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 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, net” includes costs associated with outside service contracts (such as information technology services, temporary labor, facilities services, and security), insurance, professional fees, credit losses, and restructuring and exit costs.

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CONSOLIDATED RESULTS

The following tables compare summary operating results from continuing operations and changes in revenue and operating income (loss) (dollars in millions, except per share amounts) for the periods ended September 30, 2026 and 2025:

Overview

Operating income increased 10% and 43%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to higher base rates and fuel surcharges for our package services and increased U.S. domestic package volumes, partially offset by higher purchased transportation and wage rates and fuel prices. Operating income for the four-month period ended September 30, 2026 also benefited from one additional operating day compared to the prior-year period.

We repurchased an aggregate of $0.7 billion of our common stock through open market transactions during thethree-month period ended September 30, 2026. During the four-month period ended September 30, 2026, we repurchased 6.3 million shares of FedEx common stock at an average price of $319.68 per share for a total of $2.0 billion. Share repurchases had a benefit of $0.02 per diluted share for the three-month period and $0.31 per diluted share for the four-month period ended September 30, 2026. See Note 1 of the accompanying unaudited condensed consolidated financial statements and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for additional information.

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The following graphs for Express U.S. Domestic and Express International 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.

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The following graphs for Express U.S. Domestic and Express International 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.

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Revenue

Revenue increased 12% and 14%, respectively, in the three- and four-month periods ended September 30, 2026, primarily due to U.S. Domestic and International priority base yield improvements, higher fuel surcharges, and increased U.S. Domestic package volume, partially offset by lower international domestic volumes.

Express U.S. Domestic segment revenue increased 10% and 12%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to improved package base yields, higher fuel surcharges, and increased package volumes.

Express International segment revenue increased 17% and 19%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to higher fuel surcharges, improved package and freight base yields, and growth in international export and freight volumes, partially offset by lower domestic volume.

Operating Expenses

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended September 30, 2026 and 2025:

Purchased transportation expense increased 19% and 21%, respectively, in the three- and four-month periods ended September 30, 2026, primarily due to higher contracted service provider rates and fuel prices and volume-related costs to support higher package volume. Fuel expense increased 64% and 66%, respectively, in the three- and four-month periods ended September 30, 2026, primarily driven by higher fuel prices. Salaries and employee benefits expense increased 5% and 6%, respectively, in the three- and four-month periods ended September 30, 2026, primarily driven by higher wage rates and variable incentive compensation. Other operating expenses increased 12% and 11%, respectively, in the three- and four-month periods ended September 30, 2026, primarily due to higher outside service contracts and professional fees and increased credit losses.

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Income Taxes

Our effective tax rate was 31.6% and 5.4% for the three- and four-month periods ended September 30, 2026, compared to 29.4% and 28.6% for the comparable prior-year periods.

•Three-Month Period Comparison: The effective tax rate for the three-month period ended September 30, 2026, was higher than the prior-year period (31.6% vs. 29.4%). The 2026 rate was unfavorably impacted by a $1.2 billion non-deductible loss recognized on our 19.9% ownership interest in FedEx Freight. This impact was partially offset by a $263 million deferred tax benefit related to tax and book basis differences of FedEx Supply Chain that was held for sale as of September 30, 2026. The prior-year three-month rate of 29.4% was unfavorably impacted by one-time discrete items.

•Four-Month Period Comparison: The effective tax rate for the four-month period ended September 30, 2026, decreased significantly to 5.4% from 28.6% in the prior year. This decrease was primarily driven by the recognition of a $3.3 billion non-taxable gain associated with our FedEx Freight ownership interest.

Several countries in which we operate 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 our income tax provision for the three- and four-month periods ended September 30, 2026.

