2026
We Are The Industrial Network That Powers the Global Economy.
To our FedEx stockholders,
At FedEx, our purpose has always been to connect people and possibilities. This mission was instilled in our company culture from its very beginning by our visionary founder, Frederick W. Smith.
He established foundational principles of commitment to innovation, integrity, and serving our customers and the world. He often spoke about the importance of embracing change, which is increasingly pertinent in today’s rapidly evolving global landscape.
In a year marked by significant industry headwinds, we proudly delivered an outstanding performance for FY26 while successfully launching a seven-month transition period to align our reporting with the calendar year starting in 2027. This transition marks a significant moment to reflect on ourjourney and renew our commitment to what’s next. We also successfully executed the spin-off of FedEx Freight on June 1, positioning both companies for success as stand-alone focused industry leaders. Additionally, we hosted an Investor Day where we articulated our strategy for profitable growth and shared CY29 targets.
Across the enterprise, our global teams made tremendous advancements towards our enterprise transformation initiatives and growth strategies. The progress, driven by structural improvements and differentiated solutions, demonstrates that we are the industrial network that powers the global economy. Day in and day out, our unparalleled network moves the goods that matter most with the speed, precision, visibility, and reliability that modern commerce demands.
Delivering in FY26
FedEx delivered in incredible fashion, significantly exceeding our initial outlook. We provided the essential reliability and resilience to keep our customers’ most complex supply chains running. Our results showcase the power of our unique global industrial network, strong value proposition, and outstanding execution of our profitable growth strategy.
Our progress and pipelines in premium B2C and the key healthcare, automotive, aerospace, and data center B2B verticals are especially encouraging as we continue our focus on the most premium segments in the market.
Exercising continued capital discipline, we significantly reduced our capital expenditures in FY26 to $3.8 billion, the lowest level in the last eleven years. Our capital expenditures as a percentage of revenue was 4%, the lowest level since FedEx Corporation was formed. We also achieved record adjusted free cash flow, which enabled us to return approximately $2.2 billion to our stockholders. We remain committed to continued value creation, and our strategy is clear. We are delivering for today while preparing for a resilient tomorrow.
Building Momentum Through Transformation
Our network transformation via Network 2.0, Tricolor, and opportunities in Europe is driving better density and efficiency. This progress, combined with a sharp focus on structural cost reduction, enabled us to exceed the $1 billion transformation-related savings target that we shared at the start of the fiscal year.
We remain on track to achieve our Investor Day commitments for 2029 with clear proof points in the year. We successfully advanced Network 2.0. Through the end of June, we have implemented approximately 490 Network 2.0 optimized stations across the U.S. and Canada. We remain on track to achieve nearly $1 billion of Network 2.0 and associated one FedEx savings by the end of this calendar year, and the full $2 billion by the end of CY2027.
Since FY22, we have removed a net thirty-four jet aircraft from our fleet, actions that are aligned with our Tricolor and Network 2.0 strategies. In Europe, we achieved our 12th consecutive quarter of international revenue share gains, driven by our strong value proposition and improving service levels.
Weare navigating change, building momentum through transformation, and reinforcing FedEx’s position as the backbone of global supply chains.
Technology is the Force Multiplier Digital transformation is core to how we operate as one FedEx and foundational to how we shape the future of our business. We
are using data and technology combined with our unparalleled network to reshape global trade, simplify the cross-border experience, and strengthen economic resilience for businesses and consumers worldwide.
2026 Annual Report 1
We Are The Industrial Network That Powers the Global Economy.
Our digital transformation, which is underpinned by our digital backbone and Al capabilities, is a force multiplier. It is the enabler to building smarter supply chains. We have embedded Al into our daily processes, enhancing the rigor with which we work. Our data and how we deploy itis helping to drive significant innovation and growth across the company, supporting differentiation and improving the customer experience.
A Limitless Future
The challenges of tomorrow demand a new level of innovation, and we are meeting that demand head-on. By leveraging our global network, investing in our people, and embracing cutting-edge technologies, we are making supply chains smarter for everyone and building a more resilient future.
Weare navigating change, building momentum with transformation, and shaping the future of FedEx as a collective team. Through it all, one thing stays the same: our culture. It reinforces who we are, what we believe, and how we show up every day. Our greatest differentiator remains our people and their dedication to delivering on the Purple Promise every day, in every experience.
This year has proven that our strategy is working. Our work pushes forward, and the best is yet to come.
Sincerely,
RAJ SUBRAMANIAM President & CEO, FedEx Corporation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-K
(Mark One) 7) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2026.
OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to : Commission file number 1-15829 FedEx Corporation (Exact Name of Registrant as Specified in its Charter) Delaware 62-1721435 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 942 South Shady Grove Road, Memphis, Tennessee 38120 (Address of Principal Executive Offices) (ZIP Code) Registrant’s telephone number, including area code: (901) 818-7500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, par value $0.10 per share FDX New York Stock Exchange
1.625% Notes due 2027 FDX 27 New York Stock Exchange
0.450% Notes due 2029 FDX 29A New York Stock Exchange
0.450% Notes due 2029 FDX 29B New York Stock Exchange
1.300% Notes due 2031 FDX 31B New York Stock Exchange
3.500% Notes due 2032 FDX 32 New York Stock Exchange
0.950% Notes due 2033 FDX 33 New York Stock Exchange
0.950% Notes due 2033 FDX 33A New York Stock Exchange
4.125% Notes due 2037 FDX 37 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes M No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes 0 NoM
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes M No
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes MZ No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer M Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. VJ
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 0 NoM
The aggregate market value of the common stock held by non-affiliates of the Registrant, computed by reference to the closing price as of the last business day of the Registrant’s most recently completed second fiscal quarter, November 30, 2025, was approximately $64.6 billion. The Registrant has no non-voting stock.
As of July 16, 2026, 236,581,188 shares of the Registrant’s common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement to be delivered to stockholders in connection with the 2026 annual meeting of stockholders to be held on September 28, 2026 are incorporated by reference in response to Part III of this Report.
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K (this “Annual Report”), including (but not limited to) those contained in “Item_ 1. Business”; “Item 1A. Risk Factors”; “Item 1C. Cybersecurity”; “Item 2. Properties”; “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities”; the “Trends Affecting Our Business,” “Business Optimization Costs,” “Income Taxes,” “Outlook,” “Reportable Segments,” “Liquidity Outlook,” and “Critical Accounting Estimates” sections of “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition”; and the “Description of Business Segments and Summary of Significant Accounting Policies,” “Goodwill and Other Intangible Assets,” “Long-Term Debt and Other Financing Arrangements,” “Leases,” “Income Taxes,” “Retirement Plans,” “Business Segments and Disaggregated Revenue,” “Commitments,” and “Contingencies” notes to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance, and business. Forward- looking statements include those preceded by, followed by, or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “forecasts,” “anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends,” or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements, because of, among other things, the risks and uncertainties identified in “Item 1A. Risk Factors” and the other risks and uncertainties you can find in our press releases and other Securities and Exchange Commission (“SEC”) filings.
99 66 99 66. 99 66 99 66. 99 66.
As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward- looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. Unless required to do so by law, we are under no obligation, and we expressly disclaim any obligation, to update or alter any forward- looking statements, whether as a result of new information, future events, or otherwise.
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TABLE OF CONTENTS
Page PARTI Item 1. Business 2 Item 1A. Risk Factors 18 Item 1B. Unresolved Staff Comments 32 Item 1C. Cybersecurity 32 Item 2. Properties 34 Item 3. Legal Proceedings 36 Item 4. Mine Safety Disclosures 36 Information about our Executive Officers 37 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, And Issuer Purchases Of Equity Securities 39 Item 6. [Reserved 40 Item _7. Management’s Discussion and Analysis of Results of Operations and Financial Condition 40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8. Financial Statements and Supplementary Data 66 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 114 Item 9A. Controls and Procedures 114 Item 9B. Other Information 114 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 115 PART III Item 10. Directors, Executive Officers, and Corporate Governance 115 Item 11. Executive Compensation 115 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 115 Item 13. Certain Relationships and Related Transactions, and Director Independence 115 Item 14. Principal Accountant Fees and Services 115 PART IV Item 15. Exhibits and Financial Statements Schedules 116 Item 16. Form 10-K Summary 125
PARTI ITEM 1. BUSINESS Overview
FedEx Corporation (“FedEx”) was incorporated in Delaware on October 2, 1997 to serve as the parent holding company and provide strategic direction to the FedEx portfolio of companies. FedEx provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce, and business services, offering integrated business solutions utilizing its flexible, efficient, and intelligent global network.
Our website is located at fedex.com. Detailed information about our services, solutions, and corporate responsibility initiatives can be found on our website. In addition, we make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all exhibits and amendments to such reports available, free of charge, through our website, as soon as reasonably practicable on the day they are filed with or furnished to the SEC. The Investor Relations page of our website, investors.fedex.com, contains a significant amount of information about FedEx, including our SEC filings and financial and other information for investors. The information that we post on the Investor Relations page of our website could be deemed to be material information. We encourage investors, the media, and others interested in FedEx to visit this website from time to time, as information is updated and new information is posted. The information on our website, however, is not incorporated by reference in, and does not form part of, this Annual Report.
Change in Fiscal Year End
Effective June 1, 2026, we changed our fiscal year end from May 31 to December 31. As a result, we will report operating results covering the seven-month transition period from June 1, 2026, through December 31, 2026 (the “Transition Period”), in a Transition Report on Form 10-K. Following the Transition Period, we will report our operating results on a calendar-year basis, beginning with the fiscal year ending December 31, 2027. Except as otherwise specified, any reference to a year in this Annual Report indicates our fiscal year ended May 31, 2026 or ended May 31 of the year referenced, and comparisons are to the corresponding period of the prior year.
Spin-Off and New Reportable Segments
In December 2024, we announced that FedEx’s Board of Directors decided to pursue a full separation of FedEx’s less-than-truckload freight transportation services business conducted through FedEx Freight, Inc. (“FedEx Freight”). The FedEx Freight business also included FedEx Custom Critical, Inc. (“FedEx Custom Critical”), LTL Select, and other operations historically included within our FedEx Freight reporting segment. On May 13, 2026, the FedEx Board of Directors declared a pro rata dividend of 80.1% of the outstanding shares of common stock of FedEx Freight Holding Company, Inc. (“FedEx Freight Holding’’) to FedEx’s stockholders of record as of the close of business on May 15, 2026 (the “Record Date”) to achieve the separation (the “Spin-Off’). On June 1, 2026, FedEx stockholders received one share of FedEx Freight common stock for every two shares of FedEx common stock held as of the Record Date. FedEx retained 19.9% of the outstanding shares of FedEx Freight common stock. As a result of the Spin-Off, effective June 1, 2026, FedEx will no longer consolidate the FedEx Freight business and FedEx Freight is no longer a reportable segment.
Prior to the Spin-Off, our reportable segments were Federal Express Corporation (“Federal Express”’), the world’s largest express transportation company and a leading North American provider of small-package ground delivery services, and FedEx Freight. For financial information concerning our reportable segments in place prior to the Spin-Off, refer to “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Item 8. Financial Statements and Supplementary Data” of this Annual Report. Part I of this Annual Report contains certain references to the financial and operational performance of our reportable segments in place prior to the Spin-Off. Additional information regarding our reportable segments in place during 2026 and 2025 can be found in “Item 1. Business” and “Item 2. Properties” of our Annual Report for the year ended May 31, 2025.
Following the Spin-Off and beginning the first quarter of the Transition Period, we realigned our internal reporting and management structure, resulting in the identification of two new reportable segments: Express U.S. Domestic and Express International. Prior to this change, these two segments comprised the Federal Express reportable segment. In addition, FedEx Logistics, Inc. (“FedEx Logistics”), which provides customs brokerage and global ocean and air freight forwarding, was moved from “Corporate, other, and eliminations” to Express International. These changes reflect the realignment of our organizational structure and reporting regularly provided to our chief operating decision maker to assess performance and allocate resources. These changes had no impact on our consolidated results of operations or financial position. For more information about our new reportable segments effective June 1, 2026, please refer to the “Business Segments” below.
Strategy
The collective FedEx brand gives us our competitive edge. Further, our strategy allows us to manage our business as a portfolio, in the long-term best interest of the enterprise. As a result, we base decisions on capital investment and service additions or enhancements
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upon achieving the highest overall long-term return on invested capital for our business as a whole. We focus on making appropriate investments in the technology and assets necessary to optimize our long-term earnings performance and cash flow. Our business strategy also provides flexibility in structuring our network to align with varying macroeconomic conditions and customer demand for the market segments in which the customer operates, allowing us to leverage and manage change. Volatility, uncertainty, and innovation have become the norms in the global transportation market, and we are able to use our flexibility to accommodate changing conditions in the global economy.
For more than 50 years, we have been building networks that have created a differentiated and unmatched portfolio of services while continuously evolving to meet the changing needs of our customers and the market by connecting people and possibilities. We are shifting from a collection of separate but powerful operations to one integrated, flexible, efficient, and intelligent network that delivers better service, runs on a modern technology stack and has a structurally lower cost to serve. We continue to evolve to improve our operational efficiency, enhance profitability, and build a simplified experience to better serve our customers.
In connection with our one FedEx consolidation plan, on June 1, 2024, FedEx Ground Package System, Inc. (“FedEx Ground”) and FedEx Corporate Services, Inc. were merged into Federal Express Corporation (“Federal Express”), becoming a single company operating a unified, fully integrated air-ground express network under the respected FedEx brand.
In 2026, we continued our network transformation. Through Network 2.0, we continue to transform our surface network in the U.S. and Canada by modernizing and consolidating our sortation facilities and equipment, reducing pickup-and-delivery routes, and optimizing our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network. Network 2.0 has been fully implemented in Canada and we expect to complete the U.S. implementation by the end of calendar year 2027. With Tricolor, we are redesigning our international air network by deploying our aircraft strategically to optimize asset utilization and enable a focus on growth in the premium global freight market. Internationally, we are focused on leveraging tools and best practices from our U.S. operations to transform our international operations by scaling to higher-value international mix, reengineering the network, and driving end-to-end process efficiencies. See “Business Segments” below, “Item 1A. Risk Factors,” and “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information on our transformation programs.
