FEDEX CORP

RESULTS OF OPERATIONS

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 credit losses.

-25-

CONSOLIDATED RESULTS

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, 2025 and 2024:

Overview

Operating income increased 31% in the second quarter and 20% in the first half of 2026 primarily due to improved yields for our U.S. domestic and international priority package services, structural cost reductions from business optimization initiatives, including from DRIVE initiatives commenced in prior years, and higher U.S. domestic package demand at Federal Express. Operating income for the second quarter and first half of 2026 was negatively affected by the financial impact of global trade policy changes, increased wage rates, variable incentive compensation, and purchased transportation rates, and higher costs related to the planned spin-off of FedEx Freight.

Operating income includes costs related to the planned spin-off of FedEx Freight and fiscal year change. We incurred costs related to the FedEx Freight spin-off of $205 million ($171 million, net of tax, or $0.72 per diluted share) in the second quarter and $246 million ($204 million, net of tax, or $0.86 per diluted share) in the first half of 2026. We incurred costs related to the fiscal year change of $8 million ($6 million, net of tax, or $0.03 per diluted share) in the second quarter and $12 million ($9 million, net of tax, or $0.04 per diluted share) in the first half of 2026. We did not incur any costs related to the FedEx Freight spin-off or fiscal year change in the first half of 2025. These costs were primarily related to professional services. See the “Separation and other costs” section of this MD&A for more information.

Operating income includes business optimization expenses of $30 million ($25 million, net of tax, or $0.10 per diluted share) in the second quarter and $97 million ($77 million, net of tax, or $0.32 per diluted share) in the first half of 2026 related to initiatives to reduce structural and overhead costs and to drive efficiency through Network 2.0. We incurred business optimization costs 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 related to our transformation initiatives. See the “Business Optimization Costs” section of this MD&A for more information.

Operating income includes a gain of $12 million in the second quarter of 2026 ($16 million, net of tax, or $0.07 per diluted share) for an international regulatory matter included in Federal Express.

We repurchased an aggregate of $276 million of our common stock through open market transactions during the second quarter of 2026. During the six-month period ended November 30, 2025, we repurchased 3.3 million shares of FedEx common stock through

-26- open market transactions at an average price of $233.07 per share for a total of $776 million. Share repurchases had a benefit of $0.05 per diluted share for the second quarter and $0.07 per diluted share for the first half of 2026. As of November 30, 2025, $1.3 billion remained available to be used for repurchases under the stock repurchase program approved by our Board of Directors in 2024. 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.

The following graphs for Federal Express and FedEx Freight show selected volume trends (in thousands) calculated on a 5-day-per-week basis over the five most recent quarters:

(1)International domestic average daily package volume relates to our international intra-country operations. International export average daily package volume relates to our international priority and economy services.

(2)International average daily freight pounds relate to our international priority and economy services.

-27-

The following graphs for Federal Express and FedEx Freight show selected yield trends over the five most recent quarters:

(1)International export revenue per package relates to our international priority and economy services. International domestic revenue per package relates to our international intra-country operations.

(2)International freight revenue per pound relates to our international priority and economy services.

-28-

Revenue

Revenue increased 7% in the second quarter and 5% in the first half of 2026 primarily due to U.S. domestic and international priority base yield improvements, increased U.S domestic package volume, and favorable exchange rates at Federal Express, partially offset by international export volume decreases, the expiration of our contract with the USPS, and lower shipments at FedEx Freight.

Federal Express segment revenue increased 8% in the second quarter and 6% in the first half of 2026 primarily due to U.S. domestic and international priority base yield improvements from revenue quality initiatives, increased U.S. domestic package volumes and favorable exchange rates, partially offset by international export volume decreases due to ongoing effects of global trade policies, and the expiration of our contract with the USPS. FedEx Freight revenue decreased 2% in the second quarter and first half of 2026 primarily due to lower volume from continued weak industrial production, offset by improved weight per shipment and fuel surcharges. Revenue at Corporate, other, and eliminations decreased in the second quarter of 2026 primarily due to lower demand and yields at FedEx Logistics, Inc. (“FedEx Logistics”).

