FedEx(FDX) - 2026 Q1 - Quarterly Report

FORM 10-Q Cover Page Registrant Information This section provides FedEx Corporation's identification details, registered securities, filing status, and common shares outstanding - FedEx Corporation is incorporated in Delaware with its principal executive offices in Memphis, Tennessee[3] Securities Registered on New York Stock Exchange | Title of each class | Trading Symbol | Name of each exchange on which registered | | :------------------ | :------------- | :-------------------------------------- | | Common Stock, par value $0.10 per share | FDX | New York Stock Exchange | | 1.625% Notes due 2027 | FDX 27 | New York Stock Exchange | | 0.450% Notes due 2029 | FDX 29A | New York Stock Exchange | | 1.300% Notes due 2031 | FDX 31 | New York Stock Exchange | | 3.500% Notes due 2032 | FDX 32 | New York Stock Exchange | | 0.950% Notes due 2033 | FDX 33 | New York Stock Exchange | | 4.125% Notes due 2037 | FDX 37 | New York Stock Exchange | - The registrant is a large accelerated filer[6] Common Stock Outstanding Shares | Metric | Value | | :----- | :---- | | Common Stock Outstanding Shares at September 16, 2025 | 235,955,461 | PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements This section presents FedEx Corporation's unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, cash flows, and stockholders' investment, with accompanying notes Condensed Consolidated Balance Sheets This statement provides a snapshot of FedEx's financial position, detailing assets, liabilities, and common stockholders' investment Condensed Consolidated Balance Sheet Highlights (in millions) | Category | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Total current assets | $19,344 | $18,386 | | Net property and equipment | $41,384 | $41,642 | | Total other long-term assets | $27,688 | $27,599 | | Total Assets | $88,416 | $87,627 | | Total current liabilities | $15,524 | $15,411 | | Long-term debt, less current portion | $20,291 | $19,151 | | Total other long-term liabilities | $24,830 | $24,991 | | Total Liabilities | $60,645 | $59,553 | | Total common stockholders' investment | $27,771 | $28,074 | | Total Liabilities and Common Stockholders' Investment | $88,416 | $87,627 | Condensed Consolidated Statements of Income This statement outlines the company's financial performance, including revenue, operating expenses, operating income, net income, and earnings per share Condensed Consolidated Statements of Income Highlights (in millions, except per share amounts) | Metric | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Revenue | $22,244 | $21,579 | | Operating expenses | $21,058 | $20,499 | | Operating income | $1,186 | $1,080 | | Income before income taxes | $1,134 | $1,056 | | Provision for income taxes | $310 | $262 | | Net income | $824 | $794 | | Basic earnings per common share | $3.48 | $3.24 | | Diluted earnings per common share | $3.46 | $3.21 | | Dividends declared per common share | $2.90 | $2.76 | - Revenue increased by 3.1% year-over-year, from $21,579 million in Q1 2024 to $22,244 million in Q1 2025[20] - Operating income grew by 9.8% year-over-year, from $1,080 million in Q1 2024 to $1,186 million in Q1 2025[20] - Diluted EPS increased by 7.8% year-over-year, from $3.21 in Q1 2024 to $3.46 in Q1 2025[20] Condensed Consolidated Statements of Comprehensive Income This statement presents net income and other comprehensive income (loss) components, including foreign currency translation adjustments and amortization of prior service credit Condensed Consolidated Statements of Comprehensive Income Highlights (in millions) | Metric | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net income | $824 | $794 | | Other comprehensive income (loss) | ($9) | $27 | | Comprehensive income | $815 | $821 | - Comprehensive income decreased by 0.7% year-over-year, from $821 million in Q1 2024 to $815 million in Q1 2025, primarily due to a foreign currency translation loss in 2025 compared to a gain in 2024[22] Condensed Consolidated Statements of Cash Flows This statement details cash inflows and outflows from operating, investing, and financing activities, showing the net change in cash and cash equivalents Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Activity | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Cash provided by operating activities | $1,716 | $1,187 | | Cash used in investing activities | ($619) | ($802) | | Cash used in financing activities | ($460) | ($969) | | Net increase (decrease) in cash and cash equivalents | $664 | ($558) | | Cash and cash equivalents at end of period | $6,166 | $5,943 | - Cash provided by operating activities increased by $529 million (44.6%) year-over-year[25] - Cash used in investing activities decreased by $183 million (22.8%) year-over-year, primarily due to lower capital expenditures[25] - Cash used in financing activities decreased by $509 million (52.5%) year-over-year, driven by debt issuances and lower common stock