Our digital transformation is underpinned by our digital backbone and artificial intelligence (“AI”) capabilities, enabling intelligent orchestration, standardization, and digitized and Al-enabled workflows that drive faster response, fewer exceptions, and lower our cost to serve. Our digital transformation is focused on efficiency, differentiation, and new value creation. The size and scale of our global network gives us key insights into global supply chains and trends. This foundation provides an immense amount of data we can use to build better insights, improve the customer experience, and differentiate our service offerings.
“Safety Above All” is the first and foremost value in every aspect of our business. We are committed to making our workplaces and communities safer for our team members, customers, and the public. This philosophy is embedded in our day-to-day work through rigorous policies, continual education and engagement, and investments in technology designed to prevent accidents.
Through our global transportation, information technology, and retail networks, we help to facilitate an ongoing and unprecedented expansion of customer access — to goods, services, and information. We believe it would be extremely difficult, costly, and time- consuming to replicate our global network, which reflects decades of investment, innovation, and expertise, includes the world’s largest all-cargo air fleet, and connects more than 99% of the world’s gross domestic product. We continue to position our company and team members to facilitate and capitalize on this access and to achieve stronger long-term growth, productivity, and profitability.
Business Segments
Effective June 1, 2026, we have two reporting segments: Express U.S. Domestic and Express International. Our remaining businesses are reported as Corporate, other, and eliminations. Express U.S. Domestic and Express International are collectively referred to as Federal Express.
Federal Express
Federal Express pioneered the express transportation industry over 50 years ago in 1973 and remains the industry leader today, providing a range of rapid, reliable, time- and day-definite delivery services to more than 220 countries and territories through an integrated air-ground express network.
As of May 31, 2026, Federal Express employed approximately 452,000 employees and had approximately 84,000 drop-off locations (including FedEx Office stores and FedEx OnSite locations, such as over 15,000 Walgreens and Dollar General stores), 700 aircraft, and over 180,000 motorized vehicles in its global network. Federal Express contracts with approximately 5,300 independent small businesses to conduct certain linehaul and pickup-and-delivery operations. Federal Express also provides cross-border enablement and
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technology solutions and e-commerce transportation solutions. As of May 31, 2026, Federal Express employed approximately 233,000 permanent full-time and approximately 219,000 permanent part-time employees.
The pilots at Federal Express, who are a small number of its total employees, are represented by the Air Line Pilots Association, International (“ALPA”) and are employed under a newly ratified collective bargaining agreement (“CBA”). The new CBA was ratified by Federal Express pilots in a vote concluded on June 9, 2026, and is the product of several years of bargaining under the Railway Labor Act of 1926, as amended (“RLA”), including mediation by the National Mediation Board (the U.S. governmental agency that oversees labor agreements for entities covered by the RLA). The new CBA took effect June 29, 2026, and is scheduled to become amendable in December 2030. See Note 20 of the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report for more information.
In addition to our pilots, certain of Federal Express’s non-U.S. employees are unionized. FedEx believes its employee relations are excellent. See “Item 1A. Risk Factors” of this Annual Report for more information.
Express U.S. Domestic Segment
Express U.S. Domestic offers a wide range of U.S. domestic shipping services for packages and freight. We offer three overnight package delivery services (FedEx First Overnight, FedEx Priority Overnight, and FedEx Standard Overnight) and three deferred package delivery services (FedEx 2Day, FedEx 2Day AM, and FedEx Express Saver). FedEx SameDay service is available 365 days a year throughout all 50 states for urgent shipments up to 150 pounds. We also offer express overnight and deferred freight services to handle the needs of the time-definite freight market.
Express U.S. Domestic is also a leading provider of day-definite business and residential delivery services for packages weighing up to 150 pounds through our FedEx Ground Commercial and FedEx Home Delivery services. Our service reaches 100% of the continental U.S. population. We offer day-definite delivery to 99% of the U.S. population on Saturdays and to nearly two-thirds of the U.S. population on Sundays. We also offer an economy service that is available for the consolidation and delivery of high volumes of low-weight, less time-sensitive business-to-consumer packages to any residential address in the U.S.
Express U.S. Domestic’s largest sorting facility, located in Memphis, Tennessee, serves as the center of our multiple hub-and-spoke system and worldwide air network. A second national air hub facility is located in Indianapolis, Indiana. We are making investments over multiple years in our facilities to expand and modernize our Memphis hub and modernize our Indianapolis hub. In addition to these national air hubs, Express U.S. Domestic operates regional air hubs in: Fort Worth, Texas; Newark, New York; and Oakland, California and major metropolitan sorting facilities at airports in: Chicago, Illinois; Los Angeles, California; and Atlanta, Georgia.
Express U.S. Domestic also operates a highly flexible network of approximately 1,200 facilities, as of May 31, 2026, that support its surface operations. Through Network 2.0, the multi-year effort to improve the efficiency with which we pick up, transport, and deliver packages in the U.S., these operations are being consolidated. As of May 31, 2026, we have implemented Network 2.0 at approximately 360 locations in the U.S. Under Network 2.0, we utilize both employee couriers and service providers in surface operations using a market-by-market approach. See “Item 1A. Risk Factors” and “Item _7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information on Network 2.0.
Express U.S. Domestic continues to maximize the use of existing surface facilities through Network 2.0. Many of these facilities utilize advanced automated unloading and sorting technology to streamline the handling of millions of packages daily. This technology includes a yard management system in many facilities which interacts with GPS tags on trailers to automatically notify the control center when a trailer arrives and departs. Using overhead laser and six-sided camera-based bar code scan technology, hub conveyors electronically guide packages to their appropriate destination chute where they are loaded for transport to their respective destination stations for local delivery.
Express U.S. Domestic is also implementing dynamic scheduling tools at many surface facilities to match sort staffing with volumes and is introducing capabilities to allow certain packages to bypass station sortation and proceed directly to vehicles, which helps to maximize station capacity. In addition, dock modernization efforts, including a network operating plan that uses machine learning and algorithms to develop more detailed and accurate volume forecasts, are enhancing productivity at these facilities in furtherance of our transformation initiatives. We are also testing autonomous, driverless technologies in the handling of large, non-conveyable packages, as well as robotic product sortation systems to sort small packages.
Express U.S. Domestic offers service providers advanced route optimization technology that includes near real-time data that service providers may use to plan efficient delivery routes and vehicle mix. To promote safe operations, service providers contracting with us agree to use certain safety-related vehicle technologies and satisfy certain driver standards. Additionally, we deploy software systems and internet-based applications to offer customers new ways to connect internal package data with external delivery information. We provide shipment tracing and proof-of-delivery signature functionality through the FedEx website, fedex.com. For additional information regarding FedEx e-commerce tools and solutions, including FedEx Delivery Manager and FedEx Returns Technology, see “Customer-Driven Technology — E-Commerce and Digital Solutions” below.
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Express International Segment
Express International offers a wide range of shipping services for delivery of packages and freight, connecting markets that generate more than 99% of the world’s gross domestic product. Our package services include a money-back guarantee. Our unmatched air route authorities and extensive transportation infrastructure, combined with leading-edge information technologies, make it the world’s largest express transportation company.
Express International package delivery services are available to more than 220 countries and territories, with a variety of time-definite services to meet distinct customer needs. Our FedEx International Economy service provides time-definite delivery typically in two to five business days. Our FedEx International First service provides time-definite delivery to select postal codes in more than 25 countries and territories, with delivery to select U.S. ZIP Codes as early as 8:00 a.m. from more than 190 countries, delivery by 10:00 a.m. in one business day from the U.S. to Canada, and delivery by 11:00 a.m. in one business day from the U.S. to Mexico. Our FedEx International Priority service provides end-of-day time-definite delivery in one to three business days to more than 220 countries and territories, and our FedEx International Priority Express service provides midday time-definite delivery in one to three business days to more than 30 countries and territories. We also offer domestic pickup-and-delivery services within certain non-U.S. countries, including Canada, Australia, France, the United Kingdom, Italy, Mexico, Germany, Poland, Chile, China, Brazil, India, and in Southern Africa. In addition, we offer comprehensive international express and deferred freight services, real-time tracking, and advanced customs clearance. Our FedEx International Connect Plus service, an e-commerce service currently available from over 70 origin countries to over 190 destination countries and territories, provides day-definite delivery typically within two to five business days.
FedEx Logistics provides international trade services, specializing in customs brokerage, global ocean and air freight forwarding, and managed transportation. We also provide customs clearance services at our major U.S. air hub facilities and border customs clearance for U.S. surface operations, as well as global door-to-door air charter solutions. FedEx Logistics offers customized trade solutions that enable improved compliance practices through FedEx Trade Solutions. FedEx Logistics plays a key role for Express International, offering a comprehensive suite of integrated logistics solutions, providing air and ocean cargo transportation, specialty transportation, customs brokerage, and trade management tools and data, as well as third party logistics. FedEx Logistics has the unique ability to leverage the power of the FedEx transportation networks as well as its global network of service providers.
Pricing
Federal Express periodically publishes updates to the list prices for the majority of its services in its Service Guides. In general, shipping rates are based on the service selected, origin, destination, weight, size, any ancillary service charges, and whether the customer charged the shipment to a FedEx account. On January 5, 2026, a 5.9% average list price increase was implemented for services. List prices also increased for contractual services at this time.
During times of elevated volumes, high demand for capacity, and increased operating costs across our network, Federal Express will implement Demand surcharges. Demand surcharges are determined for each market based on regular assessments of shipment volume and capacity within our network.
Federal Express has an indexed fuel surcharge for Express U.S. Domestic shipments, as well as Express International U.S. outbound and internationally originating shipments, where permitted under law and contractually possible, which is adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price from roughly two weeks prior to the week in which it is assessed. Effective June 1, 2026, the tables used to determine fuel surcharges for Express U.S. Domestic services were updated. The tables used to determine fuel surcharges for Express International services were updated in May 2026. See the “Results of Operations and Outlook — Consolidated Results — Fuel” section of “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information.
Retail Access Network
FedEx Office offers retail access to Federal Express shipping services at all of its retail locations. Federal Express also has alliances with certain other retailers to provide in-store drop-off sites, including at more than 15,000 Walgreens and Dollar General stores. Our unstaffed FedEx Drop Boxes provide customers the opportunity to drop off packages in office buildings, shopping centers, and corporate or industrial parks. Federal Express has a total of approximately 84,000 drop-off locations.
Fuel Supplies and Costs
During 2026, Federal Express purchased jet fuel from various suppliers under contracts that vary in length and which provide for estimated amounts of fuel to be delivered. The fuel represented by these contracts is purchased at market prices. We do not have any jet fuel hedging contracts.
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The following table sets forth Federal Express’s costs for jet fuel and its percentage of FedEx Corporation consolidated revenues for the last five fiscal years:
Total Jet Percentage of
Fuel Costs Consolidated Fiscal Year (in millions) Revenue 2026 $ 3,050 3.2% 2025 2,832 3.2 2024 3,598 4.1 2023 4,515 5.0 2022 3,867 4.1
Most of Federal Express’s vehicle fuel needs are satisfied by retail purchases with various discounts. Corporate, Other, and Eliminations
The “Corporate, other, and eliminations” segment is comprised of FedEx Dataworks, Inc. (“FedEx Dataworks”), FedEx Office and Print Services, Inc. (“FedEx Office”), and FedEx Supply Chain Distribution System, Inc. (“FedEx Supply Chain’). FedEx Dataworks, Inc. (“FedEx Dataworks”’) is focused on leveraging the power of our network and establishing our data estate to serve as an intelligence engine for global value chains, connecting fragmented systems and enhancing efficiency, decisioning, and providing context for our customers’ supply chains. FedEx Office and Print Services, Inc. (“FedEx Office”) provides document and business services and retail access to our package transportation businesses and FedEx Supply Chain Distribution System, Inc. (“FedEx Supply Chain’’) offers integrated supply chain management solutions. FedEx Dataworks, FedEx Office, and FedEx Supply Chain are included in “Corporate, other, and eliminations” in our segment reporting. For more information about FedEx Dataworks, FedEx Office, and FedEx Supply Chain, please see “Corporate, other, and eliminations” under “Business Segments” below.
FedEx Dataworks
The FedEx Dataworks operating segment is focused on leveraging the power of our network and establishing our data estate to serve as an intelligence engine for global value chains, connecting fragmented systems and enhancing efficiency, decisioning, and context for our customers’ supply chains.
FedEx Dataworks is centralizing data onto a single enterprise platform to create a unified neural network. By adopting this single platform — where machine learning models are reusable and self-learning — we are able to solve problems and deliver value to stakeholders at speed, scale, and with the right economics. This system serves as an adaptive decision engine, connecting planning and execution into a continuous loop that learns from disruption and adjusts in real time. By bridging the digital and physical worlds, our insights move beyond passive alerts to automate resolutions, turning fragmented data into coordinated action for our customers.
FedEx Dataworks is based in Memphis, Tennessee. As of May 31, 2026, FedEx Dataworks had approximately 200 employees. FedEx Office
FedEx Office operates adjacent to the strategy for all on-site, owned, and third-party retail channel locations, providing convenient access to shipping expertise with reliable service. The FedEx Office brick-and-mortar network features retail stores, FedEx Office locations inside Walmart stores, manufacturing plants, and on-site business centers at colleges and universities, hotels, convention centers, corporate campuses, and healthcare campuses. Many of these locations are open later in the evenings to accommodate urgent printing projects and delivery drop-offs.
FedEx Office offers a suite of printing and shipping management solutions that are flexible and scalable, allowing customers to meet their unique printing and shipping needs. The network provides an adaptable cost model helping to save time, labor, and overhead by freeing up resources and avoiding fixed costs associated with large-scale printing and e-commerce parcel volumes. This is especially valuable to our enterprise customers looking to outsource their print supply chain. Services include digital printing, professional finishing, document creation, design solutions, direct mail, signs and graphics, custom-branded boxes, copying, computer rental, free Wi-Fi, corporate print solutions, shredding, expedited U.S. passport processing and renewal through a collaboration with a registered U.S. passport agency, and fully digital notarization services through FedEx Office Online Notary.