Operating Expenses

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended November 30, 2025 and 2024:

Salaries and employee benefits expense increased 7% in the second quarter and 5% in the first half of 2026 primarily due to an increase in wage rates, higher variable incentive compensation, and unfavorable exchange rates. Purchased transportation expense increased 7% in the second quarter and 6% in the first half of 2026 primarily due to higher volume and rates. Other operating expenses increased 10% in the second quarter and 8% in the first half of 2026 primarily due to higher credit losses, professional fees, and outside service contracts. Fuel expense decreased 6% in the second quarter and 13% in the first half of 2026 due to lower fuel usage and the expiration of our contract with the USPS.

-29-

Separation and Other Costs

FedEx Freight separation

We incurred costs related to the planned spin-off of FedEx Freight of $205 million ($171 million, net of tax, or $0.72 per diluted share) in the second quarter of 2026 and $248 million ($204 million, net of tax, or $0.86 per diluted share) in the first half of 2026. These costs primarily consist of professional services. Separation costs of $205 million and $246 million for the three- and six-month periods ended November 30, 2025, respectively, are included within the “Separation and other costs” caption and separation costs of $2 million for the six-month period ended November 30, 2025 are included in the “Other, net” caption of the accompanying unaudited condensed consolidated statements of income. These costs are included in FedEx Freight; Corporate, other, and eliminations; and Federal Express. We did not incur any FedEx Freight spin-off costs in the first half of 2025.

Fiscal year change

We incurred costs related to the fiscal year change of $8 million ($6 million, net of tax, or $0.03 per diluted share) in the second quarter of 2026 and $12 million ($9 million, net of tax, or $0.04 per diluted share) in the first half of 2026. These costs were primarily related to professional fees and are included in Federal Express and Corporate, other, and eliminations. We did not incur any fiscal year change costs in the first half of 2025.

Business Optimization Costs

Our business optimization costs related to transformation initiatives aimed to improve long-term profitability, drive efficiency within and between our transportation segments, lower our overhead and support costs, and transform our digital capabilities. Costs included in the “Business optimization costs” caption of the accompanying unaudited condensed consolidated statements of income relate to DRIVE initiatives commenced in prior years, the Europe workforce reduction plan announced in June 2024, and our Network 2.0 program.

We incurred business optimization costs of $30 million ($25 million, net of tax, or $0.10 per diluted share) in the second quarter and $97 million ($77 million, net of tax, or $0.32 per diluted share) in the first half of 2026. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express. We incurred business optimization costs 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.

Network 2.0

Network 2.0 is our multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada. Through Network 2.0, we continue to consolidate our sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network. We have implemented Network 2.0 optimization in approximately 355 locations in the U.S and Canada as of November 30, 2025. Service providers will handle the pickup and delivery of Federal Express packages in some locations while employee couriers will handle others. We completed Canada’s implementation of Network 2.0 in the fourth quarter of 2025 and expect to complete the U.S. implementation by the end of calendar 2027.

Europe workforce reduction plan

Our workforce reduction plan in Europe to reduce structural costs announced in June 2024 is substantially complete as of November 30, 2025. The plan occurred over an 18-month period and impacted approximately 1,400 employees across back-office and commercial functions. Execution was carried out in accordance with local country processes and regulations. We expect savings from the plan to be approximately $150 million on an annualized basis beginning in calendar 2026.

We expect the pre-tax cost of the severance benefits and legal and professional fees to be provided under and related to the plan to be approximately $250 million in cash expenditures. These activities have been recorded as business optimization expenses. In the second quarter of 2026 and 2025, we incurred $6 million and $173 million respectively, of costs related to this plan. In addition, in the first half of 2026 and 2025, we incurred $9 million and $176 million, respectively. 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.

Income Taxes

Our effective tax rate was 25.8% for the second quarter and 26.5% for the first half of 2026 compared to 24.5% for the second quarter and 24.6% for the first half of 2025. The second quarter 2026 tax rate is higher than the second quarter 2025 tax rate due to the inclusion of favorable one-time items in the 2025 tax rate.

-30-

On July 4, 2025, the One Big Beautiful Bill Act was signed into law. Certain provisions within the act are interdependent and have implications for both the effective tax rate and cash taxes. We are currently in the process of evaluating these provisions.

