filings.toolsItem 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
GENERAL
The following Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) describes the principal factors affecting the results of operations, liquidity, capital resources, and critical accounting estimates of FedEx Corporation (“FedEx”). This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2024 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices, and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results.
We provide a broad portfolio of transportation, e-commerce, and business services, offering integrated business solutions utilizing our flexible, efficient, and intelligent global network. Our primary operating companies are Federal Express Corporation (“Federal Express”), the world’s largest express transportation company and a leading North American provider of small-package ground delivery services, and FedEx Freight, Inc. (“FedEx Freight”), a leading North American provider of less-than-truckload (“LTL”) freight transportation services. See “Reportable Segments” for further discussion. Additional information on our businesses can be found in our Annual Report.
In connection with our one FedEx consolidation plan, on June 1, 2024, FedEx Ground Package System, Inc. (“FedEx Ground”) and FedEx Corporate Services, Inc. (“FedEx Services”) were merged into Federal Express, becoming a single company operating a unified, fully integrated air-ground express network under the respected FedEx brand. FedEx Freight continues to provide LTL freight transportation services as a separate subsidiary. Beginning in the first quarter of 2025, Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments. Additionally, the results of FedEx Custom Critical, Inc. (“FedEx Custom Critical”) are included in the FedEx Freight segment instead of the Federal Express segment in 2025. Prior-year amounts were revised to reflect this presentation.
In December 2024, we announced that FedEx’s Board of Directors decided to pursue a full separation of FedEx Freight through the capital markets, creating a new publicly traded company. The transaction, which would be implemented through the spin-off of shares of the new company to FedEx stockholders, is expected to be tax-free for U.S. federal income tax purposes for FedEx stockholders and be completed by June 2026. See Part II, Item 1A. “Risk Factors – The planned spin-off of FedEx Freight may not be completed on the terms or timeline currently contemplated, if at all, and there is no guarantee that the spin-off, if completed, will achieve the intended financial and strategic benefits.”
In January 2025, the Board of Directors approved a change in FedEx’s fiscal year end from May 31 to December 31. The fiscal year change will be effective June 1, 2026.
Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2025 or ended May 31 of the year referenced, and comparisons are to the corresponding period of the prior year. References to our transportation segments include, collectively, the Federal Express segment and the FedEx Freight segment.
The key indicators necessary to understand our operating results include:
the overall customer demand for our various services based on macroeconomic factors and the global economy;
the volumes of transportation services provided through our networks, primarily measured by our average daily volume and shipment weight and size;
the mix of services purchased by our customers;
the prices we obtain for our services, primarily measured by yield (revenue per package or pound or revenue per shipment or hundredweight for LTL freight shipments);
our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and
the timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges.
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Trends Affecting Our Business
The following trends significantly affect the indicators discussed above, as well as our business and operating results. See the risk factors identified under Part I, Item 1A. “Risk Factors” in our Annual Report, as updated by our quarterly reports on Form 10-Q, for more information. Additionally, see “Results of Operations – Consolidated Results – Business Optimization Costs and – Outlook” and “Financial Condition – Liquidity Outlook” below for additional information on efforts we are taking to mitigate adverse trends.
Macroeconomic Conditions
While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth. The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to weakened business conditions for the transportation industry. Consequently, this environment has led to lower shipments at FedEx Freight, negatively affecting our results in the third quarter and nine months of 2025. Additionally, the U.S. presidential administration is in the process of significantly increasing the rates and broadening the scope of tariffs imposed on goods imported into the U.S. In response, several foreign governments have imposed new tariffs on certain goods imported from the U.S., and additional retaliatory measures against U.S. goods are expected. These or additional changes in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions for the transportation industry.
Inflation and Interest Rates
During the third quarter and nine months of 2025, global inflation decelerated year-over-year but continues to be above historical levels. Additionally, global interest rates remained elevated in an effort to curb inflation. We are experiencing pressure on demand for our transportation services, particularly our priority services, as elevated inflation and interest rates are negatively affecting consumer and business spending. We expect inflation and high interest rates to continue to negatively affect our results of operations for the remainder of 2025. The changes in trade policy discussed above under “Macroeconomic Conditions” could exacerbate global inflation.
Fuel
We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. The timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges can significantly affect our operating results either positively or negatively in the short-term. During the third quarter and nine months of 2025, lower fuel prices negatively affected yields through lower fuel surcharges at FedEx Freight and reduced fuel expense at both of our transportation segments.
Geopolitical Conflicts
Given the nature of our business and global operations, geopolitical conflicts may adversely affect our business and results of operations. While we do not expect ongoing geopolitical conflicts between Russia and Ukraine and in the Middle East to have a direct material effect on our business or results of operations, the broader consequences are adversely affecting the global economy and may also have the effect of heightening other risks disclosed in our Annual Report.
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, facilities services, and security), insurance, professional fees, and operational supplies.
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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 February 28, 2025 and February 29, 2024:
| Three Months Ended | Percent | Nine Months Ended | Percent | |||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||
| Revenue | $ | 22,160 | $ | 21,738 | 2 | $ | 65,706 | $ | 65,584 | — | ||||||||||||||||
| Operating income (loss): | ||||||||||||||||||||||||||
| Federal Express segment | 1,294 | 1,173 | 10 | 3,299 | 3,514 | (6 | ) | |||||||||||||||||||
| FedEx Freight segment | 261 | 341 | (23 | ) | 1,012 | 1,314 | (23 | ) | ||||||||||||||||||
| Corporate, other, and eliminations | (263 | ) | (271 | ) | 3 | (887 | ) | (824 | ) | (8 | ) | |||||||||||||||
| Consolidated operating income | 1,292 | 1,243 | 4 | 3,424 | 4,004 | (14 | ) | |||||||||||||||||||
| Operating margin: | ||||||||||||||||||||||||||
| Federal Express segment | 6.7 | % | 6.3 | % | 40 | bp | 5.9 | % | 6.3 | % | (40 | ) | bp | |||||||||||||
| FedEx Freight segment | 12.5 | % | 15.5 | % | (300 | ) | bp | 15.3 | % | 18.7 | % | (340 | ) | bp | ||||||||||||
| Consolidated operating margin | 5.8 | % | 5.7 | % | 10 | bp | 5.2 | % | 6.1 | % | (90 | ) | bp | |||||||||||||
| Consolidated net income | $ | 909 | $ | 879 | 3 | $ | 2,444 | $ | 2,857 | (14 | ) | |||||||||||||||
| Diluted earnings per share | $ | 3.76 | $ | 3.51 | 7 | $ | 9.99 | $ | 11.31 | (12 | ) |
| Year-over-Year Changes | ||||||||||||||||
| Revenue | Operating Income (Loss) | |||||||||||||||
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||
| Federal Express segment | $ | 509 | $ | 456 | $ | 121 | $ | (215 | ) | |||||||
| FedEx Freight segment | (116 | ) | (447 | ) | (80 | ) | (302 | ) | ||||||||
| Corporate, other, and eliminations | 29 | 113 | 8 | (63 | ) | |||||||||||
| $ | 422 | $ | 122 | $ | 49 | $ | (580 | ) |
Overview
Operating income increased 4% in the third quarter and decreased 14% in the nine months of 2025. Operating income for the third quarter and nine months of 2025 was positively affected by continued savings related to DRIVE, increased transportation segment base yields, and higher demand for U.S. ground and international export package services. Our DRIVE initiatives for the nine months of 2025 included the continued transformation of our structural network, improving the efficiency of our information technology and back-office functions, optimizing operations in Europe, and increasing linehaul efficiencies. Operating income for the third quarter and nine months of 2025 was negatively affected by increased purchased transportation and wage rates, the expiration of our contract with the U.S. Postal Service (“USPS”), higher business optimization costs, and lower fuel surcharges at FedEx Freight. The results for the nine months of 2025 were also negatively affected by one fewer operating day.