With the FedEx Office Print On Demand solution, customers can use their laptops or mobile devices to design their print needs or access their personal cloud accounts, and print directly to any FedEx Office location in the U.S., or have their order delivered right to their door. Customers also have the flexibility of using FedEx Office’s Print & Go solutions to print at self-serve locations from USBs, the cloud, or through email. Print & Go solutions allow customers to access files using popular cloud providers Google Drive™, Box, Microsoft OneDrive®, and from FedEx Office’s own My Online Documents, making printing easy.
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FedEx Office has prioritized e-commerce and digital offerings as a growth opportunity for the enterprise/large, medium, and small business customers we serve. FedEx Office has partnered with a content and creative design platform to form a digital design-to-print marketplace offering millions of images and illustrations, an extensive library of templates, and a simple drag-and-drop interface to create custom business materials from fedex.com on any device, with next-day printing on many requests available at FedEx Office stores. Additionally, FedEx Office has partnered with a leading marketing solutions company to introduce an online branded promotional products marketplace that allows businesses to customize and purchase high-quality promotional products. FedEx Office has also made investments in new machines and technology, enhancing capabilities in narrow format color, grand format, large format, color management, enhanced finishing, and other technologies.
FedEx Office provides convenient access to the full range of Federal Express shipping services for infrequent shippers and FedEx account holders. Customers may have their Federal Express packages delivered to any FedEx Office customer-facing location nationwide through the Hold at FedEx Location service, free of charge, and may redirect packages to these locations through Redirect to Hold or AutoRedirect to Hold services. FedEx Office offers the Ship and Go kiosk, a convenient self-serve shipping kiosk in approximately 1,500 locations. The Ship and Go kiosk allows customers to generate a label via a mobile label or QR code and drop off packages in a secure drop bin for a seamless and efficient customer experience. FedEx Office facilitates e-commerce and returns through FedEx Returns Technology, which allows for in-store printing of return shipping labels. Through FedEx Consolidated Returns, shoppers who purchased from participating merchants can drop off the items they wish to return with no box or label required at a FedEx Office location. For information regarding FedEx Consolidated Returns, see “Customer-Driven Technology — E- Commerce and Digital Solutions.”
FedEx Office also offers packing services, and packing supplies and boxes are included in its retail offerings. By allowing customers to have items professionally packed by specially trained FedEx Office team members and then shipped, FedEx Office offers a complete “pack-and-ship” solution. FedEx Office also offers FedEx Pack Plus, which includes custom box building capabilities and techniques; a robust assortment of specialty boxes; and additional packing supplies, equipment, and tools to serve our customers’ needs. As of May 31, 2026, FedEx Office, which is based in Plano, Texas, operated approximately 2,000 customer-facing stores and had approximately 12,000 employees.
FedEx Supply Chain
FedEx Supply Chain is a supply chain solutions provider specializing in Product Lifecycle Logistics for technology, retail, consumer and industrial goods, and healthcare industries. With nearly 10,000 employees at over 150 facilities as of May 31, 2026, FedEx Supply Chain provides a comprehensive range of integrated logistics services to enable growth, minimize cost, mitigate supply chain risk, and improve customer services. Service offerings include inbound logistics, warehousing and distribution, fulfillment, contract packaging and product configuration, systems integration, returns process and disposition, test, repair, refurbishment, and product liquidation. FedEx Supply Chain has a small number of employees who are members of unions.
FedEx Supply Chain’s FedEx Fulfillment e-commerce solution helps small and medium-sized businesses fulfill orders from multiple channels, including websites and online marketplaces, and manage inventory for their retail stores. The FedEx Fulfillment platform is designed to be an easy-to-use and all-in-one logistics solution through which customers have complete visibility into their products, giving them an easy way to track items, manage inventory, analyze trends, and make more informed decisions by better understanding shoppers’ spending behaviors.
On July 1, 2026, FedEx announced that it would sell its FedEx Supply Chain business to CMA CGM Group for $1.4 billion as part of a strategic portfolio streamlining effort. The transaction is expected to close in the second half of calendar year 2026. Upon completion of the sale, FedEx will no longer consolidate FedEx Supply Chain and FedEx Supply Chain will no longer be included in “Corporate, other, and eliminations” in our segment reporting.
Competition
As described in “Item 1A. Risk Factors” of this Annual Report, the U.S. domestic and international package and the U.S. domestic freight and international freight markets are both highly competitive and sensitive to price and service, especially in periods of little or no macroeconomic growth. The ability to compete effectively depends upon price, frequency, reliability, capacity and speed of scheduled service, ability to track packages, extent of geographic coverage, innovative service offerings, and the fit within the customer’s overall supply chain.
Competitors for Express U.S. Domestic include other package delivery concerns, principally United Parcel Service, Inc. (“UPS”), passenger airlines offering express package services, regional delivery companies, air freight forwarders, and the USPS. Express International competitors are principally DHL, UPS, DPD (a subsidiary of France’s La Poste’s GeoPost), General Logistics Systems (a Royal Mail-owned parcel delivery group), foreign postal authorities, passenger airlines, air freight forwarders, regional carriers, and all-cargo airlines. We also compete with startup companies that combine technology with crowdsourcing to focus on local market needs. In addition, some high-volume package shippers, such as Amazon.com, are developing and implementing in-house delivery capabilities and utilizing independent contractors and delivery service providers for deliveries, and may be considered competitors in
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addition to customers. For example, Amazon.com has established a network of hubs, aircraft, and vehicles, recently began offering an LTL freight service for inbound shipments to its distribution facilities, and has offered its internal delivery capabilities broadly to third parties. Many of Express International’s competitors are government-owned, -controlled, or -subsidized carriers, which may have greater resources, lower costs, less profit sensitivity, and more favorable operating conditions than Express International. For more information, see “Item 1A. Risk Factors” of this Annual Report.
Customer-Driven Technology
FedEx is a world leader in technology, and late FedEx founder and long-time Chairman and Chief Executive Officer Frederick W. Smith’s vision that “the information about a package is as important as the delivery of the package itself” remains at the core of our comprehensive technology strategy. We strive to build technology solutions that will solve our customers’ business problems with simplicity, convenience, speed, and reliability. Additionally, FedEx stands at the nexus of digital and physical networks, a crucial intersection for the success of e-commerce and time-sensitive deliveries. We continue to expand our e-commerce convenience network and explore innovative alternatives to help customers and businesses deliver. We have substantially advanced our major information technology transition from traditional mainframe computing to cloud-based systems, delivering significant benefits in flexibility, security, speed to market, and resiliency. See “FedEx Dataworks” above for more information on the solutions we are creating to enhance the end-to-end experience of our customers by making supply chains smarter for everyone.
Shipping Management and Precision Tracking
The fedex.com website is widely recognized for its speed, ease of use, and customer-focused features. The advanced tracking capability within FedEx Tracking provides customers with a consolidated view of inbound and outbound shipments. Additionally, an advanced machine learning and artificial intelligence model developed by FedEx has enhanced tracking capabilities on fedex.com, delivering greater estimated delivery date accuracy, including updates for early or delayed shipments. FedEx Virtual Assistant on fedex.com is an artificial-intelligence-enabled service that provides answers to customer shipping questions, allowing our customer service representatives and sales professionals to focus on higher-value customer interactions. During 2026, we launched confidence- based notification optimization, leveraging advanced analytics to further improve the accuracy and reliability of the estimated delivery dates and estimated delivery time windows provided to customers.
SenseAware Mobile, a FedEx innovation currently available in over 120 countries worldwide, allows customers to stay connected to their critical shipments by providing real-time updates regarding current location, temperature, relative humidity, barometric pressure readings, light exposure, shock events, tilt beyond a certain angle, and healthcare subsampling. Additionally, FedEx SenseAware ID is a lightweight sensor-based logistics device that delivers a new level of precision tracking. The enhanced location visibility provided by FedEx SenseAware ID is creating opportunities for FedEx customers to reimagine their supply chains through real-time updates on a package’s location within the Express U.S. Domestic network.
FedEx Mobile is a suite of solutions including the FedEx mobile application, FedEx mobile website, and text messaging. The FedEx Mobile app provides convenience for recipients to track packages and access FedEx Delivery Manager to customize home deliveries. Shippers can easily get rates and estimated delivery times and swiftly create a shipping label. All users can quickly find the nearest FedEx location for Hold at Location or drop-off. It is available on Android and Apple devices. The FedEx Mobile app is available in more than 220 countries and territories and 40 languages.
FedEx Surround is a visibility platform that allows customers to view and manage shipments in one place. The tool provides global visibility into shipments with package-level insights in near real-time. Advanced features include predictive delay notifications, weather advisories, and customizable views and reports and intervention capability.
FedEx also offers Picture Proof of Delivery for express and ground residential deliveries in the U.S. and Canada that are released
without a signature. The capability has since expanded to over 60 countries and territories globally. Additionally, our FedEx Ship Manager suite of solutions has offered a wide range of options to help our customers manage their parcel and freight shipping and associated processes.
E-Commerce and Digital Solutions
FedEx Delivery Manager allows our U.S. residential customers to customize home deliveries to fit their schedule by providing a range of options to schedule dates, locations, and times of delivery. Additionally, FedEx Returns Technology, a comprehensive solution for returns management, provides high-volume merchants and e-tailers complete visibility into returns and an easy way to track shipments, manage inventory, analyze returns trends, and make more informed decisions based on shoppers’ returns behaviors. In 2025, FedEx announced the launch of FedEx Easy Returns, a cost-effective way to combine customer returns into one shipment. FedEx Rewards allows businesses in the U.S. to earn rewards for their loyalty in shipping and printing with FedEx.
In January 2026, we announced FedEx Tracking+ and FedEx Returns+, Al-powered, white-labeled post-purchase solutions designed for enterprise customers and embedded directly within merchants’ digital channels. These solutions provide real-time delivery and
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returns visibility, automate responses to common customer inquiries, enable proactive and personalized customer communications, and deliver analytics to help businesses identify operational issues and improve performance. By integrating these capabilities into the post-purchase experience, these solutions help customers strengthen brand engagement, reduce support demand, and enhance overall customer satisfaction. We are scaling adoption in the United States and evaluating expansion opportunities internationally and across additional customer segments.
The FedEx retail convenience network also utilizes third-party retailers to receive and hold packages for FedEx customers. The U.S. retail convenience network has grown to include over 15,000 Walgreens and Dollar General stores in addition to our approximately 2,000 FedEx Office locations and over 500 FedEx Ship Centers. In addition to allowing for an easy returns and drop-off experience for shoppers, the retail convenience network is well positioned to serve as a “buy online, pickup in store” network for small and medium merchants without brick-and-mortar locations. We have also added FedEx Returns Technology at Walgreens locations, which allows for in-store printing of return shipping labels and eliminates the need to include a return label in every package.
We have expanded e-commerce delivery options for retailers with FedEx Extra Hours, a service that enables participating retailers to fulfill e-commerce orders into the evening and receive late pickups by Express U.S. Domestic, with next-day local delivery and two- day shipping to any address in the continental U.S. FedEx Extra Hours, which is currently available to select customers, allows retailers to extend evening order cutoff times by five to eight hours, with some as late as midnight, depending on their current order fulfillment process.
In March 2026, we launched FedEx SameDay Local, a technology-enabled delivery solution that expands our last-mile capabilities and supports increasing demand for faster and more flexible delivery options. This offering integrates into retailer checkout experiences, enabling customers to provide greater choice and convenience to end consumers while benefiting from real-time visibility and delivery updates. FedEx SameDay Local supports evolving customer expectations and strengthens our ability to participate in same-day and on-demand delivery opportunities.
In May 2026, we introduced an AI-driven assistant within the FedEx Developer Portal to help developers more efficiently access documentation, receive real-time technical guidance, and accelerate integrations with FedEx digital services. Also in 2026, we announced separate strategic partnerships with ServiceNow and Dun & Bradstreet to provide customers with more intelligent supply chain solutions powered by FedEx Dataworks. These collaborations include AI-powered workflows designed to improve supply chain visibility, exception management, and procurement decision-making, as well as predictive insights that help identify supplier risk and retail supply and demand trends.
See “The Environment” below for information about our FedEx Sustainability Insights tool, which gives customers and suppliers access to estimated CO2e emission data associated with FedEx shipments.
Autonomous Solutions
FedEx continues to explore the use of autonomous delivery technology within its operations. We continued our ongoing pilot program with Aurora Innovation, Inc. (“Aurora”) and PACCAR Inc. (““PACCAR”) to test Aurora’s autonomous driving technology in PACCAR autonomous vehicle platform-equipped trucks within FedEx linehaul operations. Throughout the pilot, we have tested multiple lanes and trailer configurations to evaluate performance across a range of real-world operating conditions.
Marketing
The FedEx brand name symbolizes outstanding service, reliability, and speed. Emphasis is continually placed on promoting and protecting the FedEx brand, one of our most important assets. As a result, FedEx is one of the most widely recognized brands in the world. In addition to television, print, and digital advertising, we promote the FedEx brand through sponsorships and special events. For example, FedEx sponsors:
¢ FedEx is the “Official Delivery Service Sponsor” and “Official Office Services Provider” of the NFL, through which we conduct events and other activities to promote the FedEx brand, such as the “FedEx Air & Ground” NFL Players of the Week and Players of the Year Awards.
¢ The Union of European Football Associations (UEFA) Champions League, which is broadcast in over 200 countries and territories worldwide.
¢ The season-long FedExCup competition on the PGA Tour, and the FedEx St. Jude Championship, a PGA Tour event that has raised millions of dollars for St. Jude Children’s Research Hospital and is one of three annual FedExCup playoff events.
¢ FedExForum in Memphis, Tennessee, a multipurpose sports and entertainment arena that serves as the home arena for the NBA’s Memphis Grizzlies and the University of Memphis men’s basketball team.
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Information Security
FedEx has a team of highly qualified professionals dedicated to securing information about our customers’ shipments and protecting our customers’, vendors’, and employees’ privacy, and we strive to provide a safe, secure online environment for our customers. We are committed to compliance with applicable information security laws, regulations, and industry standards. For more information, see “Ttem 1A. Risk Factors” and “Item 1C. Cybersecurity” of this Annual Report.