We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2016 through 2021 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur.

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 unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit sought 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 $249 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. On June 4, 2025, the District Court validated the amount of refunds owed for 2018 and 2019, which includes the foreign tax credits previously denied. On August 1, 2025, the U.S. government filed a notice to appeal the decision to 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.

Outlook

Based on current trends, we expect revenue growth to continue into the second half of 2026, driven by U.S. Domestic service offerings. We expect international revenue to remain constrained as the current trade and geopolitical environment remains highly uncertain, driving increased volatility in shipping patterns globally. In addition, softness in the industrial economy is expected to continue pressuring demand for our Freight LTL services.

To mitigate demand challenges, we will continue to execute on our revenue quality strategy through surcharge management and optimizing our customer and service mix, and we will continue to align our cost base with demand. We will also continue our focus on business optimization, where we expect to see an incremental $1.0 billion in structural cost reduction benefits from DRIVE and Network 2.0 in 2026.

See the “Business Optimization Costs” section of this MD&A for additional information on our transformation initiatives, including our Network 2.0 program and workforce reduction plan in Europe.

Our capital expenditures for 2026 are expected to be approximately $4.5 billion, $0.4 billion higher than 2025. The increase is driven by investment in Network 2.0 initiatives and other efforts to modernize our facilities and package handling equipment in the U.S. and international locations. Aircraft spend is expected to decline to approximately $1.0 billion, $0.3 billion lower than 2025.

We will continue to evaluate our investments in critical long-term strategic projects to ensure our capital expenditures are expected to generate high returns on investment and are balanced with our outlook for global economic conditions. For additional details on key 2026 capital projects, refer to the“Financial Condition – Capital Resources” and“Financial Condition – Liquidity Outlook” sections of this MD&A.

In December 2024, we announced that FedEx’s management and Board of Directors had decided to pursue a full separation of FedEx Freight through the capital markets, creating a new publicly traded company. The separation is expected to be executed by June 1, 2026.

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 2026 inherently less certain. See Part I “Item 1A. Risk Factors” in our Annual Report for more information.

See the“Trends Affecting Our Business,” “Critical Accounting Estimates,” and“Forward-Looking Statements” sections of this MD&A for additional information.

RECENT ACCOUNTING GUIDANCE

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.

-31-

REPORTABLE SEGMENTS

Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments. Our reportable segments include the following businesses:

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.

Operating expenses for our FedEx Freight segment include allocations of these services from the Federal Express segment. These allocations also include charges and credits for administrative services provided between operating companies. The allocations of net operating costs are based on metrics such as relative revenue or estimated services provided. We believe these allocations approximate the net cost of providing these functions. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

CORPORATE, OTHER, AND ELIMINATIONS

Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, certain other costs and credits not attributed to our core business, and certain costs associated with developing integrated business solutions through our FedEx Dataworks, Inc. (“FedEx Dataworks”) operating segment. FedEx Dataworks is focused on creating digital solutions to optimize operations, digitize supply chains, and create new opportunities for our customers and team members.

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.

The results of Corporate, other, and eliminations are not allocated to the other business segments.

Operating results in Corporate, other, and eliminations improved in the second quarter and first half of 2026 reflecting lower business optimization costs at FedEx Dataworks and corporate headquarters, and decreased purchased transportation at FedEx Logistics.

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 thesecond quarter of 2026 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.

-32-

FEDERAL EXPRESS SEGMENT

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, 2025 and 2024:

(1)International domestic revenue relates to our international intra-country operations.

-33-

-34-

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended November 30, 2025 and 2024:

(1)ADV is calculated on a 5-day-per-week basis.

(2)International domestic statistics relate to our international intra-country operations.

-35-

Federal Express Segment Revenue

Federal Express segment revenue increased 8% in the second quarter and 6% in the first half of 2026 primarily due to improved U.S. domestic and international priority package base yields, increased U.S. domestic package volumes, and favorable exchange rates, partially offset by lower international export package volume including the negative impacts from global trade policies and the expiration of our contract with the USPS.