Operating income includes expenses of $179 million ($137 million, net of tax, or $0.56 per diluted share) in the third quarter and $633 million ($484 million, net of tax, or $1.98 per diluted share) in the nine months of 2025 associated with our business optimization strategy to drive efficiency and lower our overhead and support costs. We recognized $114 million ($87 million, net of tax, or $0.35 per diluted share) of expenses in the third quarter and $364 million ($278 million, net of tax, or $1.10 per diluted share) in the nine months of 2024 under this program. See the “Business Optimization Costs” section of this MD&A for more information.
Operating income includes net expenses of $38 million ($29 million, net of tax, or $0.12 per diluted share) in the third quarter of 2025 for international regulatory and legacy FedEx Ground legal matters.
We incurred costs related to the planned spin-off of FedEx Freight of $23 million ($17 million, net of tax, or $0.07 per diluted share) in the third quarter of 2025. These costs consist of $18 million related to the debt exchange offer and consent solicitation transactions discussed in Note 4 of the accompanying unaudited condensed consolidated financial statements which is included in interest, net and $5 million of professional fees which is included in other. We did not incur any FedEx Freight spin-off costs in the first half of 2025 or in the three or nine months of 2024.
We repurchased an aggregate of $497 million of our common stock through open market transactions during the third quarter of 2025. During the nine-month period ended February 28, 2025, we repurchased 8.9 million shares of FedEx common stock through accelerated share repurchase (“ASR”) and open market transactions at an average price of $281.74 per share for a total of $2.5 billion. Share repurchases had a benefit of $0.12 per diluted share for the third quarter and $0.21 per diluted share for the nine months of 2025. As of February 28, 2025, $2.6 billion remained available to be used for repurchases under the 2024 stock repurchase program.
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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.
Prior year statistical information has been revised to conform to the current year presentation. 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.
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Prior year statistical information has been revised to conform to the current year presentation. 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.
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Revenue
Revenue increased 2% in the third quarter and was flat in the nine months of 2025 primarily due to base yield improvement at both of our transportation segments and higher volume at Federal Express, offset by lower volume and fuel surcharges at FedEx Freight and unfavorable currency exchange rates. The increases in revenue during the nine months of 2025 were also offset by one fewer operating day at both of our transportation segments and reduced demand surcharges at Federal Express.
Federal Express segment revenue increased 3% in the third quarter and 1% in the nine months of 2025 primarily due to increased deferred and U.S. ground package volume and improved base yields, offset by lower priority package volume, the expiration of our contract with the USPS on September 29, 2024, and unfavorable currency exchange rates. Federal Express revenue for the nine months of 2025 was also negatively affected by one fewer operating day and reduced demand surcharges. FedEx Freight revenue decreased 5% in the third quarter and 6% in the nine months of 2025 primarily due to lower shipments, fuel surcharges, and weight per shipment, partially offset by base yield improvement. FedEx Freight revenue for the nine months of 2025 was also negatively affected by one fewer operating day. Revenue at Corporate, other, and eliminations increased in the third quarter and nine months of 2025 primarily due to higher yields and volume at FedEx Logistics, Inc. (“FedEx Logistics”).
Operating Expenses
The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended February 28, 2025 and February 29, 2024:
| Three Months Ended | Percent | Nine Months Ended | Percent | |||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Salaries and employee benefits | $ | 7,879 | $ | 7,693 | 2 | $ | 23,543 | $ | 23,311 | 1 | ||||||||||||||
| Purchased transportation | 5,634 | 5,345 | 5 | 16,409 | 15,776 | 4 | ||||||||||||||||||
| Rentals and landing fees | 1,178 | 1,145 | 3 | 3,507 | 3,434 | 2 | ||||||||||||||||||
| Depreciation and amortization | 1,066 | 1,072 | (1 | ) | 3,207 | 3,183 | 1 | |||||||||||||||||
| Fuel | 889 | 1,140 | (22 | ) | 2,911 | 3,569 | (18 | ) | ||||||||||||||||
| Maintenance and repairs | 783 | 804 | (3 | ) | 2,443 | 2,482 | (2 | ) | ||||||||||||||||
| Business optimization costs | 179 | 114 | 57 | 633 | 364 | 74 | ||||||||||||||||||
| Other | 3,260 | 3,182 | 2 | 9,629 | 9,461 | 2 | ||||||||||||||||||
| Total operating expenses | 20,868 | 20,495 | 2 | 62,282 | 61,580 | 1 | ||||||||||||||||||
| Operating income | $ | 1,292 | $ | 1,243 | 4 | $ | 3,424 | $ | 4,004 | (14 | ) |
| Percent of Revenue | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Salaries and employee benefits | 35.6 | % | 35.4 | % | 35.8 | % | 35.5 | % | |||||||||
| Purchased transportation | 25.4 | 24.6 | 25.0 | 24.1 | |||||||||||||
| Rentals and landing fees | 5.3 | 5.3 | 5.3 | 5.2 | |||||||||||||
| Depreciation and amortization | 4.8 | 4.9 | 4.9 | 4.9 | |||||||||||||
| Fuel | 4.0 | 5.3 | 4.4 | 5.4 | |||||||||||||
| Maintenance and repairs | 3.6 | 3.7 | 3.7 | 3.8 | |||||||||||||
| Business optimization costs | 0.8 | 0.5 | 1.0 | 0.6 | |||||||||||||
| Other | 14.7 | 14.6 | 14.7 | 14.4 | |||||||||||||
| Total operating expenses | 94.2 | 94.3 | 94.8 | 93.9 | |||||||||||||
| Operating margin | 5.8 | % | 5.7 | % | 5.2 | % | 6.1 | % |
Operating income increased 4% in the third quarter and decreased 14% in the nine months of 2025. Operating income for the third quarter and nine months of 2025 was positively affected by continued savings related to DRIVE, increased transportation segment base yields, and higher demand for U.S. ground and international export package services. Operating income for the third quarter and nine months of 2025 was negatively affected by increased purchased transportation and wage rates, the expiration of our contract with the USPS, higher business optimization costs, and lower fuel surcharges at FedEx Freight. The results for the nine months of 2025 were also negatively affected by one fewer operating day.
Purchased transportation expense increased 5% in the third quarter and 4% in the nine months of 2025 primarily due to higher rates as well as an increase in commercial linehaul to support international economy volume growth and network changes, partially offset by savings from our DRIVE initiatives, lower fuel prices, and favorable currency exchange rates. Purchased transportation also increased
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in the third quarter of 2025 due to higher U.S. ground volume. Salaries and employee benefits expense increased 2% in the third quarter and 1% in the nine months of 2025 primarily due to an increase in wage rates, increased staffing to align with higher volume, and an increase in retirement benefits due to changes in our deferred contribution plan that increased the number of eligible employees at Federal Express, partially offset by savings from our DRIVE initiatives and favorable currency exchange rates. Variable incentive compensation had a negative effect on salaries and employee benefits expense for the third quarter and a positive effect for the nine months of 2025. Other operating expenses increased 2% in both the third quarter and nine months of 2025 primarily due to an increase in self-insurance accruals. Fuel expense decreased 22% in the third quarter and 18% in the nine months of 2025 primarily due to a decrease in fuel prices and usage.
