FEDEX CORP

Previous wording

In June 2024, we announced that FedEx’s management and Board of Directors were conducting an assessment of the role of FedEx Freight in the company’s portfolio structure. On December 19, 2024, we announced that the Board of Directors concluded that assessment and decided to pursue a full separation of FedEx Freight through the capital markets, creating a new publicly traded company. The transaction is expected to qualify as a tax-free separation for U.S. federal income tax purposes for FedEx stockholders and be executed within the next 18 months. See Part II, Item 1A. “Risk Factors –The planned separation of FedEx Freight may not be completed on the terms or timeline currently contemplated, if at all, and there is no guarantee that the separation, if completed, will achieve the intended financial and strategic benefits.”

Current wording

In December 2024, we announced that FedEx’s Board of Directors decided to pursue a full separation of FedEx Freight through the capital markets, creating a new publicly traded company. The transaction, which would be implemented through the spin-off of shares of the new company to FedEx stockholders, is expected to be tax-free for U.S. federal income tax purposes for FedEx stockholders and be completed by June 2026. See Part II, Item 1A. “Risk Factors –The planned spin-off of FedEx Freight may not be completed on the terms or timeline currently contemplated, if at all, and there is no guarantee that the spin-off, if completed, will achieve the intended financial and strategic benefits.”

Previous wording

While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth. The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to weakened economic conditions for the transportation industry. Consequently, this environment has led to lower shipments at FedEx Freight and pressured package and freight volumes at Federal Express, negatively affecting our results in the second quarter and first half of 2025. Additionally, the incoming U.S. presidential administration has indicated a desire to significantly increase the rates and broaden the scope of tariffs imposed on goods imported into the U.S.

Current wording

While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth. The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to weakened business conditions for the transportation industry. Consequently, this environment has led to lower shipments at FedEx Freight, negatively affecting our results in the third quarter and nine months of 2025. Additionally, the U.S. presidential administration is in the process of significantly increasing the rates and broadening the scope of tariffs imposed on goods imported into the U.S. In response, several foreign governments have imposed new tariffs on certain goods imported from the U.S., and additional retaliatory measures against U.S. goods are expected. These or additional changes in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions for the transportation industry.

Previous wording

During the second quarter and first half of 2025, global inflation decelerated year-over-year but continues to be above historical levels. Additionally, global interest rates remained elevated in an effort to curb inflation. We are experiencing pressure on demand for our transportation services, particularly our priority services, as elevated inflation and interest rates are negatively affecting consumer and business spending. We expect inflation and high interest rates to continue to negatively affect our results of operations for the remainder of 2025.

Current wording

During the third quarter and nine months of 2025, global inflation decelerated year-over-year but continues to be above historical levels. Additionally, global interest rates remained elevated in an effort to curb inflation. We are experiencing pressure on demand for our transportation services, particularly our priority services, as elevated inflation and interest rates are negatively affecting consumer and business spending. We expect inflation and high interest rates to continue to negatively affect our results of operations for the remainder of 2025. The changes in trade policy discussed above under “Macroeconomic Conditions” could exacerbate global inflation.

Previous wording

We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. The timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges can significantly affect our operating results either positively or negatively in the short-term. During the second quarter and first half of 2025, lower fuel prices negatively affected yields through lower fuel surcharges and reduced fuel expense at both of our transportation segments.

Current wording

We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. The timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges can significantly affect our operating results either positively or negatively in the short-term. During the third quarter and nine months of 2025, lower fuel prices negatively affected yields through lower fuel surcharges at FedEx Freight and reduced fuel expense at both of our transportation segments.

Previous wording

Many of our operating expenses are directly affected by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in revenue and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends affecting expenses other than those factors strictly related to changes in revenue and volumes. The line item “Other” includes costs associated with outside service contracts (such as information technology services, temporary labor, security, and facilities services), insurance, professional fees, and operational supplies.

Current wording

Many of our operating expenses are directly affected by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in revenue and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends affecting expenses other than those factors strictly related to changes in revenue and volumes. The line item “Other” includes costs associated with outside service contracts (such as information technology services, temporary labor, facilities services, and security), insurance, professional fees, and operational supplies.

