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, 2025 (“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.

Following our one FedEx consolidation on June 1, 2024, Federal Express operates a unified, fully integrated air-ground express network under the respected FedEx brand. FedEx Freight provides LTL freight transportation services as a separate subsidiary. Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments.

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 will 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 1, 2026.

In January 2025, the Board of Directors approved a change in FedEx’s fiscal year end from May 31 to December 31. The planned fiscal year change is expected to be effective June 1, 2026.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2026 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, 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.

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

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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 second quarter and first half of 2026.

In November 2025, the U.S. Federal Aviation Administration issued an emergency Airworthiness Directive to address a potentially unsafe condition on all Boeing MD-11 aircraft, prohibiting further flight until the aircraft are inspected and all corrective actions are performed. As a result, during the second quarter of 2026, we experienced operational impacts related to the grounding of our MD-11 aircraft fleet which had an immaterial impact on our results. However, a prolonged grounding directive could materially impact our capacity and financial results for the remainder of 2026.

Additionally, since the third quarter of 2025 there have been significant changes within the global trade environment, such as the August 2025 removal of the de minimis exemption for goods imported into the U.S. from countries other than China. The uncertain and evolving global trade environment is negatively affecting our results in the second quarter and first half of 2026. Continued uncertainty and volatility in the global trade environment could lead to further weakened business conditions for the transportation industry.

Inflation and Interest Rates

During the second quarter and first half of 2026, global inflation slowed year-over-year but continued to be elevated. Additionally, global interest rates remained relatively steady in an effort to curb inflation. We are experiencing pressure on demand for our transportation services, particularly our international export package services, as elevated inflation and interest rates continue to negatively affect consumer and business spending. We expect inflation and elevated interest rates to continue to negatively affect our results of operations for the remainder of 2026. The changes in trade policy discussed above under “Macroeconomic Conditions” could also 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 second quarter of 2026, higher fuel prices positively affected yields due to increased fuel surcharges and negatively affected fuel expense at Federal Express. During the first half of 2026, lower fuel prices negatively affected yields due to lower fuel surcharges and positively affected fuel expense at Federal Express.

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, or escalations thereof, 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 under Part I, Item 1A. “Risk Factors.”

RESULTS OF OPERATIONS

Many of our operating expenses are directly affected by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in revenue and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends affecting expenses other than those factors strictly related to changes in revenue and volumes. The line item “Other” includes costs associated with outside service contracts (such as information technology services, temporary labor, security, and facilities services), insurance, professional fees, and credit losses.

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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 November 30, 2025 and 2024:

			Three Months Ended												Percent						Six Months Ended												Percent
			2025						2024						Change						2025						2024						Change
Revenue			$	23,469					$	21,967					7						$	45,713					$	43,546					5
Operating income (loss):
Federal Express segment			1,551						1,052						47						2,689						2,005						34
FedEx Freight segment			90						312						(71)						450						751						(40)
Corporate, other, and eliminations			(263)						(312)						16						(575)						(624)						8
Consolidated operating income			1,378						1,052						31						2,564						2,132						20
Operating margin:
Federal Express segment			7.6		%				5.6		%				200		bp				6.8		%				5.4		%				140		bp
FedEx Freight segment			4.2		%				14.3		%				(1,010)		bp				10.2		%				16.7		%				(650)		bp
Consolidated operating margin			5.9		%				4.8		%				110		bp				5.6		%				4.9		%				70		bp
Consolidated net income			$	956					$	741					29						$	1,780					$	1,535					16
Diluted earnings per share			$	4.04					$	3.03					33						$	7.50					$	6.24					20

			Year-over-Year Changes
			Revenue												Operating Income (Loss)
			Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
Federal Express segment			$	1,592					$	2,403					$	499					$	684
FedEx Freight segment			(38)						(110)						(222)						(301)
Corporate, other, and eliminations			(52)						(126)						49						49
			$	1,502					$	2,167					$	326					$	432

Overview

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

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

Operating income includes business optimization expenses of $30 million ($25 million, net of tax, or $0.10 per diluted share) in the second quarter and $97 million ($77 million, net of tax, or $0.32 per diluted share) in the first half of 2026 related to initiatives to reduce structural and overhead costs and to drive efficiency through Network 2.0. We incurred business optimization costs of $326 million ($249 million, net of tax, or $1.02 per diluted share) in the second quarter and $454 million ($347 million, net of tax, or $1.41 per diluted share) in the first half of 2025 related to our transformation initiatives. See the “Business Optimization Costs” section of this MD&A for more information.