Business Optimization Costs
In the second quarter of 2023, we announced DRIVE, a comprehensive program to improve long-term profitability. This program includes a business optimization plan to drive efficiency within and among our transportation segments, lower our overhead and support costs, and transform our digital capabilities. We have commenced our plan 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 through Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada.
We have implemented Network 2.0 optimization in more than 200 locations in the U.S. and Canada. Contracted service providers will handle the pickup and delivery of Federal Express packages in some locations while employee couriers will handle others.
In June 2024, Federal Express announced a workforce reduction plan in Europe as part of its ongoing measures to reduce structural costs. The plan will impact approximately 1,500 employees in Europe across back-office and commercial functions. The execution of the plan is subject to a consultation process that is expected to occur over an 18-month period in accordance with local country processes and regulations. We expect savings from the plan to be between $125 million and $175 million on an annualized basis beginning in 2027.
We incurred business optimization costs, including the workforce reduction plan in Europe, of $179 million ($137 million, net of tax, or $0.56 per diluted share) in the third quarter and $633 million ($484 million, net of tax, or $1.98 per diluted share) in the nine months of 2025. These costs were primarily related to professional services and severance and are included in Federal Express and Corporate, other, and eliminations. We incurred business optimization costs of $114 million ($87 million, net of tax, or $0.35 per diluted share) in the third quarter and $364 million ($278 million, net of tax, or $1.10 per diluted share) in the nine months of 2024. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express.
We expect the pre-tax cost of the severance benefits and legal and professional fees to be provided under and related to our workforce reduction plan in Europe to range from $250 million to $300 million in cash expenditures through 2026. In the nine months of 2025, we incurred $220 million of costs related to this plan. We expect the aggregate pre-tax cost of our business optimization activities to be approximately $1.7 billion through 2025. The timing and amount of our business optimization expenses and the related cost savings from the workforce reduction plan may change as we revise and implement our plans. The identification of costs as business optimization-related expenditures is subject to our disclosure controls and procedures.
FedEx Freight Spin-Off Costs
We incurred costs related to the planned spin-off of FedEx Freight of $23 million ($17 million, net of tax, or $0.07 per diluted share) in the third quarter of 2025. These costs are included in Corporate, other, and eliminations and consist of $18 million related to the debt exchange offer and consent solicitation transactions discussed in Note 4 of the accompanying unaudited condensed consolidated financial statements which is included in interest, net and $5 million of professional fees which is included in other. We did not incur any FedEx Freight spin-off costs in the first half of 2025 or in the three or nine months of 2024.
Income Taxes
Our effective tax rate was 23.0% for the third quarter and 24.1% for the nine months of 2025, compared to 25.7% for the third quarter and 25.0% for the nine months of 2024. The third quarter 2025 tax rate was favorably impacted by a net tax benefit of $46 million arising primarily from changes in our corporate legal entity structure and revisions of prior year estimates for actual tax return results.
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.
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During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on foreign earnings not repatriated, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $226 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. On February 13, 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. We continue to work towards obtaining a final judgment for the applicable refund amounts due to the regulation being invalid. Once the District Court enters a final judgment, the U.S. government could file an appeal with the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.
Outlook
In the remainder of 2025, we expect revenue to continue to be pressured by macroeconomic conditions, including uncertainty related to international trade, negatively affecting customer demand and constraining yield growth. We anticipate a continued mix shift to deferred services offerings to negatively affect results. We will continue to execute on our DRIVE program initiatives focused on reducing our permanent cost structure, aligning our cost base with demand, and increasing the flexibility of our network. We will also continue to execute on our revenue quality strategy and pursue profitable revenue growth opportunities to mitigate the impact of the service mix shift on our yield as well as base yield pressures through surcharge management and optimizing our customer mix. We expect the benefits from DRIVE and revenue quality initiatives to be partially offset by expense headwinds related to higher global inflation, the unfavorable effect of the expiration in September 2024 of the contract for Federal Express to provide the USPS U.S. domestic transportation services, and one fewer operating day in the fourth quarter.
See the “Business Optimization Costs” section of this MD&A for additional information on our DRIVE program, workforce reduction plan in Europe, and other cost savings initiatives.
Our capital expenditures for 2025 are expected to be approximately $4.9 billion, $0.3 billion lower than 2024, as we continue to reduce our capital intensity relative to revenue. Aircraft spend is expected to decline, partially offset by increased investments in network optimization and modernization of our facilities.
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 2025 capital projects, refer to the “Financial Condition – Capital Resources” and “Financial Condition – Liquidity Outlook” sections of this MD&A.
The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, developments in international trade, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2025 inherently less certain. See “Item 1A. Risk Factors” for more information.
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.
REPORTABLE SEGMENTS
Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments. Our reportable segments include the following businesses:
| Federal Express Segment | Federal Express (express transportation, small-package ground delivery, and freight transportation) |
| FedEx Freight Segment | FedEx Freight (LTL freight transportation) FedEx Custom Critical (time-critical transportation) |
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
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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 solutions to transform the digital and physical experiences of 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 third quarter and declined in the nine months of 2025. Increased business optimization costs and outside service contracts expense at FedEx Dataworks were partially offset by lower salaries and employee benefits expense at FedEx Office in both the third quarter and nine months of 2025. FedEx Logistics results also improved in the third quarter of 2025 primarily due to higher revenue and lower salaries and employee benefits expense and other operating expense, which were partially offset by higher purchased transportation expense.
Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the third quarter and nine months of 2025 FedEx Freight provided road and intermodal support for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.
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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 February 28, 2025 and February 29, 2024:
| Three Months Ended | Percent | Nine Months Ended | Percent | ||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||
| Package: | |||||||||||||||||||||||||
| U.S. priority | $ | 2,646 | $ | 2,595 | 2 | $ | 7,800 | $ | 7,873 | (1 | ) | ||||||||||||||
| U.S. deferred | 1,386 | 1,316 | 5 | 3,736 | 3,710 | 1 | |||||||||||||||||||
| U.S. ground | 8,986 | 8,363 | 7 | 25,298 | 24,805 | 2 | |||||||||||||||||||
| Total U.S. domestic package revenue | 13,018 | 12,274 | 6 | 36,834 | 36,388 | 1 | |||||||||||||||||||
| International priority | 2,097 | 2,317 | (9 | ) | 6,534 | 7,034 | (7 | ) | |||||||||||||||||
| International economy | 1,465 | 1,107 | 32 | 4,413 | 3,407 | 30 | |||||||||||||||||||
| Total international export package revenue | 3,562 | 3,424 | 4 | 10,947 | 10,441 | 5 | |||||||||||||||||||
| International domestic(1) | 1,078 | 1,139 | (5 | ) | 3,380 | 3,492 | (3 | ) | |||||||||||||||||
| Total package revenue | 17,658 | 16,837 | 5 | 51,161 | 50,321 | 2 | |||||||||||||||||||
| Freight: | |||||||||||||||||||||||||
| U.S. | 286 | 641 | (55 | ) | 1,238 | 1,795 | (31 | ) | |||||||||||||||||
| International priority | 551 | 520 | 6 | 1,717 | 1,641 | 5 | |||||||||||||||||||
| International economy | 470 | 438 | 7 | 1,462 | 1,380 | 6 | |||||||||||||||||||
| Total freight revenue | 1,307 | 1,599 | (18 | ) | 4,417 | 4,816 | (8 | ) | |||||||||||||||||
| Other | 216 | 236 | (8 | ) | 749 | 734 | 2 | ||||||||||||||||||
| Total revenue | 19,181 | 18,672 | 3 | 56,327 | 55,871 | 1 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||
| Salaries and employee benefits | 6,390 | 6,141 | 4 | 18,920 | 18,520 | 2 | |||||||||||||||||||
| Purchased transportation | 5,196 | 4,954 | 5 | 15,064 | 14,611 | 3 | |||||||||||||||||||
| Rentals and landing fees | 1,002 | 968 | 4 | 2,975 | 2,906 | 2 | |||||||||||||||||||
| Depreciation and amortization | 926 | 933 | (1 | ) | 2,779 | 2,787 | — | ||||||||||||||||||
| Fuel | 777 | 1,005 | (23 | ) | 2,566 | 3,130 | (18 | ) | |||||||||||||||||
| Maintenance and repairs | 672 | 697 | (4 | ) | 2,106 | 2,151 | (2 | ) | |||||||||||||||||
| Business optimization costs | 92 | 45 | 104 | 341 | 149 | 129 | |||||||||||||||||||
| Intercompany allocations | (199 | ) | (167 | ) | 19 | (591 | ) | (510 | ) | 16 | |||||||||||||||
| Other | 3,031 | 2,923 | 4 | 8,868 | 8,613 | 3 | |||||||||||||||||||
| Total operating expenses | 17,887 | 17,499 | 2 | 53,028 | 52,357 | 1 | |||||||||||||||||||
| Operating income | $ | 1,294 | $ | 1,173 | 10 | $ | 3,299 | $ | 3,514 | (6 | ) | ||||||||||||||
| Operating margin | 6.7 | % | 6.3 | % | 40 | bp | 5.9 | % | 6.3 | % | (40 | ) | bp |
(1)
International domestic revenue relates to our international intra-country operations.
