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FEDEX CORP (FDX)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 delivered a clean beat: adjusted EPS $3.83 vs consensus $3.61* and revenue $22.24B vs consensus $21.65B*, aided by U.S. domestic yield/volume strength and disciplined pricing capture .
  • Operating margin expanded year over year on an adjusted basis (5.8% vs 5.6%), despite headwinds from de minimis changes and USPS contract expiration; management quantified a full‑year ~$1.0B operating income headwind from the global trade environment and ~$160M from USPS .
  • FY2026 guidance introduced: revenue growth +4% to +6%; adjusted EPS $14.20–$16.00 (pre‑MTM) and $17.20–$19.00 (after excluding specified costs); ETR ~25%; pension contributions cut to “up to $400M” (from “up to $600M”), with $4.5B capex and $1B permanent cost reductions reaffirmed .
  • Strategic catalysts: Best Buy named FedEx primary national parcel carrier, Amazon onboarding ramps through Q3, Network 2.0 optimization progressing, and FedEx Freight spin‑off on track for June 2026 (FDXF), with Form 10 confidentially filed and IRS ruling requested .
  • Balance sheet/capital returns supportive: $0.5B repurchased in Q1; cash $6.2B at quarter end; quarterly dividend of $1.45/share declared Aug. 7, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EPS and revenue beat Street consensus; adjusted operating income grew ~7% YoY, with U.S. domestic package yields up ~3% and domestic ADV up ~5% .
  • Commercial wins and pricing capture: Best Buy made FedEx its primary parcel carrier; Amazon onboarding progressing, with expected completion by Q3; demand surcharges and a 5.9% GRI effective Jan. 5, 2026 support revenue quality .
  • Network/program execution: ~$200M Q1 transformation savings, continued roll‑out of Network 2.0 and Tricolor, and improving Europe productivity; CDIO/DataWorks leadership strengthened to scale AI‑driven capabilities .

What Went Wrong

  • International export headwinds (de minimis, China→U.S.) reduced revenue; management cites ~$150M Q1 adjusted OI headwind, embedded in a full‑year ~$1.0B OI headwind assumption .
  • FedEx Freight softness: revenue down 3% YoY, adjusted operating margin down ~250 bps YoY, pressured by industrial economy weakness and lower fuel surcharge capture .
  • USPS contract expiration headwind ($130M adjusted OI in Q1), with mix shift to lower‑yielding freight lanes and incremental customs/administrative costs ($300M full‑year) weighing on operating leverage .

Financial Results

Consolidated Quarter Progression

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Revenue ($USD Billions)$22.16 $22.22 $22.24
Diluted EPS (GAAP)$3.76 $6.88 $3.46
Diluted EPS (Adjusted)$4.51 $6.07 $3.83
Operating Margin (GAAP)5.8% 8.1% 5.3%
Operating Margin (Adjusted)6.8% 9.1% 5.8%

Year-over-Year (Same Quarter)

MetricQ1 FY2025Q1 FY2026
Revenue ($USD Billions)$21.58 $22.24
Diluted EPS (GAAP)$3.21 $3.46
Diluted EPS (Adjusted)$3.60 $3.83
Operating Margin (GAAP)5.0% 5.3%
Operating Margin (Adjusted)5.6% 5.8%

Versus Consensus (Q1 FY2026)

MetricConsensusActual
Revenue ($USD Billions)$21.65*$22.24
Adjusted EPS ($)$3.61*$3.83

Values with * retrieved from S&P Global.

Segment Breakdown (Q1 FY2026)

SegmentRevenue ($USD Millions)YoY %Operating Income ($USD Millions)YoY %
Federal Express$19,116 +4% $1,138 +19%
FedEx Freight$2,257 (3%) $360 (18%)
Other & Eliminations$871 (8%) Corporate/Other OI $(312) —

KPIs (Selected, Federal Express & Freight)

KPIQ1 FY2025Q1 FY2026
U.S. Domestic ADV (000s)13,295 13,920
International Export ADV (000s)1,113 1,080
Composite Package Yield ($)$15.86 $16.22
U.S. Domestic Composite Yield ($)$13.87 $14.25
Total Avg. Daily Freight Pounds (000s)20,490 18,034
Composite Freight Yield ($/lb)$1.19 $1.24
FedEx Freight Avg. Daily Shipments (000s)92.0 90.0
Freight Composite Rev/100wt ($)$40.73 $40.50