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

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

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open market transactions at an average price of $233.07 per share for a total of $776 million. Share repurchases had a benefit of $0.05 per diluted share for the second quarter and $0.07 per diluted share for the first half of 2026. As of November 30, 2025, $1.3 billion remained available to be used for repurchases under the stock repurchase program approved by our Board of Directors in 2024. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Financial Condition – Liquidity and – Liquidity Outlook” below, and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for additional information.

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

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

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

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

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

Operating Expenses

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

						Three Months Ended												Percent						Six Months Ended												Percent
						2025						2024						Change						2025						2024						Change
Operating expenses:
Salaries and employee benefits						$	8,395					$	7,879					7						$	16,457					$	15,664					5
Purchased transportation						5,885						5,500						7						11,373						10,775						6
Rentals and landing fees						1,211						1,168						4						2,403						2,329						3
Depreciation and amortization						1,068						1,063						—						2,160						2,141						1
Fuel						889						947						(6)						1,762						2,022						(13)
Maintenance and repairs						889						831						7						1,732						1,660						4
Separation and other costs						213						—						NM						258						—						NM
Business optimization costs						30						326						(91)						97						454						(79)
Other						3,511						3,201						10						6,907						6,369						8
Total operating expenses						22,091						20,915						6						43,149						41,414						4
Operating income						$	1,378					$	1,052					31						$	2,564					$	2,132					20

						Percent of Revenue
						Three Months Ended												Six Months Ended
						2025						2024						2025						2024
Operating expenses:
Salaries and employee benefits						35.8		%				35.9		%				36.0		%				36.0		%
Purchased transportation						25.1						25.0						24.9						24.8
Rentals and landing fees						5.1						5.3						5.3						5.4
Depreciation and amortization						4.5						4.8						4.7						4.9
Fuel						3.8						4.3						3.8						4.6
Maintenance and repairs						3.8						3.8						3.8						3.8
Separation and other costs						0.9						—						0.6						—
Business optimization costs						0.1						1.5						0.2						1.0
Other						15.0						14.6						15.1						14.6
Total operating expenses						94.1						95.2						94.4						95.1
Operating margin						5.9		%				4.8		%				5.6		%				4.9		%

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

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Separation and Other Costs

FedEx Freight separation

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

Fiscal year change

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

Business Optimization Costs

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

We incurred business optimization costs of $30 million ($25 million, net of tax, or $0.10 per diluted share) in the second quarter and $97 million ($77 million, net of tax, or $0.32 per diluted share) in the first half of 2026. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express. We incurred business optimization costs of $326 million ($249 million, net of tax, or $1.02 per diluted share) in the second quarter and $454 million ($347 million, net of tax, or $1.41 per diluted share) in the first half of 2025. These costs were primarily related to severance and professional services and are included in Federal Express and Corporate, other, and eliminations.

Network 2.0

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

Europe workforce reduction plan

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

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

Income Taxes

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

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

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

During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit sought to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $249 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. On February 13, 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. On June 4, 2025, the District Court validated the amount of refunds owed for 2018 and 2019, which includes the foreign tax credits previously denied. On August 1, 2025, the U.S. government filed a notice to appeal the decision to the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

Outlook

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

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

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

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

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

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

The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, developments in international trade, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2026 inherently less certain. See Part I “Item 1A. Risk Factors” in our Annual Report for more information.

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

RECENT ACCOUNTING GUIDANCE

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

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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, Inc. (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 of these services to reflect the full cost of operating our businesses in the results of those segments. We review and evaluate the performance of FedEx Freight and our other operating segments based on operating income inclusive of these allocations.

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

CORPORATE, OTHER, AND ELIMINATIONS

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

Also included in Corporate and other are the FedEx Office and Print Services, Inc. (“FedEx Office”) operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics operating segment, which provides integrated supply chain management solutions, specialty transportation, customs brokerage, and global ocean and air freight forwarding.