Previous wording

The following tables compare summary operating results and changes in revenue and operating income (loss) (dollars in millions, except per share amounts) for the periods ended November 30:

Current wording

The following tables compare summary operating results and changes in revenue and operating income (loss) (dollars in millions, except per share amounts) for the periods ended February 28, 2025 and February 29, 2024:

Previous wording

Operating income declined 18% for the second quarter and 23% for the first half of 2025 primarily due to lower demand for U.S. domestic package and freight LTL services driven by macroeconomic factors, increased purchased transportation and wage rates, and higher business optimization costs. This decline in operating income was partially offset by increased demand for our international export package services, base yield improvements at Federal Express and FedEx Freight, and continued cost savings related to DRIVE. Our DRIVE initiatives for the first half of 2025 included the continued transformation of our structural network, improving the efficiency of our information technology and back office functions, optimizing operations in Europe, and increasing linehaul efficiencies. The results for the first half of 2025 were also negatively affected by one fewer operating day and lower demand surcharges.

Current wording

Operating income increased 4% in the third quarter and decreased 14% in the nine months of 2025. Operating income for the third quarter and nine months of 2025 was positively affected by continued savings related to DRIVE, increased transportation segment base yields, and higher demand for U.S. ground and international export package services. Our DRIVE initiatives for the nine months of 2025 included the continued transformation of our structural network, improving the efficiency of our information technology and back-office functions, optimizing operations in Europe, and increasing linehaul efficiencies. Operating income for the third quarter and nine months of 2025 was negatively affected by increased purchased transportation and wage rates, the expiration of our contract with the U.S. Postal Service (“USPS”), higher business optimization costs, and lower fuel surcharges at FedEx Freight. The results for the nine months of 2025 were also negatively affected by one fewer operating day.

Previous wording

Operating income includes expenses of $326 million ($249 million, net of tax, or $1.02 per diluted share) in the second quarter and $454 million ($347 million, net of tax, or $1.41 per diluted share) in the first half of 2025 associated with our business optimization strategy to drive efficiency and lower our overhead and support costs. We recognized $145 million ($110 million, net of tax, or $0.44 per diluted share) of expenses in the second quarter and $250 million ($191 million, net of tax, or $0.75 per diluted share) in the first half of 2024 under this program. See the “Business Optimization Costs” section of this MD&A for more information.

Current wording

Operating income includes expenses of $179 million ($137 million, net of tax, or $0.56 per diluted share) in the third quarter and $633 million ($484 million, net of tax, or $1.98 per diluted share) in the nine months of 2025 associated with our business optimization strategy to drive efficiency and lower our overhead and support costs. We recognized $114 million ($87 million, net of tax, or $0.35 per diluted share) of expenses in the third quarter and $364 million ($278 million, net of tax, or $1.10 per diluted share) in the nine months of 2024 under this program. See the “Business Optimization Costs” section of this MD&A for more information.

Previous wording

We repurchased an aggregate of $1.0 billion of our common stock through accelerated share repurchase (“ASR”) transactions with two banks and open market transactions during the second quarter of 2025. During the six-month period ended November 30, 2024, we repurchased 7.1 million shares of FedEx common stock through ASR and open market transactions at an average price of $283.13 per share for a total of $2.0 billion. Share repurchases had a benefit of $0.07 per diluted share for the second quarter and $0.10 per diluted share for the first half of 2025. As of November 30, 2024, $3.1 billion remained available to be used for repurchases under the 2024 stock repurchase program. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Financial Condition – Liquidity and – Liquidity Outlook” below, and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for additional information.

Current wording

We repurchased an aggregate of $497 million of our common stock through open market transactions during the third quarter of 2025. During the nine-month period ended February 28, 2025, we repurchased 8.9 million shares of FedEx common stock through accelerated share repurchase (“ASR”) and open market transactions at an average price of $281.74 per share for a total of $2.5 billion. Share repurchases had a benefit of $0.12 per diluted share for the third quarter and $0.21 per diluted share for the nine months of 2025. As of February 28, 2025, $2.6 billion remained available to be used for repurchases under the 2024 stock repurchase program.