repurchases[25] Condensed Consolidated Statements of Changes In Common Stockholders' Investment This statement details changes in common stockholders' investment components, including common stock, additional paid-in capital, retained earnings, AOCL, and treasury stock Changes in Common Stockholders' Investment (in millions) | Component | August 31, 2025 | August 31, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Common Stock (Ending Balance) | $32 | $32 | | Additional Paid-in Capital (Ending Balance) | $4,327 | $4,134 | | Retained Earnings (Ending Balance) | $41,538 | $38,767 | | Accumulated Other Comprehensive Loss (Ending Balance) | ($1,371) | ($1,332) | | Treasury Stock (Ending Balance) | ($16,755) | ($14,425) | | Total Common Stockholders' Investment Balance | $27,771 | $27,176 | - Total common stockholders' investment increased by $595 million (2.2%) year-over-year[27] - Cash dividends declared were $2.90 per share in Q1 2025 and $2.76 per share in Q1 2024[27] Notes to Condensed Consolidated Financial Statements These notes provide additional disclosures for the condensed consolidated financial statements, covering segments, accounting policies, credit losses, comprehensive income, financing, EPS, retirement plans, segment performance, commitments, and contingencies NOTE 1: DESCRIPTION OF BUSINESS SEGMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note describes FedEx's business segments, significant accounting policies, business optimization costs, separation costs, and details on stock repurchases and dividends - FedEx's primary operating companies are Federal Express (express transportation, small-package ground delivery) and FedEx Freight (less-than-truckload freight transportation)[30] - Business optimization costs for Q1 2026 were $67 million ($52 million net of tax, or $0.22 per diluted share), down from $128 million in Q1 2025, primarily related to professional services and severance for Network 2.0 and the Europe workforce reduction plan[42] - The Europe workforce reduction plan is expected to impact approximately 1,400 employees and generate annualized savings of approximately $150 million starting in calendar 2026, with pre-tax costs of about $250 million incurred through fiscal 2026[44][45] - Costs related to the planned spin-off of FedEx Freight were $43 million ($33 million net of tax, or $0.14 per diluted share) in Q1 2026, with the transaction expected to be completed by June 2026[46][47] - FedEx's Board approved a change in fiscal year end from May 31 to December 31, effective June 1, 2026, incurring $4 million in costs in Q1 2026[48] - During Q1 2026, 2.2 million shares were repurchased for $500 million at an average price of $232.25 per share; $1.6 billion remained available under the 2024 stock repurchase program as of August 31, 2025[59][61] - A quarterly cash dividend of $1.45 per share was declared on August 7, 2025, payable October 1, 2025[62] NOTE 2: CREDIT LOSSES This note details FedEx's credit loss exposure, primarily from trade receivables, and the methodology for determining the allowance for credit losses - Credit losses were $219 million for the three-month period ended August 31, 2025, an increase from $129 million for the same period in 2024[68] - The allowance for credit losses increased to $492 million at August 31, 2025, from $438 million at May 31, 2025[68] NOTE 3: ACCUMULATED OTHER COMPREHENSIVE LOSS This note presents changes in Accumulated Other Comprehensive Loss (AOCL), net of tax, primarily driven by foreign currency translation and retirement plan adjustments Changes in AOCL (in millions) | Component | August 31, 2025 | August 31, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Foreign currency translation loss (end of period) | ($1,427) | ($1,393) | | Retirement plans adjustments (end of period) | $56 | $61 | | AOCL at end of period | ($1,371) | ($1,332) | - AOCL increased to a loss of $1,371 million at August 31, 2025, from a loss of $1,332 million at August 31, 2024, primarily due to foreign currency translation adjustments[69] NOTE 4: FINANCING ARRANGEMENTS This note details FedEx's financing arrangements, including long-term debt issuances, credit agreements, and compliance with financial covenants - On July 30, 2025, FedEx issued €850 million of senior unsecured debt (€500 million of 3.50% notes due 2032 and €350 million of 4.125% notes due 2037), using a portion of proceeds to repay €500 million of 0.45% notes due August 2025[71] Long-Term Debt Carrying and Fair Values (in millions) | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Long-term debt (carrying value) | $20,400 | $19,900 | | Long-term debt (estimated fair value) | $18,200 | $17,200 | | Annualized weighted-average interest rate | 3.6% | N/A | - FedEx maintains a $1.75 billion three-year credit agreement (expiring March 2027) and a $1.75 billion five-year credit agreement (expiring March 2029), with no amounts outstanding as of August 31, 2025[74] - The ratio of debt to adjusted