FEDEX CORP

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 expenses 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, facilities services, security, temporary labor and security), insurance, professional fees, and credit losses.

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CONSOLIDATED RESULTS

The following table compares summary operating results (dollars in millions, except per share amounts) for the years ended May 31:

The following table shows changes in revenue and operating income results by reportable segment for 2026 compared to 2025 (in millions):

The following is a summary of the effects of the (costs) benefits of certain items affecting our financial results for the years ended May 31 (in millions):

Overview

Operating income increased in 2026 primarily due to improved base yields for our package services, increased U.S. domestic package volumes and higher fuel surcharges, combined with the continued structural cost reductions from business optimization initiatives, including from DRIVE initiatives commenced in prior years. Operating income for 2026 was negatively affected by higher salaries and employee benefit expense, higher purchased transportation expense, the financial impact of global trade policy changes, and

-43- increased costs related to the Spin-Off. The increase in salaries and employee benefits was primarily driven by higher wage rates, variable incentive compensation, and employee benefit expenses.

Operating income includes separation and other costs of $771 million in 2026. These costs are related to the Spin-Off and fiscal year change and are primarily related to professional services and an employee incentive plan. In 2025, we incurred costs related to the Spin-Off of $56 million. These costs are included in Corporate, other, and eliminations and consist of $38 million of professional and legal fees included in separation and other costs and $18 million related to the debt exchange offer and consent solicitation transactions discussed in Note 6 of the accompanying financial statements included in other, net. See the “Separation and other costs” section of this MD&A for more information.

Operating income in 2026 and 2025 includes $366 million and $756 million, respectively, of business optimization expenses related to ongoing network optimization through Network 2.0, international operational transformation initiatives, and structural and overhead cost‑reduction initiatives under our DRIVE program commenced in prior years. See the “Business Optimization Costs” section of this MD&A for more information.

Operating income in 2026 and 2025 includes $23 million and $21 million, respectively, of asset impairment charges associated with the decision to permanently retire certain aircraft and related engines at Federal Express. See the “Asset Impairment Charges” section of this MD&A for more information.

Operating income in 2026 and 2025 includes a gain of $12 million and net expense of $88 million, respectively, associated with certain international regulatory and other legal matters.

Net income in 2026 and 2025 includes a pre-tax, noncash gain of $647 million and $515 million, respectively, associated with our MTM retirement plans accounting adjustments. See the “Retirement Plans MTM Adjustments” section of this MD&A and Note 12 of the accompanying consolidated financial statements for more information.

During fiscal year 2026, we repurchased 3.3 million shares of FedEx common stock under ASR or open market transactions at an average price of $233.07 per share for a total of $776 million. Share repurchases had a benefit of $0.21 per diluted share in 2026. See “Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” and Note 1 of the accompanying consolidated financial statements and the “Financial Condition—Liquidity” section of this MD&A for additional information on our stock repurchases during fiscal year 2026.

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The following graphs for Federal Express and FedEx Freight show selected volume trends (in thousands) calculated on a 5-day-per-week basis for the years ended May 31:

(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.

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The following graphs for Federal Express and FedEx Freight show selected yield trends for the years ended May 31:

(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.

Revenue

Revenue increased 8% in 2026 primarily due toimproved base yields for our package services, increased U.S. domestic package volumes, higher fuel surcharges, and favorable exchange rates, partially offset by the negative impacts from the expiration of our contract with the U.S. Postal Service and lower shipments at FedEx Freight.

Federal Express segment revenue increased 9% in 2026 primarily due to improved package base yields, increased U.S. domestic package volumes, higher fuel surcharges, favorable exchange rates, and growth in international freight volumes, partially offset by negative impacts from the expiration of our contract with the U.S. Postal Service and global trade policy changes.

FedEx Freight segment revenue decreased 1% in 2026 primarily due to lower volume resulting from macroeconomic conditions, partially offset by higher fuel surcharges and base yield improvement.