Previous wording

Revenue decreased 1% in the second quarter and first half of 2025 primarily due to lower volume and fuel surcharges, partially offset by base yield improvement, at both of our transportation segments. Additionally, revenue during the first half of 2025 was negatively affected by one fewer operating day at both of our transportation segments and reduced demand surcharges at Federal Express.

Current wording

Revenue increased 2% in the third quarter and was flat in the nine months of 2025 primarily due to base yield improvement at both of our transportation segments and higher volume at Federal Express, offset by lower volume and fuel surcharges at FedEx Freight and unfavorable currency exchange rates. The increases in revenue during the nine months of 2025 were also offset by one fewer operating day at both of our transportation segments and reduced demand surcharges at Federal Express.

Previous wording

Federal Express segment revenue was flat in the second quarter and first half of 2025 primarily due to increased deferred package volume and improved base yields, partially offset by lower priority package volume, the expiration on September 29, 2024 of our contract with the U.S. Postal Service (“USPS”) to provide the USPS domestic transportation services, and reduced fuel surcharges. Federal Express revenue for the first half of 2025 was also negatively affected by one fewer operating day and reduced demand surcharges. FedEx Freight revenue decreased 11% in the second quarter and 7% in the first half of 2025 primarily due to lower shipments, fuel surcharges, and weight per shipment, partially offset by base yield improvement. FedEx Freight revenue for the first half of 2025 was also negatively affected by one fewer operating day. Revenue at Corporate, other, and eliminations increased in the second quarter and first half of 2025 primarily due to higher yields and volume at FedEx Logistics, Inc. (“FedEx Logistics”).

Current wording

Federal Express segment revenue increased 3% in the third quarter and 1% in the nine months of 2025 primarily due to increased deferred and U.S. ground package volume and improved base yields, offset by lower priority package volume, the expiration of our contract with the USPS on September 29, 2024, and unfavorable currency exchange rates. Federal Express revenue for the nine months of 2025 was also negatively affected by one fewer operating day and reduced demand surcharges. FedEx Freight revenue decreased 5% in the third quarter and 6% in the nine months of 2025 primarily due to lower shipments, fuel surcharges, and weight per shipment, partially offset by base yield improvement. FedEx Freight revenue for the nine months of 2025 was also negatively affected by one fewer operating day. Revenue at Corporate, other, and eliminations increased in the third quarter and nine months of 2025 primarily due to higher yields and volume at FedEx Logistics, Inc. (“FedEx Logistics”).

Previous wording

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended November 30:

Current wording

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended February 28, 2025 and February 29, 2024:

Previous wording

Operating income declined 18% for the second quarter and 23% for the first half of 2025 primarily due to lower demand for U.S. domestic package and freight LTL services driven by macroeconomic factors, increased purchased transportation and wage rates, and higher business optimization costs. The decline in operating income was partially offset by increased demand for our international export package services, base yield improvements at Federal Express and FedEx Freight, and continued cost savings related to DRIVE. The results for the first half of 2025 were also negatively affected by one fewer operating day and lower demand surcharges.

Current wording

Operating income increased 4% in the third quarter and decreased 14% in the nine months of 2025. Operating income for the third quarter and nine months of 2025 was positively affected by continued savings related to DRIVE, increased transportation segment base yields, and higher demand for U.S. ground and international export package services. Operating income for the third quarter and nine months of 2025 was negatively affected by increased purchased transportation and wage rates, the expiration of our contract with the USPS, higher business optimization costs, and lower fuel surcharges at FedEx Freight. The results for the nine months of 2025 were also negatively affected by one fewer operating day.