EBITDA was 1.9 at August 31, 2025, well within the covenant limit of not more than 3.5 to 1.0[75] NOTE 5: COMPUTATION OF EARNINGS PER SHARE This note provides the detailed calculation of basic and diluted earnings per common share for the reported periods Earnings Per Share Calculation (in millions, except per share amounts) | Metric | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net earnings allocable to common shares | $823 | $793 | | Weighted-average common shares (basic) | 236 | 244 | | Basic earnings per common share | $3.48 | $3.24 | | Weighted-average diluted shares | 238 | 247 | | Diluted earnings per common share | $3.46 | $3.21 | | Anti-dilutive options excluded | 7.1 | 4.3 | NOTE 6: RETIREMENT PLANS This note outlines costs associated with FedEx's defined benefit pension, defined contribution, and postretirement healthcare plans Retirement Plans Costs (in millions) | Plan Type | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Defined benefit pension plans | $47 | $70 | | Defined contribution plans | $306 | $287 | | Postretirement healthcare plans | $22 | $22 | | Total retirement plans costs | $375 | $379 | - FedEx made voluntary contributions of $200 million to its U.S. Pension Plan during Q1 2026, with no required contributions for fiscal 2026 as the plan is fully funded[79] NOTE 7: BUSINESS SEGMENTS AND DISAGGREGATED REVENUE This note provides detailed financial information for FedEx's reportable segments, disaggregated revenue by service type and geographic region, and segment capital expenditures Segment Operating Results (Three Months Ended August 31, 2025, in millions) | Segment | Revenue | Operating Expenses | Operating Income | | :-------------------------------- | :------ | :----------------- | :--------------- | | Federal Express Segment | $19,116 | $17,978 | $1,138 | | FedEx Freight Segment | $2,257 | $1,897 | $360 | | Corporate, other, and eliminations | $871 | $1,183 | ($312) | | Consolidated Total | $22,244 | $21,058 | $1,186 | Segment Operating Results (Three Months Ended August 31, 2024, in millions) | Segment | Revenue | Operating Expenses | Operating Income | | :-------------------------------- | :------ | :----------------- | :--------------- | | Federal Express Segment | $18,305 | $17,352 | $953 | | FedEx Freight Segment | $2,329 | $1,890 | $439 | | Corporate, other, and eliminations | $945 | $1,257 | ($312) | | Consolidated Total | $21,579 | $20,499 | $1,080 | Revenue by Service Type (Three Months Ended August 31, in millions) | Service Type | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Federal Express segment: | | | | Total U.S. domestic package revenue | $12,694 | $11,798 | | Total international export package revenue | $3,612 | $3,566 | | International domestic | $1,135 | $1,112 | | Total package revenue | $17,441 | $16,476 | | Total freight revenue | $1,426 | $1,558 | | Other | $249 | $271 | | Total Federal Express Segment | $19,116 | $18,305 | | FedEx Freight Segment | $2,257 | $2,329 | | Other and eliminations | $871 | $945 | | Total Revenue | $22,244 | $21,579 | Geographic Revenue Information (Three Months Ended August 31, in millions) | Region | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | U.S. | $15,975 | $15,496 | | International | $6,269 | $6,083 | | Total Revenue | $22,244 | $21,579 | Segment Capital Expenditures (Three Months Ended August 31, in millions) | Segment | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Federal Express Segment | $568 | $703 | | FedEx Freight Segment | $32 | $35 | | Corporate, other, and eliminations | $23 | $29 | | Consolidated Total | $623 | $767 | NOTE 8: COMMITMENTS This note outlines FedEx's future purchase commitments for aircraft and other items, and minimum lease payments under noncancelable operating and finance leases Purchase Commitments as of August 31, 2025 (in millions) | Fiscal Year | Aircraft and Aircraft Related | Other | Total | | :-------------------------------- | :---------------------------- | :---- | :---- | | 2026 (remainder) | $808 | $626 | $1,434 | | 2027 | $1,119 | $712 | $1,831 | | 2028 | $993 | $545 | $1,538 | | 2029 | $413 | $461 | $874 | | 2030 | $205 | $35 | $240 | | Thereafter | $1,073 | $90 | $1,163 | | Total | $4,611 | $2,469 | $7,080 | Aircraft Purchase Commitments as of August 31, 2025 | Aircraft Type | 2026 (remainder) | 2027 | 2028 | 2029 | 2030 | Total | | :-------------------------------- | :--------------- | :--- | :--- | :--- | :--- | :---- | | Cessna SkyCourier 408 | 15 | 4 | — | — | — | 19 | | ATR 72-600F | 3 | 4 | 4 | 4 | 2 | 17 | | B767F | 6 | — | — | — | — | 6 | | B777F | — | 5 | 5 | — | — | 10 | | Total Aircraft | 24 | 13 | 9 | 4 | 2 | 52 | Future Minimum Lease Payments as of August 31, 2025 (in millions) | Fiscal Year | Operating Leases | Finance Leases | Total Leases | | :-------------------------------- | :--------------- | :------------- | :----------- | | 2026 (remainder) | $2,332 | $85 | $2,417 | | 2027 | $3,041 | $116 | $3,157 | | 2028 | $2,663 | $115 | $2,778 | | 2029 | $2,260 | $112 | $2,372 | | 2030 | $1,842 | $95 | $1,937 | | Thereafter | $8,086 | $619 | $8,705 | | Total lease payments | $20,224 | $1,142 | $21,366 | | Less imputed interest | ($3,492) | ($347) | ($3,839) | | Present value of lease liability | $16,732 | $795 | $17,527 | NOTE 9: CONTINGENCIES This note addresses various legal proceedings and claims against FedEx and its subsidiaries, and confirms no material environmental matters requiring disclosure - FedEx is subject to various legal proceedings and claims, including lawsuits alleging employer/joint employer status for service provider drivers, wage-and-hour violations, and responsibility for third-party losses from vehicle accidents[98] - Management believes the aggregate liability from these actions will not have a material adverse effect on financial position, results of operations, or cash flows[98] - No environmental matters required to be disclosed for this period, based on the SEC's $1 million threshold[99] NOTE 10: SUPPLEMENTAL CASH FLOW INFORMATION This note provides supplemental cash flow details, specifically cash payments for interest expense and income taxes Supplemental Cash Flow Information (in millions) | Cash Payments for | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Interest (net of capitalized interest) | $195 | $158 | | Income taxes | $112 | $75 | | Income tax refunds received | ($27) | ($12) | | Cash tax payments/(refunds), net | $85 | $63 | Report of Independent Registered Public Accounting Firm Ernst & Young LLP reviewed FedEx's interim financial statements, finding no material modifications necessary for U.S. GAAP conformity and confirming the fair statement of the May 31, 2025, balance sheet - The independent registered public accounting firm is not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. GAAP[102] - The information in the condensed consolidated balance sheet as of May 31, 2025, is fairly stated in all material respects[103] ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition This section provides management's perspective on FedEx's financial performance, liquidity, capital resources, and critical accounting estimates, discussing key trends and segment-specific results GENERAL This section outlines FedEx's business, primary operating companies, and recent strategic decisions, including the planned FedEx Freight spin-off and fiscal year end change - FedEx provides a broad portfolio of transportation, e-commerce, and business services through its global network[107] - FedEx's Board decided to pursue a full separation of FedEx Freight through a tax-free spin-off to stockholders, expected to be completed by June 2026[109] - The Board approved a change in FedEx's fiscal year end from May 31 to December 31, effective June 1, 2026[110] Trends Affecting Our Business This section discusses significant macroeconomic, inflationary, fuel price, and geopolitical trends impacting FedEx's business and the transportation industry - Weakened business conditions in the transportation industry are attributed to a decline in U.S. imports of consumer goods and slowed global industrial production, negatively affecting FedEx Freight shipments[113] - Changes in the global trade environment, such as the removal of the de minimis exemption for U.S. imports from non-China countries, have contributed to lower international export package volumes[114] - Elevated global inflation and steady interest rates continue to negatively affect consumer and business spending, pressuring demand for FedEx's transportation services, particularly priority services[115] - Lower fuel prices in Q1 2026 negatively affected yields due to reduced fuel surcharges but also led to decreased fuel expense across transportation segments[116] RESULTS OF OPERATIONS This section analyzes FedEx's operating results, covering consolidated performance, revenue and expense drivers, business optimization and separation costs, income taxes, and the company's outlook Consolidated Operating Results (Three Months Ended August 31, in millions, except per share amounts) | Metric | 2025 | 2024 | Percent Change | | :-------------------------------- | :----- | :----- | :------------- | | Revenue | $22,244 | $21,579 | 3% | | Consolidated operating income | $1,186 | $1,080 | 10% | | Consolidated net income | $824 | $794 | 4% | | Diluted earnings per share | $3.46 | $3.21 | 8% | | Consolidated operating margin | 5.3% | 5.0% | 30 bp | | Federal Express segment operating income | $1,138 | $953 | 19% | | FedEx Freight segment operating income | $360 | $439 | (18)% | | Corporate, other, and eliminations operating income | ($312) | ($312) | — | | Federal Express segment operating margin | 6.0% | 5.2% | 80 bp | | FedEx Freight segment operating margin | 16.0% | 18.8% | (280) bp | - Operating income was positively impacted by improved yields for U.S. domestic and international priority package services, structural cost reductions from business optimization initiatives, and