Revenue at Corporate, other, and eliminations decreased in 2026 primarily due to lower demand at FedEx Logistics.

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Operating Expenses

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the years ended May 31:

(1)Includes costs associated with our transformation initiatives in 2026 and 2025.

(2)Includes asset impairment charges in 2026 and 2025 associated with the Federal Express operating segment.

(3)Includes a gain of $12 million in 2026 for an international regulatory matter in Federal Express. Includes $88 million of net expenses in 2025 associated with international regulatory and legacy FedEx Ground legal matters.

Salaries and employee benefits expense increased 8% in 2026 prim arily driven by higher wage rates, variable incentive compensation, and employee benefit expenses, and unfavorable exchange rate impacts. Purchased transportation expense increased 9% in 2026 primarilydue to volume-related costs to support higher package volume and contracted service provider rates. Other operating expenses increased 8% in 2026 primarilydue to increased credit losses, higher outside service contracts and professional fees, and unfavorable exchange rates.

Fuel

We apply a fuel surcharge on our air and ground services, most of which are adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price from ten days prior to the week in which it is assessed. Some Federal Express international fuel surcharges are updated on a monthly basis. We routinely review our fuel surcharges and periodically update the tables used to determine our fuel surcharges at all of our transportation segments.

While fluctuations in fuel surcharge percentages can be significant from period to period, fuel surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield. Additional components include the mix of services sold, the base price, and extra service charges we obtain for these services and level of pricing discounts offered.

Fuel expense increased 7% during 2026 primarily due to higher fuel prices. In addition to variability in usage and market prices, the manner in which we purchase fuel also influences our results. For example, our contracts for jet fuel purchases at Federal Express are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual arrangements, approximately 61% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of our purchases tied primarily to the index price for the preceding month and preceding day, rather than based on daily spot rates. These contractual provisions mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.

Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our earnings either positively or negatively in the short term. For more information, see “Item 1A. Risk Factors.”

Separation and Other Costs

Spin-Off

We incurred costs related to the Spin-Off of $744 million ($589 million, net of tax, or $2.46 per diluted share) in 2026. These costs primarily consist of professional services and an employee incentive plan related to the Spin-Off. Separation costs of $738 million in

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2026 are included within “Separation and other costs” and separation costs of $6 million are included in “Other, net” in the accompanying audited consolidated statements of income. These costs are included in FedEx Freight; Corporate, other, and eliminations; and Federal Express. In 2025, we incurred costs related to the Spin-Off of $56 million ($44 million, net of tax, or $0.18 per diluted share). Professional and legal fees of $38 million are included within “Separation and other costs,” and $18 million related to a debt exchange offer and consent solicitation transactions discussed in Note 6 are included within “Other, net” in the accompanying consolidated statements of income. These costs are included in Corporate, other, and eliminations. Costs included in “Separation and other costs” for 2025 were reclassified from “Other” to conform to the current period presentation. This change had no impact on total operating income or net income. Additionally, “Separation and other costs, net of payments” of $15 million were reclassified from “Changes in assets and liabilities: Accounts payable and other liabilities” in the consolidated statements of cash flows for 2025.

Fiscal year change

We incurred costs related to the fiscal year change of $33 million ($26 million, net of tax, or $0.11 per diluted share) in 2026. These costs, included in Federal Express and Corporate, other, and eliminations were primarily related to professional fees. We did not incur any fiscal year change costs in 2025.

Business Optimization and Realignment Costs

Our business optimization and realignment costs relate 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 “Business optimization and realignment costs” in the accompanying consolidated statements of income relate to our Network 2.0 program, our international operational transformation programs, and the Europe workforce reduction plan announced in June 2024.

