reflecting a $1.2B non-deductible loss on the Freight interest, partly offset by a $263M deferred tax benefit related to FedEx Supply Chain, then held for sale.

Segment performance

• Express U.S. Domestic: Revenue was $14.710B versus $13.392B for three months and $19.748B versus $17.596B for four months. Operating income was $946M versus $884M and $1.400B versus $1.088B, respectively; margins were 6.4% versus 6.6% and 7.1% versus 6.2%. Three-month revenue included U.S. package $14.093B versus $12.876B—priority $3.142B versus $2.826B, deferred $1.406B versus $1.302B, and ground $9.545B versus $8.748B—plus freight of $315M and other revenue of $201M (prior-period amounts not legible). Four-month revenue included package $18.930B versus $16.944B—priority $4.199B versus $3.710B, deferred $1.887B versus $1.708B, and ground $12.844B versus $11.526B—freight $486M versus $409M and other $332M versus $243M. Domestic package growth reflected better yields, fuel surcharges, premium-service mix, and volume. Three-month composite package yield increased to $15.32 from $14.28 and average daily package volume to 14.370M, up 2%; priority volume rose 4%, ground 2%, and deferred fell 2%.
• Express International: Revenue was $7.465B versus $6.363B for three months and $9.994B versus $8.398B for four months. Operating income was $220M versus $192M and $399M versus $219M; margins were 2.9% versus 3.0% and 4.0% versus 2.6%. Three-month revenue included package $5.513B versus $4.894B (priority $2.677B versus $2.325B, economy $1.680B versus $1.403B, international domestic $1.156B versus $1.166B), freight $1.442B versus $1.126B, and other $510M versus $343M. Four-month revenue included package $7.388B versus $6.441B (priority $3.595B versus $3.049B, economy $2.232B versus $1.845B, international domestic $1.561B versus $1.547B), freight $1.921B versus $1.505B, and other $685M versus $452M. Higher fuel surcharges, yields, and export/freight volumes drove growth, partly offset by weaker international domestic volumes. Three-month export volume rose 8%, economy volume 17%, while international domestic volume fell 11%; composite package yield increased to $30.46 from $25.96 and freight yield to $1.20 from $1.08.
• Corporate, other and eliminations: Operating loss was $(99)M versus $(104)M for three months and $(188)M versus $(178)M for four months.

Costs, cash flow and capital allocation

Three-month and four-month expenses, respectively, were: salaries and benefits $7.434B versus $7.078B / $9.984B versus $9.409B; purchased transportation $6.455B versus $5.419B / $8.565B versus $7.107B; fuel $1.270B versus $774M / $1.676B versus $1.009B; and other expense $3.685B versus $3.304B / $4.882B versus $4.405B. Higher purchased-transportation rates, fuel prices, wages, and other service costs pressured margins; surcharges have generally helped recover fuel costs, though competitive conditions may constrain recovery.

Four-month operating cash flow was $2.496B versus $2.488B. Capital expenditures were $1.035B versus $815M, including $844M versus $587M in the three-month period. Cash declined $5.350B to $7.961B; at September 30, cash and equivalents were approximately $8.0B, down from $13.1B at May 31, and available credit-agreement capacity was $3.5B. Cash-flow results reflect investing outflows of $3.553B versus $834M, including a $2.501B equity-method investment, and financing outflows of $4.240B versus $737M. Financing included debt principal payments of $5.748B versus $631M, debt issuance proceeds of $3.909B versus $997M, and repurchases of $2.000B versus $776M. Cash-flow net income includes the investment gain and a $627M gain from early debt extinguishment.

FedEx repurchased $700M of stock in the three-month period and 6.3M shares for $2.0B, at an average $319.68 per share, during the four-month period. Repurchases added $0.02 and $0.31 to diluted EPS, respectively. A July authorization provided for up to $5.0B of additional repurchases, with $4.3B remaining at September 30. A quarterly dividend of $1.22 per share was paid October 1.

Calendar-year 2026 capital expenditures are forecast at approximately $3.9B, $0.4B above 2025, including about $1.0B for aircraft. Spending supports accelerated Network 2.0 investment, facility modernization, and fleet renewal; aircraft purchases can be costly to defer. Network 2.0 and One FedEx target $1.0B in structural cost reductions by calendar year-end 2026. International transformation programs are expected to cost $230M–$260M pre-tax, with $147M incurred in fiscal 2026 and $72M in the four months ended September 30; about $220M of annualized savings is expected beginning in 2027.

Liquidity, transactions and risks

FedEx says cash, operating cash flow, and financing sources should cover operating needs, investment, pensions, dividends, and repurchases. Cash included $5.0B held abroad, most accessible without material tax cost; no credit-facility borrowings or commercial paper were outstanding. FedEx has $17.1B principal amount of senior unsecured notes guaranteed by certain subsidiaries and guarantees $659M principal amount of pass-through certificates. S&P and Moody’s ratings are BBB and Baa2, both with stable outlooks; downgrades could increase borrowing costs or limit capital-market access. FedEx expects a voluntary $100M U.S. pension contribution during the remainder of 2026 and reports no current minimum contribution requirement. Goodwill testing found no impairment, and management sees no current indication of impairment risk.

FedEx Supply Chain was sold to CMA CGM on October 1 for $1.4B cash, net of approximately $35M in direct transaction expenses; this was a post-quarter event. Key uncertainties include weak transportation demand, inflation, fuel volatility, trade and tariff changes, and related refund claims and litigation. FedEx began seeking refunds after the February 2026 Supreme Court tariff decision; timing, amounts, customer obligations, and receivable collectibility remain uncertain, and fourteen class actions seek tariff refunds. Other exposures include labor costs and negotiations, competition, geopolitical and operational disruption, cyber and technology risks, and execution of Network 2.0 and other transformation plans. The FAA grounding of MD-11s disrupted operations, but most aircraft had returned to service by September 30, and FedEx does not expect further adverse effects after the quarter.

Market Risk

As of September 30, 2026, FedEx reported no material changes in its market-risk-sensitive instruments or positions since its Annual Report. Foreign-currency exposure is concentrated in the euro, Chinese yuan, Canadian dollar, British pound, Australian dollar, Mexican peso, Hong Kong dollar, and Japanese yen. Currency movements have historically affected revenue more than expenses, as significant costs—including aircraft and fuel—are denominated in U.S. dollars. During the four-month period ended September 30, 2026, the stronger U.S. dollar relative to currencies in FedEx’s operating countries had a slightly positive effect on results. Indexed fuel surcharges largely mitigate exposure to changes in vehicle and jet fuel prices.

Controls and Procedures

FedEx’s principal executive and financial officers concluded that disclosure controls and procedures were effective as of September 30, 2026. No change during the quarter ended September 30, 2026 materially affected, or was reasonably likely to materially affect, internal control over financial reporting. The section reported no financial metrics, business developments, or specific control deficiencies.

No material changes were reported to the risk factors disclosed in FedEx’s most recent Form 10-K. FedEx cautions that risks not currently known, or currently considered immaterial, could nonetheless materially affect its business, results of operations, financial condition, and common-stock price.

For the quarter ended September 30, 2026, no FedEx director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement. This section reports no financial results or business developments.