Seasonality
For information on the seasonality of our business, see the “Results of Operations and Outlook — Consolidated Results — Seasonality of Business” section of “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report.
Trademarks
We own numerous trademarks and intellectual property rights relating to the “FedEx” trademark. Those trademarks, service marks, and trade names are essential to our worldwide business, and include FedEx, FedEx Express, FedEx Ground, FedEx Office, FedEx Logistics, FedEx Dataworks, and FedEx Supply Chain. We also own other trademarks which we license for use in other lines of business. In connection with the Spin-Off, we licensed the use of FedEx Freight and FedEx Custom Critical to FedEx Freight Holding. FedEx takes active measures to enforce its intellectual property rights where appropriate.
Regulation
Air. Under the Federal Aviation Act of 1958, as amended (the “Federal Aviation Act”), both the U.S. Department of Transportation (“DOT”) and the Federal Aviation Administration (“FAA”) exercise regulatory authority over FedEx’s air operations. The FAA’s regulatory authority relates primarily to operational aspects of air transportation, including aircraft standards and maintenance, as well as personnel and ground facilities, which may from time to time affect the ability of FedEx to operate its aircraft in the most efficient manner. FedEx holds an air carrier certificate granted by the FAA pursuant to Part 119 of the federal aviation regulations. This certificate is of unlimited duration and remains in effect so long as FedEx maintains its standards of safety and meets the operational requirements of the regulations.
The DOT’s authority relates primarily to economic aspects of air transportation. The DOT’s jurisdiction extends to aviation route authority and to other regulatory matters, including the transfer of route authority between carriers. FedEx holds various certificates issued by the DOT authorizing the company to engage in U.S. and international air transportation of property and mail on a worldwide basis. These certificates remain in effect as we maintain our economic fitness to perform all-cargo services following the one FedEx consolidation.
Under the Aviation and Transportation Security Act of 2001, as amended, the Transportation Security Administration (“TSA”), an agency within the Department of Homeland Security, has responsibility for aviation security. The TSA requires FedEx to comply with a Full All-Cargo Aircraft Operator Standard Security Plan, which contains evolving and strict security requirements. These requirements are not static, but change periodically as the result of regulatory and legislative requirements, imposing additional security costs and creating a level of uncertainty for our operations. It is reasonably possible that these rules or other future security requirements could impose material costs on us.
FedEx participates in the Civil Reserve Air Fleet (“CRAF’’) program. Under this program, the U.S. Department of Defense may requisition for military use certain of FedEx’s wide-bodied aircraft in the event of a declared need, including a national emergency. FedEx would be compensated for the operation of any aircraft requisitioned under the CRAF program at standard contract rates established each year in the normal course of awarding contracts. Through its participation in the CRAF program, FedEx is entitled to bid on peacetime military cargo charter business. FedEx, together with a consortium of other carriers, currently contracts with the U.S. government for such charter flights.
See “Item 1A. Risk Factors” of this Annual Report for discussion of regulations related to pilots, including the proposed pilot flight and duty time regulations, that could affect our business.
Ground. The ground transportation performed by employees of FedEx and by service providers is integral to its air transportation services. The enactment of the Federal Aviation Administration Authorization Act of 1994 abrogated the authority of states to regulate the rates, routes, or services of intermodal all-cargo air carriers and most motor carriers. States may now only exercise jurisdiction over safety and insurance. FedEx is registered in those states that require registration.
The interstate operations of FedEx that conduct certain linehaul and pick-up and delivery operations are currently regulated by the DOT and the Federal Motor Carrier Safety Administration, which retain oversight authority over federally regulated motor carriers. Federal law preempts the regulation by the states of rates, routes, and services in interstate freight transportation. Like other interstate
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motor carriers, our operations are subject to certain DOT safety requirements governing interstate operations. In addition, vehicle weight and dimensions remain subject to both federal and state regulations.
International. FedEx’s international authority permits it to carry cargo and mail from points in its U.S. route system to numerous points throughout the world. The DOT regulates international routes and practices and is authorized to investigate and take action against discriminatory treatment of U.S. air carriers abroad. The right of a U.S. carrier to serve foreign points is subject to the DOT’s approval and generally requires a bilateral agreement between the U.S. and the foreign government. In addition, the carrier must then be granted the permission of such foreign government to provide specific flights and services. The regulatory environment for global aviation rights may from time to time impair the ability of FedEx to operate its air network in the most efficient manner, and efficient operations often utilize open skies provisions of aviation agreements. Additionally, global air cargo carriers, such as FedEx, are subject to current and potential additional aviation security regulation by U.S. and foreign governments.
Our operations outside of the U.S., such as FedEx’s international domestic operations, are also subject to current and potential regulations, including certain postal regulations and licensing requirements, that restrict, make difficult, and sometimes prohibit, the ability of foreign-owned companies such as FedEx to compete effectively in parts of the international domestic transportation and logistics market.
Environmental
Noise: The FAA, with the assistance of the U.S. Environmental Protection Agency (“EPA”), is authorized to establish standards governing aircraft noise. FedEx’s aircraft fleet is in compliance with current FAA noise standards. Although the Airport Noise and Capacity Act of 1990 established a National Noise Policy that enables certain airport operators to implement noise abatement programs, it created an opportunity for FedEx to plan for noise reduction and better respond to local noise constraints. Additionally, certain U.S. airport operators have implemented local noise regulations, and certain foreign jurisdictions impose noise-based limitations on airline operations. Neither the National Noise Policy nor any domestic or foreign local noise regulations have a material effect in any of FedEx’s significant markets.
Greenhouse Gas Emissions: Views about climate change, including the effect of global warming, have led to significant U.S. and international legislative and regulatory efforts to limit greenhouse gas (“GHG”) emissions, including our aircraft and vehicle engine emissions. Increasingly, state and local governments are also considering GHG regulatory requirements. Compliance with such regulation and the associated potential cost is complicated by the fact that various countries and regions are following different approaches to the regulation of climate change. In 2016, the International Civil Aviation Organization (“ICAO”) formally adopted a global, market-based emissions offset program known as the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”) in lieu of a patchwork of country-level requirements to address emissions from international flights. This program established a goal for the aviation industry to achieve carbon neutral growth in international aviation beginning in calendar 2021. Any growth above a global industry emissions baseline would need to be addressed using either eligible carbon offset credits or qualifying sustainable aviation fuel (“SAF”) purchases. As a result of the COVID-19 pandemic’s effect on international aviation, during the pilot phase of the CORSIA program (from calendar 2021 to calendar 2023), flight activity did not exceed the baseline, so airlines had no offsetting obligations. During the subsequent first phase of the program, which runs from calendar 2024 to calendar 2026, flight activity is rebounding, and emissions are expected to exceed the baseline. The U.S. agreed to participate but has not fully implemented CORSIA to date. In the interim, we continue to voluntarily report our emissions data to the FAA.
Other ICAO member states are moving forward with implementing CORSIA and have taken additional action to reduce aircraft GHG emissions. For example, both the EU and the United Kingdom have implemented regulations to include aviation in the Emissions Trading Scheme (“ETS”). For the EU, under these regulations any airline with flights originating or landing in the European Economic Area (“EEA”’) is subject to the ETS. Beginning in calendar 2012, airlines including FedEx were required to purchase emissions allowances or, alternatively, purchase qualifying SAF if they exceeded the number of free allowances allocated under the ETS. While the current scope of ETS has been limited to apply only to flights within the EEA through calendar 2026, the EU adopted legislation in 2023 requiring that a study be conducted in July 2026 reassessing whether the European Commission should propose to expand the scope of ETS to include international flights from the EEA based on CORSIA implementation and performance.
We expect compliance with CORSIA and the ETS to increase FedEx operating expenses. The amount of such increase will ultimately depend on a number of factors, including CORSIA and ETS program elements still under development or reconsideration, the number of our flights subject to CORSIA and the ETS, the fuel efficiency of our fleet, the average growth of the aviation sector, our ability to utilize SAF in the future and the price of such fuels, the availability of free allowances (which will be eliminated entirely by the end of calendar 2026), and the price of eligible emission units, offsets, or allowances required to be purchased by FedEx.
Additionally, in 2017, ICAO adopted new carbon dioxide emissions standards that would apply not only to new aircraft types as of calendar 2020, but also to new deliveries of currently in-production aircraft types from calendar 2023. ICAO established a production cutoff date of January 1, 2028 for aircraft that do not comply with these standards. The standards are considered to be especially stringent for larger aircraft weighing over 60 tons. In 2021, the EPA adopted its own aircraft and aircraft engine GHG emissions standards, which are aligned with the 2017 ICAO emissions standards, and the FAA finalized its own conforming rulemaking to
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implement the standards through its aircraft certification process which went into effect in April 2024. In the past, the U.S. Congress has also considered bills that would regulate GHG emissions, and some form of federal climate change legislation is possible in the future. In January 2025, the U.S. again withdrew from the Paris climate accord, an agreement among 197 countries to reduce GHG emissions. The effect of the withdrawal on future U.S. policy regarding GHG emissions and on other GHG regulation is uncertain.
Additionally, the extent to which other countries implement CORSIA could have an adverse direct or indirect effect on our business. Starting in January 2025, we were required to monitor and report the non-carbon dioxide aviation effects for certain routes in the European Union as part of the expanded scope of the ETS. In January 2027, we will be required to monitor and report non-carbon dioxide effects for all flight activity involving an airport located in the EEA. While the requirement currently is only to report and verify the non-carbon dioxide emissions, we may be required to comply with additional reporting obligations in the future. See “Item_ 1A. Risk Factors — Environmental, Climate, and Weather Risks — We may be affected by global climate change or by legal, regulatory, or market responses to such change” for information on disclosure requirements regarding GHG emissions and other environmental matters.
Sustainable Aviation Fuels: On October 18, 2023, the EU adopted its RefuelEU regulation requiring fuel producers at certain EU airports to supply a minimum percentage of blended SAF to aircraft operators beginning January 1, 2025. The mandate requires that, beginning in calendar 2025, two percent of the jet fuel supplied in certain EU airports must qualify as SAF, and the percentage increases incrementally to 70% in calendar 2050. Fuel suppliers have incorporated a SAF fee into future uptake agreements for their compliance or production costs related to the Refuel EU regulation. As part of the RefuelEU requirements, beginning January 1, 2025, we are required to submit a verified compliance report on actual fuel uplift at EU covered airports, SAF purchases, and economic fuel tankering. A similar mandate went into effect in the United Kingdom on January 1, 2025. We continue to monitor the introduction of fuel mandates in other countries and regions across the world.
Hazardous Substances: U.S. federal and state authorities continue to adopt legislation and regulations restricting the use of certain per- and polyfluoroalkyl substances (“PFAS”). PFAS are used in a wide variety of consumer and industrial products, including the firefighting foams approved for use by the FAA to extinguish fuel-based fires at airports and refineries. In April 2025, the EPA announced its strategic plans to comprehensively address PFAS in air emissions, water, land, waste, and manufactured and imported products. Certain states have adopted laws banning the manufacture, sale, distribution, and/or use of firefighting foams with intentionally added PFAS. The EPA rule designating certain PFAS as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) became effective July 2024. The EPA rule could subject airlines and refineries to potential liability for cleanup of historical PFAS contamination. We could incur remediation costs for currently and formerly operated facilities. While the impact of these federal and state laws and regulations on our business and operations cannot currently be predicted, we remain committed to transitioning to PFAS-free materials for fire suppression in accordance with the framework outlined by the FAA.
Vehicle Emissions Regulations: The Clean Air Act grants the EPA and, through the preemption waiver process, the state of California the authority to set vehicle emission standards. In October 2023, the California Air Resources Board’s (“CARB”) Advanced Clean Fleets (“ACF”) rule requiring subject companies to add an increasing percentage of medium and heavy duty zero emission trucks became effective. The U.S. president signed congressional resolutions preventing California from implementing its ACF rule and its stricter emission standards for heavy-duty vehicles in June 2025. In response, California filed a lawsuit challenging the president’s authority to prevent implementation of the program and standards. We will continue to monitor federal and state actions on vehicle emissions regulations for impacts to our operations.
We are also subject to other U.S. and international environmental laws and regulations relating to, among other things, the shipment of dangerous goods, the management of underground storage tanks, the discharge of effluents from our properties and equipment, and contingency planning for spills of petroleum products. Additionally, certain contractual and lease agreements governing regulated substances could trigger investigation and remediation obligations if sites become affected. FedEx has an environmental management system based on International Standardization 14001 designed to maintain compliance with these regulations and minimize our operational environmental footprint and certified all U.S. airport locations in 2022.
Export Controls. In recent years, the U.S. government has increased the number of companies and persons subject to U.S. export control regulations. Such regulations can restrict the types of items that FedEx customers are permitted to ship to certain entities, and in some instances may prohibit FedEx from serving certain entities altogether. Violations of these regulations can result in significant monetary and other penalties. For example, the Export Control Reform Act of 2018 (the “ECRA”’) and the International Emergency Economic Powers Act (the “IEEPA”’), and their implementing regulations, the Export Administration Regulations and Office of Foreign Asset Control regulations, may hold carriers such as FedEx strictly liable for violations without requiring evidence that the carriers had knowledge of any violations. Violations of the ECRA and IEEPA can result in criminal penalties of up to $1 million and civil penalties up to $378,000 (or twice the value of the transaction) per individual violation. FedEx continues to invest in improvements and updates to its export control compliance programs. However, the heightened focus on export controls by the U.S. government increases FedEx’s exposure to potential regulatory penalties and could result in higher compliance costs.
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Customs Clearance, Customs Brokerage, and Freight Forwarding. Our customs clearance activities, including customs brokerage, are subject to regulation by U.S. Customs and Border Protection and other partner government agencies (for example, the Food and Drug Administration) that regulate the importation and exportation of specific products. Our freight forwarding activities are regulated by the TSA within the Department of Homeland Security, the U.S. Federal Maritime Commission (ocean freight forwarding), and the Department of Transportation (air freight forwarding). Our offshore operations are subject to similar regulation by the regulatory authorities of foreign jurisdictions.