We incurred business optimization and realignment costs of $366 million ($285 million, net of tax, or $1.19 per diluted share) in 2026. These costs, included in Federal Express and Corporate, other, and eliminations, were primarily related to severance, professional services, and incentive payments to our contracted service providers in support of Network 2.0. We incurred business optimization and realignment costs of $756 million ($577 million, net of tax, or $2.37 per diluted share) in 2025. These costs, included in Federal Express and Corporate, other, and eliminations, were primarily related to professional services.

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 410 locations in the U.S. and Canada as of May 31, 2026. 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 fiscal year 2025 and expect to complete the U.S. implementation by the end of calendar 2027.

International operational transformation programs

In January 2026, FedEx initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international domestic operations. These transformation programs may reduce approximately 5,000 operational employees, as well as changing working locations and schedules for up to 800 operational employees and is expected to occur over approximately 18 months, subject to required consultation processes in accordance with local regulations.

We expect the combined pre‑tax costs of severance benefits, legal and professional fees, and facilities‑related exit costs to range from $225 million to $325 million, substantially all of which are cash expenditures. These charges are expected to be incurred through calendar year 2028 and will be recorded as business optimization expenses. In 2026, we incurred $147 million of costs related to this program. The timing and amount of our business optimization expenses and the related cost savings associated with this operational transformation program are dependent on local country consultation processes, regulations and the negotiation of social plans, and may change as we revise and implement our plans.

Europe workforce reduction plan

Our workforce reduction plan in Europe to reduce structural costs announced in June 2024 is now fully complete as of May 31, 2026. The plan occurred over an 18-month period in accordance with local country processes and regulations and impacted approximately 1,400 employees across back-office and commercial functions. Savings from the plan are expected to be approximately $150 million on an annualized basis beginning in calendar 2026.

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The pre-tax cost of the severance benefits and legal and professional fees related to the plan have been recorded as business optimization expenses. In 2026 and 2025, we incurred $13 million and $235 million, respectively, of costs related to this plan.

Retirement Plans MTM Adjustments

In 2026, we incurred a pre-tax, noncash MTM gain of $647 million ($497 million, net of tax, or $2.08 per diluted share) related to the year-end actuarial adjustments of pension and postretirement healthcare plans’ assets and liabilities. These actuarial adjustments were due to higher asset returns, partially offset by lower discount rates.

In 2025, we incurred a pre-tax, noncash MTM gain of $515 million ($390 million, net of tax, or $1.60 per diluted share) related to the year-end actuarial adjustments of pension and postretirement healthcare plans’ assets and liabilities. These actuarial adjustments were due to higher discount rates, partially offset by changes to the actuarial assumptions regarding rates of retirement.

For more information, see the “Critical Accounting Estimates” section of this MD&A and Note 1 and Note 12 of the accompanying consolidated financial statements.

Asset Impairment Charges

In 2026, we made the decision to permanently retire from service 10 aircraft, resulting in a noncash impairment charge of $23 million ($18 million, net of tax, or $0.08 per diluted share). These retirements included four Boeing 757-200 aircraft, one Airbus A300-600 aircraft, and five MD-11 aircraft, and align with Federal Express’s fleet reduction and modernization strategy as we continue to improve our global network efficiency and better align air network capacity with anticipated demand.

In 2025, we made the decision to permanently retire from service 12 aircraft and eight related engines, resulting in a noncash impairment charge of $21 million ($16 million, net of tax, or $0.06 per diluted share). These retirements included two Boeing 757-200 aircraft, seven Airbus A300-600 aircraft, three Boeing MD-11 aircraft, and align with Federal Express’s fleet reduction and modernization strategy as we continue to improve our global network efficiency and better align air network capacity with anticipated demand.

Income Taxes

Our effective tax rate was 23.5% for 2026, compared to 24.8% for 2025. The 2026 tax provision includes a net income tax benefit of $100 million ($0.41 per diluted share) from the reduction of a Brazil valuation allowance on certain foreign tax loss carryforwards due to operational changes which impacted the determination of the realizability of the deferred tax asset in that jurisdiction. The 2025 tax provision includes a net income tax benefit of $46 million ($0.19 per diluted share) arising primarily from changes in our corporate legal entity structure and revisions of prior year estimates for actual tax return results.