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| Percent of Revenue | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Salaries and employee benefits | 33.3 | % | 32.9 | % | 33.6 | % | 33.1 | % | |||||||||
| Purchased transportation | 27.1 | 26.5 | 26.7 | 26.2 | |||||||||||||
| Rentals and landing fees | 5.2 | 5.2 | 5.3 | 5.2 | |||||||||||||
| Depreciation and amortization | 4.8 | 5.0 | 4.9 | 5.0 | |||||||||||||
| Fuel | 4.1 | 5.4 | 4.6 | 5.6 | |||||||||||||
| Maintenance and repairs | 3.5 | 3.7 | 3.7 | 3.8 | |||||||||||||
| Business optimization costs | 0.5 | 0.2 | 0.6 | 0.3 | |||||||||||||
| Intercompany allocations | (1.0 | ) | (0.9 | ) | (1.0 | ) | (0.9 | ) | |||||||||
| Other | 15.8 | 15.7 | 15.7 | 15.4 | |||||||||||||
| Total operating expenses | 93.3 | 93.7 | 94.1 | 93.7 | |||||||||||||
| Operating margin | 6.7 | % | 6.3 | % | 5.9 | % | 6.3 | % |
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Prior year statistical information has been revised to conform to the current year presentation. The following table compares selected statistics (in thousands, except yield amounts) for the periods ended February 28, 2025 and February 29, 2024:
| Three Months Ended | Percent | Nine Months Ended | Percent | |||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||
| Package Statistics | ||||||||||||||||||||||||
| Average daily package volume (ADV)(1): | ||||||||||||||||||||||||
| U.S. priority | 1,588 | 1,634 | (3 | ) | 1,597 | 1,664 | (4 | ) | ||||||||||||||||
| U.S. deferred | 1,162 | 1,104 | 5 | 1,048 | 1,027 | 2 | ||||||||||||||||||
| U.S. ground commercial | 4,181 | 4,189 | — | 4,260 | 4,289 | (1 | ) | |||||||||||||||||
| U.S. ground home delivery/economy | 7,887 | 7,090 | 11 | 7,092 | 6,826 | 4 | ||||||||||||||||||
| Total U.S. domestic ADV | 14,818 | 14,017 | 6 | 13,997 | 13,806 | 1 | ||||||||||||||||||
| International priority | 558 | 663 | (16 | ) | 592 | 665 | (11 | ) | ||||||||||||||||
| International economy | 583 | 393 | 48 | 552 | 388 | 42 | ||||||||||||||||||
| Total international export ADV | 1,141 | 1,056 | 8 | 1,144 | 1,053 | 9 | ||||||||||||||||||
| International domestic(2) | 1,908 | 1,883 | 1 | 1,930 | 1,954 | (1 | ) | |||||||||||||||||
| Total ADV | 17,867 | 16,956 | 5 | 17,071 | 16,813 | 2 | ||||||||||||||||||
| Revenue per package (yield): | ||||||||||||||||||||||||
| U.S. priority | $ | 26.44 | $ | 25.20 | 5 | $ | 25.70 | 24.78 | 4 | |||||||||||||||
| U.S. deferred | 18.94 | 18.93 | — | 18.77 | 18.91 | (1 | ) | |||||||||||||||||
| U.S. ground | 11.82 | 11.77 | — | 11.73 | 11.68 | — | ||||||||||||||||||
| U.S. domestic composite | 13.95 | 13.90 | — | 13.85 | 13.80 | — | ||||||||||||||||||
| International priority | 59.65 | 55.48 | 8 | 58.11 | 55.40 | 5 | ||||||||||||||||||
| International economy | 39.92 | 44.71 | (11 | ) | 42.03 | 46.00 | (9 | ) | ||||||||||||||||
| International export composite | 49.57 | 51.47 | (4 | ) | 50.35 | 51.94 | (3 | ) | ||||||||||||||||
| International domestic(2) | 8.96 | 9.59 | (7 | ) | 9.22 | 9.35 | (1 | ) | ||||||||||||||||
| Composite package yield | 15.69 | 15.76 | — | 15.77 | 15.67 | 1 | ||||||||||||||||||
| Freight Statistics | ||||||||||||||||||||||||
| Average daily freight pounds: | ||||||||||||||||||||||||
| U.S. | 2,201 | 6,067 | (64 | ) | 3,440 | 5,674 | (39 | ) | ||||||||||||||||
| International priority | 4,485 | 4,353 | 3 | 4,625 | 4,405 | 5 | ||||||||||||||||||
| International economy | 10,990 | 11,072 | (1 | ) | 11,387 | 11,307 | 1 | |||||||||||||||||
| Total average daily freight pounds | 17,676 | 21,492 | (18 | ) | 19,452 | 21,386 | (9 | ) | ||||||||||||||||
| Revenue per pound (yield): | ||||||||||||||||||||||||
| U.S. | $ | 2.06 | $ | 1.68 | 23 | $ | 1.89 | $ | 1.66 | 14 | ||||||||||||||
| International priority | 1.95 | 1.90 | 3 | 1.95 | 1.95 | — | ||||||||||||||||||
| International economy | 0.68 | 0.63 | 8 | 0.68 | 0.64 | 6 | ||||||||||||||||||
| Composite freight yield | 1.17 | 1.18 | (1 | ) | 1.20 | 1.18 | 2 |
(1)
ADV is calculated on a 5-day-per-week basis.
(2)
International domestic statistics relate to our international intra-country operations.
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Federal Express Segment Revenue
Federal Express segment revenue increased 3% in the third quarter and 1% in the nine months of 2025 primarily due to increased deferred and U.S. ground package volume and improved yields, partially offset by decreases from lower priority package and U.S. freight volume and unfavorable currency exchange rates. Revenue in the nine months of 2025 was also negatively affected by one fewer operating day and reduced demand surcharges.
