FedEx Corporation Q2 FY2026 earnings call

Peak Season Gratitude: Raj Subramaniam thanked frontline workers and acknowledged the recent tragedy at UPS. ### Q2 Results: Revenue up 7% year over year, adjusted operating income grew 17%, and adjusted EPS outlook raised to $17.80 to $19.00. ### Network Flexibility: Adjusted network during peak season by reducing Transpacific Asia bond capacity, shifting capacity to Asia-Europe lane, and making adjustments due to MD-11 grounding for safety. ### Network Transformation: Appointed Cavalpreet as EVP of Planning, Engineering, and Transformation; about 24% of eligible volume flows through 355 network2.o optimized facilities; over 150 facilities closed. ### AI and Partnerships: Scaling AI adoption, launched global AI program, and had a strategic collaboration with ServiceNow for logistics intelligence.

In Q2, US domestic package services saw revenue up 8% year over year, with adjusted operating income growing 24% and adjusted operating margin expanding by 100 basis points, driven by yield and volume strength and B2B services contributing nearly half of revenue growth. FedEx Freight faced pressure from lower volumes, but revenue per shipment increased 2% due to higher weight per shipment and revenue per 100 weight, though average daily shipments were down 4% due to the industrial economy weakness. Revenue contribution: US domestic package services were a key driver, while FedEx Freight was pressured by industry trends.

Adjusted EPS Outlook: Raised to $17.80 to $19.00 for FY 2026. ### FEC Expectations: Expected to have 7% revenue growth with adjusted operating margin slightly up. ### FedEx Freight Expectations: Expected revenue slightly down with margin down year over year. ### Quarter-to-Quarter: Q3 adjusted EPS expected to be sequentially lower than Q2; Q4 expected to be the strongest adjusted EPS quarter of the fiscal year.

Headwinds: Global trade policy changes, MD-11 grounding, weakness in the industrial economy, and LTL industry trends. ### Costs: Potential impacts from ongoing network adjustments and spin-off preparation costs.

Q: Brandon Oglenski asked about volume and market share in domestic US package business and yield gains.

A: Brie Carere responded on profitable market share, B2B focus, and rate discipline.

Q: Jonathan Chappell inquired about breaking down B2B revenue growth.

A: Brie Carere said it was a combination of new business, share of wallet, and small business B2B performance.

Q: Richa Harnain asked about service cost and network transformation.

A: Raj Subramaniam talked about incentive compensation and network2.o progress, noting 3-6 months for efficiency in Canada.

Q: Chris Wetherbee asked about LTL freight duplicative costs and spin-off.

A: John Dietrich discussed separation costs and market trends.

Q: Brian Ossenbeck asked about MD-11 process and EPS guide.

A: John Dietrich and Raj Subramaniam spoke about MD-11 return timeline and Q3/Q4 expectations.

Q: Thomas Wadewitz asked about incentive comp and margin improvement.

A: Raj Subramaniam said underlying momentum is strong with incremental headwinds in next 3-6 months.

Q: Jordan Alliger asked about framing the high end of EPS guide.

A: John Dietrich said it's due to stronger revenue and better cost environment.

Q: Bascome Majors asked about UPS competition and growth.

A: Brie Carere said UPS relationship isn't a threat to primary growth strategy.

Q: Ken Hoexter asked about freight simplification and spin costs.

A: John Dietrich discussed LTL industry impact and spin-off preparation costs.

Q: Reed C. asked about LTL consolidation.

A: Raj Subramaniam and John Dietrich talked about industry consolidation and LTL yield inflection.

Q: J. Bruce Chan asked about tariffs and trade impact.

A: Raj Subramaniam said early to comment on tariff impact.

Q: Stephanie Moore asked about peak season color.

A: Brie Carere provided peak season updates on volume, revenue quality, and network management.

Q: Ariel Rosa asked about Network two point zero impact.

A: John Dietrich said more on it at Investor Day but saw margin profile benefits.

Q: Conor Cunningham asked about healthcare, SMB, and data center.

A: Brie Carere detailed healthcare growth, SMB performance, and data center opportunity.

Q: David Vernon asked about Network two point zero margin impact.

A: Raj Subramaniam and John Dietrich talked about volume flow and future Investor Day details.

Q: Jeff Kaufman asked about non-GAAP add backs.

A: John Dietrich said most tied to freight separation.