higher U.S. domestic package demand at Federal Express[121] - Negative impacts included increased operating expenses, decreased yields for international economy package services, lower international package export volume due to global trade policies, the expiration of the USPS contract, and lower revenue at FedEx Freight[121] - Business optimization costs were $67 million in Q1 2026, down from $128 million in Q1 2025[122] - Costs related to the FedEx Freight spin-off were $43 million in Q1 2026[123] - FedEx repurchased $500 million of common stock in Q1 2026, benefiting diluted EPS by $0.02[124] CONSOLIDATED RESULTS Consolidated operating income increased by 10% in Q1 2026, driven by improved yields, structural cost reductions, and higher U.S. domestic package demand at Federal Express Revenue Consolidated revenue increased by 3% in Q1 2026, driven by Federal Express yield improvements and volume, partially offset by USPS contract expiration and FedEx Freight declines - Consolidated revenue increased 3% in Q1 2026 to $22,244 million[130] - Federal Express segment revenue increased 4% due to improved base yields, increased U.S. domestic and international economy package volumes, and favorable exchange rates[131] - FedEx Freight revenue decreased 3% due to lower volume and lower base yields[131] Operating Expenses Total operating expenses increased by 3% in Q1 2026, driven by higher salaries and purchased transportation, partially offset by a significant decrease in fuel expense Operating Expenses (Three Months Ended August 31, in millions) | Expense Category | 2025 | 2024 | Percent Change | | :-------------------------------- | :----- | :----- | :------------- | | Salaries and employee benefits | $8,062 | $7,785 | 4% | | Purchased transportation | $5,488 | $5,275 | 4% | | Fuel | $873 | $1,075 | (19)% | | Separation and other costs | $45 | — | NM | | Business optimization costs | $67 | $128 | (48)% | | Other | $3,396 | $3,168 | 7% | | Total operating expenses | $21,058 | $20,499 | 3% | - Salaries and employee benefits increased 4% due to higher wage rates, unfavorable exchange rates, and higher employee benefits, partially offset by lower variable incentive compensation[133] - Purchased transportation expense increased 4% due to higher rates and volume[133] - Fuel expense decreased 19% due to lower fuel prices and the expiration of the USPS contract[133] - Other operating expenses increased 7% primarily due to higher professional fees, credit losses, and self-insurance accruals[133] Business Optimization Costs FedEx incurred $67 million in business optimization costs in Q1 2026, a 48% decrease, related to Network 2.0 and the Europe workforce reduction plan - Business optimization costs were $67 million ($52 million net of tax, or $0.22 per diluted share) in Q1 2026, down from $128 million in Q1 2025[135] - These costs are primarily related to professional services and severance for Network 2.0 and the Europe workforce reduction plan[135] - Network 2.0, a multi-year effort to improve U.S. and Canada package efficiency, has been implemented in approximately 360 locations as of August 31, 2025, with U.S. implementation expected by end of calendar 2027[136] - The Europe workforce reduction plan is expected to yield approximately $150 million in annualized savings starting calendar 2026, with pre-tax costs of about $250 million through fiscal 2026[137][138] Separation and Other Costs FedEx incurred $43 million for the FedEx Freight spin-off and $4 million for the fiscal year change in Q1 2026, primarily for professional services - Costs for the planned FedEx Freight spin-off were $43 million ($33 million net of tax, or $0.14 per diluted share) in Q1 2026, mainly for professional services[139] - Costs for the fiscal year change were $4 million ($3 million net of tax, or $0.01 per diluted share) in Q1 2026, primarily for professional fees[140] Income Taxes The effective tax rate for Q1 2026 was 27.3%, unfavorably impacted by a non-recurring expense, with ongoing evaluation of new legislation and tax examinations - The effective tax rate was 27.3% for Q1 2026, up from 24.8% in Q1 2025, due to a non-recurring income tax expense of $16 million ($0.07 per diluted share)[141] - FedEx is evaluating the implications of the 'One Big Beautiful Bill Act' signed in July 2025[142] - The company is under IRS examination for tax years 2016-2021 and is litigating a challenge to a tax regulation related to the TCJA's transition tax, having recorded a cumulative benefit of $249 million[143][144] Outlook FedEx anticipates continued demand pressure for higher-yielding services, expects $1.0 billion in structural cost reduction benefits in fiscal 2026, and projects $4.5 billion in capital expenditures - The industrial economy is expected to continue pressuring demand for higher-yielding business-to-business services, with a shift towards deferred service offerings[145] - FedEx expects an incremental $1.0 billion in structural cost reduction