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Introduction & Market Context
FedEx Corporation (NYSE:FDX) delivered its fiscal first quarter 2026 earnings presentation on September 18, 2025, reporting stronger-than-expected results that exceeded analyst forecasts. The logistics giant posted its strongest quarterly year-over-year revenue growth in three years, despite ongoing challenges in the global trade environment and weakness in the industrial economy.
The company’s stock responded positively to the results, closing at $225.78 (up 0.32%) in regular trading and gaining an additional 0.35% in after-hours trading to reach $226.57. While this represents a modest gain, it reflects investor confidence in FedEx’s strategic direction and operational execution.
Quarterly Performance Highlights
FedEx reported solid financial results for Q1 FY26, with revenue reaching $22.2 billion, a 3% increase year-over-year. Adjusted operating income grew by 7% to $1.30 billion, while adjusted operating margin expanded by 20 basis points to 5.8%. Adjusted earnings per share came in at $3.83, up 6% compared to the same period last year and exceeding analyst expectations of $3.68.
As shown in the following comprehensive financial summary:
The company attributed these results to overall strength in U.S. domestic package services and operational agility. Notably, FedEx achieved its $200 million transformation-related cost savings target for the quarter, demonstrating progress in its efficiency initiatives.
Capital expenditures for the quarter totaled $623 million, while the company returned significant capital to shareholders through $345 million in dividends and $500 million in share repurchases.
Segment Performance Analysis
FedEx’s two main transportation segments showed divergent performance in the quarter. Federal Express delivered strong results with revenue of $19.1 billion, up 4% year-over-year, and adjusted operating income of $1.16 billion, representing an impressive 17% increase. This growth was primarily driven by higher yields, continued cost reduction efforts, and increased U.S. domestic package volume.
In contrast, FedEx Freight faced challenges with revenue declining 3% to $2.26 billion and adjusted operating income falling 16% to $369 million. This performance aligns with current trends in the less-than-truckload (LTL) industry and reflects the impact of a weak industrial economy.
The following chart illustrates the transportation segment revenue performance:
FedEx management emphasized that the LTL market remains rational and that the company is maintaining a disciplined approach to strategic growth in this segment. The decline in FedEx Freight’s operating income was attributed to lower revenue, higher wage rates, and investments in additional LTL sales professionals as the company prepares for its planned spin-off.
Strategic Initiatives & Transformation
FedEx continues to advance its transformation initiatives, with Network 2.0 delivering tangible results through optimized stations and improved efficiency. The company highlighted its ability to adapt to the changing trade environment through its "Tricolor" strategy, which enables swift network adjustments.
In response to shifting global trade patterns, FedEx has reduced its Purple tail trans-Pacific Asia outbound capacity by 25% year-over-year and nearly 10% versus the prior quarter. The company has also decreased third-party White tail capacity by similar percentages while shifting capacity to capture profitable revenue on the Asia-to-Europe lane.
The following slide details how FedEx is adapting to the changing trade environment and advancing its network transformation:
On the commercial front, FedEx is focusing on high-value verticals, particularly in healthcare and small and medium businesses (SMB). The company reported that its U.S. domestic SMB segment revenue grew by more than 10% year-over-year in the first quarter, reflecting targeted focus and strong sales execution.
The healthcare portfolio continues to show momentum, with new business onboarding, especially within the global air freight business. FedEx has launched a new flight linking Dublin and Indianapolis to support this growth.
As shown in the following slide on revenue outlook and strategic commercial priorities:
FedEx Freight Spin-Off Progress
The planned spin-off of FedEx Freight remains on track for June 2026. The company has submitted a confidential Form 10 to the SEC and requested an IRS private letter ruling on the tax treatment of the transaction. FedEx Freight will be listed on the New York Stock Exchange under the ticker symbol FDXF.
FedEx reported continued progress in hiring a dedicated sales team for the freight business, with nearly 50% of positions filled. An investor day for FedEx Freight is planned for Spring 2026 in New York City, where more details about the spin-off will be shared.
FY26 Outlook & Forward Guidance
Looking ahead, FedEx provided a positive outlook for fiscal year 2026, projecting revenue growth of 4% to 6% and adjusted earnings per share between $17.20 and $19.00. The company expects an effective tax rate of approximately 25%.
The outlook incorporates several key assumptions, including approximately $1 billion in transformation-related cost savings, offset by a similar $1 billion headwind due to the global trade environment and a $160 million headwind from the U.S. Postal Service contract expiration.
For the upcoming peak season, FedEx is anticipating a modest increase in Average Daily Volume (ADV) and a mid-to-high single-digit percentage increase in year-over-year total peak volume.
The following slide presents FedEx’s fiscal year 2026 outlook and illustrative operating income bridge:
Raj Subramaniam, President and CEO of FedEx, emphasized the importance of data and technology in driving long-term value creation, noting that the company moves "17 million packages a day, two petabytes of data. It’s not just the volume of the data, it’s the value of the data."
Despite challenges in the global trade environment and the industrial economy, FedEx’s first quarter results demonstrate the company’s ability to adapt and execute on its strategic initiatives. With continued focus on high-value verticals, network optimization, and cost reduction, FedEx appears well-positioned to deliver on its full-year guidance and create long-term shareholder value.
Full presentation:
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