Labor. All U.S. employees at FedEx are covered by the Railway Labor Act of 1926, as amended (the “RLA”), while labor relations within the U.S. at our other companies are governed by the National Labor Relations Act of 1935, as amended (the “NLRA”). Under the RLA, groups that wish to unionize must do so across nationwide classes of employees. The RLA also requires mandatory government-led mediation of contract disputes supervised by the National Mediation Board (“NMB”) before a union can strike or an employer can replace employees or impose contract terms. This part of the RLA helps minimize the risk of strikes that would shut down large portions of the nation’s economy. Under the NLRA, employees can unionize in small localized groups, and government- led mediation is not a required step in the negotiation process.
The RLA was originally passed to govern railroad and express carrier labor negotiations. As transportation systems evolved, the law expanded to cover airlines, which are now the dominant national transportation systems. As an express air carrier with an integrated air/ground network, FedEx and its employees have been covered by the RLA since the founding of the company. The purpose of the RLA is to provide employees a process by which to unionize (if they choose) and engage in collective bargaining while also protecting the nation’s transportation networks from damaging work stoppages and delays. Specifically, the RLA ensures that an entire transportation system, such as at FedEx, cannot be shut down by the actions of a local segment of the network.
The U.S. Congress has, in the past, considered adopting changes in labor laws that would make it easier for unions to organize units of our employees. For example, there is always a possibility that Congress could remove most FedEx employees from the jurisdiction of
the RLA, thereby exposing the FedEx network to sporadic labor disputes and the risk that small groups of employees could disrupt the entire air/ground express network. In addition, the NMB and the National Labor Relations Board (“NLRB”) have and may continue to
take actions that could make it easier for our employees, and employees of service providers contracting with FedEx to conduct certain linehaul and pickup-and-delivery operations, to organize under the RLA or NLRA. For a description of these and other potential labor
law changes, see “Item 1A. Risk Factors” of this Annual Report.
Data Protection. There has recently been heightened regulatory and enforcement focus relating to the collection, use, retention, transfer, and processing of personal data in the U.S. (at both the state and federal level) and internationally. For more information, see “Ttem 1A. Risk Factors” of this Annual Report.
Reputation and Responsibility
FedEx is one of the most trusted and respected companies in the world, and the FedEx brand name is a powerful sales and marketing tool. Among the many reputation awards we received during 2026, FedEx ranked 18" overall on FORTUNE magazine’s “World’s Most Admired Companies” list — the 26" consecutive year FedEx has ranked among the top 20 on the prestigious list. We also retained our position as the highest ranked delivery company on the overall “World’s Most Admired Companies” list. Additionally in 2026, Ethisphere, a global leader in defining and advancing the standards of ethical business practices, named FedEx as one of the “World’s Most Ethical Companies®” for the fourth consecutive year. Along with a strong reputation among customers and the general public, FedEx is widely acknowledged as a great place to work. For example, in 2026, FedEx was ranked 23rd on LinkedIn’s “The 50 best employers to grow your career in the U.S.” and was also recognized as one of Forbes’ “America’s Best Employers 2026.”
The success of our efforts is built on our sound corporate responsibility practices, which are aligned with our strategic focus. Our 2026 Corporate Responsibility Report is available at fedex.com/en-us/sustainability/reports.html. This report details progress toward our sustainability strategies, goals, and initiatives and our approach toward industry leadership in sustainability to support our strategy and values. Information in our Corporate Responsibility Report is not incorporated by reference in, and does not form part of, this Annual Report.
We remain committed to helping lift local economies by investing in people and communities where we live and work. In the U.S., this includes seeking diverse suppliers and strengthening our supply chain by sourcing from small, minority-, and women-owned businesses. We have a history of supporting diverse and inclusive nonprofit and community empowerment organizations to create greater economic opportunity, help amplify diverse voices, and provide access to leadership, educational, and employment opportunities that inspire people to succeed.
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Human Resource Management Our Culture
At FedEx, we believe our culture is a strategic asset. For more than 50 years, our People-Service-Profit philosophy has driven our unrivaled success, innovation, and resilience as a global industrial network. Our philosophy holds that when we take care of our people, they deliver outstanding service, which drives strong business results and generates the resources needed to reinvest in our team members and our operations. The Compensation and Human Resources Committee of our Board of Directors reviews and discusses with management our key human resource management strategies and programs.
Across our global network, team members are united by the Purple Promise: our shared commitment to make every FedEx experience outstanding. Our five culture values guide how we lead, collaborate, and serve — take care of each other, commit to do good, own outstanding, drive business results, and create what’s next.
Health and Safety
Protecting the health and safety of our team members, service providers, and the communities we serve is fundamental to how we operate. Our “Safety Above All” philosophy is embedded across our governance, policies, and daily operations — guiding decisions from equipment design and operational processes to training and recognition programs.
Our Board of Directors plays an active role through the Governance, Safety, and Public Policy Committee, which regularly reviews operational safety metrics and performance within the company and discusses safety-related programs and developments with management. At the enterprise level, safety is integrated into policies, technology investments, risk evaluation processes, and training programs designed to prevent incidents and strengthen a culture of accountability. We are committed to compliance with all applicable workplace health and safety regulations and collaborate with regulatory agencies to ensure ongoing adherence and continuous improvement.
Equality, Opportunity, and Diversity
As part of our longstanding commitment to opportunity and access, we organize our efforts across four interconnected pillars: Our People; Our Education and Engagement; Our Communities, Customers, and Suppliers; and Our Story.
Underpinning each of these pillars is our commitment to Equality, Opportunity, and Diversity (“EO&D”). Since our founding in 1971, we have believed that when everyone has the opportunity to grow and advance, our team members thrive and FedEx prospers. We believe that varied backgrounds, experiences, and perspectives are a source of strength that enhance innovation, decision-making, and service delivery across our network.
Regional councils across our international operations provide forums for local insight, dialogue, and alignment on equality, opportunity, diversity, and culture. These forums help inform day-to-day business practices while reinforcing enterprise-wide values. Consolidated EEO-1 Reports can be found at fedex.com/en-us/sustainability/reports.html.
Quality of Life
At FedEx, we invest in benefits that support the whole person. We support the health, safety, and well-being of our employees through a comprehensive suite of benefits designed to meet the diverse needs of our employees across the globe. These offerings help us attract and retain talent while reinforcing our People-Service-Profit philosophy. Our Global Total Rewards team conducts regular benchmarking and internal pay equity analyses to help ensure our offerings remain competitive, compliant with applicable regulations, and responsive to employee feedback. In the U.S., FedEx covers approximately 70% of total eligible health costs for more than 355,000 enrolled part-time and full-time employees and dependents (based on 2026 enrollment data). U.S. health care benefits include flexible options across medical, dental, vision, pharmacy, and behavioral care, and focus on three main priorities: Access, Affordability, and Advocacy. Medical coverage starts at as low as $0 monthly contributions (premiums) for employee-only coverage. In FY26, we continued to evaluate, enhance, and streamline our benefits portfolio across the globe to provide more access to care and strengthen work-life balance support.
Learning and Development
We are committed to equipping team members with the tools, training, and support to grow their careers at FedEx. All new hires complete onboarding training tailored to individual roles, including safety, security, compliance, and sustainability. Function-specific programs develop power skills, technical expertise, and regulatory competencies across frontline, operations, and professional roles. Compliance training remains central to strengthening enterprise-wide risk awareness. In 2026, we launched an enterprise-wide AI Literacy Program for all team members to provide knowledge and skills to use AI responsibly and effectively and to build AI confidence and capability across FedEx.
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Executive development includes onboarding and transition support, content to hone leadership capabilities, and executive coaching. Our global succession management process proactively identifies and develops high-potential talent through objective assessments, tailored development, and transparent governance, providing enterprise-wide visibility into our leadership pipeline and ensuring leadership continuity and resilience across our worldwide operations.
Talent Acquisition, Engagement, and Turnover
Our global team is at the heart of our performance, reputation, and resilience. We work to attract and retain high-performing team members by aligning our human resource strategy with the evolving needs of the business and the expectations of our team members. From hiring and onboarding to upskilling and engagement, we are focused on supporting team members throughout their entire employment lifecycle. We have strengthened internal talent pipelines through targeted development programs which include job- specific training and reskilling efforts such as the Driver Development program, which prepares team members to operate tractor- trailers, and training to support new operational roles tied to evolving technologies, including EVs, cargo bikes, and e-motorcycles.
Our recruiting practices are designed to identify high-quality candidates while maintaining compliance with labor regulations. We conduct periodic labor practice audits and use performance data to strengthen hiring outcomes. Our hiring strategy is data-driven and aligned to enterprise priorities, enabling us to evaluate recruitment effectiveness, cost per hire, and process improvements across operating companies.
To improve both speed and candidate experience, we continue to modernize the hiring process. Our strategy uses automation, mobile tools, and digital outreach to meet candidates where they are, internally through our careers platform and externally through targeted social and digital channels. Team member feedback plays a central role in refining our human resources strategy. Our enterprise-wide global listening platform harmonizes survey timing and structure across operating companies and supports both annual engagement surveys and pulse checks, enabling consistent, data-driven decision-making at scale.
Globally, in 2026, we hired 469,000 full- and part-time team members. Turnover for part-time team members, primarily package handlers at our sorting locations, was 78%, while full-time team member turnover was 18%, in 2026. Turnover rates among part-time frontline workers in a number of industries are historically higher than among other employee groups. Within the ground transportation industry, many part-time workers pursue temporary employment opportunities that allow them to exit and re-enter the workforce more frequently based on their needs. These higher turnover rates drive elevated hiring volumes.
Other Information
As of May 31, 2026, FedEx employed approximately 300,000 permanent full-time and approximately 230,000 permanent part-time employees and utilized approximately 5,300 service providers to conduct certain linehaul and pickup-and-delivery operations.
See “Business Segments — Federal Express” for information regarding our pilots at Federal Express, who are a small number of our total employees, which are represented by the ALPA and are employed under a newly ratified CBA. A small number of our other employees are members of unions. For additional information, see “Regulation” and “Item 1A. Risk Factors.”
Our Community
The impact of our culture extends beyond the workplace to the communities where we live, work, and serve. Through non-profit partnerships, education initiatives, and employee engagement — including programs highlighted on our FedEx Cares website (visit www.fedexcares.com) — we work to expand access to opportunity and promote economic mobility.
Our collaborations focus on empowering diverse voices and providing access to leadership, education, and employment opportunities that inspire people to succeed. By reinforcing our People-Service-Profit philosophy, we aim to create long-term value for communities, customers, and FedEx alike. Team members contribute through volunteering and skills-based engagement, supported by global partnerships that advance dignity, access, and opportunity.
As One FedEx, we also support a global supplier base that includes small businesses. The Environment
By building smarter supply chains, we aim to deliver more resilient and sustainable value for our customers and the global economy. We’re advancing a long-term strategy to reduce our climate impact, codified by our goal to reach carbon-neutral operations by 2040. Network 2.0 and our ongoing air network redesign accelerate these efforts. We have demonstrated our capabilities to reduce
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environmental impacts by improving the efficiency of our fleet, reducing miles driven, and minimizing route redundancies. Our climate strategy builds on this approach, while adapting to changing market conditions. It is founded on three guiding principles.
* Decarbonize what’s possible: Prioritize emissions reductions through proven technology, efficiency, and fleet modernization.
* Co-create with purpose: Collaborate across industry, government, and academia to accelerate innovation and close technology gaps.
¢ Neutralize what’s left: Invest in measurable, durable carbon removal solutions for residual emissions starting in 2040.
In 2021, we established an enterprise-wide goal to achieve carbon-neutral operations by 2040, encompassing Scope | and 2 emissions, along with Scope 3 emissions from contracted transportation. Since then, we have reduced emissions from FedEx-controlled operations by over 15%, while delivering strong revenue growth, reflecting steady progress across multiple network levers. Also, this year, the Science Based Targets initiative (“SBTi’”) validated our near-term science-based emissions reduction targets, reinforcing our climate strategy and commitment to “decarbonize what’s possible” within our operations.
Even if we deploy all decarbonization efforts and technology at our disposal, there will be emissions remaining in 2040. Therefore, we will need proven and durable carbon removal solutions available for us to meet our carbon-neutral goal. If we don’t invest and support this nascent industry today, effective solutions will not be available when we and our industry need to avert the worst impacts of climate change. For this reason, we have helped establish the Yale Center for Natural Carbon Capture, empowering Yale scientists to rapidly advance research on nature-based, durable carbon dioxide removal solutions. Our support has helped to enable faster transition of several solutions from lab to commercial application, driving a robust pipeline of solutions to add future supply of carbon credits that are measurable, verifiable, and durable to both the compliance and voluntary marketplace.
We align our assessment and reporting approach with the recommendations from the Global Reporting Initiative, Sustainability Accounting Standards Board, the Task Force on Climate-related Financial Disclosures, and applicable mandatory disclosure requirements. Evaluation of climate-related physical and transition risk is integrated into our enterprise risk management process (“ERM”), which identifies and reports top enterprise risks in the short-, medium-, and long-term through industry research, surveys, and workshops with business leaders. Separately, FedEx has conducted a dedicated Climate Risk Assessment to further analyze climate-related impacts, risks, and opportunities. This assessment complements the ERM framework and informs ongoing risk management and strategic planning. Based on the risks identified, specific contingency plans and strategies are formulated to minimize potential adverse effects on our business.
Sustainable Aviation Fuels, Aircraft Fuel Conservation, and Fleet Modernization
Our aircraft operations are the largest contributor to our emissions footprint, and aviation fuel also represents one of our largest expenses. To reduce emissions and strengthen the operational resilience of our air networks, we are focused on two central strategies: sourcing cost-competitive sustainable aviation fuel (““SAF’’) and improving efficiency through fleet modernization and fuel conservation.
Beginning in May 2025, FedEx executed five SAF offtake agreements designed to bring more than 16.5 million gallons of blended SAF deployed at a minimum blend ratio of 30% online across five U.S. airports: Los Angeles (LAX), Chicago O’Hare (ORD), Miami (MIA), Dallas Fort Worth (DFW), and New York-JFK International (JFK). These efforts support our goal to source 30% of jet fuel blended with alternative sources by 2030. In addition to voluntary procurement, we also comply with SAF blending mandates in regions across the globe.