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

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

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the second quarter of 2026 FedEx Freight provided road and intermodal support for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

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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 November 30, 2025 and 2024:

						Three Months Ended												Percent						Six Months Ended												Percent
						2025						2024						Change						2025						2024						Change
Revenue:
Package:
U.S. priority						$	2,843					$	2,563					11						$	5,610					$	5,154					9
U.S. deferred						1,396						1,199						16						2,669						2,350						14
U.S. ground						9,173						8,256						11						17,827						16,312						9
Total U.S. domestic package revenue						13,412						12,018						12						26,106						23,816						10
International priority						2,383						2,231						7						4,641						4,437						5
International economy						1,511						1,588						(5)						2,865						2,948						(3)
Total international export package revenue						3,894						3,819						2						7,506						7,385						2
International domestic(1)						1,257						1,190						6						2,392						2,302						4
Total package revenue						18,563						17,027						9						36,004						33,503						7
Freight:
U.S.						304						383						(21)						607						952						(36)
International priority						617						640						(4)						1,212						1,166						4
International economy						582						529						10						1,110						992						12
Total freight revenue						1,503						1,552						(3)						2,929						3,110						(6)
Other						367						262						40						616						533						16
Total revenue						20,433						18,841						8						39,549						37,146						6
Operating expenses:
Salaries and employee benefits						6,824						6,329						8						13,340						12,530						6
Purchased transportation						5,480						5,067						8						10,553						9,868						7
Rentals and landing fees						1,028						987						4						2,041						1,973						3
Depreciation and amortization						931						918						1						1,885						1,853						2
Fuel						779						835						(7)						1,539						1,789						(14)
Maintenance and repairs						773						715						8						1,510						1,434						5
Separation and other costs						18						—						NM						23						—						NM
Business optimization costs						7						206						(97)						28						249						(89)
Intercompany allocations						(229)						(205)						12						(462)						(392)						18
Other						3,271						2,937						11						6,403						5,837						10
Total operating expenses						18,882						17,789						6						36,860						35,141						5
Operating income						$	1,551					$	1,052					47						$	2,689					$	2,005					34
Operating margin						7.6		%				5.6		%				200		bp				6.8		%				5.4		%				140		bp

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

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						Percent of Revenue
						Three Months Ended												Six Months Ended
						2025						2024						2025						2024
Operating expenses:
Salaries and employee benefits						33.4		%				33.6		%				33.7		%				33.7		%
Purchased transportation						26.8						26.9						26.6						26.6
Rentals and landing fees						5.0						5.2						5.2						5.3
Depreciation and amortization						4.6						4.9						4.8						5.0
Fuel						3.8						4.4						3.9						4.8
Maintenance and repairs						3.8						3.8						3.8						3.9
Separation and other costs						0.1						—						0.1						—
Business optimization costs						—						1.1						0.1						0.7
Intercompany allocations						(1.1)						(1.1)						(1.2)						(1.1)
Other						16.0						15.6						16.2						15.7
Total operating expenses						92.4						94.4						93.2						94.6
Operating margin						7.6		%				5.6		%				6.8		%				5.4		%