Previous wording

Purchased transportation expense increased 2% in the second quarter and 3% in the first half of 2025 primarily due to higher rates and an increase in commercial linehaul to support international economy volume growth and network changes, partially offset by lower fuel prices and savings from our DRIVE initiatives. Other operating expenses increased 1% in the second quarter and first half of 2025 primarily due to an increase in self-insurance accruals and higher outside service contracts expense. Salaries and employee benefits expense increased 1% in the second quarter and slightly in the first half of 2025 primarily due to an increase in wage rates as well as an increase in retirement benefits due to changes in our deferred contribution plan that increased the number of eligible employees at

Current wording

-26 - in the third quarter of 2025 due to higher U.S. ground volume. Salaries and employee benefits expense increased 2% in the third quarter and 1% in the nine months of 2025 primarily due to an increase in wage rates, increased staffing to align with higher volume, and an increase in retirement benefits due to changes in our deferred contribution plan that increased the number of eligible employees at Federal Express, partially offset by savings from our DRIVE initiatives and favorable currency exchange rates. Variable incentive compensation had a negative effect on salaries and employee benefits expense for the third quarter and a positive effect for the nine months of 2025. Other operating expenses increased 2% in both the third quarter and nine months of 2025 primarily due to an increase in self-insurance accruals. Fuel expense decreased 22% in the third quarter and 18% in the nine months of 2025 primarily due to a decrease in fuel prices and usage.

Previous wording

In June 2024, Federal Express announced a workforce reduction plan in Europe as part of its ongoing measures to reduce structural costs. The plan will impact between 1,700 and 2,000 employees in Europe across back-office and commercial functions. The execution of the plan is subject to a consultation process that is expected to occur over an 18-month period in accordance with local country processes and regulations. We expect savings from the plan to be between $125 million and $175 million on an annualized basis beginning in 2027.

Current wording

In June 2024, Federal Express announced a workforce reduction plan in Europe as part of its ongoing measures to reduce structural costs. The plan will impact approximately 1,500 employees in Europe across back-office and commercial functions. The execution of the plan is subject to a consultation process that is expected to occur over an 18-month period in accordance with local country processes and regulations. We expect savings from the plan to be between $125 million and $175 million on an annualized basis beginning in 2027.

Previous wording

We incurred business optimization costs, including the workforce reduction plan in Europe, of $326 million ($249 million, net of tax, or $1.02 per diluted share) in the second quarter and $454 million ($347 million, net of tax, or $1.41 per diluted share) in the first half of 2025. These costs were primarily related to severance and professional services and are included in Federal Express and Corporate, other, and eliminations. We incurred business optimization costs of $145 million ($110 million, net of tax, or $0.44 per diluted share) in the second quarter and $250 million ($191 million, net of tax, or $0.75 per diluted share) in the first half of 2024. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express.

Current wording

We incurred business optimization costs, including the workforce reduction plan in Europe, of $179 million ($137 million, net of tax, or $0.56 per diluted share) in the third quarter and $633 million ($484 million, net of tax, or $1.98 per diluted share) in the nine months of 2025. These costs were primarily related to professional services and severance and are included in Federal Express and Corporate, other, and eliminations. We incurred business optimization costs of $114 million ($87 million, net of tax, or $0.35 per diluted share) in the third quarter and $364 million ($278 million, net of tax, or $1.10 per diluted share) in the nine months of 2024. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express.

Previous wording

We expect the pre-tax cost of the severance benefits and legal and professional fees to be provided under and related to our workforce reduction plan in Europe to range from $250 million to $375 million in cash expenditures through 2026. In the first half of 2025, we incurred $176 million of costs related to this plan. We expect the aggregate pre-tax cost of our other business optimization activities to be approximately $1.7 billion through 2025. The timing and amount of our business optimization expenses and the related cost savings from the workforce reduction plan may change as we revise and implement our plans. The identification of costs as business optimization-related expenditures is subject to our disclosure controls and procedures.

Current wording

We expect the pre-tax cost of the severance benefits and legal and professional fees to be provided under and related to our workforce reduction plan in Europe to range from $250 million to $300 million in cash expenditures through 2026. In the nine months of 2025, we incurred $220 million of costs related to this plan. We expect the aggregate pre-tax cost of our business optimization activities to be approximately $1.7 billion through 2025. The timing and amount of our business optimization expenses and the related cost savings from the workforce reduction plan may change as we revise and implement our plans. The identification of costs as business optimization-related expenditures is subject to our disclosure controls and procedures.

