01—Abstract
Summary
Summary of the 10-Q filed March 19, 2026. Cited figures are marked; the original filing is the authoritative source.
FedEx reported strong third-quarter fiscal 2026 results (quarter ended February 28, 2026).
Revenue rose 8% to $24.0 billiona, and operating income rose 4% to $1.35 billion. Net income increased 16% to $1.06 billion, and diluted EPS grew 17% to $4.41. For the nine months, operating income rose 14% to $3.91 billion and diluted EPS rose 19% to $11.91.
Federal Express drove the gains: its segment operating income increased 21% in the quarter on higher U.S. domestic and international priority yields, business optimization savings, and stronger U.S. domestic volume. FedEx Freight, by contrast, nearly collapsed, with segment operating income falling 97% to $8 millionb on weak LTL shipment volumes and $126 million of spin-off-related separation costs. The balance sheet and cash flow changed materially because of the planned spin-off of FedEx Freight, which is expected to be completed by June 1, 2026.
In February 2026, FedEx Freight Holding issued $3.7 billionc of senior unsecured notes. The proceeds are held as restricted cash and will be distributed to FedEx in the spin-off. Total cash, cash equivalents, and restricted cash reached $11.7 billion, and long-term debt including current maturities was $24.1 billion.
Nine-month operating cash flow rose to $5.66 billiond from $4.52 billion, and capital expenditures fell to $2.34 billion. FedEx did not repurchase shares in the quarter, but it still has $1.3 billion of authorization remaining. The quarterly dividend is $1.45 per share.
Investors should weigh several items beyond the headline earnings beat. Potential IEEPA tariff refunds following the February 20, 2026 Supreme Court ruling could be material, but no benefit has been recorded, and FedEx has filed suit to recover them. The company also faces the planned FedEx Freight spin-off costs, a pending InPost investment of about $2.6 billion, international workforce restructuring of up to $225 to $325 million, and the MD-11 grounding.
Management still expects inflation, global trade uncertainty, and industrial softness to weigh on international export and LTL demand through the rest of 2026. The effective tax rate was 16.4% in the quarter, aided by a $99 million one-time valuation allowance release, and FedEx is litigating a $249 million cumulative tax benefit that could be reversed if it loses its appeal.
02—Key points
Key Highlights
- Q3 FY26 revenue rose 8% to $24.0 billion, and nine-month revenue rose 6% to $69.7 billion, led by higher U.S. domestic and international priority yields and increased U.S. domestic package volume.
- Diluted EPS was $4.41 in the quarter (up 17% from $3.76) and $11.91 for nine months (up 19% from $9.99). Quarterly operating margin was 5.6%, down 20 basis points, while nine-month margin improved to 5.6% from 5.2%.
- Federal Express segment operating income rose 21% to $1.57 billion in the quarter, but FedEx Freight segment operating income fell 97% to $8 million, reflecting weak LTL demand and $126 million of spin-off costs.
- FedEx Freight separation costs were $195 million pre-tax in the quarter ($0.61 per diluted share), with $443 million for nine months. The spin-off is expected to be tax-free and completed by June 1, 2026.
- FedEx Freight Holding issued $3.7 billion of unsecured notes, held as restricted cash of $3.68 billion until the spin-off. Total cash and restricted cash reached $11.7 billion, and the debt-to-adjusted-EBITDA ratio was 1.9 against a 3.5x covenant limit.
- Nine-month operating cash flow grew to $5.66 billion from $4.52 billion. Capital expenditures fell to $2.34 billion, and 2026 capex guidance is about $4.1 billion. No shares were repurchased in the quarter, but $1.3 billion remains under the buyback authorization.
- Potential IEEPA tariff refunds following the February 2026 Supreme Court ruling are uncertain and could be material. No benefit has been recorded, and FedEx has filed suit to recover duties paid.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2026filed March 19, 2026Financial Statements
Q3 FY2026 against Q3 FY2025
| Line item | Q3 FY2026Q3 FY2025 | Change |
|---|---|---|
| Revenue | $24.00B$22.16B | +8.3% |
| Operating Expenses | $22.65B$20.87B | +8.5% |
| Operating Income | $1.35B$1.29B | +4.3% |
| Net Income | $1.06B$909.00M | +16.2% |
| EPS (Basic) | $4.46$3.79 | +17.7% |
| EPS (Diluted) | $4.41$3.76 | +17.3% |
| Shares Outstanding (Basic) | 236.00M240.00M | −1.7% |
| Shares Outstanding (Diluted) | 239.00M242.00M | −1.2% |
05—Questions
Frequently Asked Questions
Why did FedEx Freight's operating income collapse in the third quarter?
FedEx Freight operating income fell to $8 million from $261 million, mainly because of $126 million of spin-off-related separation costs, higher outside service and professional fees, and lower shipment volume. Average daily shipments fell 6% on weak industrial activity and excess LTL industry capacity. Revenue per shipment rose 1%, partly offsetting these pressures.
What is the status of the FedEx Freight spin-off and the fiscal year change?
The spin-off is expected to be completed by June 1, 2026, and is intended to be tax-free to FedEx stockholders. The FedEx Freight notes and term loan proceeds are being distributed to FedEx at closing, and FedEx will be released from the guarantees of the FedEx Freight debt. The Board also approved changing the fiscal year end from May 31 to December 31, effective June 1, 2026.
How large is the potential IEEPA tariff refund, and how is it reflected in the financial statements?
The impact is uncertain because it is unclear how much CBP will refund and whether FedEx can fully collect related receivables. FedEx has not recorded any adjustment because it cannot reasonably estimate the amount, but it says the impact could be material. FedEx filed a refund lawsuit on February 23, 2026, and five class actions have been filed against it in U.S. district courts.
Is FedEx's liquidity and capital allocation position sound ahead of the spin-off and InPost investment?
FedEx held $8.0 billion of unrestricted cash and $3.7 billion of restricted cash, with $3.5 billion of available credit under its $3.5 billion revolving facilities. Its debt-to-adjusted-EBITDA ratio was 1.9, well inside the 3.5x covenant limit. FedEx expects to fund its roughly $2.6 billion InPost investment from cash or new liquidity sources, and management believes liquidity is adequate. Buybacks were paused in the quarter, and $1.3 billion of authorization remains.
06—Continue