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth (YoY)FY2026—+4% to +6% New
Adjusted EPS (pre-MTM)FY2026—$14.20–$16.00 New
Adjusted EPS (with specified cost exclusions)FY2026—$17.20–$19.00 New
Effective Tax Rate (pre-MTM)FY2026—~25% New
Pension ContributionsFY2026Up to $600M Up to $400M Lowered
Permanent Cost ReductionsFY2026$1.0B $1.0B Maintained
Capital ExpendituresFY2026$4.5B $4.5B Maintained
General Rate Increase2026—5.9% avg (effective Jan 5, 2026) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2025, Q4 FY2025)Current Period (Q1 FY2026)Trend
Global trade/de minimis headwindRevised FY2025 outlook; USPS expiration headwind; DRIVE offsets ~$150M Q1 adjusted OI headwind; ~$1.0B full-year OI headwind; customs/admin ~$300M Deteriorating external environment pressure
USPS contract expirationLapping end of Sept. 2024; removal of costs ongoing ~$130M adjusted OI headwind in Q1; will lap by end of month Headwind moderating from Q2
Network 2.0/Tricolor executionDRIVE and integration progressing ~70 U.S. stations optimized in Q1; ~360 optimized across U.S./Canada; densification benefits Continuing execution
AI/DataWorks monetizationDigital/transformation emphasis; leadership changes not yet announcedNew CDIO/DataWorks leader hired; scaling AI and exploring new revenue models Accelerating digital strategy
U.S. domestic packageYield strength; ADV growth +5% ADV; +3% yields; pricing capture; demand surcharges Improving
Europe operationsFocus on productivity/costBest new business quarter in two years; improved productivity metrics Improving
FedEx FreightIndustrial demand softnessRevenue down; margin down; building dedicated sales team; spin-off on track Stabilizing/positioning for spin
Pricing/GRI/fuelPricing supported yieldsGRI 5.9%; fuel surcharge index changes benefitted yields Supportive

Management Commentary

  • “Our earnings growth underscores the success of our strategic initiatives, as we are flexing our network and reducing our cost-to-serve, while further enhancing our value proposition and customer experience.” — Raj Subramaniam, CEO .
  • “We executed very well in Q1… we grew adjusted operating income by ~$90M despite the $150M headwind from the global trade environment, $130M headwind from the USPS contract expiration, and continued softness at FedEx Freight.” — John Dietrich, CFO .
  • “In Q1, Best Buy named FedEx as their primary national parcel carrier… We are excited to partner with Best Buy to create a smarter, more reliable supply chain.” — Brie Carere, CCO .
  • “We move 17 million packages through our network daily, generating two petabytes of data… FedEx owns one of the richest logistics intelligence assets in the world.” — Raj Subramaniam, CEO .
  • “We now anticipate making up to $400 million in voluntary pension contributions… compared to our prior forecast of up to $600 million.” — John Dietrich, CFO .

Q&A Highlights

  • Clarified full‑year EPS range drivers: evolution of global trade, industrial economy health, U.S. demand, B2B traction, inflation; midpoint assumes +5% revenue growth and $1B transformation savings .
  • De minimis impact: majority of the $150M Q1 headwind was top‑line from China→U.S.; plan assumes continuation plus ~$300M customs/admin costs; ~$1.0B full‑year OI headwind embedded .
  • Operating leverage/mix: lower‑yielding mix and external headwinds constrain flow‑through despite revenue growth and cost savings; management reiterates profitability focus and revenue quality .
  • Peak outlook: modest ADV growth; total peak volume mid‑to‑high single‑digit YoY; driven by large B2C customers and onboarding wins; peak surcharges and capacity plans in place .
  • FedEx Freight spin‑off: Form 10 confidentially filed; IRS private letter ruling requested; target NYSE listing (FDXF) by June 2026; building dedicated LTL sales force to ~400 .

Estimates Context

  • Q1 FY2026 beat: Adjusted EPS $3.83 vs consensus $3.61* (+6%); Revenue $22.24B vs consensus $21.65B* (+2.7%); 21 EPS estimates and 20 revenue estimates contributed to consensus. Values retrieved from S&P Global.
  • Implications: Street models likely raise FY2026 revenue/EPS on stronger U.S. domestic yield/ADV and pricing capture, partly offset by modeled de minimis/USPS headwinds and Freight softness .

Key Takeaways for Investors

  • The P&L is showing resilience: adjusted margins modestly expanded YoY on pricing discipline, U.S. domestic momentum, and transformation savings, despite external trade shocks .
  • Structural initiatives are gaining traction: Network 2.0/Tricolor densify the network, improve service, and support yield growth; expect continued execution benefits through FY2026 .
  • Commercial pipeline credible: marquee wins (Best Buy) and Amazon onboarding into Q3 underpin revenue trajectory; SMB and healthcare vertical momentum add stickier, higher‑value mix .
  • Guidance skewed by macro/trade: model ~$1.0B OI headwind from de minimis/global trade and ~$160M USPS headwind; offsets include $1B transformation savings, pricing, and share repurchase .
  • FX/customs costs rising: incorporate ~$300M direct trade‑related expenses (customs, staffing/administration) in FY2026 assumptions .
  • Capital returns durable: $1.45 quarterly dividend and ongoing buybacks ($1.6B authorization remaining) support EPS; liquidity strong ($6.2B cash) .
  • Spin‑off optionality: FedEx Freight separation (FDXF) by June 2026 could unlock value; monitor Form 10 progress, investor day, and dedicated sales ramp .

Notes:

  • All adjusted figures exclude specified items per company disclosures; GAAP/Adjusted reconciliations provided in the 8‑K press release .
  • Segment and KPI data sourced from Q1 FY2026 8‑K; prior period comparisons reflect the company’s reported metrics .
  • Consensus estimates marked with * are from S&P Global.