FedEx Reports Fiscal Year Results, Plans Strategic Separation of FedEx Freight

**FedEx Reports Fiscal Year Results, Announces Strategic Separation of FedEx Freight**

FedEx Corporation (NYSE: FDX) has released its financial results for the fiscal year ended May 31, 2025, showcasing a slight increase in revenue to $87.9 billion, compared to $87.7 billion in the previous fiscal year. The company's operating income experienced a decrease of 6%, landing at $5.2 billion, down from $5.6 billion. Net income also saw a decline of 6%, settling at $4.1 billion, with diluted earnings per share decreasing by 2% to $16.81. These results reflect the impact of lower shipments and fuel surcharges at FedEx Freight, a shift towards deferred package services, and the expiration of a contract with the U.S. Postal Service.

The Federal Express segment reported a modest increase in operating income of 1%, reaching $4.9 billion, with revenue up 1% to $75.3 billion. This growth was driven by higher international economy and U.S. ground package volumes, as well as improved base yields. However, the FedEx Freight segment faced challenges, with operating income decreasing by 18% to $1.5 billion and revenue declining by 6% to $8.9 billion, primarily due to lower shipments and fuel surcharges. The "Corporate, other, and eliminations" segment reported an operating loss of $1.2 billion.

Strategically, FedEx announced its Board of Directors' decision to pursue a full separation of FedEx Freight through capital markets, aiming to create a new publicly traded company by June 2026. This spin-off is expected to be tax-free for U.S. federal income tax purposes for FedEx stockholders. The company also continued its DRIVE transformation program, which includes Network 2.0, aimed at improving operational efficiency and enhancing profitability. As of May 31, 2025, Network 2.0 optimization had been implemented in approximately 290 locations in the U.S. and Canada.

Operationally, Federal Express employed approximately 440,000 employees and had approximately 63,000 drop-off locations, nearly 700 aircraft, and over 175,000 motorized vehicles in its global network. The company also contracts with approximately 5,700 independent small businesses for certain linehaul and pickup-and-delivery operations. FedEx Dataworks, with approximately 700 employees, focused on leveraging data and technology to enhance the efficiency of the FedEx network and customer experience. The company also launched fdx, a fully integrated data-driven commerce platform, in September 2024.

Looking ahead, FedEx anticipates continued pressure on demand for its higher-yielding business-to-business services due to the industrial economy, with a further shift towards deferred service offerings. The company expects to realize an incremental $1 billion in structural cost reduction benefits from DRIVE and Network 2.0 in fiscal year 2026. Capital expenditures for 2026 are projected to be approximately $4.5 billion, with a focus on modernizing facilities and package handling equipment. The company also expects to incur additional costs related to the workforce reduction plan in Europe, with anticipated savings of approximately $150 million on an annualized basis beginning in calendar 2026.