benefits from DRIVE and Network 2.0 in fiscal 2026[146] - Capital expenditures for fiscal 2026 are expected to be approximately $4.5 billion, a $0.4 billion increase from 2025, driven by Network 2.0 and modernization efforts[148] - Aircraft spend is expected to decline to approximately $1.0 billion in fiscal 2026, $0.3 billion lower than 2025[148] - The full separation of FedEx Freight through capital markets is expected to be executed by June 2026[150] RECENT ACCOUNTING GUIDANCE This section refers to Note 1 for a discussion of recent accounting guidance, including new accounting standards and those not yet adopted - Refer to Note 1 for a discussion of recent accounting guidance, including ASU 2025-05 (Financial Instruments—Credit Losses), ASU 2023-09 (Income Taxes Disclosures), and ASU 2024-03 (Income Statement–Expense Disaggregation Disclosures)[153][64][65][66] REPORTABLE SEGMENTS FedEx's reportable segments are Federal Express and FedEx Freight, with Federal Express operating combined sales, marketing, administrative, and IT functions - Federal Express and FedEx Freight are the major service lines and reportable segments[154] - The Federal Express segment operates combined sales, marketing, administrative, and IT functions, with net operating costs allocated to other segments based on metrics like relative revenue or estimated services provided[154][155] CORPORATE, OTHER, AND ELIMINATIONS This category includes corporate headquarters, FedEx Dataworks, FedEx Office, and FedEx Logistics costs, with operating results flat in Q1 2026 due to offsetting factors - Corporate, other, and eliminations includes corporate headquarters, FedEx Dataworks, FedEx Office, and FedEx Logistics[156][157] - Operating results were flat in Q1 2026, driven by decreased purchased transportation costs at FedEx Logistics offset by higher professional fees at corporate headquarters and FedEx Dataworks[158] FEDERAL EXPRESS SEGMENT The Federal Express segment reported a 4% revenue increase and 19% operating income increase in Q1 2026, driven by improved yields and higher U.S. domestic and international economy package volumes Federal Express Segment Revenue (Three Months Ended August 31, in millions) | Revenue Category | 2025 | 2024 | Percent Change | | :-------------------------------- | :----- | :----- | :------------- | | Total U.S. domestic package revenue | $12,694 | $11,798 | 8% | | Total international export package revenue | $3,612 | $3,566 | 1% | | International domestic | $1,135 | $1,112 | 2% | | Total package revenue | $17,441 | $16,476 | 6% | | Total freight revenue | $1,426 | $1,558 | (8)% | | Other | $249 | $271 | (8)% | | Total revenue | $19,116 | $18,305 | 4% | | Operating income | $1,138 | $953 | 19% | | Operating margin | 6.0% | 5.2% | 80 bp | Federal Express Segment Package Statistics (Three Months Ended August 31, in thousands, except yield) | Metric | 2025 | 2024 | Percent Change | | :-------------------------------- | :----- | :----- | :------------- | | Total U.S. domestic ADV | 13,920 | 13,295 | 5% | | International priority ADV | 562 | 622 | (10)% | | International economy ADV | 518 | 491 | 5% | | Total international export ADV | 1,080 | 1,113 | (3)% | | U.S. domestic composite package yield | $14.25 | $13.87 | 3% | | International priority package yield | $62.77 | $55.37 | 13% | | International economy package yield | $40.87 | $43.33 | (6)% | | Composite package yield | $16.22 | $15.86 | 2% | - U.S. average daily freight pounds decreased 59% due to the expiration of the USPS contract[164] - Operating expenses increased primarily due to higher wage and purchased transportation rates and higher credit losses, partially offset by a 20% decrease in fuel expense[166][167] - The segment incurred $21 million in business optimization costs, $4 million for the fiscal year change, and $1 million for the FedEx Freight spin-off in Q1 2026[168] FEDEX FREIGHT SEGMENT The FedEx Freight segment experienced a 3% revenue decrease and an 18% operating income decrease in Q1 2026, primarily due to lower volume, base yields, and increased intercompany charges FedEx Freight Segment Operating Results (Three Months Ended August 31, in millions, except per shipment/hundredweight) | Metric | 2025 | 2024 | Percent Change | | :-------------------------------- | :----- | :----- | :------------- | | Revenue | $2,257 | $2,329 | (3)% | | Operating income | $360 | $439 | (18)% | | Operating margin | 16.0% | 18.8% | (280) bp | | Total average daily shipments (thousands) | 90.0 | 92.0 | (2)% | | Composite revenue per shipment | $374.62 | $378.09 | (1)% | | Composite revenue per hundredweight | $40.50 | $40.73 | (1)% | - Average daily shipments decreased 2% due to reduced demand from macroeconomic conditions[172] - Intercompany charges increased 9% due to increased sales staffing for the planned spin-off[174] - Fuel expense decreased 7% due to fewer shipments and lower fuel prices[174] - The segment incurred $9 million in costs related to the