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

						Three Months Ended												Percent						Six Months Ended												Percent
						2025						2024						Change						2025						2024						Change
Package Statistics
Average daily package volume (ADV)(1):
U.S. priority						1,679						1,603						5						1,666						1,601						4
U.S. deferred						1,135						1,014						12						1,097						991						11
U.S. ground commercial						4,371						4,309						1						4,331						4,299						1
U.S. ground home delivery/economy						7,531						6,962						8						7,221						6,698						8
Total U.S. domestic ADV						14,716						13,888						6						14,315						13,589						5
International priority						580						594						(2)						571						608						(6)
International economy						583						586						(1)						550						538						2
Total international export ADV						1,163						1,180						(1)						1,121						1,146						(2)
International domestic(2)						2,027						2,060						(2)						1,916						1,941						(1)
Total ADV						17,906						17,128						5						17,352						16,676						4
Revenue per package (yield):
U.S. priority						$	26.88					$	25.38					6						$	26.51					$	25.34					5
U.S. deferred						19.53						18.76						4						19.16						18.68						3
U.S. ground						12.23						11.63						5						12.15						11.68						4
U.S. domestic composite						14.47						13.73						5						14.36						13.80						4
International priority						65.18						59.59						9						63.98						57.41						11
International economy						41.17						43.03						(4)						41.03						43.17						(5)
International export composite						53.15						51.37						3						52.72						50.73						4
International domestic(2)						9.85						9.18						7						9.83						9.34						5
Composite package yield						16.46						15.78						4						16.34						15.82						3
Freight Statistics
Average daily freight pounds:
U.S.						2,137						2,772						(23)						2,151						4,056						(47)
International priority						5,106						4,927						4						4,875						4,694						4
International economy						12,535						12,475						—						11,874						11,584						3
Total average daily freight pounds						19,778						20,174						(2)						18,900						20,334						(7)
Revenue per pound (yield):
U.S.						$	2.26					$	2.19					3						$	2.22					$	1.85					20
International priority						1.92						2.06						(7)						1.96						1.96						—
International economy						0.74						0.67						10						0.74						0.67						10
Composite freight yield						1.21						1.22						(1)						1.22						1.20						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 8% in the second quarter and 6% in the first half of 2026 primarily due to improved U.S. domestic and international priority package base yields, increased U.S. domestic package volumes, and favorable exchange rates, partially offset by lower international export package volume including the negative impacts from global trade policies and the expiration of our contract with the USPS.

Volume:

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

Yield:

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

Federal Express Segment Operating Income

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

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

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

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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 November 30, 2025 and 2024:

						Three Months Ended												Percent						Six Months Ended												Percent
						2025						2024						Change						2025						2024						Change
Revenue						$	2,139					$	2,177					(2)						$	4,396					$	4,506					(2)
Operating expenses:
Salaries and employee benefits						983						976						1						1,958						1,960						—
Purchased transportation						197						197						—						398						400						(1)
Rentals						76						72						6						150						143						5
Depreciation and amortization						113						112						1						223						222						—
Fuel						110						111						(1)						223						232						(4)
Maintenance and repairs						89						88						1						170						170						—
Separation and other costs						152						—						NM						161						—						NM
Intercompany charges						153						143						7						315						291						8
Other						176						166						6						348						337						3
Total operating expenses						2,049						1,865						10						3,946						3,755						5
Operating income						$	90					$	312					(71)						$	450					$	751					(40)
Operating margin						4.2		%				14.3		%				(1010)		bp				10.2		%				16.7		%				(650)		bp
Average daily shipments (in thousands):
Priority						60.1						62.5						(4)						61.1						62.7						(3)
Economy						27.3						28.5						(4)						27.6						28.8						(4)
Total average daily shipments						87.4						91.0						(4)						88.7						91.5						(3)
Weight per shipment (lbs):
Priority						930						935						(1)						931						946						(2)
Economy						910						865						5						908						866						5
Composite weight per shipment						924						913						1						924						921						—
Revenue per shipment:
Priority						$	361.25					$	352.84					2						$	360.37					$	358.51					1
Economy						408.41						400.00						2						408.23						404.41						1
Composite revenue per shipment						$	375.97					$	367.60					2						$	375.28					$	372.96					1
Revenue per hundredweight:
Priority						$	38.85					$	37.73					3						$	38.69					$	37.90					2
Economy						44.90						46.26						(3)						44.94						46.69						(4)
Composite revenue per hundredweight						$	40.71					$	40.26					1						$	40.60					$	40.50					—

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						Percent of Revenue
						Three Months Ended												Six Months Ended
						2025						2024						2025						2024
Operating expenses:
Salaries and employee benefits						46.0		%				44.8		%				44.5		%				43.5		%
Purchased transportation						9.2						9.1						9.0						8.9
Rentals						3.5						3.3						3.4						3.2
Depreciation and amortization						5.3						5.2						5.1						4.9
Fuel						5.1						5.1						5.1						5.1
Maintenance and repairs						4.2						4.0						3.9						3.8
Separation and other costs						7.1						—						3.7						—
Intercompany charges						7.2						6.6						7.2						6.4
Other						8.2						7.6						7.9						7.5
Total operating expenses						95.8						85.7						89.8						83.3
Operating margin						4.2		%				14.3		%				10.2		%				16.7		%