Yield:
U.S. domestic composite package yield increased slightly in both the third quarter and nine months of 2025 primarily due to higher base rates from our continued focus on revenue quality. U.S. freight yield increased 23% in the third quarter and 14% in the nine months of 2025 primarily due to the expiration of our contract with the USPS on September 29, 2024. International export composite package yield decreased 4% in the third quarter and 3% in the nine months of 2025 primarily due to unfavorable service mix. Package and freight yields were also negatively affected by reduced demand surcharges in the nine months of 2025.
Volume:
International economy package volume increased 48% in the third quarter and 42% in the nine months of 2025 primarily due to continued growth in our deferred service offerings as a result of strengthening e-commerce. U.S. ground home delivery/economy package volume increased 11% in the third quarter and 4% in the nine months of 2025 primarily due to increased demand for our services and, in the third quarter of 2025, the timing of cyber week. International priority package volume decreased 16% in the third quarter and 11% in the nine months of 2025 driven by softness in the global industrial economy. U.S. average daily freight pounds decreased 64% in the third quarter and 39% in the nine months of 2025 primarily due to the expiration of our contract with the USPS on September 29, 2024. U.S. priority package volume decreased 3% in the third quarter and 4% in the nine months of 2025 primarily due to economic softness and lower consumer spending.
Federal Express Segment Operating Income
Federal Express segment operating income increased 10% in the third quarter of 2025 due to higher base yields and volume, partially offset by increased operating expenses. Federal Express segment operating income decreased 6% in the nine months of 2025 due to increased operating expenses and one fewer operating day, partially offset by higher base yields and volume. The increase in operating expenses in the third quarter and nine months of 2025 was driven by increased wage and purchased transportation rates, business optimization costs, and increased employee benefits, partially offset by lower fuel prices and continued benefits from DRIVE initiatives that drove a reduction in our permanent cost structure. These initiatives included the continued transformation of our structural network, improving the efficiency of our information technology and back-office functions, optimizing operations in Europe, and increasing linehaul efficiencies. Currency exchange rates had a negative effect on revenue and a positive effect on expenses and operating income in the third quarter and nine months of 2025.
Purchased transportation expense increased 5% in the third quarter and 3% in the nine months of 2025 primarily due to higher rates as well as an increase in commercial linehaul to support international economy volume growth and network changes, partially offset by savings from our DRIVE initiatives and lower fuel prices. Purchased transportation also increased in the third quarter of 2025 due to higher U.S. ground volume. Salaries and employee benefits expense increased 4% in the third quarter and 2% in the nine months of 2025 primarily due to an increase in wage rates, increased staffing to align with peak demand, and an increase in retirement benefits due to changes to our defined contribution plan which increased the number of eligible employees, partially offset by savings from our DRIVE initiatives. In addition, variable incentive compensation was higher in the third quarter and lower in the nine months of 2025. Other operating expense increased 4% in the third quarter and 3% in the nine months of 2025 primarily due to higher self-insurance accruals. Fuel expense decreased 23% in the third quarter and 18% in the nine months of 2025 due to decreases in fuel prices and usage resulting from lower flight hours.
Federal Express segment results include business optimization costs of $92 million in the third quarter and $341 million in the nine months of 2025. Federal Express segment results include business optimization costs of $45 million in the third quarter and $149 million in the nine months of 2024. See the “Business Optimization Costs” section of this MD&A for more information.
In July 2023, Federal Express’s pilots failed to ratify the tentative successor agreement that was approved by the Air Line Pilots Association, International’s FedEx Master Executive Council in the prior month. The ongoing bargaining process has no effect on our operations. See Note 1 of the accompanying unaudited condensed consolidated financial statements for additional information.
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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 February 28, 2025 and February 29, 2024:
| Three Months Ended | Percent | Nine Months Ended | Percent | ||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||
| Revenue | $ | 2,089 | $ | 2,205 | (5 | ) | $ | 6,595 | $ | 7,042 | (6 | ) | |||||||||||||
| Operating expenses: | |||||||||||||||||||||||||
| Salaries and employee benefits | 939 | 959 | (2 | ) | 2,899 | 2,962 | (2 | ) | |||||||||||||||||
| Purchased transportation | 202 | 218 | (7 | ) | 602 | 668 | (10 | ) | |||||||||||||||||
| Rentals | 72 | 70 | 3 | 215 | 209 | 3 | |||||||||||||||||||
| Depreciation and amortization | 113 | 108 | 5 | 335 | 297 | 13 | |||||||||||||||||||
| Fuel | 112 | 134 | (16 | ) | 344 | 437 | (21 | ) | |||||||||||||||||
| Maintenance and repairs | 85 | 78 | 9 | 255 | 247 | 3 | |||||||||||||||||||
| Intercompany charges | 142 | 132 | 8 | 433 | 405 | 7 | |||||||||||||||||||
| Other | 163 | 165 | (1 | ) | 500 | 503 | (1 | ) | |||||||||||||||||
| Total operating expenses | 1,828 | 1,864 | (2 | ) | 5,583 | 5,728 | (3 | ) | |||||||||||||||||
| Operating income | $ | 261 | $ | 341 | (23 | ) | $ | 1,012 | $ | 1,314 | (23 | ) | |||||||||||||
| Operating margin | 12.5 | % | 15.5 | % | (300 | ) | bp | 15.3 | % | 18.7 | % | (340 | ) | bp | |||||||||||
| Average daily shipments (in thousands): | |||||||||||||||||||||||||
| Priority | 58.2 | 61.5 | (5 | ) | 61.2 | 65.4 | (6 | ) | |||||||||||||||||
| Economy | 26.9 | 27.7 | (3 | ) | 28.2 | 28.9 | (2 | ) | |||||||||||||||||
| Total average daily shipments | 85.1 | 89.2 | (5 | ) | 89.4 | 94.3 | (5 | ) | |||||||||||||||||
| Weight per shipment (lbs): | |||||||||||||||||||||||||
| Priority | 935 | 974 | (4 | ) | 943 | 979 | (4 | ) | |||||||||||||||||
| Economy | 877 | 885 | (1 | ) | 870 | 880 | (1 | ) | |||||||||||||||||
| Composite weight per shipment | 917 | 946 | (3 | ) | 920 | 949 | (3 | ) | |||||||||||||||||
| Revenue per shipment: | |||||||||||||||||||||||||
| Priority | $ | 360.68 | $ | 363.21 | (1 | ) | $ | 359.19 | $ | 360.47 | — | ||||||||||||||
| Economy | 408.56 | 414.79 | (2 | ) | 405.72 | 412.84 | (2 | ) | |||||||||||||||||
| Composite revenue per shipment | $ | 375.81 | $ | 379.26 | (1 | ) | $ | 373.85 | $ | 376.53 | (1 | ) | |||||||||||||
| Revenue per hundredweight: | |||||||||||||||||||||||||
| Priority | $ | 38.57 | $ | 37.31 | 3 | $ | 38.11 | $ | 36.80 | 4 | |||||||||||||||
| Economy | 46.59 | 46.89 | (1 | ) | 46.66 | 46.92 | (1 | ) | |||||||||||||||||
| Composite revenue per hundredweight | $ | 41.00 | $ | 40.10 | 2 | $ | 40.66 | $ | 39.68 | 2 |
| Percent of Revenue | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Salaries and employee benefits | 44.9 | % | 43.5 | % | 43.9 | % | 42.1 | % | |||||||||
| Purchased transportation | 9.7 | 9.9 | 9.1 | 9.5 | |||||||||||||
| Rentals | 3.4 | 3.1 | 3.3 | 3.0 | |||||||||||||
| Depreciation and amortization | 5.4 | 4.9 | 5.1 | 4.2 | |||||||||||||
| Fuel | 5.4 | 6.1 | 5.2 | 6.2 | |||||||||||||
| Maintenance and repairs | 4.1 | 3.5 | 3.9 | 3.5 | |||||||||||||
| Intercompany charges | 6.8 | 6.0 | 6.6 | 5.7 | |||||||||||||
| Other | 7.8 | 7.5 | 7.6 | 7.1 | |||||||||||||
| Total operating expenses | 87.5 | 84.5 | 84.7 | 81.3 | |||||||||||||
| Operating margin | 12.5 | % | 15.5 | % | 15.3 | % | 18.7 | % |
FedEx Freight Segment Revenue
FedEx Freight segment revenue decreased 5% in the third quarter and 6% in the nine months of 2025 primarily due to lower shipments and yields. Revenue was also negatively affected by one fewer operating day in the nine months of 2025.