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.

Several countries in which the company operates have adopted the Organization for Economic Cooperation and Development’s global framework implementing a 15% corporate minimum tax, commonly referred to as Pillar Two. Pillar Two did not have a material effect on the company’s 2026 income tax provision.

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 IRS 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 government filed a notice to appeal the decision to the U.S. Court of Appeals for the Sixth Circuit. The government submitted its opening brief on January 7, 2026, and FedEx filed its response on March 23, 2026. The government filed its reply brief on May 13, 2026. Oral arguments are scheduled for July 30, 2026. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

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For more information on income taxes, see the “Critical Accounting Estimates” section of this MD&A and Note 11 of the accompanying consolidated financial statements.

Outlook

Based on current trends, we anticipate revenue and operating profit growth to continue the remainder of calendar year 2026, driven by year-over-year growth in U.S. Domestic and International segments. We expect continued yield and volume improvement to more than offset expense increases, including higher wage and purchased transportation rates, higher costs associated with the newly ratified pilot CBA, which took effect June 29, 2026, and other inflationary matters. We will continue to execute on our business optimization initiatives, including Network 2.0 and our one FedEx program, where we expect to achieve $1.0 billion in structural cost reduction by the end of calendar year 2026.

In January 2026, we initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international domestic operations. We expect the combined pre‑tax costs of severance benefits, legal and professional fees, and facilities‑related exit costs to range from $225 million to $325 million, substantially all of which are cash expenditures, of which $147 million was incurred in fiscal year 2026. The remaining charges are expected to be incurred through calendar year 2028 and will be recorded as business optimization expenses.

Our workforce reduction plan in Europe to reduce structural costs announced in June 2024 is now fully complete as of May 31, 2026. We expect savings from the plan to be approximately $150 million on an annualized basis beginning in calendar 2026. These activities have been recorded as business optimization expenses. See the “Business Optimization Costs” section of this MD&A for additional information on our transformation initiatives and other cost savings initiatives.

Our capital expenditures during calendar year 2026 are expected to be approximately $3.9 billion, $0.4 billion higher than calendar year 2025. The increase is primarily driven by accelerated investment in Network 2.0 initiatives and modernization of U.S. Domestic and International facilities. Aircraft spend is expected to be approximately $1.0 billion for calendar year 2026. Historical and projected capital expenditures exclude FedEx Freight.

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.

We are directly affected by the state of the global economy and geopolitical developments. Additional changes in international trade policies, including tariffs, and relations could significantly reduce the volume of goods transported globally, increase our costs, and materially and adversely affect our business, financial condition, cash flows, and results of operations. Our transportation businesses and their profitability are affected by the price and availability of jet and vehicle fuel, as well as our ability to collect fuel surcharges. The uncertainty of these factors make any expectations for calendar year 2026 inherently less certain. See “Forward-Looking Statements,” “Item 1A. Risk Factors,” “Trends Affecting Our Business,” and “Critical Accounting Estimates” for a discussion of these and other potential risks and uncertainties that could materially affect our future performance.

Seasonality of Business

Our businesses are cyclical in nature, as seasonal fluctuations affect volumes, revenue, and earnings. Historically, our U.S. express priority and deferred package services experience an increase in volumes in late November and December. Historically, the fall is the busiest shipping period for U.S. ground services, while late December, June and July are the slowest periods. International business, particularly in the Asia-to-U.S. market, peaks in October and November in advance of the U.S. holiday sales season. The quarters including summer vacation and post winter-holiday seasons have historically experienced lower volumes relative to other periods. Shipment levels, operating costs, and earnings for each of our companies can also be adversely affected by inclement weather, particularly the impact of severe winter weather in our third fiscal quarter. See “Item 1A. Risk Factors” for more information.