FedEx Freight Segment Revenue

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

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

FedEx Freight Segment Operating Income

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

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

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

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FINANCIAL CONDITION

LIQUIDITY

Cash and cash equivalents totaled $6.6 billion at November 30, 2025, compared to $5.5 billion at May 31, 2025. The following table provides a summary of our cash flows for the periods ended November 30, 2025 and 2024 (in millions):

						Six Months Ended
						2025						2024
Operating activities:
Net income						$	1,780					$	1,535
Separation and other costs, net of payments						146						—
Business optimization costs, net of payments						(130)						125
Other noncash charges and credits						4,165						4,064
Changes in assets and liabilities						(2,294)						(3,219)
Cash provided by operating activities						3,667						2,505
Investing activities:
Capital expenditures						(1,380)						(1,585)
Purchase of investments						(326)						(107)
Proceeds from sale of investments						177						52
Proceeds from asset dispositions, and other investing activities, net						49						34
Cash used in investing activities						(1,480)						(1,606)
Financing activities:
Proceeds from debt issuances						997						—
Principal payments on debt						(647)						(47)
Proceeds from stock issuances						50						440
Dividends paid						(687)						(676)
Purchases of common stock						(796)						(2,020)
Other						(9)						(6)
Cash used in financing activities						(1,092)						(2,309)
Effect of exchange rate changes on cash						(27)						(62)
Net increase (decrease) in cash and cash equivalents						1,068						(1,472)
Cash and cash equivalents at the end of period						$	6,570					$	5,029

Cash Provided by Operating Activities. Cash flows from operating activities increased $1.2 billion in the first half of 2026 primarily due to working capital changes driven by increases in pension liabilities and accounts payable, as well as increases in accruals for self-insurance, variable incentive compensation, income taxes, and professional fees.

Cash Used in Investing Activities. Capital expenditures decreased $0.1 billion in the first half of 2026 primarily due to decreased spending on “package handling and ground support equipment” and “aircraft and related equipment” at Federal Express. See “Capital Resources” for a discussion of capital expenditures during 2026.

Cash Used in Financing Activities. Cash used in financing activities decreased $1.2 billion in the first half of 2026 primarily due to less repurchases of our common stock compared to the first half of 2025. Additionally, in the first quarter of 2026, we issued €850 million of senior unsecured debt and used a portion of the net proceeds to repay the €500 million aggregate principal amount outstanding of our 0.45% notes at maturity. See Note 1 and Note 4 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.

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.

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The following table compares capital expenditures by asset category and reportable segment for the periods ended November 30, 2025 and 2024 (in millions):

						Three Months Ended												Six Months Ended												Percent Change
						2025						2024						2025						2024						Three Months Ended						Six Months Ended
Aircraft and related equipment						$	124					$	82					$	184					$	263					51						(30)
Package handling and ground support equipment						252						213						457						410						19						11
Information technology						93						106						211						259						(12)						(19)
Vehicles and trailers						60						184						107						274						(67)						(61)
Facilities and other						228						233						421						379						(2)						11
Total capital expenditures						$	757					$	818					$	1,380					$	1,585					(7)						(13)
Federal Express segment						$	640					$	598					$	1,208					$	1,301					7						(7)
FedEx Freight segment						100						195						132						230						(49)						(43)
Other						17						25						40						54						(33)						(26)
Total capital expenditures						$	757					$	818					$	1,380					$	1,585					(7)						(13)

Capital expenditures decreased in the second quarter of 2026 primarily due to decreased spending on “vehicles and trailers” at FedEx Freight and “information technology” investments at Federal Express, partially offset by increased spending on “aircraft and related equipment” at Federal Express and “package handling and ground support equipment” at Federal Express and FedEx Freight.

Capital expenditures decreased in the first half of 2026 primarily due to decreased spending on “package handling and ground support equipment” and “aircraft and related equipment” at Federal Express partially offset by increased spending on “vehicles and trailers” at FedEx Freight. These reductions are a result of continuing to prioritize investments that support increasing efficiency and reducing our cost to serve.