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Average daily shipments decreased 5% in both the third quarter and nine months of 2025 due to reduced demand for our services, primarily resulting from macroeconomic conditions. Revenue per shipment decreased 1% in both the third quarter and nine months of 2025 primarily due to lower fuel surcharges and weight per shipment, partially offset by base yield improvement resulting from our continued focus on revenue quality.
FedEx Freight Segment Operating Income
FedEx Freight segment operating income decreased 23% in both the third quarter and nine months of 2025 primarily due to lower revenue, partially offset by reduced operating expenses. Operating income was also negatively affected by one fewer operating day in the nine months of 2025.
Combined fuel and purchased transportation expense decreased 11% in the third quarter and 14% in the nine months of 2025 due to decreased shipments and lower fuel prices. Salaries and employee benefits expense decreased 2% in both the third quarter and nine months of 2025 primarily due to reduced staffing to align with lower volumes, partially offset by higher wage rates. Depreciation expense increased 13% in the nine months of 2025 primarily due to a gain on the sale of facilities in the second quarter of 2024 and investments in information technology and transportation equipment.
FINANCIAL CONDITION
LIQUIDITY
Cash and cash equivalents totaled $5.1 billion at February 28, 2025, compared to $6.5 billion at May 31, 2024. The following table provides a summary of our cash flows for the nine-month periods ended February 28, 2025 and February 29, 2024 (in millions):
| 2025 | 2024 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 2,444 | $ | 2,857 | ||||
| Business optimization costs, net of payments | 114 | (50 | ) | |||||
| Other noncash charges and credits | 6,058 | 5,777 | ||||||
| Changes in assets and liabilities | (4,099 | ) | (2,970 | ) | ||||
| Cash provided by operating activities | 4,517 | 5,614 | ||||||
| Investing activities: | ||||||||
| Capital expenditures | (2,582 | ) | (3,974 | ) | ||||
| Purchase of investments | (197 | ) | (110 | ) | ||||
| Proceeds from sale of investments | 77 | 24 | ||||||
| Proceeds from asset dispositions and other | 42 | 94 | ||||||
| Cash used in investing activities | (2,660 | ) | (3,966 | ) | ||||
| Financing activities: | ||||||||
| Principal payments on debt | (89 | ) | (143 | ) | ||||
| Proceeds from stock issuances | 472 | 265 | ||||||
| Dividends paid | (1,008 | ) | (949 | ) | ||||
| Purchases of common stock | (2,517 | ) | (2,000 | ) | ||||
| Other | (30 | ) | (7 | ) | ||||
| Cash used in financing activities | (3,172 | ) | (2,834 | ) | ||||
| Effect of exchange rate changes on cash | (51 | ) | (26 | ) | ||||
| Net decrease in cash and cash equivalents | $ | (1,366 | ) | $ | (1,212 | ) | ||
| Cash and cash equivalents at the end of period | $ | 5,135 | $ | 5,644 |
Cash Provided by Operating Activities. Cash flows from operating activities decreased $1.1 billion in the nine months of 2025 primarily due to working capital changes driven by a decrease in accrued incentive compensation and other liabilities and an increase in accounts receivable, partially offset by an increase in accounts payable from the nine months of 2024.
Cash Used in Investing Activities. Capital expenditures decreased during the nine months of 2025 primarily due to decreased spending on aircraft and related equipment, facilities and other, and vehicles and trailers. See “Capital Resources” for a discussion of capital expenditures during 2025.
Financing Activities. We repurchased an aggregate of $497 million of our common stock through open market transactions during the third quarter of 2025. During the nine months of 2025, we repurchased 8.9 million shares of FedEx common stock through ASR and open market transactions at an average price of $281.74 per share for a total of $2.5 billion. See Note 1 of the accompanying
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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.
CAPITAL RESOURCES
Our operations are capital intensive, characterized by significant investments in aircraft, package handling and sort equipment, technology, vehicles and trailers, and facilities. The amount and timing of capital investments depend on various factors, including pre-existing contractual commitments, anticipated volume growth, domestic and international economic conditions, new or enhanced services, geographical expansion of services, availability of satisfactory financing, and actions of regulatory authorities.
The following table compares capital expenditures by asset category and reportable segment for the periods ended February 28, 2025 and February 29, 2024 (in millions):
| Three Months Ended | Nine Months Ended | Percent Change | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | Three Months Ended | Nine Months Ended | |||||||||||||||||||
| Aircraft and related equipment | $ | 367 | $ | 329 | $ | 630 | $ | 1,484 | 12 | (58 | ) | |||||||||||||
| Package handling and ground support equipment | 208 | 217 | 618 | 644 | (4 | ) | (4 | ) | ||||||||||||||||
| Information technology | 107 | 142 | 366 | 437 | (25 | ) | (16 | ) | ||||||||||||||||
| Vehicles and trailers | 99 | 243 | 373 | 539 | (59 | ) | (31 | ) | ||||||||||||||||
| Facilities and other | 216 | 448 | 595 | 870 | (52 | ) | (32 | ) | ||||||||||||||||
| Total capital expenditures | $ | 997 | $ | 1,379 | $ | 2,582 | $ | 3,974 | (28 | ) | (35 | ) | ||||||||||||
| Federal Express segment | $ | 844 | $ | 1,217 | $ | 2,145 | $ | 3,623 | (31 | ) | (41 | ) | ||||||||||||
| FedEx Freight segment | 129 | 139 | 359 | 280 | (7 | ) | 28 | |||||||||||||||||
| Other | 24 | 23 | 78 | 71 | 4 | 10 | ||||||||||||||||||
| Total capital expenditures | $ | 997 | $ | 1,379 | $ | 2,582 | $ | 3,974 | (28 | ) | (35 | ) |
Capital expenditures decreased in the third quarter primarily due to decreased spending on facilities and other and vehicles and trailers at Federal Express. Capital expenditures decreased in the nine months of 2025 primarily due to decreased spending on aircraft and related equipment, facilities and other, and vehicles and trailers at Federal Express.
GUARANTOR FINANCIAL IN****FORMATION
We are providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to our senior unsecured debt securities and Pass-Through Certificates, Series 2020-1AA (the “Certificates”).
The $19.1 billion principal amount of the senior unsecured notes were issued by FedEx under a shelf registration statement and are guaranteed by certain direct and indirect subsidiaries of FedEx (“Guarantor Subsidiaries”). FedEx owns, directly or indirectly, 100% of each Guarantor Subsidiary. The guarantees are (1) unsecured obligations of the respective Guarantor Subsidiary, (2) rank equally with all of their other unsecured and unsubordinated indebtedness, and (3) are full and unconditional and joint and several. If we sell, transfer, or otherwise dispose of all of the capital stock or all or substantially all of the assets of a Guarantor Subsidiary to any person that is not an affiliate of FedEx, the guarantee of that Guarantor Subsidiary will terminate, and holders of debt securities will no longer have a direct claim against such subsidiary under the guarantee. See Note 4 of the accompanying unaudited condensed consolidated financial statements for information regarding the exchange offer and consent solicitation transactions related to the guarantee of FedEx Freight that were completed during the third quarter of 2025.