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, and the examination has been expanded to include 2023 and 2024 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 in February 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. In June 2025, the District Court validated the amount of refunds owed and in August 2025, the U.S. government filed a notice to appeal the decision to the U.S. Court of Appeals for the Sixth Circuit. The government filed its opening appellant brief in January 2026, and we filed our response in March 2026. The government filed its reply in May 2026. The Sixth Circuit Court of Appeals heard oral arguments on July 30, 2026, and the Company is awaiting the court’s decision. 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 anticipate year-over-year revenue and operating profit growth to continue in the remainder of calendar year 2026. We expect continued yield and volume improvement to more than offset expense increases, including higher purchased transportation and wage rates, higher costs associated with the newly ratified pilot Collective Bargaining Agreement (“CBA”), which took effect June 29, 2026, maintenance expense and other inflationary matters. We will continue to execute on our business optimization program, including Network 2.0 and associated One FedEx initiatives, 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 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 for announced programs to range from $230 million to $260 million, substantially all of which are cash expenditures, of which $147 million was incurred in fiscal year 2026 and $72 million was incurred in the four-month period ended September 30, 2026. The remaining charges are expected to be incurred through calendar year 2028 and will be recorded as business optimization expenses. We expect savings from implementation of these plans to be approximately $220 million on an annualized basis beginning in calendar 2027.

See the “Restructuring and Exit Costs” section of Note 1 for additional information on our transformation initiatives and other cost savings initiatives.

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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 the“Trends Affecting Our Business,” “Critical Accounting Estimates,” and“Forward-Looking Statements” sections of this MD&A for a discussion of these and other potential risks and uncertainties that could materially affect our future performance.

RECENT ACCOUNTING GUIDANCE

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

REPORTABLE SEGMENTS

Express U.S. Domestic and Express International represent our major service lines and constitute our reportable segments. Our remaining businesses are reported as Corporate, other, and eliminations.

The U.S. Domestic 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 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 our other operating segments based on operating income inclusive of these allocations.

Operating expenses for our Express International segment include allocations of these services from the U.S. Domestic 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.

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EXPRESS U.S. DOMESTIC SEGMENT

Express U.S. Domestic offers a wide range of 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 tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the periods ended September 30, 2026 and 2025:

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The following table compares selected statistics (in thousands, except yield amounts) for the periods ended September 30, 2026 and 2025:

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

Express U.S. Domestic Segment Revenue

Express U.S. Domestic segment revenue increased 10% and 12%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to improved package base yields, higher fuel surcharges, and increased package volumes. Higher base yields and package volume reflected growth in premium package services and favorable service mix.

Volumes: Ground package volume increased 2% and 3%, respectively, in the three- and four-month periods ended September 30, 2026 benefitting from higher ground commercial and home delivery volumes. Priority package volume increased 4% in the three- and four-month periods ended September 30, 2026, and deferred package volume decreased 2% and 1% in the three- and four-month periods ended September 30, 2026 driven by revenue quality objectives.

Yield: Domestic composite package yield increased 7% and 8%, respectively, in the three- and four-month periods ended September 30, 2026 due to improved base yields, higher fuel surcharges, and favorable service mix.

Express U.S. Domestic Segment Operating Income

Express U.S. Domestic segment operating income increased 7% and 29%, respectively, in the three- and four-month periods ended September 30, 2026 due to higher package yields and volume. These improvements were partially offset by higher purchased transportation rates, salaries and employee benefits, and fuel price driven expense increases. Operating income for the four-month period ended September 30, 2026 also benefited from one additional operating day compared to the prior-year period.

Purchased transportation expense increased 18% and 20%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to higher rates and fuel prices. Salaries and employee benefits expense increased 3% and 5% in the three- and four-month periods ended September 30, 2026 primarily due to higher wage rates, as well as additional costs associated with the newly ratified CBA. Fuel expense increased 56% and 58% respectively, in the three- and four-month periods ended September 30, 2026 primarily due to higher fuel

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EXPRESS INTERNATIONAL SEGMENT

Express International offers a wide range of shipping services for delivery of packages and freight including priority and economy services, which provide delivery on a time-definite or day-definite basis. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the three- and four-month periods ended September 30, 2026 and 2025:

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

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The following table compares selected statistics (in thousands, except yield amounts) for the periods ended September 30, 2026 and 2025:

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

Express International Segment Revenue

Express International segment revenue increased 17% and 19%, respec tively, in the three- and four-month periods ended September 30, 2026 primarily due to higher fuel surcharges, improved package and freight base yields, and growth in international export and freight volumes, partially offset by lower domestic volume.