Previous wording

During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on foreign earnings not repatriated, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $226 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. We continue to work towards obtaining a final judgment for the applicable refund amounts due to the regulation being invalid. Once the District Court enters a final judgment, the U.S. government could file an appeal with the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

Current wording

During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on foreign earnings not repatriated, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $226 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. On February 13, 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. We continue to work towards obtaining a final judgment for the applicable refund amounts due to the regulation being invalid. Once the District Court enters a final judgment, the U.S. government could file an appeal with the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

Previous wording

During 2025, we expect revenue growth to be constrained as the macroeconomic environment remains challenging while customer demand further shifts to deferred service offerings. We will continue to execute on our DRIVE program initiatives focused on reducing our permanent cost structure, aligning our cost base with demand, and increasing the flexibility of our network. We will also continue to execute on our revenue quality strategy and pursue profitable revenue growth opportunities to mitigate the impact of the

Current wording

In the remainder of 2025, we expect revenue to continue to be pressured by macroeconomic conditions, including uncertainty related to international trade, negatively affecting customer demand and constraining yield growth. We anticipate a continued mix shift to deferred services offerings to negatively affect results. We will continue to execute on our DRIVE program initiatives focused on reducing our permanent cost structure, aligning our cost base with demand, and increasing the flexibility of our network. We will also continue to execute on our revenue quality strategy and pursue profitable revenue growth opportunities to mitigate the impact of the service mix shift on our yield as well as base yield pressures through surcharge management and optimizing our customer mix. We expect the benefits from DRIVE and revenue quality initiatives to be partially offset by expense headwinds related to higher global inflation, the unfavorable effect of the expiration in September 2024 of the contract for Federal Express to provide the USPS U.S. domestic transportation services, and one fewer operating day in the fourth quarter.

Previous wording

Our capital expenditures for 2025 are expected to be approximately $5.2 billion, in line with 2024, as we continue to reduce our capital intensity relative to revenue. Aircraft spend is expected to decline, partially offset by increased investments in network optimization and modernization of our facilities.

Current wording

Our capital expenditures for 2025 are expected to be approximately $4.9 billion, $0.3 billion lower than 2024, as we continue to reduce our capital intensity relative to revenue. Aircraft spend is expected to decline, partially offset by increased investments in network optimization and modernization of our facilities.

Previous wording

The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2025 inherently less certain. See “Item 1A. Risk Factors” for more information.

Current wording

The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, developments in international trade, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2025 inherently less certain. See “Item 1A. Risk Factors” for more information.

Previous wording

The Federal Express segment operates combined sales, marketing, administrative, and information-technology functions in shared service operations for U.S. customers of our major business units and certain back-office support to FedEx Freight and our other operating segments which allows us to obtain synergies from the combination of these functions. We allocate the net operating costs of these services to reflect the full cost of operating our businesses in the results of those segments. We review and evaluate the performance of FedEx Freight and our other operating segments based on operating income inclusive of these allocations.

Current wording

The Federal Express segment operates combined sales, marketing, administrative, and information-technology functions in shared service operations for U.S. customers of our major business units and certain back-office support to FedEx Freight and our other operating segments which allows us to obtain synergies from the combination of these functions. We allocate the net operating costs

Previous wording

Also included in Corporate and other are the FedEx Office and Print Services, Inc. (“FedEx Office”) operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and

Current wording

Also included in Corporate and other are the FedEx Office and Print Services, Inc. (“FedEx Office”) operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics operating segment, which provides integrated supply chain management solutions, specialty transportation, customs brokerage, and global ocean and air freight forwarding.

Previous wording

Operating results in Corporate, other, and eliminations declined in the second quarter and first half of 2025 primarily due to increased business optimization costs and outside service contracts expense at FedEx Dataworks.

Current wording

Operating results in Corporate, other, and eliminations improved in the third quarter and declined in the nine months of 2025. Increased business optimization costs and outside service contracts expense at FedEx Dataworks were partially offset by lower salaries and employee benefits expense at FedEx Office in both the third quarter and nine months of 2025. FedEx Logistics results also improved in the third quarter of 2025 primarily due to higher revenue and lower salaries and employee benefits expense and other operating expense, which were partially offset by higher purchased transportation expense.

