Key financial results
- FedEx reported a 12% year-over-year increase in consolidated revenue for the third quarter.
On a year-over-year basis, we grew revenue by 12%, supported by strong base yields across both our Express U.S. Domestic and International segments.
- Consolidated adjusted operating income grew 16% year-over-year, despite cost headwinds.
We more than offset cost headwinds from purchase transportation rates, the new pilot agreement and variable compensation, growing adjusted operating income by 16%.
- Adjusted earnings per share for the quarter were $3.74, representing a 28% increase year-over-year.
On a consolidated basis in Q3, we delivered $3.74 in adjusted earnings per share, up 28% year-over-year.
- The company faced specific cost headwinds including a $100 million impact from a new pilot agreement and $75 million from variable incentive compensation.
Business segment results
- Express U.S. Domestic: Express U.S. Domestic revenue grew 10% and adjusted operating income increased 7%.
- Express International: Express International revenue grew 17% and adjusted operating income increased 52%.
Within Express International, we grew revenue by 17% and adjusted operating income by 52%.
- U.S. Domestic: U.S. domestic package yield increased 7%, driven by mid- to high single-digit yield growth across all services.
U.S. domestic package yield was up 7%, driven by mid- to high single-digit yield growth across all services.
- International: International package yield increased 17%, supported by a 16% increase in international priority yield.
- Volumes: U.S. domestic ADV increased 2%, with 4% growth in priority volume and 3% growth in ground commercial.
- Volumes: International export volume grew 8% year-over-year, marking the third consecutive quarter of growth.
- Volumes: International domestic volume declined 11% as part of a strategy to focus on higher-yielding cross-border volumes.
- Volumes: Ground economy volume declined 4% as the company focused on differentiated premium services.
Capital allocation
- The company repurchased $2 billion worth of stock since June.
Since June, we have repurchased $2 billion worth of FedEx stock.
- There is an additional $4.3 billion in buyback authorization remaining from the Board of Directors.
We have an additional $4.3 billion in buyback authorization from the Board of Directors and plan to continue to repurchase stock opportunistically.
- FedEx expects $3.9 billion of capital expenditures for calendar year 2026, with 90% allocated to maintenance or efficiency.
We continue to expect $3.9 billion of CapEx for CY '26, of which 90% is maintenance or efficiency related.
- The company maintains a target of $6 billion in adjusted free cash flow by the end of 2029.
With a $6 billion adjusted free cash flow target by the end of 2029, we will allocate capital prudently in support of value creation for our stockholders.
Industry trends and dynamics
- Fuel price-driven surcharges provided a 4 percentage point boost to total revenue growth.
Revenue was up 12%, which includes a 4 percentage point boost from fuel price-driven surcharge revenue.
- Tightening labor markets for truck drivers are creating pressure on purchase transportation rates.
The unique pressures in U.S. Domestic purchase transportation rates are largely tied to the broader tightening in the labor market for truck drivers from recent regulatory changes.
- Management noted that the pricing environment is competitive but rational.
From a headline perspective, we continue to see that calendar year '26 has an improved pricing environment over calendar year '25 is competitive but rational.
Competitive landscape
- FedEx is winning share in the global airfreight market by leveraging end-to-end solutions.
Additionally, we are winning share in the global airfreight market based on service and our unique end-to-end solutions while growing yield.
- The company believes its end-to-end network provides a competitive advantage against smaller integrators.
When we compete against anyone outside of the top 2 integrators, we have our end-to-end network that they simply don't have.
Macroeconomic environment
- Customers are navigating changing global trade policies and geopolitical developments.
- The U.S. consumer remains resilient despite high fuel surcharges.
Growth opportunities and strategies
- FedEx is targeting growth in key verticals including health care, aerospace, defense, automotive, and AI data centers.
- The company is collaborating with the U.S. Army to modernize logistics networks.
Our team of logistics and technology experts is supporting a sweeping modernization of the Army's U.S. nontactical logistics networks, supply chain procedures and organic industrial-based sites.
- FedEx is deploying robotic loaders at its Hagerstown, Maryland hub to automate operations.
For example, in collaboration with Dexterity, we are deploying robotic loaders at our Hagerstown, Maryland hub to support peak and post-peak operations.
- The company launched Global Trade Navigator to help customers manage supply chain complexity.
Last month, we launched Global Trade Navigator, a great example of how we are making supply chain smarter for everyone.
Financial guidance and outlook
- FedEx raised its CY '26 adjusted EPS outlook to a range of $18 to $18.60.
- The company expects 12% full-year revenue growth for CY '26.
We now expect 12% full year revenue growth, including approximately 4 percentage points for fuel price-driven surcharge revenue.
- FedEx expects to generate approximately $4 billion in adjusted free cash flow for CY '26.
We are introducing a CY '26 adjusted free cash flow outlook of approximately $4 billion.
- The effective tax rate for CY '26 is expected to be approximately 22.5%.
Additionally, we expect our CY '26 effective tax rate to be approximately 22.5%, down 50 basis points from our prior assumption.
- The embedded Q4 adjusted EPS range is $6.3 to $6.63.
Our embedded Q4 adjusted EPS range is $6.3 to $6.63.
Network transformation
- Nearly 65% of eligible volume is now flowing through approximately 630 Network 2.0 optimized stations.
We now have nearly 65% of eligible volume flowing through about 630 Network 2.0 optimized stations.
- The company has closed more than 260 stations as part of its network optimization.
Additionally, we have closed more than 260 stations.
- FedEx expects nearly $1 billion in savings from Network 2.0 and One FedEx initiatives by the end of the calendar year, with $2 billion cumulative by the end of 2027.
Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Revenue | 12% growth | Year-over-year |
| Consolidated Adjusted Operating Income | 16% growth | Year-over-year |
| Adjusted EPS | $3.74 | Up 28% year-over-year |
| Express International Revenue | 17% growth | Year-over-year |
| Express International Adjusted Operating Income | 52% growth | Year-over-year |
How management sounded
Balanced (+35 on our -100 to +100 scale). Management expressed strong conviction in their strategic execution and raised full-year guidance, though they acknowledged transitory cost pressures from pilot agreements and transportation rates. Management sounded more upbeat than on 20% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Read the analyst Q&A summary and guidance and outlook for this call.
What to watch before the next call
- Progress on Network 2.0 savings targets and the cumulative $2 billion goal by 2027.
- Management of transitory cost headwinds, specifically pilot agreement costs and over-the-road line-haul rates.
- Monetization of the remaining FedEx Freight stake within the 24-month window.
Earlier calls
- Q4 FY2026 (Jun 23, 2026), tone Balanced: FedEx reported Q4 FY2026 results with 13% revenue growth and initiated a calendar year 2026 outlook with adjusted EPS of $16.90 to $18.10. The company successfully completed the FedEx Freight spin-off and continues to execute its Network 2.0 transformation.