planned spin-off of FedEx Freight in Q1 2026[175] FINANCIAL CONDITION This section assesses FedEx's financial condition, covering liquidity, capital resources, guarantor financial information, and the liquidity outlook LIQUIDITY FedEx's cash and cash equivalents increased to $6.2 billion, driven by significantly increased operating cash flows and decreased investing and financing activities Cash Flow Summary (Three Months Ended August 31, in millions) | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Cash provided by operating activities | $1,716 | $1,187 | | Cash used in investing activities | ($619) | ($802) | | Cash used in financing activities | ($460) | ($969) | | Net increase (decrease) in cash and cash equivalents | $664 | ($558) | | Cash and cash equivalents at end of period | $6,166 | $5,943 | - Cash flows from operating activities increased by $0.5 billion in Q1 2026, primarily due to working capital changes[176] - Capital expenditures decreased in Q1 2026, leading to a decrease in cash used in investing activities[177] - Cash used in financing activities decreased by $0.5 billion, driven by lower common stock repurchases and new debt issuances[178] CAPITAL RESOURCES FedEx's capital expenditures decreased by 19% in Q1 2026, primarily due to reduced spending on aircraft, vehicles, and IT, partially offset by increased facilities spending Capital Expenditures by Asset Category (Three Months Ended August 31, in millions) | Asset Category | 2025 | 2024 | Percent Change | | :-------------------------------- | :----- | :----- | :------------- | | Aircraft and related equipment | $60 | $181 | (67)% | | Package handling and ground support equipment | $205 | $197 | 4% | | Information technology | $118 | $153 | (23)% | | Vehicles and trailers | $47 | $90 | (48)% | | Facilities and other | $193 | $146 | 32% | | Total capital expenditures | $623 | $767 | (19)% | Capital Expenditures by Segment (Three Months Ended August 31, in millions) | Segment | 2025 | 2024 | Percent Change | | :-------------------------------- | :----- | :----- | :------------- | | Federal Express segment | $568 | $703 | (19)% | | FedEx Freight segment | $32 | $35 | (9)% | | Other | $23 | $29 | (21)% | | Total capital expenditures | $623 | $767 | (19)% | - Decreased spending on aircraft and related equipment, vehicles and trailers, and information and technology investments at Federal Express and FedEx Freight[180] GUARANTOR FINANCIAL INFORMATION This section provides summarized financial information for FedEx (Parent) and its Guarantor Subsidiaries, and for FedEx (Parent Guarantor) and Federal Express (Subsidiary Issuer) - FedEx's senior unsecured debt securities are guaranteed by certain direct and indirect subsidiaries, which are 100% owned by FedEx, with guarantees being full, unconditional, and joint and several[182] - FedEx fully and unconditionally guarantees the payment obligations of Federal Express for its $711 million Pass-Through Certificates[183] Parent and Guarantor Subsidiaries Summarized Balance Sheet (in millions) | Category | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Current Assets | $9,924 | $9,514 | | Intercompany Receivable | $5,145 | $4,278 | | Total Assets | $84,186 | $83,125 | | Current Liabilities | $11,439 | $11,202 | | Total Liabilities | $53,492 | $52,324 | Parent and Guarantor Subsidiaries Summarized Statement of Income (Three Months Ended August 31, 2025, in millions) | Metric | Amount | | :-------------------------------- | :----- | | Revenue | $16,643 | | Intercompany Charges, net | ($1,106) | | Operating Income | $1,265 | | Income Before Income Taxes | $1,043 | | Net Income | $691 | Parent Guarantor and Subsidiary Issuer Summarized Balance Sheet (in millions) | Category | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Current Assets | $9,856 | $9,504 | | Intercompany Receivable | $1,187 | $581 | | Total Assets | $73,227 | $72,044 | | Current Liabilities | $10,598 | $10,310 | | Total Liabilities | $50,346 | $49,200 | Parent Guarantor and Subsidiary Issuer Summarized Statement of Income (Three Months Ended August 31, 2025, in millions) | Metric | Amount | | :-------------------------------- | :----- | | Revenue | $14,302 | | Intercompany Charges, net | ($1,261) | | Operating Income | $894 | | Income Before Income Taxes | $1,035 | | Net Income | $772 | LIQUIDITY OUTLOOK FedEx expects to meet liquidity needs through existing cash, operating cash flows, and available financing, while continuing stock repurchases, voluntary pension contributions, and quarterly dividends - FedEx held $6.2 billion in cash and cash equivalents and had $3.5 billion in available liquidity under its credit agreements at August 31, 2025[190] - Costs related to the FedEx Freight spin-off are expected to be significant but not adversely affect liquidity[190] - The company expects to continue repurchasing additional shares of common stock during the remainder of 2026[191] - Capital expenditures for 2026 are expected to be