Additionally, FedEx fully and unconditionally guarantees the payment obligation of Federal Express in respect of the $737 million principal amount of the Certificates. See Note 4 of the accompanying unaudited condensed consolidated financial statements and Note 6 to the financial statements included in our Annual Report for additional information regarding the terms of the Certificates.
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The following tables present summarized financial information for FedEx (as Parent) and the Guarantor Subsidiaries on a combined basis after transactions and balances within the combined entities have been eliminated.
Parent and Guarantor Subsidiaries
The following table presents the summarized balance sheet information as of February 28, 2025 and May 31, 2024 (in millions):
| February 28, 2025 | May 31, 2024 | |||||||
| Current Assets | $ | 9,420 | $ | 10,618 | ||||
| Intercompany Receivable | 3,953 | 4,625 | ||||||
| Total Assets | 81,915 | 83,880 | ||||||
| Current Liabilities | 10,112 | 9,658 | ||||||
| Intercompany Payable | — | — | ||||||
| Total Liabilities | 51,550 | 52,551 |
The following table presents the summarized statement of income information for the nine-month period ended February 28, 2025 (in millions):
| Revenue | $ | 48,582 | ||
| Intercompany Charges, net | (2,878 | ) | ||
| Operating Income | 3,035 | |||
| Intercompany Charges, net | 177 | |||
| Income Before Income Taxes | 2,387 | |||
| Net Income | $ | 1,675 |
The following tables present summarized financial information for FedEx (as Parent Guarantor) and Federal Express (as Subsidiary Issuer) on a combined basis after transactions and balances within the combined entities have been eliminated.
Parent Guarantor and Subsidiary Issuer
The following table presents the summarized balance sheet information as of February 28, 2025 and May 31, 2024 (in millions):
| February 28, 2025 | May 31, 2024 | |||||||
| Current Assets | $ | 9,383 | $ | 4,473 | ||||
| Intercompany Receivable | 772 | 7,399 | ||||||
| Total Assets | 70,884 | 62,900 | ||||||
| Current Liabilities | 9,272 | 5,958 | ||||||
| Intercompany Payable | — | — | ||||||
| Total Liabilities | 48,426 | 38,962 |
The following table presents the summarized statement of income information for the nine-month period ended February 28, 2025 (in millions):
| Revenue | $ | 41,760 | ||
| Intercompany Charges, net | (3,487 | ) | ||
| Operating Income | 2,238 | |||
| Intercompany Charges, net | (21 | ) | ||
| Income Before Income Taxes | 2,396 | |||
| Net Income | $ | 1,835 |
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LIQUIDITY OUTLOOK
In response to current business and economic conditions as referenced above in the “Outlook” section of this MD&A, we are continuing to actively manage and optimize our capital allocation in response to the slowdown in the economy, inflationary pressures, changing fuel prices, geopolitical conflicts, and uncertainty regarding international trade. We held $5.1 billion in cash and cash equivalents at February 28, 2025 and had $3.5 billion in available liquidity under our $1.75 billion three-year credit agreement (the “Three-Year Credit Agreement”) and $1.75 billion five-year credit agreement (the “Five-Year Credit Agreement” and together with the Three-Year Credit Agreement, the “Credit Agreements”), and we believe that our cash and cash equivalents, cash from operations, and available financing sources will be adequate to meet our liquidity needs, which include operational requirements, expected capital expenditures, voluntary pension contributions, dividend payments, and stock repurchases. In the third quarter of 2025, we began incurring costs and expenses related to the planned spin-off of FedEx Freight, which are expected to be significant but will not materially adversely affect our liquidity.
We repurchased an aggregate of $497 million of our common stock in the third quarter of 2025 through open market transactions. For the nine months of 2025, we completed $2.5 billion in share repurchases through ASR and open market transactions. See Note 1 of the accompanying unaudited condensed consolidated financial statements and “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” for more information. Depending on market conditions, our liquidity needs, and other factors, we may consider repurchasing additional shares of our common stock during the fourth quarter of 2025.
Our cash and cash equivalents balance at February 28, 2025 includes $2.7 billion of cash in foreign jurisdictions associated with our permanent reinvestment strategy. We are able to access the majority of this cash without a material tax cost and do not believe that the indefinite reinvestment of these funds impairs our ability to meet our U.S. domestic debt or working capital obligations.
Our capital expenditures for 2025 are expected to be approximately $4.9 billion, $0.3 billion lower than 2024, as we continue to reduce our capital intensity relative to revenue. Aircraft spend is expected to decline, partially offset by increased investments in network optimization and modernization of our facilities.
There have been no material changes to the contractual commitments described in Part II, Item 7 in our Annual Report. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material effect on our financial condition or liquidity.
We have several aircraft modernization programs under way that are supported by the purchase of Boeing 777 Freighter and Boeing 767-300 Freighter aircraft. These aircraft are significantly more fuel-efficient per unit than the aircraft types previously utilized, and these expenditures are necessary to achieve significant long-term operating savings and to replace older aircraft. Our ability to delay the timing of these aircraft-related expenditures is limited without incurring significant costs to modify existing purchase agreements. In March 2025, Federal Express exercised options to purchase an additional eight B777F aircraft, three of which are expected to be delivered in calendar year 2026 and five of which are expected to be delivered in calendar year 2027. Additionally, we have extended the retirement of the entire Boeing MD-11 fleet from 2028 to the end of 2032.
The Three-Year Credit Agreement and the Five-Year Credit Agreement expire in March 2027 and March 2029, respectively. Each of the Credit Agreements has a $125 million letter of credit sublimit. The Credit Agreements are available to finance our operations and other cash flow needs. See Note 4 of the accompanying unaudited condensed consolidated financial statements for more information.
We have a shelf registration statement filed with the Securities and Exchange Commission (“SEC”) that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock and allows pass-through trusts formed by Federal Express to sell, in one or more future offerings, pass-through certificates.
During the nine months of 2025, we made voluntary contributions of $800 million to our tax-qualified U.S. domestic pension plan (“U.S. Pension Plan”). There are currently no required minimum contributions to our U.S. Pension Plan, and we maintain a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds $3.0 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we have the flexibility to eliminate all required contributions to our U.S. Pension Plan for several years. Our U.S. Pension Plan has ample funds to meet expected benefit payments.
On February 14, 2025, our Board of Directors declared a quarterly cash dividend of $1.38 per share of common stock. The dividend will be paid on April 1, 2025 to stockholders of record as of the close of business on March 10, 2025. Each quarterly dividend payment is subject to review and approval by our Board of Directors, and we evaluate our dividend payment amount on an annual basis.
Standard & Poor’s has assigned us a senior unsecured debt credit rating of BBB, a Certificates rating of AA-, a commercial paper rating of A-2, and a ratings outlook of “stable.” Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa2, a
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Certificates rating of Aa3, a commercial paper rating of P-2, and a ratings outlook of “stable.” Our interest expense may increase in the event of a reduction in our credit rating. If our unsecured debt or commercial paper ratings are reduced to below investment grade, our access to the capital markets may become limited.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements of a complex, global corporation. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and new or better information.
