FedEx Delivers Strong Second-Quarter Earnings Growth as Transformation Strategy Gains Momentum
FedEx Corp. (NYSE: FDX), one of the world’s largest transportation and logistics companies, reported a strong set of consolidated financial results for the second quarter ended November 30, underscoring the effectiveness of its strategic transformation initiatives amid a complex and challenging global operating environment. The company posted solid year-over-year growth in revenue, operating income, net income, and earnings per share, supported by higher package yields, disciplined cost management, and continued progress under its multi-year Network 2.0 transformation program.
Adjusted financial measures, which exclude certain items detailed by the company, highlight the underlying strength of FedEx’s core operations across its express, ground, and freight businesses.
Second-Quarter Financial Performance Highlights
For the second quarter of fiscal 2026, FedEx reported consolidated revenue of $23.5 billion, representing a meaningful increase from $22.0 billion in the same period last year. Revenue growth reflected improved pricing, higher U.S. domestic package volumes, and continued demand for premium international shipping services.
Operating income on a GAAP basis rose to $1.38 billion, compared with $1.05 billion a year earlier. On an adjusted basis, operating income increased to $1.61 billion, up from $1.38 billion in the prior-year period. As a result, operating margin expanded to 6.9% on an adjusted basis, compared with 6.3% last year, signaling improved operational efficiency.
Net income for the quarter totaled $0.96 billion on a reported basis, up from $0.74 billion in the prior year. Adjusted net income increased to $1.14 billion, compared with $0.99 billion in fiscal 2025. Diluted earnings per share also showed robust growth, rising to $4.04 on a GAAP basis and $4.82 on an adjusted basis, compared with $3.03 and $4.05, respectively, in the same quarter last year.
Drivers of Improved Performance
FedEx attributed its improved consolidated results to several key operational and strategic factors. Strength in U.S. domestic and International Priority package yields played a central role, reflecting successful pricing actions and favorable customer mix. The company also benefited from continued structural cost reductions, a core objective of its transformation strategy.
Higher U.S. domestic package volumes contributed positively, particularly during the early stages of the peak shipping season. These gains were achieved despite ongoing macroeconomic uncertainty, volatile global trade conditions, and geopolitical challenges affecting international commerce.
Raj Subramaniam, President and Chief Executive Officer of FedEx Corp., highlighted the significance of the quarter’s performance.
FedEx delivered an outstanding second quarter as we successfully executed our growth strategy and advanced our network transformation, while navigating a highly challenging external environment,” Subramaniam said. “I am extremely proud of our team members worldwide for their commitment to making every FedEx experience outstanding this Peak season.
Federal Express Segment Shows Strong Improvement
The Federal Express segment recorded improved operating results during the quarter, driven by a combination of higher yields, cost savings, and increased volumes. U.S. domestic and International Priority package yields rose as the company continued to optimize pricing and service offerings.
Cost performance benefited from savings generated through transformation initiatives, including Network 2.0, as well as lower business optimization costs compared with the prior year. Increased U.S. domestic package volume further supported profitability.
However, these positive factors were partially offset by several headwinds. FedEx cited the financial impact of global trade policy changes, higher wage rates, and increased variable incentive compensation expenses. The company also faced rising purchased transportation rates and costs associated with the grounding of its MD-11 aircraft fleet, which affected capacity planning and network flexibility.
Despite these challenges, management emphasized that the segment’s performance demonstrated the resilience of FedEx’s express network and the benefits of ongoing structural improvements.
FedEx Freight Segment Faces Near-Term Pressure Ahead of Spin-Off
The FedEx Freight segment experienced a decline in operating results during the quarter, primarily due to lower shipment volumes and higher wage rates. In addition, the company incurred higher costs related to the hiring of additional dedicated less-than-truckload (LTL) sales professionals as it prepares for the planned separation of FedEx Freight into an independent public company.