Modernizing our fleet of 700 aircraft remains one of the most impactful ways to improve fuel efficiency while reducing emissions and operating costs. In 2025, we saved 120 million gallons of jet fuel through our aircraft modernization efforts. These included the ongoing retirement of less efficient three-engine aircraft and the integration of newer, fuel-efficient models that reduce emissions per package-mile. These efforts build on our multi-year modernization program, including a retirement strategy for our remaining three- engine aircraft by 2032. In addition, the FedEx Fuel Sense program, launched in 2006, continues to deliver meaningful fuel savings through continuing operational efficiency measures, like real-time route optimization and automated fuel tracking, incorporated into daily operations. Through these fleet modernization and fuel conservation efforts we have reduced our aircraft emissions intensity by over 32% from a 2005 baseline and have set a target to further reduce our aircraft emissions intensity by 40% by 2034.
While FedEx works extensively to modernize our air fleet and conserve fuel, our future emissions reduction ambition relies on reducing emissions with SAF. We continue to work closely with industry coalitions, governments, and non-government organizations to scale SAF supply and signal long-term demand for low-carbon fuel innovation. Concerted support must be part of global policy frameworks, including incentives to increase production to achieve requisite SAF market growth.
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Vehicle Electrification and Alternative Fuels
Our approach to our surface operations prioritizes pairing the right vehicle with the right route while balancing emissions reduction, local regulatory requirements, and performance demands. Electrification and alternative fuels present a significant opportunity to reduce the environmental impact of our global ground fleet, which includes more than 180,000 motorized vehicles including pickup- and-delivery (“PUD”) vans, long-haul trucks, airport ground equipment, and off-road vehicles.
FedEx continues its phased approach to fleet electrification. During this time, 50% of all purchase orders issued for our owned PUD fleet were for electric vehicles (“EVs”). FedEx now operates nearly 9,500 on- and off-road EVs across our global fleet. These milestones reflect continued progress during a period of significant network transformation, closely aligned with our broader network redesign, which is reshaping how fleets and infrastructure are deployed across our operations.
As Network 2.0 transformation continues to streamline PUD operations and reduce route redundancies, fleet requirements are evolving alongside a more efficient operating model. As a result, we are reassessing the pace and scale of EV purchases against our previously stated 2030 EV purchase order goal. Future deployment plans and associated goals will be refined as the network redesign progresses toward completion in 2027. We continue to collaborate with leading vehicle manufacturers to co-develop EVs that are better suited to the demands of our Network 2.0 optimization strategy, which aims to improve delivery efficiency by redesigning routes and aligning vehicle capacity with shipment volume. In 2025, we made a strategic investment in Harbinger Motors, through its $160 million Series C funding round, supporting the development of medium-duty EV solutions, including an initial order of 53 trucks.
FedEx continues to explore new solutions to address technology gaps with heavier duty long-haul vehicles, including new battery configuration and lower-carbon drop in fuels. In 2025, FedEx advanced heavy-duty electric truck pilots across multiple markets, including deployments of Class 7 and 8 electric trucks in the U.S. and expanded trials of the eActros 300 electric tractor from Mercedes-Benz in Europe. Beyond electrification, we are testing drop-in alternative fuels, including renewable diesel and hydrotreated vegetable oil (“‘HVO”). Alternative fuels can offer practical solutions for heavy-duty vehicles and long-haul applications where full electrification is not yet feasible at scale.
Facility Resiliency and Renewable Energy
We operate more than 4,000 facilities across the globe, including air and ground hubs, local stations, freight service centers, and retail locations. This physical footprint presents an opportunity to improve energy efficiency, scale renewable energy, and strengthen operational resilience. Our transition to one FedEx and implementation of Network 2.0 transformation will support our sustainability efforts through the minimization of operational redundancies and reduction in our overall physical footprint.
FedEx is actively investing in renewable energy through a diversified strategy that includes on-site solar, off-site generation, utility partnerships, and exploring virtual power purchase agreements and options for energy attribute certificates. We are executing a portfolio-based energy strategy to increase renewable electricity generation and procurement across our facilities, while building the foundation for long-term electrification and grid resilience. Last year, we set mid-term renewable energy goals through calendar 2033 as we advance to our goal of having all electricity used at our facilities from renewable sources by calendar 2040. In 2025 we sourced 96.7 GWh of renewable energy and 37 facilities generated on- or off-site solar energy, up from 34 in the prior year.
We are committed to embedding resiliency in our operations as the physical risks of climate change increase, causing extreme weather events, strain on electricity grids, and higher energy costs. We invest in infrastructure reinforcement to meet growing electricity demand and evolving renewable generation standards, in addition to mitigating the potential for storm damage. We also continuously enhance our contingency planning to address the impacts of severe weather more quickly. We strive to reduce the waste we generate and recycle waste when possible. We challenge our individual team members to find new ways to improve efficiencies and equip them with Quality Driven Management (“QDM”) tools to assist in identifying waste. QDM tools are designed to drive continuous improvement and, in many cases, successful ideas become integrated across our networks.
Sustainable Customer Solutions
FedEx handles more than 18 million shipments per day across our global network. We recognize that the transportation of those goods has environmental consequences, particularly in the form of emissions and waste. This is why we’re expanding our tools, technologies, and packaging solutions to help customers reduce their environmental impact while meeting the demands of a growing e-commerce economy.
We integrate circularity principles into our package design to minimize our environmental impact while protecting shipments from damage and loss. For example, our Reusable Padded Pak is designed to reduce single-use packaging in e-commerce shipping and returns. In 2025, the FedEx Packaging Lab advanced its collaboration with Returnity to develop a reusable packaging system for B2B shippers. The solution is designed to address common barriers to adoption by eliminating handling fees typically associated with alternative packaging formats, enabling a more seamless transition from single use to reusable packaging. To help us source our
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packaging materials responsibly, we also seek relevant third-party certifications. In 2025, 86% of FedEx packaging materials were from third-party certified sources.
Our FedEx Sustainability Insights (““FSI’’) tool gives our customers and suppliers access to estimated CO e emissions data associated with their FedEx shipments, from the individual package to account levels, enabling them to understand their environmental impact and drive informed supply chain decisions. This tool enables greater transparency for customers to inform their emissions reporting, understand their carbon footprint, and make informed decisions about their shipping patterns. The platform is developed in alignment with the Greenhouse Gas Protocol and the Global Logistics Emissions Council framework and includes forecasting and predictive modeling capabilities for U.S.-based users. Launched globally in 2024, FSI is currently translated into more than 30 languages and available in over 100 markets. In 2025, over 30,000 emissions reports were generated from the tool. Providing our customers with this level of information empowers them to gain a better understanding of their Scope 3 emissions generated from their shipping activities with us and enables service selections that meet their business needs and sustainability aspirations.
For additional information on the ways we are minimizing our impact on the environment, see fedex.com/en-us/sustainability.html. For additional information regarding environmental, climate, and weather-related regulation and risks, see “Regulation” above and “Ttem 1A. Risk Factors” under “Environmental, Climate, and Weather Risks.”
Governance
The FedEx Board of Directors is comprised of a majority of independent directors and is committed to the highest quality corporate governance and accountability to stockholders. Our Board of Directors periodically reviews all aspects of our governance policies and practices, including our Corporate Governance Guidelines (the “Guidelines”) and our Code of Conduct, in light of best practices and makes whatever changes it deems appropriate to further our longstanding commitment to the highest standards of corporate governance. The Guidelines and the Code of Conduct, which apply to all of our directors, officers, and employees, including our principal executive officer and senior financial officers, are available under the Corporate Governance heading under “Governance” on the Investor Relations page of our website at investors.fedex.com. We will post under the Corporate Governance heading on the Investor Relations page of our website information regarding any amendment to, or waiver from, the provisions of the Code of Conduct to the extent such disclosure is required.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Annual Report, you should carefully consider the following factors, which could materially affect our business, reputation, operating results (including components of our financial results), financial condition, cash flows, liquidity, and the price of our common stock. Although the risks below are organized by headings and each risk is discussed separately, many are interrelated.
Macroeconomic and Market Risks
We are directly affected by the state of the global economy and geopolitical developments. While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth — key macroeconomic measurements influenced by, among other things: inflation and deflation; international trade policies and relations; supply chain disruptions; interest rates; currency exchange rates; labor costs and unemployment levels; fuel and energy prices; inventory levels; spending patterns (including shifts from goods to services and vice versa); disposable income; debt levels; credit availability; political uncertainty; public health crises; geopolitical tensions or conflicts; emerging global trade corridors; and changes to social conditions and regulations. When individuals and companies purchase and produce fewer goods, we transport fewer shipments, and as companies move manufacturing closer to consumer markets and expand the number of distribution centers, we transport shipments shorter distances, which materially and adversely affects our revenue per shipment and results of operations. Certain manufacturers and retailers are also making investments to produce and store goods in closer proximity to supply chains and consumers. Further, the scale of our operations and our relatively high fixed-cost structure, particularly with respect to our air network, make it difficult to quickly adjust to match shifting volume levels.
The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to continued weakened business conditions for the transportation industry leading to lower shipment volumes. Additionally, recent changes in U.S. and international trade policy have further weakened business conditions for the transportation industry. Inflation and elevated interest rates are negatively affecting consumer and business spending, and we expect inflation and elevated interest rates to continue to negatively affect our results for the remainder of calendar year 2026. See “Item_7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information.
Moreover, given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including international taxes, government-to-government relations, the typically more volatile economies of emerging markets, and geopolitical risks such as the ongoing conflicts between Russia and Ukraine, the United States and Iran, and other
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hostilities in the Middle East, may materially and adversely affect our business and results of operations. For example, our services in Ukraine remain limited, our services in Belarus remain suspended, we have exited our operations in Russia, and our services in the Middle East are impacted. The broader consequences, duration, and evolving nature of these conflicts, which have included and may include further sanctions, embargoes, regional instability, and geopolitical shifts; airspace bans relating to certain routes, or strategic decisions to alter certain routes; potential retaliatory action by foreign governments and other groups against us; and the increased tensions between the United States and countries in which we operate, cannot be predicted.
To the extent the continued conflicts between Russia and Ukraine, and the United States and Iran, and hostilities in the Middle East, or subsequent similar conflicts or hostilities, materially and adversely affect our business, they may also have the effect of heightening many other risks disclosed in this Annual Report, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, disruptions to our global technology infrastructure, including through cyberattack or cyber-intrusion, ransomware attack, or malware attack; adverse changes in international trade policies; increased costs and unavailability of fuel; our ability to implement and execute our business strategy, particularly with regard to our international business; disruptions in global supply chains, which can limit the access of Federal Express and our service providers to vehicles and other key capital resources and increase our costs and could affect our ability to achieve our goal of carbon neutrality for our global operations by calendar 2040; our ability to maintain our strong reputation and the value of the FedEx brand; terrorist activities targeting transportation infrastructure; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets.
Additional changes in international trade policies, including tariffs, and relations could significantly reduce the volume of goods transported globally, increase our costs, and materially and adversely affect our business, financial condition, cash flows, and results of operations. The United States government has taken certain actions that have negatively affected United States trade, including imposing tariffs on many goods imported into the United States. Additionally, many foreign governments have imposed, and others have threatened to impose, new, expanded, or retaliatory tariffs, sanctions, embargoes, and/or quotas or trade barriers on certain goods imported from the United States. These actions have contributed to weakness in the global economy that has adversely affected our results of operations. Increased tariffs or the imposition of sanctions, and/or quotas or trade barriers may lead to lower levels of trade or heightened political tensions. Continued uncertainty and changes in global trade policies have and could continue to lead to increased tariffs, export controls, quotas, embargoes, or sanctions, which may lead to increased or volatile prices or trade limitations for goods transported globally, potentially reducing customer demand for our services. See “Item_7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information.
Additionally, the U.S. government has taken action to limit the ability of domestic companies to engage in commerce with certain foreign entities under certain circumstances, and foreign governments may investigate our compliance with these restrictions. Furthermore, given the nature of our business and our global recognizability, foreign governments may target FedEx by limiting the ability of foreign entities to do business with us in certain instances, imposing monetary or other penalties or taking other retaliatory action, which could materially and adversely affect our business, financial condition, cash flows, and results of operations, as well as the price of our common stock.
Our transportation businesses and their profitability are affected by the price and availability of jet and vehicle fuel, as well as our ability to collect fuel surcharges. We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. In addition, our purchased transportation expense is affected by fuel costs. During 2026, higher fuel prices positively affected yields through increased fuel surcharges and negatively affected fuel expenses. To date, we have been mostly successful in mitigating over time the expense effect of higher fuel costs through our indexed fuel surcharges, as the amount of the surcharges is closely linked to the market prices for fuel. If we are unable to maintain or increase our fuel surcharges because of competitive pricing pressures or some other reason, fuel costs could materially and adversely affect our operating results. See “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information. As of May 31, 2026, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations, and we currently have no plans to use derivative financial instruments for this purpose in the future.
Even if we are able to offset the cost of fuel with our surcharges, high fuel surcharges could move our customers away from our higher-yielding express services to our lower-yielding deferred or ground services or even reduce customer demand for our services altogether. In addition, disruptions in the supply of fuel could have a negative effect on our ability to operate our transportation networks. The following factors have and may continue to affect fuel prices and the supply of fuel, and have and could result in price increases and shortages in the future: weather-related events; natural disasters; political disruptions or wars involving oil-producing countries, including, economic sanctions imposed against oil-producing countries or specific industry participants; changes in governmental policy concerning fuel production, transportation, taxes, or marketing; changes in refining capacity; sustainability concerns; cyberattacks; and public and investor sentiment.
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Operating Risks
The failure to successfully execute our transformation initiatives in the expected time frame and at the expected cost may materially and adversely affect our future results. Our transformation initiatives aim to improve long-term profitability, drive efficiency, lower our overhead and support costs, and transform our digital capabilities. Network 2.0 is our multi-year effort to improve the efficiency with which Federal Express picks up, transports, and delivers packages in the United States and Canada. Tricolor is our global redesign of our intercontinental air network across three distinct systems focused on priority parcel service, priority freight, and deferred parcels and freight. In January 2026, we initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international domestic operations. See “Item 1. Business” and “Ttem 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information.