GOODWILL. Goodwill is tested for impairment between annual tests whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. In connection with our one FedEx consolidation plan, we reevaluated the conclusion of our 2024 goodwill impairment tests as of June 1, 2024, and concluded that the estimated fair values of our reporting units with significant goodwill continued to exceed their carrying values. We do not believe there has been any additional change of events or circumstances that would indicate that additional reevaluation of the goodwill of our reporting units is required as of February 28, 2025, nor do we believe the goodwill of our reporting units is at risk of failing impairment testing. For additional details on goodwill impairment testing, refer to Note 1 to the financial statements included in our Annual Report.
Information regarding our critical accounting estimates can be found in our Annual Report, including Note 1 to the financial statements therein. Management has discussed the development and selection of these critical accounting estimates with the Audit and Finance Committee of our Board of Directors and with our independent registered public accounting firm.
OTHER MATTERS
In March 2025, FedEx submitted a claim to the USPS in accordance with the dispute provisions of the parties’ contract, seeking recovery of losses arising between October 1, 2020 and September 30, 2023 from the USPS’s diversion of mail to other carriers in breach of the contract between Federal Express and the USPS executed in April 2013.
FORWARD-LOOKING STATEMENTS
Certain statements in this report, including (but not limited to) those contained in “General,” “Trends Affecting Our Business,” “Business Optimization Costs,” “Income Taxes,” “Outlook,” “Liquidity Outlook,” “Legal Proceedings,” and “Risk Factors” and the “Description of Business Segments and Summary of Significant Accounting Policies,” “Financing Arrangements,” “Retirement Plans,” “Commitments,” and “Contingencies” notes to our unaudited condensed consolidated financial statements, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance, and business and the assumptions underlying such statements. Forward-looking statements include those preceded by, followed by, or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “forecasts,” “projects,” “intends,” or similar expressions. These forward-looking statements, which are intended to enjoy the protection of the safe harbor for forward-looking statements provided by the PSLRA as well as protections afforded by other federal securities laws, involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements because of, among other things, potential risks and uncertainties, such as:
economic conditions in the global markets in which we operate;
significant changes in the volumes of shipments transported through our networks, customer demand for our various services, or the prices we obtain for our services;
geopolitical developments and additional changes in and/or uncertainty regarding international trade policies and relations;
the price and availability of jet and vehicle fuel;
failure to successfully implement our business strategy and effectively respond to changes in market dynamics and customer preferences;
our ability to execute our DRIVE transformation, including Network 2.0 and the redesign of the Federal Express international air network, in the expected time frame and at the expected cost and achieve the expected operational efficiencies and network flexibility, alignment of our cost base with demand, cost savings and reductions to our permanent cost structure, and other benefits while managing the potential risks;
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our ability to successfully implement the planned tax-free spin-off of the FedEx Freight business into a new publicly traded company and achieve the anticipated benefits of such transaction;
the timing and amount of any costs or benefits or any specific outcome, transaction, or change (of which there can be no assurance), or the terms, timing, and structure thereof, related to our global transformation program and other ongoing reviews and initiatives;
our ability to successfully implement our workforce reduction in Europe;
a significant data breach or other disruption to our technology infrastructure, and our ability to mitigate the technological, operational, legal and regulatory, and reputational risks related to emerging technologies such as autonomous technology and artificial intelligence;
failure to remove costs related to services provided to the USPS under the contract for Federal Express to provide the USPS domestic transportation services, which expired on September 29, 2024;
the future rate of e-commerce growth and our ability to successfully expand our e-commerce services portfolio;
increased insurance and claims expenses related to vehicle accidents, workers’ compensation claims, property and cargo loss, general business liabilities, and benefits paid under employee disability programs;
failure to receive or collect expected insurance coverage;
the effect of any international conflicts or terrorist activities on the United States and global economies in general, the transportation industry, or FedEx in particular;
failure of third-party service providers to perform as expected, or disruptions in our relationships with those providers or their provision of services to FedEx;
widespread outbreak of an illness or any other communicable disease or public health crisis;
damage to our reputation or loss of brand equity;
the effect of intense competition on our ability to maintain or increase our prices (including our fuel surcharges) or to maintain or grow our revenue and market share;
our ability to manage our network capacity and cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;
our ability to execute and effectively operate, integrate, leverage, and grow acquired businesses, and to continue to support the value we allocate to these acquired businesses;
noncash impairment charges related to our goodwill and certain deferred tax assets;
failure to attract and retain employee talent and our ability to meet our labor and purchased transportation needs while controlling related costs and maintain our company culture;
our ability to maintain good relationships with our employees and avoid attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs and reduce our operational flexibility, as well as the outcome of negotiations to reach new collective bargaining agreements (including with the pilots of Federal Express);
the effect of costs related to lawsuits in which it is alleged that Federal Express should be treated as an employer or joint employer of drivers employed by service providers engaged by Federal Express;
increasing costs, the volatility of costs and funding requirements, and other legal mandates for employee benefits, especially pension and healthcare benefits;
the effects of global climate change;
our ability to achieve or demonstrate progress on our goal of carbon neutrality for our global operations by calendar 2040;
our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;
any effects on our businesses resulting from evolving or new U.S. domestic or international government regulations, laws, policies, and actions, which could be unfavorable to our business, including labor (such as joint employment standards or changes to the Railway Labor Act of 1926, as amended, affecting Federal Express employees); regulatory or other actions affecting data protection; global aviation or other transportation rights; increased air cargo, pilot flight and duty time, and
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other security or safety requirements; import and export controls; the use of new technology and accounting; trade (such as protectionist measures, tariffs, or restrictions on free trade); foreign exchange intervention in response to currency volatility; environmental (such as global climate change legislation); or postal rules;
adverse changes in tax laws, regulations, and interpretations or challenges to our tax positions;
increasing costs related to changing and heightened regulations and enforcement related to data protection;
the increasing costs of compliance with federal, state, and foreign governmental agency mandates (including the Foreign Corrupt Practices Act and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies;
changes in foreign currency exchange rates, especially in the euro, Chinese yuan, British pound, Canadian dollar, Australian dollar, Mexican peso, Hong Kong dollar, and Japanese yen, which can affect our sales levels and foreign currency sales prices;
loss or delay in the collection of accounts receivable;
any liability resulting from and the costs of defending against class-action, derivative, and other litigation, such as wage-and-hour, joint employment, securities, vehicle accident, and discrimination and retaliation claims, claims related to our reporting and disclosure of environmental and sustainability topics, and any other legal or governmental proceedings, including the matters discussed in Note 10 of the accompanying unaudited condensed consolidated financial statements;
adverse rulings on appeals and in other future judicial decisions, subsequent adverse jury findings, and changes in judicial precedent;
the sufficiency of insurance coverage we purchase;
the effect of technology developments (including artificial intelligence and machine learning) on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization;
disruptions in global supply chains, which can limit the access of FedEx and our service providers to vehicles and other key capital resources and increase our costs;
difficulties experienced by the companies with which we contract to fly smaller regional “feeder” aircraft in attracting and retaining pilots, which could cause a reduction of service offered to certain locations, service disruptions, increased costs of operations, and other difficulties;
governmental underinvestment in transportation infrastructure, which could increase our costs and adversely affect our service levels due to traffic congestion, prolonged closure of key thoroughfares, or sub-optimal routing of our vehicles and aircraft;
constraints, volatility, or disruption in the capital markets, our ability to maintain our current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and our ability to meet credit agreement financial covenants; and
other risks and uncertainties you can find in our press releases and SEC filings, including the risk factors identified under Part I, Item IA. “Risk Factors” in our Annual Report, as updated by our quarterly reports on Form 10-Q and current reports on Form 8-K.
As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise.
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