approximately $4.5 billion, with aircraft spend declining to $1.0 billion[193] - Voluntary contributions of $200 million were made to the U.S. Pension Plan in Q1 2026, with up to $200 million more anticipated for the remainder of 2026; no minimum contributions are required[198] - Standard & Poor's and Moody's Investors Service have assigned investment-grade credit ratings with a 'stable' outlook[200] CRITICAL ACCOUNTING ESTIMATES Management continuously reviews accounting policies and estimates, with no additional events indicating goodwill impairment testing is required or at risk as of August 31, 2025 - Management does not believe there has been any additional change of events or circumstances that would indicate that additional reevaluation of the goodwill of our reporting units is required as of August 31, 2025, nor do we believe the goodwill of our reporting units is at risk of failing impairment testing[202] FORWARD-LOOKING STATEMENTS This section provides a cautionary statement regarding forward-looking statements, emphasizing that actual results may differ materially due to various risks and uncertainties - Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those contemplated[205] - Key risks include economic conditions, changes in shipment volumes and prices, geopolitical developments, fuel price volatility, ability to implement business strategy and transformation initiatives (Network 2.0, FedEx Freight spin-off), data breaches, e-commerce growth, and regulatory changes[205][215] - The company is under no obligation to update or alter any forward-looking statements[207] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section reports no material changes in market risk sensitive instruments, identifying foreign currency exchange rates and fuel prices as principal market risks - No material changes in market risk sensitive instruments and positions since the Annual Report[208] - Principal foreign currency exchange rate risks relate to the euro, Chinese yuan, British pound, Canadian dollar, Australian dollar, Mexican peso, Hong Kong dollar, and Japanese yen[209] - The U.S. dollar's weaker performance relative to foreign currencies had a slightly negative effect on results in Q1 2026[209] - Market risk for changes in vehicle and jet fuel prices is largely mitigated by indexed fuel surcharges[210] ITEM 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of August 31, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of August 31, 2025[211] - No material changes occurred in internal control over financial reporting during the quarter ended August 31, 2025[212] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings This section refers to Note 9 of the condensed consolidated financial statements for a description of all material pending legal proceedings - For a description of all material pending legal proceedings, refer to Note 9 of the accompanying unaudited condensed consolidated financial statements[213] ITEM 1A. Risk Factors This section states that there have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K[214] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of unregistered common stock for an acquisition and FedEx's common stock repurchases during Q1 2026 - FedEx issued 359,052 unregistered shares of common stock (valued at approximately $90 million) in February 2025 and an additional 296 shares in August 2025 as partial consideration for the acquisition of RouteSmart Technologies, Inc[216] Issuer Purchases of Equity Securities (Q1 2026) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares That May Yet Be Purchased Under Program ($ in millions) | | :---------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------------------------- | | Jun. 1-30, 2025 | 650,000 | $224.56 | 650,000 | $1,918 | | Jul. 1-31, 2025 | 1,502,645 | $235.58 | 1,502,645 | $1,564 | | Aug. 1-31, 2025 | — | — | — | $1,564 | | Total | 2,152,645 | | 2,152,645 | $1,564 | - FedEx repurchased 2.2 million shares for $500 million in Q1 2026 under its $5.0 billion stock repurchase program, with approximately $1.6 billion remaining available as of September 18, 2025[219][220] ITEM 5. Other Information No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended August 31, 2025 - No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended August 31, 2025[222] ITEM 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, indentures, certifications, and interactive data files - The exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, Indentures for debt securities, certifications of principal executive and financial officers, and Interactive Data Files (Inline XBRL)[223] Signature Official Signature This section contains the official signature block, confirming the report was signed on behalf of FedEx Corporation by its Corporate Vice President and Chief Accounting Officer - The report is signed by Guy M. Erwin II, Corporate Vice President and Chief Accounting Officer of FedEx Corporation, on September 18, 2025[226]