There can be no assurance that the Federal Express and legacy FedEx Ground businesses and networks, which historically operated separately and independently, can successfully be fully integrated as planned. Additionally, it is possible that the business and network integration and optimization process could result in higher-than-currently-expected costs, less-than-expected savings, the loss of customers, the disruption of ongoing businesses, union organizing, litigation, legal disputes with service providers, governmental agency challenges, the loss of key employees or service providers, or other unexpected issues. It is also possible that the overall process will take longer than currently anticipated. Additionally, the following issues, among others, must be addressed in order to realize the anticipated timing and projected benefits of our transformation initiatives:
* — our ability to maintain coverage of U.S. employees under the RLA and successfully manage challenges to the employment status of drivers employed by service providers utilized in certain linehaul and pickup-and-delivery operations, in addition to other labor-related risks;
* combining the Federal Express and legacy FedEx Ground physical networks and operations, including consolidating or optimizing pickup-and-delivery and linehaul operations;
* integrating, consolidating, and implementing new administrative and back-office support functions, information-technology infrastructure, and computer systems;
¢ harmonizing certain operating practices; human resource management practices such as employee recruitment, development, and compensation programs; internal controls; and other policies, procedures, and processes;
* maintaining or amending existing agreements with customers and service providers and avoiding delays in entering into new agreements with prospective customers and service providers;
* — legal challenges by service providers or governmental agencies seeking to slow or stop plans related to Network 2.0; ¢ addressing employee issues so as to promote retention and maintain efficient and effective labor and employee relations; * maintaining access to ports of call and railroads for intermodal support;
* managing the closure and consolidation of certain buildings and the movement of certain positions, functions, or work to different locations or to third party vendors;
* obtaining any required regulatory licenses, operating authority, or contractual consents; and
* managing unforeseen increased expenses or delays associated with the transformation process.
We may be unable to achieve the expected operational efficiencies and network flexibility, alignment of our cost base with demand, cost savings and reductions to our permanent cost structure, and other benefits from our transformation initiatives (including our technology infrastructure, adopting and utilizing AI and machine learning technologies). The actual amount and timing of costs to be incurred and related cost savings and reductions to our permanent cost structure resulting from these initiatives and enhancements may differ from our current expectations and estimates. These initiatives and enhancements could also result in asset impairment charges and changes to our tax liabilities and deferred tax balances and subject us to litigation. If we are not able to successfully implement our transformation initiatives, our future financial results will suffer and we may not be able to achieve our financial performance goals.
All of these factors could adversely affect our results of operations and negatively affect the price of our common stock. In addition, at times the attention of certain members of our management may be focused on our transformation initiatives and diverted from day-to- day business operations, which may disrupt our business.
A significant data breach or other disruption to our technology infrastructure could disrupt our operations and result in the loss of critical sensitive or confidential information, adversely affecting our reputation, business, or results of operations. Our ability to attract and retain customers, efficiently operate our businesses, execute our business strategy, conduct transformation initiatives, and compete effectively increasingly depends in part upon the sophistication, security, and reliability of our technology network, including our ability to provide features of service that are important to our customers, to protect our confidential business information including the sensitive and personal information provided by our customers, and to maintain customer confidence in our ability to protect our systems and to provide services consistent with their expectations.
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We are subject to risks imposed by data breaches and operational disruptions, both random and targeted, including through cyberattack or cyber-intrusion, ransomware attack, malware attack, or denial-of-service attack by computer hackers, foreign governments and state-sponsored actors, cyber terrorists and hacktivists, cyber criminals, malicious employees or other insiders of Federal Express or third-party service providers, and other groups and individuals. Data breaches and other technological disruptions of companies and governments continue to increase as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased and we, our customers, and third parties increasingly store and transmit data by means of connected information technology systems. Additionally, risks such as code anomalies, “Acts of God,” transitional challenges in migrating operating company functionality to our FedEx enterprise automation platforms, data leakage, cyber-fraud, and human error pose a direct threat to our products, services, systems, and data and could result in unauthorized intrusion or block legitimate access to sensitive or confidential data regarding our operations, customers, employees, and suppliers, including personal information. The rapid evolution and increased sophistication, availability, and use of emerging technologies such as AI technologies and machine learning by us, our customers, suppliers, business partners, third-party providers, and bad actors may increase the likelihood of the occurrence of data breaches and operational disruptions.
We also depend on and interact with the technology and systems of third parties for a variety of reasons, including AI-enabled technologies, encryption and authentication technology, employee email, and other communication technologies, cloud services, delivery services, back-office support, and other functions. Certain third parties host, process, or have access to information we maintain about our company, customers, employees, and vendors and/or operate systems that are critical to our business operations and services. Like us, these third parties are subject to risks imposed by data breaches, cyberattacks, and other events or actions that could damage, disrupt, or close their networks or systems. We have security processes, protocols, and standards in place, including contractual provisions requiring such security measures, that are applicable to such third parties and are designed to protect information that is held by them, or to which they have access, as a result of their engagements with us. A cyberattack has and may in the future defeat one or more of such third parties’ security measures, allowing an attacker to obtain information about our company, customers, employees, and vendors or disrupt our operations. Certain third parties also have and may in the future experience operational disruptions or human error that could result in unauthorized access to sensitive or confidential data regarding our operations, customers, employees, and suppliers, including personal information. See “Failure of third-party service providers, vendors, or suppliers to perform as expected, or disruptions in our relationships with such third parties or their provision of services to Federal Express, could materially and adversely affect our business, financial condition, cash flows, and results of operations.”
From time to time we experience disruptions to our complex, global technology infrastructure, including our computer systems and websites. Such events could result in the loss of confidential business or customer information; require substantial repairs or replacements, resulting in significant costs; and lead to the temporary or permanent transfer by customers of some or all of their business to our competitors. The foregoing could harm our reputation and adversely affect our business, customer service, and results of operations. Additionally, a security breach could require us to devote significant management resources to address the problems created. These types of adverse effects could also occur in the event the confidentiality, integrity, or availability of company and customer information was compromised due to a data loss by Federal Express or a trusted third party.
We or the third parties with which we share information may not discover any security breach and loss of information for a significant period of time after the security breach occurs. Even if we detect a cybersecurity incident, the nature and extent of the incident may not be immediately clear. It may also not be clear how best to contain and remediate any harm caused by the cybersecurity incident, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Based on the sophistication of these threat actors and the size and complexity of our information systems and network environment, among other factors, an investigation into a cybersecurity incident could take a significant amount of time to complete. In addition, while the investigation of a cybersecurity incident is ongoing, we may not know the full extent of the harm caused by a threat actor, and such harm may spread both internally and to certain customers, vendors, or other third parties. Additionally, our logging capabilities and the logging capabilities of third parties are not always complete or sufficiently detailed, which could affect our ability to fully investigate and understand the scope of security events. Given the age, size, and complexity of our network environment, operational technology, and computer systems, patches for certain vulnerabilities may not exist and, even where patches or other risk-mitigating activities are available, the development of patches or execution of risk-mitigating actions may not occur before an underlying vulnerability is exploited and results in the disruption of our operations or compromise of our information systems or data. A significant number of our employees as well as customers and others with whom we do business continue to work remotely or in hybrid models, which may heighten these risks. These risks may also be heightened by our transformation initiatives.
Furthermore, we are subject to an increasing number of cybersecurity compliance and reporting obligations in different jurisdictions that vary in their scope and application, creating conflicting reporting requirements. These factors and the time spent to comply may inhibit our ability to quickly provide complete and reliable information about the cybersecurity incident to customers, counterparties, and regulators, as well as the public. Any or all of these factors could further increase the costs and consequences of a cybersecurity incident on our business and results of operations. See “Our business is subject to complex and evolving United States and foreign laws and regulations regarding data protection and cybersecurity, which impose significant costs and regulatory risks that are likely to increase over time” for additional information on risks related to legal and regulatory developments with respect to data protection.
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We have invested and continue to invest in technology security initiatives, information-technology risk management, business continuity, and disaster recovery plans, including investments to retire and replace end-of-life systems. The development and maintenance of these measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly more frequent, intense, and sophisticated. Despite our efforts, we are not fully insulated from data breaches, technology disruptions, data loss, and cyber-fraud, which could adversely affect our competitiveness and results of operations.
Additionally, we and our third-party service providers, vendors, and suppliers have experienced repeated attempts, some of which have been successful, by cyber criminals to gain access to customer accounts for the purposes of fraudulently diverting and misappropriating items being transported in our network, fraudulently charging shipment fees to customer accounts, and fraudulently sending e-mails to recipients purporting to be from FedEx. Our security processes and initiatives may be unable to detect or prevent a breach or disruption in the future.
Although we do not believe the cyber incidents and other systems disruptions that we and our third-party service providers have experienced to date have had a material effect on our business, there is no guarantee that a future cybersecurity threat or incident will be detected and remediated to not materially and adversely affect our business strategy, reputation, results of operations, or financial condition. While we believe we devote significant resources to network security, disaster recovery, employee training and other measures to secure our information technology systems and prevent unauthorized access to or loss of data, there are no guarantees that they will be adequate to safeguard against all cyber incidents, systems disruptions, system compromises or misuses of data.
We are increasingly utilizing AI within our operations. The development and deployment of AI technologies involve significant risks and uncertainties, and our ability to successfully implement and use AI technologies depends on a variety of factors, including the reliability, accuracy, security, and effectiveness of the technologies; the availability of qualified personnel and technical infrastructure; the performance of third-party vendors and service providers; evolving regulatory requirements and industry standards; and customer and market acceptance. AI technologies are rapidly evolving and may produce inaccurate, flawed, or unintended outputs or outcomes. Our use of AI may also increase risks related to cybersecurity, data privacy, intellectual property, confidentiality, regulatory compliance, and reputational harm. In addition, evolving laws, regulations, and governmental guidance relating to AI may require us to incur additional compliance costs, change our business practices, or limit our ability to develop or use AI technologies. Our competitors may also adopt AI technologies more quickly or more effectively than we do. Further, our investments in AI technologies may not improve our services, operations, efficiency, or profitability to the extent anticipated and may divert resources from other strategic initiatives. Any failure to successfully develop, implement, manage, or use AI technologies in a timely, compliant, and responsible manner could adversely affect our business, reputation, results of operations, or financial condition.
We are self-insured for certain costs associated with our operations, and insurance and claims expenses could materially and adversely affect our business, financial condition, cash flows, and results of operations. We are self-insured up to certain limits for costs associated with workers’ compensation claims, vehicle accidents, property and cargo loss, general business liabilities, and benefits paid under employee disability programs. Our self-insurance accruals are primarily based on estimated costs determined by actuarial methods. Estimated costs include consideration of a variety of factors and related assumptions such as the severity of claims, frequency and volume of claims, healthcare inflation, seasonality, and plan designs, which may be subject to a high degree of variability. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims involved and the length of time until the ultimate cost is known, which may be several years. Material increases in the magnitude of claims, changes to healthcare costs, accident frequency and severity, insurance retention levels, judgment and settlement amounts, associated legal expenses, and other factors could result in unfavorable differences between actual self-insurance costs and our reserve estimates. As a result, our insurance and claims costs could materially increase in the future, which could adversely affect our results of operations and financial condition.
As a supplement to our self-insurance program, we maintain coverage with excess insurance carriers for potential losses that exceed the amounts we self-insure. Periodically, we evaluate the level of insurance coverage and adjust insurance levels based on risk tolerance, risk volatility, and premium expense. Although we believe our aggregate insurance limits should be sufficient to cover our historic claims amounts, we can provide no assurance that such coverage will be adequate to protect us from costs incurred with certain events. For example, the commercial trucking industry has experienced a wave of blockbuster or so-called “nuclear” verdicts, including some instances in which juries have awarded hundreds of millions of dollars to those injured in accidents and their families. Given this trend, it is possible that additional claims could exceed our aggregate coverage limits. If a claim were to exceed our aggregate insurance coverage, we would bear the excess exposure not covered by excess insurance carriers. Given the current claims environment, the amount of coverage available from excess insurance carriers is decreasing, the premiums for this excess coverage are increasing significantly, and excess insurance carriers are challenging insurance claims more frequently. Accordingly, our excess insurance and claims expenses may continue to increase, or we could further increase our exposure not covered by excess insurance carriers as policies are renewed or replaced. Our results of operations and financial condition could continue to be adversely affected if our costs or losses significantly exceed our aggregate coverage limits, we are unable to obtain excess insurance coverage in amounts we deem sufficient, our insurance carriers fail to pay on our insurance claims, or we experience a claim for which coverage is not provided.
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The transportation infrastructure continues to be a target of terrorist activities. Because transportation assets continue to be a target of terrorist activities, governments around the world are adopting or are considering adopting stricter security requirements that will increase operating costs and potentially slow service for businesses, including those in the transportation industry. These security requirements change periodically as the result of regulatory and legislative requirements, imposing additional security costs and creating a level of uncertainty for our operations. For example, the TSA requires Federal Express to comply with a Full All-Cargo Aircraft Operator Standard Security Plan, which contains evolving and strict security requirements. It is reasonably possible that these rules or other future security requirements could impose material costs on us or slow our service to our customers. The effects on our operations of avoiding areas of the world, including airspace, in which there are geopolitical conflicts and the targeting of aircraft by parties to those conflicts can also be significant. Moreover, a terrorist attack, or acts of sabotage by nation state actors using hybrid operations, directed at Federal Express or other aspects of the transportation infrastructure could disrupt our operations and adversely affect demand for our services.
Failure of third-party service providers, vendors, and suppliers to perform as expected, or disruptions in our relationships with such third parties or their provision of services to FedEx, could materially and adversely affect our business, financial condition, cash flows, and results of operations. FedEx has engaged third-party service providers, vendors, and suppliers to perform certain key functions, including the provision of information technology infrastructure, application development, maintenance and support, and end-user support services. There can be no assurance that our third-party service providers, vendors, and suppliers will perform contractual service obligations or adhere to compliance requirements, and such service providers, vendors, and suppliers may suffer disruptions to their systems, labor groups, or supply chains that could adversely affect their services. FedEx may also have disagreements with such service providers, vendors, or suppliers, and related contracts may be terminated or may not be extended or renewed. Additionally, from time to time third-party service providers, vendors, or suppliers have engaged in fraudulent activities in the course of their business relationships with FedEx. Any of the foregoing could disrupt our operations and result in a material adverse effect on our reputation, business, or results of operations.