Previous wording

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the second quarter and first half of 2025 FedEx Freight provided road and intermodal support for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

Current wording

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the third quarter and nine months of 2025 FedEx Freight provided road and intermodal support for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

Previous wording

Federal Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority, deferred, and economy services, which provide delivery on a time-definite or day-definite basis. The following table compares revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the periods ended November 30:

Current wording

Federal Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority, deferred, and economy services, which provide delivery on a time-definite or day-definite basis. The following table compares revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the periods ended February 28, 2025 and February 29, 2024:

Previous wording

Prior year statistical information has been revised to conform to the current year presentation. The following table compares selected statistics (in thousands, except yield amounts) for the periods ended November 30:

Current wording

Prior year statistical information has been revised to conform to the current year presentation. The following table compares selected statistics (in thousands, except yield amounts) for the periods ended February 28, 2025 and February 29, 2024:

Previous wording

Federal Express segment revenue was flat in the second quarter and first half of 2025 primarily due to increased deferred package volume and improved yields, partially offset by decreases from lower priority package and U.S. freight volume. Revenue in the first half of 2025 was also negatively affected by one fewer operating day and reduced demand surcharges.

Current wording

Federal Express segment revenue increased 3% in the third quarter and 1% in the nine months of 2025 primarily due to increased deferred and U.S. ground package volume and improved yields, partially offset by decreases from lower priority package and U.S. freight volume and unfavorable currency exchange rates. Revenue in the nine months of 2025 was also negatively affected by one fewer operating day and reduced demand surcharges.

Previous wording

U.S. priority package yield increased 3% in the second quarter and first half of 2025 primarily due to higher base rates. Composite freight yield increased 4% in the second quarter and 2% in the first half of 2025 primarily due to improved U.S. freight yield resulting from the expiration of our contract with the USPS on September 29, 2024 and an increase in international economy freight yield due to improved market strength. These improvements were partially offset by a decrease in international export composite package yield of 2% in the second quarter and 3% in the first half of 2025 primarily due to unfavorable service mix. Package and freight yields were also negatively affected by lower fuel surcharges in the second quarter and first half of 2025 and reduced demand surcharges in the first half of 2025.

Current wording

U.S. domestic composite package yield increased slightly in both the third quarter and nine months of 2025 primarily due to higher base rates from our continued focus on revenue quality. U.S. freight yield increased 23% in the third quarter and 14% in the nine months of 2025 primarily due to the expiration of our contract with the USPS on September 29, 2024. International export composite package yield decreased 4% in the third quarter and 3% in the nine months of 2025 primarily due to unfavorable service mix. Package and freight yields were also negatively affected by reduced demand surcharges in the nine months of 2025.

Previous wording

International priority package volume decreased 12% in the second quarter and 9% in the first half of 2025 driven by softer global industrial production. U.S. average daily freight pounds decreased 51% in the second quarter and 26% in the first half of 2025 primarily due to the expiration of our contract with the USPS on September 29, 2024. U.S. priority package volume decreased 4% in the second quarter and 5% in the first half of 2025 primarily due to economic softness and lower consumer spending. International economy package volume increased 44% in the second quarter and 40% in the first half of 2025 primarily due to continued growth in our deferred service offerings as a result of global macroeconomic conditions.

Current wording

International economy package volume increased 48% in the third quarter and 42% in the nine months of 2025 primarily due to continued growth in our deferred service offerings as a result of strengthening e-commerce. U.S. ground home delivery/economy package volume increased 11% in the third quarter and 4% in the nine months of 2025 primarily due to increased demand for our services and, in the third quarter of 2025, the timing of cyber week. International priority package volume decreased 16% in the third quarter and 11% in the nine months of 2025 driven by softness in the global industrial economy. U.S. average daily freight pounds decreased 64% in the third quarter and 39% in the nine months of 2025 primarily due to the expiration of our contract with the USPS on September 29, 2024. U.S. priority package volume decreased 3% in the third quarter and 4% in the nine months of 2025 primarily due to economic softness and lower consumer spending.