GUARANTOR FINANCIAL INFORMATION

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 $19.8 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 issuance by FedEx of its 3.500% Notes due 2032 and 4.125% Notes due 2037 guaranteed by the Guarantor Subsidiaries that was completed during the first quarter of 2026.

Additionally, FedEx fully and unconditionally guarantees the payment obligation of Federal Express in respect of the $711 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 November 30, 2025 and May 31, 2025 (in millions):

						November 30, 2025						May 31, 2025
Current Assets						$	11,030					$	9,514
Intercompany Receivable						4,957						4,278
Total Assets						84,550						83,125
Current Liabilities						12,041						11,202
Intercompany Payable						—						—
Total Liabilities						$	53,832					$	52,324

The following table presents the summarized statement of income information for the period ended November 30, 2025 (in millions):

			Six Months Ended
			November 30, 2025
Revenue			$	34,032
Intercompany Charges, net			(2,180)
Operating Income			2,277
Intercompany Charges, net			146
Income Before Income Taxes			1,822
Net Income			$	1,236

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 November 30, 2025 and May 31, 2025 (in millions):

			November 30, 2025						May 31, 2025
Current Assets			$	10,996					$	9,504
Intercompany Receivable			724						581
Total Assets			73,372						72,044
Current Liabilities			11,030						10,310
Intercompany Payable			—						—
Total Liabilities			$	50,496					$	49,200

The following table presents the summarized statement of income information for the period ended November 30, 2025 (in millions):

			Six Months Ended
			November 30, 2025
Revenue			$	29,451
Intercompany Charges, net			(2,556)
Operating Income			1,855
Intercompany Charges, net			26
Income Before Income Taxes			1,867
Net Income			$	1,389

LIQUIDITY OUTLOO****K

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, including the impact of global trade policies.

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We held $6.6 billion in cash and cash equivalents at November 30, 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. See Note 4 of the accompanying unaudited condensed consolidated financial statements for information regarding recent amendments to the Credit Agreements. In the third quarter of 2025, we began incurring costs related to the planned spin-off of FedEx Freight, which are expected to be significant but are not expected to adversely affect our liquidity.

We repurchased an aggregate of $276 million and $776 million of our common stock in the second quarter and first half of 2026, respectively, through 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. Subject to market conditions, liquidity needs, and other factors, the company will continue to evaluate repurchasing additional shares of our common stock during the remainder of fiscal 2026.

Our cash and cash equivalents balance at November 30, 2025 includes $3.6 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 2026 are expected to be approximately $4.5 billion, $0.4 billion higher than 2025.The increase is driven by investment in Network 2.0 initiatives and other efforts to modernize our facilities and package handling equipment in the U.S. and internationally. Aircraft spend is expected to decline to approximately $1.0 billion, $0.3 billion lower than 2025.

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 (“B777F”) and Boeing 767-300 Freighter (“B767F”) 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.

The Three-Year Credit Agreement and the Five-Year Credit Agreement expire in March 2028 and March 2030, 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.

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 first six months of 2026, we made voluntary contributions of $200 million to our tax-qualified U.S. domestic pension plan (“U.S. Pension Plan”), and we anticipate making $75 million of additional voluntary contributions for the remainder of fiscal 2026. 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 November 21, 2025, our Board of Directors declared a quarterly cash dividend of $1.45 per share of common stock. The dividend will be paid on January 6, 2026 to stockholders of record as of the close of business on December 15, 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 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

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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 evaluated for impairment indicators between annual tests and tested for impairment whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. 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 November 30, 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.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including (but not limited to) those contained in “General,” “Trends Affecting Our Business,” “Separation and Other Costs,” “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 uncertainty and/or additional volatility in the global trade environment;

• 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 transformation initiatives, 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;

• 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;

• 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;

• 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;

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• 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);

• 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, including regulatory and/or legal compliance requirements that can affect our ability to efficiently or fully utilize our aircraft; increased air cargo, pilot flight and duty time, and other security or safety requirements; import and export controls; the use of new technology and accounting; changes to global trade policies; 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;

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• 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 9 of the accompanying unaudited condensed consolidated financial statements;

• 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;

• successful completion of stock repurchases;

• 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.