FedEx — Q3 2026 Earnings Summary

Financial Performance:

• Consolidated revenue for the three months ended September 30, 2026, was $22.9 billion, a 12% increase from $20.4 billion in the prior year period.
• GAAP operating income was $1.07 billion (4.7% margin) compared to $0.97 billion (4.8% margin) in the prior year; adjusted operating income was $1.20 billion (5.3% margin).
• GAAP net income was $0.29 billion ($1.21 diluted EPS) compared to $0.65 billion ($2.73 diluted EPS) in the prior year; adjusted net income was $0.90 billion ($3.74 diluted EPS).
• The $1.2 billion loss on short-term investment related to the FedEx Freight spin-off and a $627 million pre-tax gain on debt extinguishment significantly impacted GAAP net income.
• For the nine months ended September 30, 2026, consolidated revenue was $66.6 billion, a 12% increase from $59.2 billion in the prior year.
• Nine-month GAAP operating income was $3.3 billion (up 26% from $2.6 billion), and GAAP net income was $7.2 billion (up 130% from $3.1 billion).
• Cash and cash equivalents were $8.0 billion as of September 30, 2026, including approximately $2.7 billion in IEEPA tariff refunds held for customers.
• Capital expenditures for the nine months ended September 30, 2026, were $2.9 billion.

Guidance and Future Outlook:

• FedEx raised its full-year 2026 revenue growth forecast to approximately 12% year-over-year, up from a prior forecast of ~11%.
• Revised 2026 diluted EPS guidance for continuing operations is $35.30 to $35.90, compared to a prior forecast of $16.55 to $17.75 (which excluded MTM adjustments and debt extinguishment gains).
• Revised 2026 adjusted diluted EPS guidance is $18.00 to $18.60, up from a prior forecast of $16.90 to $18.10.
• The effective tax rate (ETR) forecast for 2026 is approximately 22.5%, revised down from ~23%.
• Capital spending for 2026 remains unchanged at $3.9 billion, prioritizing network optimization, fleet modernization, and automation.
• Pension contributions for 2026 remain unchanged at $475 million.
• Rate increases averaging 5.9% are scheduled to take effect on January 4, 2027.

Business Segments and Product Lines:

• Express U.S. Domestic: Operating income increased to $946 million (6.4% margin) from $884 million (6.6% margin) in the prior year, driven by higher yields, increased volume, and improved service mix.
• Express International: Operating income increased to $220 million (2.9% margin) from $192 million (3.0% margin) in the prior year, driven by higher base yields, increased export volume, and increased freight weight.
• Express U.S. Domestic Revenue: Increased 10% to $14.7 billion in the quarter, with package revenue up 9% and freight revenue up 16%.
• Express International Revenue: Increased 17% to $7.5 billion in the quarter, with package revenue up 13% and freight revenue up 28%.
• Corporate, Other, and Eliminations: Revenue was $680 million, and operating loss was $99 million.
• FedEx completed the sale of FedEx Supply Chain to CMA CGM Group on October 1, 2026, for approximately $1.4 billion.
• FedEx completed the spin-off of FedEx Freight on June 1, 2026, retaining a 19.9% ownership interest valued at $3.3 billion as of September 30, 2026.

Market and Competitive Landscape:

• The company reported winning across high-value market segments while optimizing its network.
• Global trade policy changes and increased purchased transportation rates presented headwinds to operating results.
• FedEx aims to leverage digital insights to unlock new markets and maintain its position as the world's premier B2B parcel and air freight provider.
• The company targets achieving carbon-neutral operations by 2040.

Risks and Challenges:

• Operating results were partially offset by increased purchased transportation rates, higher wage rates, and variable compensation expenses.
• Risks include economic conditions, global trade volatility, labor disruptions, and geopolitical conflicts affecting fuel prices and supply chains.
• Potential risks involve the successful implementation of business strategies, network optimization initiatives (Network 2.0, Tricolor), and the realization of benefits from the FedEx Freight spin-off.
• Future results may be impacted by MTM adjustments for retirement plan accounting and the FedEx Freight investment, which are excluded from adjusted guidance.

Management Commentary and Tone:

• CEO Raj Subramaniam stated that strong operating results and adjusted free cash flow demonstrate momentum toward 2029 financial targets.
• CFO Claude Russ noted that the $2 billion stock repurchase reflects conviction in achieving 2029 targets and a commitment to deploying strong free cash flow.
• Management emphasized disciplined operational execution to reduce cost-to-serve and focus on profitable growth.
• The tone regarding the transformation strategy was confident, citing the right strategy to simplify the portfolio and concentrate resources on core strengths.

Other Key Points:

• FedEx completed $2.0 billion in stock repurchases (approximately 6.3 million shares) during the June-September period, reducing outstanding shares and benefiting Q3 results by $0.02 per diluted share.
• Approximately $4.3 billion remained available for repurchases under the 2026 authorization as of September 30, 2026.
• FedEx utilized proceeds from a $4.1 billion dividend received from FedEx Freight, along with cash on hand, to fund cash tender offers for approximately $4.9 billion in outstanding debt securities.
• The company recognized a $263 million deferred income tax benefit related to the FedEx Supply Chain basis difference.
• FedEx Office, FedEx Supply Chain, and FedEx Dataworks are included in the "Corporate, other, and eliminations" segment.