Previous wording

Federal Express segment operating income increased 2% in the second quarter of 2025 due to higher base yields, partially offset by increased operating expenses. Federal Express segment operating income decreased 14% in the first half of 2025 due to increased operating expenses and one fewer operating day, partially offset by higher base yields. The increase in operating expenses in the second quarter and first half of 2025 was driven by increased wage and purchased transportation rates, business optimization costs, and increased employee benefits, partially offset by lower fuel prices and continued benefits from DRIVE initiatives that drove a reduction in our permanent cost structure. These initiatives included the continued transformation of our structural network, improving the efficiency of our information technology and back office functions, optimizing operations in Europe, and increasing linehaul efficiencies.

Current wording

Federal Express segment operating income increased 10% in the third quarter of 2025 due to higher base yields and volume, partially offset by increased operating expenses. Federal Express segment operating income decreased 6% in the nine months of 2025 due to increased operating expenses and one fewer operating day, partially offset by higher base yields and volume. The increase in operating expenses in the third quarter and nine months of 2025 was driven by increased wage and purchased transportation rates, business optimization costs, and increased employee benefits, partially offset by lower fuel prices and continued benefits from DRIVE initiatives that drove a reduction in our permanent cost structure. These initiatives included the continued transformation of our structural network, improving the efficiency of our information technology and back-office functions, optimizing operations in Europe, and increasing linehaul efficiencies. Currency exchange rates had a negative effect on revenue and a positive effect on expenses and operating income in the third quarter and nine months of 2025.

Previous wording

Purchased transportation expense increased 2% in the second quarter and first half of 2025 primarily due to higher rates as well as an increase in commercial linehaul to support international economy volume growth and network changes, partially offset by lower fuel prices and savings from our DRIVE initiatives. Salaries and employee benefits increased 2% in the second quarter and 1% in the first half of 2025 primarily due to an increase in wage rates as well as an increase in retirement benefits due to changes to our defined contribution plan which increased the number of eligible employees, partially offset by savings from our DRIVE initiatives and lower variable incentive compensation. Other operating expense increased 3% in the second quarter and first half of 2025 primarily due to higher outside service contracts expense resulting from increased information technology spending and higher self-insurance accruals. Fuel expense decreased 28% in the second quarter and 16% in the first half of 2025 due to decreases in fuel prices and usage resulting from lower flight hours.

Current wording

Purchased transportation expense increased 5% in the third quarter and 3% in the nine months of 2025 primarily due to higher rates as well as an increase in commercial linehaul to support international economy volume growth and network changes, partially offset by savings from our DRIVE initiatives and lower fuel prices. Purchased transportation also increased in the third quarter of 2025 due to higher U.S. ground volume. Salaries and employee benefits expense increased 4% in the third quarter and 2% in the nine months of 2025 primarily due to an increase in wage rates, increased staffing to align with peak demand, and an increase in retirement benefits due to changes to our defined contribution plan which increased the number of eligible employees, partially offset by savings from our DRIVE initiatives. In addition, variable incentive compensation was higher in the third quarter and lower in the nine months of 2025. Other operating expense increased 4% in the third quarter and 3% in the nine months of 2025 primarily due to higher self-insurance accruals. Fuel expense decreased 23% in the third quarter and 18% in the nine months of 2025 due to decreases in fuel prices and usage resulting from lower flight hours.

Previous wording

Federal Express segment results include business optimization costs of $206 million in the second quarter and $249 million in the first half of 2025. Federal Express segment results include business optimization costs of $77 million in the second quarter and $104 million in the first half of 2024. See the “Business Optimization Costs” section of this MD&A for more information.

Current wording

Federal Express segment results include business optimization costs of $92 million in the third quarter and $341 million in the nine months of 2025. Federal Express segment results include business optimization costs of $45 million in the third quarter and $149 million in the nine months of 2024. See the “Business Optimization Costs” section of this MD&A for more information.