These pressures were partially offset by increased yield, reflecting pricing discipline in the LTL market. During the quarter, FedEx Freight incurred $152 million in one-time spin-off-related costs, largely associated with professional fees and separation planning.
Management reiterated that these costs are temporary and strategic in nature, positioning FedEx Freight for long-term success as a standalone business.
Share Repurchases and Strong Liquidity Position
FedEx continued to return capital to shareholders during the quarter through its share repurchase program. The company completed $276 million in share repurchases via open market transactions, buying back approximately 1.2 million shares.
The reduction in outstanding shares contributed $0.05 per diluted share to second-quarter earnings. As of November 30, 2025, FedEx had $1.3 billion remaining under its existing stock repurchase authorization.
FedEx ended the quarter with $6.6 billion in cash on hand, providing ample liquidity to support operations, strategic investments, shareholder returns, and upcoming corporate initiatives.
FedEx Freight Spin-Off Progressing as Planned
The planned spin-off of FedEx Freight remains on track and is expected to be completed on June 1, 2026, in a tax-efficient manner for FedEx stockholders. Following the separation, FedEx Freight will become a fully independent, publicly traded company listed on the New York Stock Exchange under the ticker symbol FDXF.
As part of the preparation process, FedEx Freight will host an Investor Day in New York City on April 8, 2026, offering investors a detailed view of its strategy, financial profile, and growth opportunities as a standalone LTL carrier.
Management views the separation as a value-enhancing move that will allow both FedEx and FedEx Freight to pursue more focused strategies, improve capital allocation, and enhance transparency for investors.
Reflecting the strong second-quarter performance and improving momentum, FedEx revised its fiscal 2026 outlook upward. The company now expects year-over-year revenue growth of 5% to 6%, compared with its prior forecast of 4% to 6%.
On an adjusted basis, FedEx now anticipates diluted earnings per share of $14.80 to $16.00, excluding mark-to-market retirement plans accounting adjustments. When also excluding costs related to the FedEx Freight spin-off, business optimization initiatives, the planned fiscal year change, and an international regulatory matter, adjusted EPS is expected to range between $17.80 and $19.00, an improvement from the prior forecast of $17.20 to $19.00.
The company also reduced its expected pension contributions to $275 million, down from a previous estimate of up to $400 million.
FedEx reaffirmed several key elements of its fiscal 2026 outlook, including:
- $1 billion in permanent cost reductions from transformation-related initiatives
- An effective tax rate of approximately 25%, excluding mark-to-market adjustments
- Capital expenditures of $4.5 billion, focused on network optimization, automation, fleet modernization, and facility upgrades
John Dietrich, Executive Vice President and Chief Financial Officer of FedEx Corp., emphasized the strategic importance of these updates.
Our strong second-quarter results and revised full-year outlook reflect the momentum that is building in our business as we continue to drive stockholder value within a challenging operating environment,” Dietrich said. “The progress we are making on our strategic initiatives is tangible, and we are committed to creating significant value in the years ahead.
Long-Term Strategy and Corporate Overview
FedEx Corp. provides a comprehensive portfolio of transportation, e-commerce, and business services through its integrated global network. With annual revenue of approximately $90 billion, the company serves customers in more than 220 countries and territories.
FedEx continues to invest in digital transformation, automation, and sustainability, with a stated goal of achieving carbon-neutral operations by 2040. Its Network 2.0 initiative remains central to improving efficiency, reducing structural costs, and enhancing service reliability across its operating companies.
While FedEx acknowledged ongoing risks related to economic uncertainty, global trade volatility, labor costs, and geopolitical developments, management expressed confidence in the company’s ability to execute its strategy and adapt to changing market conditions.
The strong second-quarter performance, upwardly revised outlook, and continued progress on the FedEx Freight spin-off collectively signal a company gaining traction in its transformation journey. As FedEx moves through the remainder of fiscal 2026, investors and industry observers will be closely watching how effectively it translates operational momentum into sustained long-term value creation.
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