Volumes: Export package volume increased 8% in the three- and four-month periods ended September 30, 2026 primarily driven by higher demand in Europe.

Total average daily freight pounds increased 15% in the three- and four-month periods ended September 30, 2026 reflecting priority and economy freight volume increases.

Yield: Priority package yield increased 16% and 17%, respectively, in the three- and four-month periods ended September 30, 2026, and international economy package yields increased 2% in the three- and four-month periods ended September 30, 2026 driven by increased weight per package and higher fuel surcharges.

Composite freight yield increased 11% and 10%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to base yield and fuel surcharge increases.

Express International Segment Operating Income

Express International segment operating income increased 15% and 82%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to higher international export and freight yield and volume. These impacts were partially offset by higher wage and purchased transportation rates and fuel price driven expense increases. Operating income for the four-month period ended September 30, 2026 also benefited from one additional operating day compared to the prior-year period.

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Fuel expense increased 68% and 70%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to higher fuel prices. Purchased transportation expense increased 19% and 21%, respectively, in the three- and four-month periods ended September 30, 2026 primarily due to increased rates. Salaries and employee benefit expenses increased 10% in the three- and four-month periods ended September 30, 2026 primarily due to higher wage rates and variable incentive compensation. Other operating expenses increased 20% and 15%, respectively, in the three- and four-month periods ended September 30, 2026 due to increased costs related to restructuring in France and Brazil, credit losses, and outside service contracts.

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. Corporate, other, and eliminations also includes the results of FedEx Dataworks, Inc. (“FedEx Dataworks”), FedEx Office and Print Services, Inc. (“FedEx Office”), and FedEx Supply Chain Distribution System, Inc. (“FedEx Supply Chain”). FedEx Dataworks is focused on leveraging the power of our network and establishing our data estate to serve as an intelligence engine for global value chains, connecting fragmented systems and enhancing efficiency, decisioning, and providing context for our customers’ supply chains. FedEx Office provides document and business services and retail access to our package transportation businesses and FedEx Supply Chain offers integrated supply chain management solutions. The results of Corporate, other, and eliminations are not allocated to the other business segments.

Operating results in Corporate, other, and eliminations were relatively unchanged in the three- and four-month periods ended September 30, 2026 reflecting consistent corporate headquarters costs and stable operating results for our other businesses.

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FINANCIAL CONDITION

LIQUIDITY(1)

Cash and cash equivalents totaled $8.0 billion at September 30, 2026, compared to $13.1 billion at May 31, 2026. The following table provides a summary of our cash flows (in millions):

(1) The statement of cash flows has not been recast to reflect discontinued operations for any periods presented. Supplemental disclosure of operating and investing cash flows from discontinued operations is included in Note 2.

Cash Provided by Operating Activities. Cash flows from operating activities remained relatively unchanged in the four-month period ended September 30, 2026 compared to the four-month period ended September 30, 2025 primarily due to less unfavorable changes in working capital, offset by slightly lower net income after excluding noncash gains on our short-term investment in FedEx Freight and early extinguishment of debt and other noncash items.

Cash Used in Investing Activities. Cash flows used in investing activities increased $2.7 billion in the four-month period ended September 30, 2026 compared to the four-month period ended September 30, 2025 primarily due to a $2.5 billion equity method investment purchased during 2026.

Cash Used in Financing Activities. Cash flows used in financing activities increased $3.5 billion in the four-month period ended September 30, 2026 primarily due to higher repayments of debt and repurchases of our common stock, partially offset by higher proceeds from debt issuances when compared to the four-month period ended September 30, 2025.

See Note 1, Note 2, Note 4 and Note 5 of the accompanying unaudited condensed consolidated financial statements, “Liquidity Outlook” below, and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” for additional information.

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