Volume:

U.S. domestic package volume increased 6% in the second quarter and 5% in the first half of 2026 primarily driven by increased U.S. ground home delivery/economy package volumes. International export package volume decreased 1% in the second quarter and 2% in the first half of 2026 primarily due to the negative impacts from global trade policies. U.S. average daily freight pounds decreased 23% in the second quarter and 47% in the first half of 2026 primarily due to the expiration of our contract with the USPS.

Yield:

International priority package yield increased by 9% in the second quarter and 11% in the first half of 2026 due to increased base yields and favorable exchange rates. U.S. domestic composite package yield increased 5% in the second quarter and 4% in the first half of 2026 primarily due to improved base yields. International economy package yields decreased 4% in the second quarter and 5% in the first half of 2026 due to decreased base yields, partially offset by favorable exchange rates.

Federal Express Segment Operating Income

Federal Express segment operating income increased 47% in the second quarter and 34% in the first half of 2026 due to higher U.S. domestic and international priority package yields, structural cost reductions realized from business optimization initiatives, including from DRIVE initiatives commenced in prior years, lower business optimization costs, and higher U.S. domestic package demand. These improvements were partially offset by increased wage rates, purchased transportation rates, and variable incentive compensation, and the negative impacts from global trade policies including higher credit losses.

Salaries and employee benefits expense increased 8% in the second quarter and 6% in the first half of 2026 primarily due to higher wage rates, variable incentive compensation, increased staffing to align with higher volumes in the U.S., and increased employee benefits. Purchased transportation expense increased 8% in the second quarter and 7% in the first half of 2026 primarily due to higher rates, increased volume, and unfavorable exchange rates. Other operating expense increased 11% in the second quarter and 10% in the first half of 2026 primarily due to increased credit losses from higher revenue and impacts from global trade policies, professional and outside service contract fees, and customs-related brokerage fees due to the changes to the de minimis exemption. Business optimization expense decreased 97% in the second quarter and 89% in the first half of 2026 due to DRIVE initiatives commenced in prior years.

Federal Express segment results include business optimizationcosts of $7 million and $28 million in the second quarter and first half of 2026, respectively, compared to $206 million and $249 million in the second quarter and first half of 2025. Results also include $7 million and $11 million in the second quarter and first half of 2026, respectively, of costs associated with our planned fiscal year change, and $11 million and $12 million in the second quarter and first half of 2026, respectively, of costs associated with the planned spin-off of FedEx Freight. We did not incur any costs associated with our planned fiscal year change or planned spin-off of FedEx Freight in the second quarter or first half of 2025. See the “Business Optimization Costs” and “Separation and Other Costs” sections of this MD&A for more information.

-36-

FEDEX FREIGHT SEGMENT

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, 2025 and 2024:

-37-

FedEx Freight Segment Revenue

FedEx Freight segment revenue decreased 2% in the second quarter and first half of 2026 primarily due to lower volume, partially offset by increased weight per shipment and improved fuel price.

Average daily shipments decreased 4% in the second quarter and 3% in the first half of 2026 due to reduced demand for our services primarily resulting from macroeconomic conditions, including continued weak industrial production, global trade policy uncertainty, and excess capacity in the LTL industry. Revenue per shipment increased 2% in the second quarter and 1% in the first half of 2026 primarily due to increased weight per shipment and fuel surcharge.

FedEx Freight Segment Operating Income

FedEx Freight segment operating income decreased 71% in the second quarter and 40% in the first half of 2026 primarily due to higher costs related to the planned spin-off of FedEx Freight, reduced demand, and increased wage rates, variable compensation, and intercompany charges, partially offset by increased weight per shipment and improved fuel price.

Salaries and employee benefits increased 1% in the second quarter and were flat in the first half of 2026 primarily due to increased wage rates and variable incentive compensation, partially offset by decreased staffing to align with lower volumes. Intercompany charges increased 7% in the second quarter and 8% in the first half of 2026 primarily due to increased sales staffing to prepare for the planned spin-off of FedEx Freight.

FedEx Freight segment results include costs associated with our planned spin-off of FedEx Freight of $152 million in the second quarter and $161 million in the first half of 2026. FedEx Freight did not incur costs related to the FedEx Freight spin-off in the second quarter or first half of 2025. See the “Separation and Other Costs” section of this MD&A for more information.

-38-

FINANCIAL CONDITION