RECENT ACCOUNTING GUIDANCE

See Note 2 of the accompanying consolidated financial statements for a discussion of recent accounting guidance.

REPORTABLE SEGMENTS

During 2026 and 2025, Federal Express and FedEx Freight represented our major service lines and constitute our reportable segments. 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.

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Operating expenses for our FedEx Freight segment included allocations of these services from the Federal Express segment. These allocations also included 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 approximated the net cost of providing these functions. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

On June 1, 2026, we completed the Spin-Off. Effective as of this date, we will no longer consolidate the FedEx Freight business, and FedEx Freight is no longer a reportable segment. This MD&A is based on our segment reporting that was in effect during 2026 and 2025.

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 years ended May 31:

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

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The following table compares selected statistics (in thousands, except yield amounts) for the years ended May 31:

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

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

Federal Express Segment Revenue

Federal Express segment revenue increased 9% in 2026 primarily due to improved package base yields, increased U.S. domestic package volumes, higher fuel surcharges, favorable exchange rates, and growth in international freight volumes, partially offset by negative impacts from the expiration of our contract with the U.S. Postal Service and global trade policy changes. Improved base

-52- yields and U.S. domestic package volumes reflect strong residential e‑commerce growth in the U.S. domestic business and international performance benefitted from increased international business‑to‑business demand.

Volumes:

U.S. deferred package volumes increased 8% driven by large customer demand and peak-related growth. U.S. ground package volume increased 4% in 2026, benefitting from higher home delivery and economy package volumes driven by increased business-to-consumer volume. U.S. priority package volumes increased 4% in 2026 supported by growth in demand by business-to-business customers.

International export package volume increased 1% in 2026 primarily driven by higher business‑to‑business demand in Europe, offsetting the negative impacts of global trade policy changes and decrease in demand in Asia Pacific.

Total average daily freight pounds remained flat in 2026 reflecting international priority and economy freight volume increases, which were offset by a reduction of U.S. postal-related volumes following the expiration of our contract with the U.S. Postal Service.

Yield:

U.S. domestic composite package yield increased 6% in 2026 prim arily due to higher base rates from our continued focus on revenue quality and higher fuel surcharges in the fourth quarter of 2026.

International priority package yield increased 13% in 2026 primarily due to increased weight per package, favorable exchange rates and higher fuel surcharges. International economy package yields decreased 2% primarily due to lower base yields, partially offset by favorable exchange rates and higher fuel surcharges.

Composite freight yield increased 4% in 2026 primarily due to favorable exchange rates, higher fuel surcharges, and a favorable mix impact from lower U.S. postal-related volumes following the expiration of our contract with the U.S. Postal Service.

Federal Express Segment Operating Income

Federal Express segment operating income increased 21% in 2026 primarily due to revenue growth described above and continued structural cost reductions realized from business optimization initiatives, including Network 2.0, Tricolor and our international operational transformation programs. These improvements were partially offset by increased salaries and employee benefits expense, higher purchased transportation expense, the negative impacts from global trade policy changes including higher credit losses, the expiration of our contract with the U.S. Postal Service, and the grounding of our MD-11 fleet.

Salaries and employee benefits expense increased 9% in 2026 primarily due to higher wage rates, variable incentive compensation and employee benefits expense, unfavorable exchange rates, and increased staffing to align with higher volumes in the U.S. Purchased transportation expense increased 9% in 2026 primarily due to increased volume, higher contracted service provider rates, higher fuel rates, and unfavorable exchange rates. Other operating expense increased 9% in 2026 primarily due to credit losses from higher revenue and impacts from global trade policy changes, increased outside service contracts and professional fees, and customs-related brokerage fees due to the removal of the de minimis exemption. Fuel expense increased 8% in 2026 primarily due to an increase in fuel price.

