01—Abstract
Summary
Summary of the 8-K filed December 18, 2025. Cited figures are marked; the original filing is the authoritative source.
FedEx (FDX) reported second-quarter fiscal 2026 results for the quarter ended November 30, 2025, with revenue of $23.5 billiona, up 7% year over year, and GAAP diluted EPS of $4.04, up 33% from $3.03.
Adjusted EPS was $4.82b versus $4.05 a year earlier, excluding FedEx Freight spin-off costs ($0.72 per share), business optimization costs, fiscal year change costs, and a benefit from an international regulatory matter. Growth was led by the Federal Express segment, where operating income rose 47% to $1.55 billion on higher U.S. domestic and International Priority yields, structural cost savings, and higher U.S. domestic volume. The FedEx Freight segment weakened, with operating income down 71% to $90 million as shipments fell, wage costs rose, and LTL sales hiring ramped ahead of the separation.
Management raised its fiscal 2026 revenue growth outlook to 5% to 6% and its adjusted EPS outlook (before mark-to-market pension adjustments) to $14.80 to $16.00c, from $14.20 to $16.00, and cut its pension contribution forecast to $275 million from up to $400 million. The company reaffirmed $1 billion in permanent cost reductions, a roughly 25% effective tax rate before MTM adjustments, and $4.5 billion in capital spending. It cannot forecast GAAP EPS or the tax rate because of pension mark-to-market uncertainty, which could be material.
The FedEx Freight spin-off remains on track for June 1, 2026, with the new company trading on the NYSE as FDXF and holding an Investor Day on April 8, 2026. The company also completed $276 milliond in share repurchases during the quarter, has $1.3 billion remaining on its authorization, and ended the quarter with $6.6 billion in cash. Investors should note the continued drag from Freight, the MD11 grounding, and the fiscal year-end change to December 31 effective June 1, 2026.
02—Key points
Key Highlights
- Q2 FY2026 GAAP revenue of $23.5B (+7% YoY); GAAP diluted EPS of $4.04 (+33%), adjusted EPS of $4.82 (vs. $4.05)
- Federal Express operating income up 47% to $1.55B, with operating margin expanding 200 bps to 7.6% on higher U.S. domestic and International Priority yields and cost savings
- FedEx Freight operating income fell 71% to $90M (margin 4.2%) on lower shipments, higher wages, and pre-spin-off hiring; the segment absorbed $152M of spin-off costs
- Adjusted FY2026 EPS guidance raised to $14.80–$16.00 (before MTM pension adjustments) from $14.20–$16.00; revenue growth raised to 5%–6%
- Pension contributions cut to $275M from up to $400M; $1B permanent cost reduction and $4.5B capex reaffirmed
- FedEx Freight spin-off (ticker FDXF, NYSE) remains on track for June 1, 2026, with Investor Day on April 8, 2026
- Returned capital via $276M of buybacks in the quarter; $1.3B remaining authorization; cash of $6.6B at quarter end
03—Questions
Frequently Asked Questions
Why did GAAP EPS grow faster than revenue in the quarter?
Operating income rose 31% to $1.38B on a 200 bp Federal Express margin gain driven by yield improvement and transformation savings, and a lower share count (236M vs. 244M diluted shares) added to per-share growth. Results were also helped by lower business optimization costs ($30M vs. $326M a year earlier), though the spin-off costs offset part of the gain.
What is the outlook for FedEx Freight and the spin-off?
The separation is still planned for June 1, 2026, and FedEx Freight will trade as FDXF on the NYSE. Freight profitability weakened sharply this quarter (operating margin 4.2% vs. 14.3%), so investors will want to see how the standalone company performs and what its Investor Day on April 8, 2026 reveals about its margin targets.
Why can't FedEx provide a GAAP EPS forecast?
The company cannot predict fiscal 2026 mark-to-market retirement plan accounting adjustments, which depend on interest rates and financial markets. It is relying on the SEC exemption and warns these adjustments could have a material effect on GAAP results and the effective tax rate.
What do the revised forecasts and capital returns imply for shareholders?
The higher adjusted EPS range, reduced pension cash requirements ($275M vs. up to $400M), and continued buybacks ($276M this quarter, $1.3B remaining) support cash returns. Guidance still assumes current economic and fuel conditions with no new adverse trade or geopolitical developments, and the $4.5B capex plan remains a significant cash use.
How does the fiscal year-end change affect comparability?
FedEx will move its fiscal year end from May 31 to December 31, effective June 1, 2026, and has incurred $8M of related costs this quarter. Investors should expect a transition period and be careful when comparing results across the change.
04—Continue