Shares of FedEx Corporation (NYSE: FDX) soared more than 5% in the after market hours on Thursday last week after the company delivered better-than-expected results for first quarter of FY 2026, surpassing market estimates on both revenue and earnings. Despite the ongoing tension in the global trade environment, the logistics giant reported an increase of 3% in its quarterly revenue to $22.26 billion, supported by stronger domestic package volumes. Adjusted earnings rose 6% y-o-y to $3.83 per share, comfortably ahead of analyst expectations of $3.59 per share, aided by ongoing structural cost reductions.
However, the market optimism was buoyed by the company’s decision to reinstate its full-year 2026 outlook, which had been suspended last quarter over concerns about tariff-driven weakness in domestic spending. FedEx now expects its FY 2026 revenue to grow 4% to 6% and projects adjusted earnings per share to be between $17.20 and $19.00, factoring in the FedEx Freight spin-off and a change in its fiscal year. While the stock is still 15% down year-to-date, the updated outlook has surely renewed the sentiment around the company and overall logistics industry.
Let’s take a deeper look at the company’s financial performance for the quarter and delve into its strategies to achieve the updated outlook.
Operating Performance
FedEx, headquartered in Memphis, Tennessee, is one of the world’s largest express transportation companies, with its core segment, Federal Express, focused on small-package ground delivery in North America. The segment posted a solid Q1 2026 performance, with revenue rising 4% y-o-y to $19.1 billion on the back of stronger U.S. domestic package volumes. Adjusted operating income surged 17% year-on-year to $1.16 billion, supported by higher yields in both U.S. domestic and international priority services, along with cost savings from ongoing transformation initiatives. These gains were partly offset by higher wage and purchased transportation expenses, as well as the expiration of the U.S. Postal Service contract and the “de minimis” exception. The latter, which previously allowed duty-free entry for shipments under $800, has now been eliminated, prompting FedEx to increase rates on low-value packages going forward.
In contrast, FedEx Freight—the segment providing less-than-truckload (LTL) services—remained under pressure. Revenue declined 3% year-on-year to $2.26 billion, while adjusted operating income fell 16% to $369 million, weighed down by softer top-line performance, higher wage costs, and increased investment in sales personnel ahead of its planned separation.
FedEx Freight Spin-off Update
On the spin-off, FedEx confirmed that the separation of FedEx Freight into a standalone publicly traded entity remains on track for completion by June 2026. The company has submitted a confidential Form 10 to the SEC and requested an IRS private letter ruling regarding the tax treatment of the transaction. Progress has also been made in building a dedicated salesforce, with nearly half of the planned positions already filled. The new company will trade on the New York Stock Exchange (NYSE) under the ticker FDXF, with an investor day scheduled for Spring 2026 in New York City to provide further details.
From a capital allocation perspective, FedEx returned $845 million to shareholders in Q1 2026 through $500 million in share repurchases and $345 million in dividends (dividend yield of ~2.5%). The company repurchased 2.2 million shares in the open market during the quarter, with $1.6 billion still available under its 2024 buyback authorization as of August 31, 2025. The company plans to continue repurchasing additional shares subject to favorable market conditions. In addition, FedEx invested $623 million in capital expenditure during the period. The company ended the quarter with a cash balance of $6.2 billion, while total debt stood at $21.1 billion and lease liabilities at $16.7 billion.
Cautiously Optimistic Outlook
Despite ongoing volatility in the global trade environment, FedEx remains cautiously optimistic about its fiscal 2026 trajectory. The company expects a revenue growth of 4% to 6% and adjusted earnings in the range of $17.20 to $19.00 per share for FY 2026. It reiterated permanent transformation-related savings of $1 billion through structural cost reductions and the continued rollout of Network 2.0. That said, FedEx also anticipates notable headwinds, including $1 billion from trade tariffs and the expiration of the de minimis exception, as well as an additional $160 million hit from the expiration of the U.S. Postal Service contract in FY 2026.
Capital expenditure is estimated to be around $4.5 billion, with a focus on network optimization, fleet and facility modernization, and automation to drive long-term efficiency gains. Looking ahead to the peak season, FedEx anticipates a modest increase in Peak Average Daily Volume (ADV) and a mid-to-high single-digit percentage y-o-y increase in total peak volumes.
Strategic Initiatives & Transformation
FedEx continued to advance its transformation agenda in Q1 2026, with Network 2.0 delivering measurable efficiency gains through optimized stations and streamlined operations. The company emphasized its agility in navigating a volatile trade environment, supported by its “Tricolor” strategy, which enables rapid adjustments across networks. Notably, FedEx cut Purple tail trans-Pacific outbound capacity by 25% year-over-year and nearly 10% sequentially, while also reducing third-party White tail capacity by similar levels. At the same time, it shifted resources to the Asia–Europe lane to capture more profitable freight flows. These moves contributed to greater network densification and lower unit costs across the Purple, White, and Orange networks.
Within Network 2.0, FedEx optimized an additional 70 U.S. stations during the quarter, bringing the total to 360 stations across the U.S. and Canada. By the end of September, roughly 3 million ADV will be flowing through these optimized facilities, underscoring the scale of progress. On the commercial front, FedEx is sharpening its focus on high-value verticals, particularly healthcare and small and medium businesses (SMBs). The healthcare portfolio maintained momentum with strong new business wins, including in global air freight. To further strengthen this segment, FedEx launched a new Dublin–Indianapolis flight that cuts transit times by a full day. Meanwhile, the U.S. domestic SMB segment delivered revenue growth of over 10% year-over-year in the first quarter, driven by targeted strategies and effective sales execution. The FedEx Rewards program also continued to deepen relationships with SMB customers, reinforcing retention and loyalty.
Conclusion
FedEx’s first-quarter results underscore the company’s resilience in a challenging macro environment, balancing cost efficiencies with targeted growth investments. The reinstatement of full-year guidance reflects management’s confidence in delivering earnings growth despite tariff and regulatory pressures. With Network 2.0 and Tricolor strategy driving structural savings, the Freight spin-off progressing on schedule, and momentum building in healthcare and SMB verticals, FedEx appears well positioned to navigate near-term headwinds while strengthening its long-term competitive and financial profile.