Federal Express segment results include business optimization costs of $303 million and $384 million in 2026 and 2025, respectively, associated with our plan to drive efficiency and lower our overhead and support costs. Results in 2026 also include $22 million of costs associated with our fiscal year change and $70 million of costs associated with the Spin-Off. Federal Express did not incur any costs associated with our fiscal year change or the Spin-Off in 2025. Federal Express segment results in 2026 and 2025 also include $23 million and $21 million, respectively, of asset impairment charges associated with the decision to permanently retire certain aircraft and related engines. Results include a gain of $12 million in 2026 for an international regulatory matter and include $88 million of net expenses in 2025 associated with international regulatory and legacy FedEx Ground legal matters. See the “Business Optimization Costs,” “Separation and Other Costs” and “Asset Impairment Charges” sections of this MD&A for more information.

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FEDEX FREIGHT SEGMENT

During 2026 and 2025, FedEx Freight LTL service offerings included 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 years ended May 31:

FedEx Freight Segment Revenue

FedEx Freight segment revenue decreased 1% in 2026 primarily due to lower volume resulting from macroeconomic conditions, partially offset by higher fuel surcharges and base yield improvement.

Average daily shipments decreased 4% in 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 4% in 2026 primarily driven by higher fuel surcharges, as well ashigher weight per shipment.

FedEx Freight Segment Operating Income

FedEx Freight segment operating income decreased 59% in 2026 primarily due to higher costs related to the Spin-Off, including increased salaries and employee benefits expense, outside service contracts and professional fees, as well as reduced demand. These impacts were partially offset by increased revenue per shipment due to the factors noted above.

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Salaries and employee benefits expense increased 3% in 2026 largely reflecting Spin-Off-related personnel activity, including the transfer to FedEx Freight of over 1,500 employees from Federal Express during 2026, as well as higher wage rates, partially offset by lower volume. Other operating expense increased 17% in 2026 due to increased outside service contracts and professional fees related to the Spin-Off, including incremental software license costs and other technology-related activities.

Separation and other costs of $492 million in 2026 are primarily professional fees and an employee incentive plan associated with the Spin-Off. FedEx Freight did not incur any costs associated with the Spin-Off in 2025. See the “Separation and Other Costs” section of this MD&A for more information.

CORPORATE, OTHER, AND ELIMINATIONS

Corporate, other, and eliminations 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 new digital revenue streams using proven FedEx intelligence to digitize supply chains and create new opportunities for our customers and team members.

Also included in Corporate, other, and eliminations 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 2026 due to improved operating results for FedEx Dataworks driven by lower business optimization costs and improved operating results for FedEx Office driven by higher revenue, offset by adecline in operating results for FedEx Logistics driven by higher salaries and benefits expense.

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 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.

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FINANCIAL CONDITION

LIQUIDITY

Cash and cash equivalents totaled $13.3 billion at May 31, 2026, compared to $5.5 billion at May 31, 2025. The following table provides a summary of our cash flows for the years ended May 31 (in millions):

Cash Provided by Operating Activities. Cash flows from operating activities increased $1.9 billion in 2026 primarily due to higher net income, net of non-cash adjustments, and favorable working capital changes driven by increases in accruals for variable incentive compensation, self-insurance, and professional fees, partially offset by an increase in accounts receivable.

Cash Used in Investing Activities. Capital expenditures decreased $0.2 billion in fiscal 2026 primarily due to lower spending on “aircraft and related equipment” at Federal Express and “vehicles and trailers” at Federal Express and FedEx Freight. See “Capital Resources” below for a more detailed discussion of capital expenditures during fiscal 2026.

Cash Provided by (Used in) Financing Activities. Cash flows from financing activities increased $6.8 billion in fiscal 2026 primarily due to the proceeds from debt issuances by FedEx Freight and lower repurchases of our common stock in fiscal 2026 when compared to fiscal 2025, offset by higher principal payments on debt in 2026. See Note 1 and Note 6 of the accompanying audited consolidated financial statements, “Liquidity Outlook” below, and “Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” for more information.