Previous wording

FedEx Freight LTL service offerings include priority services when speed is critical and economy services when time can be traded for savings. The following table compares revenue, operating expenses, operating income (dollars in millions), operating margin, selected statistics, and operating expenses as a percent of revenue for the periods ended November 30:

Current wording

FedEx Freight LTL service offerings include priority services when speed is critical and economy services when time can be traded for savings. The following table compares revenue, operating expenses, operating income (dollars in millions), operating margin, selected statistics, and operating expenses as a percent of revenue for the periods ended February 28, 2025 and February 29, 2024:

Previous wording

FedEx Freight segment revenue decreased 11% in the second quarter and 7% in the first half of 2025 primarily due to lower shipments and yields. Revenue was also negatively affected by one fewer operating day in the first half of 2025.

Current wording

FedEx Freight segment revenue decreased 5% in the third quarter and 6% in the nine months of 2025 primarily due to lower shipments and yields. Revenue was also negatively affected by one fewer operating day in the nine months of 2025.

Previous wording

Average daily shipments decreased 8% in the second quarter and 5% in the first half of 2025 due to reduced demand for our services, primarily resulting from macroeconomic conditions. Revenue per shipment decreased 4% in the second quarter and 1% in the first half of 2025 primarily due to lower fuel surcharges and weight per shipment, partially offset by base yield improvement resulting from our continued focus on revenue quality.

Current wording

Average daily shipments decreased 5% in both the third quarter and nine months of 2025 due to reduced demand for our services, primarily resulting from macroeconomic conditions. Revenue per shipment decreased 1% in both the third quarter and nine months of 2025 primarily due to lower fuel surcharges and weight per shipment, partially offset by base yield improvement resulting from our continued focus on revenue quality.

Previous wording

FedEx Freight segment operating income decreased 36% in the second quarter and 23% in the first half of 2025 primarily due to lower revenue, partially offset by reduced operating expenses. Operating income was also negatively affected by one fewer operating day in the first half of 2025.

Current wording

FedEx Freight segment operating income decreased 23% in both the third quarter and nine months of 2025 primarily due to lower revenue, partially offset by reduced operating expenses. Operating income was also negatively affected by one fewer operating day in the nine months of 2025.

Previous wording

Combined fuel and purchased transportation expense decreased 22% in the second quarter and 16% in the first half of 2025 due to decreased shipments and lower fuel prices. Salaries and employee benefits expense decreased 4% in the second quarter and 2% in the first half of 2025 primarily due to reduced staffing to align with lower volumes, partially offset by higher wage rates. Depreciation expense increased 38% in the second quarter and 17% in the first half of 2025 primarily due to a gain on the sale of facilities in the second quarter of 2024.

Current wording

Combined fuel and purchased transportation expense decreased 11% in the third quarter and 14% in the nine months of 2025 due to decreased shipments and lower fuel prices. Salaries and employee benefits expense decreased 2% in both the third quarter and nine months of 2025 primarily due to reduced staffing to align with lower volumes, partially offset by higher wage rates. Depreciation expense increased 13% in the nine months of 2025 primarily due to a gain on the sale of facilities in the second quarter of 2024 and investments in information technology and transportation equipment.

Previous wording

Cash and cash equivalents totaled $5.0 billion at November 30, 2024, compared to $6.5 billion at May 31, 2024. The following table provides a summary of our cash flows for the six-month periods ended November 30, 2024 and 2023 (in millions):

Current wording

Cash and cash equivalents totaled $5.1 billion at February 28, 2025, compared to $6.5 billion at May 31, 2024. The following table provides a summary of our cash flows for the nine-month periods ended February 28, 2025 and February 29, 2024 (in millions):

Previous wording

Cash Provided by Operating Activities. Cash flows from operating activities decreased $1.5 billion in the first half of 2025 primarily due to working capital changes driven by a decrease in accrued incentive compensation and other liabilities and an increase in accounts receivable, partially offset by an increase in accounts payable from the first half of 2024.

Current wording

Cash Provided by Operating Activities. Cash flows from operating activities decreased $1.1 billion in the nine months of 2025 primarily due to working capital changes driven by a decrease in accrued incentive compensation and other liabilities and an increase in accounts receivable, partially offset by an increase in accounts payable from the nine months of 2024.