The effects of a widespread outbreak of an illness or any other communicable disease or public health crisis could materially and adversely affect our business, results of operations, cash flows, and financial condition. A widespread outbreak of an illness or any other communicable disease or public health crisis could have varying effects on the demand for our services, our business operations, and the North American and global economies and supply chains. The extent of the effect of such an event on our business, results of operations, and financial condition, as well as the North American and global economies, will be dictated by developments that cannot be predicted, such as: its duration and spread; the success of efforts to contain it and treat its effects, including travel bans and restrictions, quarantines, shelter-in-place orders, business and government shutdowns, and other restrictions; the possibility of additional subsequent widespread outbreaks and variant strains and the effect of actions taken in response; and the resulting effects on the economic conditions in the markets in which we operate.
Our business is labor and capital intensive in nature, which may require us to incur higher costs to operate our networks during such an event. If we are unable to remain agile and flex our networks to align with shipping volumes, customer needs, disrupted global supply chains, and other network inefficiencies, market demands, and operating conditions, or are unable to continuously respond to evolving governmental policies, our business operations could be negatively affected, which could have a further adverse effect on our results of operations. Further, due to the size, scope, and geographically dispersed nature of our operations, the expenses we incur to protect the health and safety of our team members and customers may be higher than similar expenses incurred by companies in other industries.
To the extent a widespread outbreak of an illness or any other communicable disease or public health crisis adversely affects our business and financial results, it may also have the effect of heightening many other risks described in this section, any of which could materially and adversely affect our business, results of operations, cash flows, and financial condition. Such risks include, but are not limited to, additional changes in the state of the global economy and international trade policies and relations; our ability to execute our transformation initiatives, implement our business strategy, and effectively respond to changes in market dynamics and customer preferences; our strong reputation and the value of the FedEx brand; our ability to meet our labor and purchased transportation needs while controlling related costs; our ability to achieve our goal of carbon neutrality for our global operations by calendar 2040; and the effect of litigation or claims from customers, team members, suppliers, regulators, or other third parties relating to the crisis or our actions in response.
Strategic Risks
Failure to successfully implement our business strategy and effectively respond to changes in market dynamics and customer preferences will cause our future financial results to suffer. We are making significant investments and other decisions in connection with our long-term business strategy, such as those related to our transformation initiatives. See “The failure to successfully execute our transformation initiatives in the expected time frame and at the expected cost may materially and adversely affect our future results.” above and “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for additional information. In addition, we are investing in data insight solutions intended to drive supply chain efficiency for our customers.
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Such initiatives and enhancements may require us to make significant capital expenditures or incur significant expenses. We have also incurred, and may continue to incur, increased operating expenses in connection with certain changes to our business strategy. We may not be able to derive the expected operational efficiencies and network flexibility, alignment of our cost base with demand, cost savings and reductions to our permanent cost structure, digital revenue growth, and other benefits from our strategic investments and other decisions. For example, in January 2026, we initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international and domestic operations. See “Item _7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information. The execution of the programs is subject to a consultation process in accordance with local country processes and regulations. The actual amount and timing of business optimization costs and related cost savings resulting from the workforce reduction plan are dependent on local country consultation processes and regulations and negotiated social plans and may differ from our current expectations and estimates. If we are not able to successfully implement this plan, our future financial results may suffer.
Further, in developing our business strategy, we make certain assumptions including, but not limited to, those related to customer demand and the mix of services to be purchased by our customers, the future rate of e-commerce growth and inventory restocking, passenger airline cargo capacity, competition, and the global economy, and actual market, economic, and other conditions may be different from our assumptions. As technology (including AI and machine learning), customer behavior, and market conditions continue to evolve, it is important that we maintain the relevance of our brand and service offerings to our customers. If we are not able to successfully implement our business strategy and effectively respond to changes in technology, customer preferences, and market dynamics, our future financial results will suffer. For additional discussion, see “Item 1. Business” of this Annual Report under the caption “Strategy.”
We may not be able to achieve our calendar 2029 financial performance targets. On February 12, 2026, we announced a comprehensive multi-year financial framework with financial performance targets for 2029. Our ability to achieve these goals is dependent on a number of factors, including the other risk factors described in this Annual Report. We may fail to achieve our long- term financial performance targets if we are unsuccessful in implementing our strategies, our estimates or assumptions change, or for any other reason. Our inability to achieve these targets could materially and adversely affect our results of operations and financial condition, and the price of our common stock may be negatively affected.
We may not realize the anticipated benefits from the Spin-Off, which could harm our business. On June 1, 2026, we completed the Spin-Off. We may incur significant additional expenses and challenges arising from and following the Spin-Off of the FedEx Freight business. We may not be able to achieve the full strategic, financial, operational, or other benefits that are expected to result from the Spin-Off, and the anticipated benefits of the Spin-Off are based on a number of assumptions, some of which may prove incorrect. A failure to realize all or some of the expected benefits of the Spin-Off, or if such benefits are delayed, could materially and adversely affect our business, financial condition, cash flows, and results of operations. In addition, there can be no assurance that the combined value of the shares of the two separated companies will be equal to or greater than the value of our common stock had the Spin-Off not occurred.
In connection with the Spin-Off, we and FedEx Freight entered into various agreements that provide for the performance of certain services by each company for the benefit of the other, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property cross-license agreement, a trademark license agreement, stockholder and registration rights agreement, and an indemnification agreement. The separation and distribution agreement provides for cross-indemnities between us and FedEx Freight for liabilities allocated to the respective party pursuant to the terms of such agreement. If FedEx Freight or its successor entities are unable to satisfy their obligations under these agreements, we could incur operational difficulties or losses. In addition, the terms of the Spin-Off include licenses and other arrangements to provide for certain ongoing use of intellectual property in the operations of both businesses. For example, both us and FedEx Freight retain the ability to make ongoing use of certain brands and other intellectual property. As a result of this continuing shared use of brands and other intellectual property, there is a risk that conduct or events materially and adversely affecting the reputation of FedEx Freight could also materially and adversely affect our reputation.
In addition, we retained an equity interest in FedEx Freight in connection with the Spin-Off. We cannot predict the trading price of shares of FedEx Freight’s common stock and the market value of the FedEx Freight shares is subject to market volatility and other factors outside of our control. As previously disclosed, we will divest our ownership interest in FedEx Freight within twenty-four months from the Spin-Off, but there can be no assurance regarding the timing of, or timeframe over which, such divestiture or divestitures may occur, or the amount of proceeds to be received by us in connection with any such divestitures within the twenty-four month timeframe.
The Spin-Off could result in substantial tax liability to us and our stockholders. We received an opinion of counsel and a private letter ruling from the U.S. Internal Revenue Service (the “IRS”) regarding the qualification of the Spin-Off and certain related transactions as a transaction that is generally tax-free to us and our stockholders for U.S. federal income tax purposes. While the private letter ruling is generally binding on the IRS to the extent the factual representations and assumptions on which it is based are true and accurate, the opinion of our counsel is not binding on the IRS or the courts. There can be no assurance that the IRS or a court
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will not take a contrary position with respect to the conclusions reached in the tax opinion. If the IRS ultimately determines that the Spin-Off is taxable, then the Spin-Off could be treated as a taxable dividend or capital gain to our stockholders for U.S. federal income tax purposes, and we could incur significant U.S. tax liabilities. In connection with the Spin-Off, we entered into a tax matters agreement with FedEx Freight, pursuant to which FedEx Freight agreed to not enter into transactions that could cause the Spin-Off or any related transactions to be taxable to us and to indemnify us for any tax liability resulting from any such transaction. However, there can be no assurance that FedEx Freight would have the resources or liquidity required to indemnify us for any such tax liability.
We depend on our strong reputation and the value of the FedEx brand. FedEx is one of the most widely recognized, trusted, and respected brands in the world, and the FedEx brand is one of our most important and valuable assets. The FedEx brand name symbolizes high-quality service, reliability, and speed. In addition, we have a strong reputation among customers, team members, and the general public for high standards of corporate responsibility, governance, and ethics. The FedEx brand name and our corporate reputation are powerful tools for sales, marketing, and recruitment, and we devote significant resources to promoting and protecting them. Adverse publicity or sensationalism across media channels (whether or not justified) relating to activities including, but not limited to, the following by our team members or others with whom we do business (over whom we may have little or no control) could tarnish our reputation and reduce the value of our brand and goodwill: customer service mishaps, accidents, catastrophes, or incidents involving aircraft, vehicles, or facilities operated by us or our service providers; low safety or service levels; data breaches, cyberattacks, or technology infrastructure disruptions; utilization of emerging technologies such as AI; allegations of noncompliance with laws or claims that result in litigation; the shipment of certain items pursuant to our obligation as a common carrier operating under federal law; labor relations and workforce reductions or disruptions; our advertising campaigns, sponsorship arrangements, or marketing programs; our sustainability goals and related progress; our political activities and expenditures; or our executive compensation practices.
With the rapid growth in the use of AI and the global influence of social media outlets such as Facebook, YouTube, Instagram, X, TikTok, and other platforms, adverse publicity, whether warranted or not, can be disseminated quickly and broadly without context, making it increasingly difficult for us to effectively respond. Certain forms of technology and AI also allow users to alter or create images, videos, and other information relating to FedEx and present the information in a false or misleading manner that seems real, including attempts by third parties to masquerade as FedEx couriers and customer service agents for the purpose of deceiving and defrauding FedEx customers. Further, our actual or perceived position, lack of position, or perceived lack of transparency on environmental, social, political, public policy, labor relations, or other sensitive issues could harm our reputation with certain groups, including our customers, stockholders, team members, advocacy groups, government representatives, and regulatory bodies. Expectations regarding these matters continue to evolve and are not uniform. Although we try to adapt and maintain a balance that satisfies all of these stakeholders, we may not always be able or choose to move as quickly or in the direction that various competing interests desire or demand, which could materially and adversely impact our reputation. Damage to our reputation and loss of brand equity could reduce demand for our services and/or create difficulties in retaining and recruiting employee talent and could materially and adversely affect our business, financial condition, cash flows, and results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand and goodwill.
We face intense competition. The transportation and business services markets are both highly competitive and sensitive to price and service, especially in periods of little or no macroeconomic growth. Some of our competitors have more financial resources and competitive advantages than we do, appear willing to operate at little or no margin to gain market share, or are owned, controlled, or subsidized by foreign governments, which enables them to raise capital more easily. We face intense competition from global air freight forwarders for air freight business. We also compete with regional transportation providers that operate smaller and less capital-intensive transportation networks and startup companies that combine technology with flexible labor solutions such as crowdsourcing to focus on local market needs. In addition, some high-volume package shippers are developing and implementing in- house delivery capabilities and utilizing independent contractors for deliveries, which could in turn materially and adversely affect our business, financial condition, cash flows, and results of operations. For example, Amazon has established a network of hubs, aircraft, and vehicles, recently began offering an LTL freight service for inbound shipments to its distribution facilities, and recently began offering its internal delivery capabilities broadly to third parties. See “Item _1. Business” of this Annual Report for additional information.
We believe we compete effectively with these companies - for example, by providing more reliable service at compensatory prices. However, the existence of an irrational pricing environment could limit our ability to maintain or increase our prices (including our fuel surcharges in response to rising fuel costs), which could materially and adversely affect our results of operations. While we believe we compete effectively through our current and planned service offerings, if our current competitors or potential future competitors offer a broader range of services or better service levels, more effectively bundle their services, or offer services at lower prices, it could materially and adversely affect our business, financial condition, cash flows, and results of operations. Continued transportation industry consolidation may further increase competition. Moreover, if high-volume package shippers further develop or expand internal capabilities for the services we provide, it may reduce our revenue and could negatively affect our financial condition and results of operations. These effects could be exacerbated if high-volume package shippers offer such capabilities to third parties. News regarding such developments or expansions could also negatively affect the price of our common stock.
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New and emerging technologies continue to create additional sources of competition, and if we fail to incorporate new and emerging technologies as effectively as our competitors, our competitive position may be harmed. Advancements in technology, such as advanced safety systems; automated package sorting, handling, and delivery; autonomous delivery; third-party supply chain insight and management; AJ; vehicle platooning; alternative fuel vehicles; and digitization of freight services, may necessitate that we increase investments in order to remain competitive, and our customers may not be willing to accept higher rates to cover the cost of these investments. See “We may be unable to achieve or demonstrate progress on our goal of carbon neutrality for our global operations by calendar 2040.” below for additional information.
Our businesses are capital intensive, and we must make capital decisions based upon projected volume levels. We make significant investments in aircraft, package handling facilities, vehicles, technology, sort equipment, acquired companies, and other assets to support our transportation and business networks. The amount and timing of capital investments depend on various factors, including our anticipated volume growth. We must make commitments to purchase or modify aircraft years before the aircraft are actually needed based on projections of volume levels and fleet requirements, which have become more difficult to make in light of recent macroeconomic, international trade and geopolitical uncertainty and volatility. Missing our projections could result in too much or too little capacity relative to our shipping volumes. Overcapacity could lead to below-market asset dispositions or write-downs, as well as negatively affect operating margins, and undercapacity could negatively affect service levels. See “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition - Results of Operations and Outlook - Consolidated Results - Asset Impairment Charges” of this Annual Report for information regarding the noncash impairment charges recorded in 2026 and 2025 in connection with our decision to permanently retire certain aircraft and related engines from service.
Our inability to execute and effectively operate, integrate, leverage, and grow acquired businesses and realize the anticipated benefits of acquisitions, joint ventures, and strategic alliances and investments could materially and adversely affect us. Our strategy for long-term growth, productivity, and profitability depends in part on our ability to make prudent strategic acquisitions and investments, form joint ventures or strategic alliances, and realize the expected benefits from these transactions. We regularly acquire businesses, enter into strategic alliances, and make investments across the more than 220 countries and territories in which we provide services.
Acquisitions and other strategic transactions involve special commercial, customer, accounting, regulatory, compliance, information technology, human resources, cultural, and other risks, including the potential assumption of unanticipated liabilities and contingencies. Additionally, we may be required to make significant capital expenditures and/or incur certain operating expenses following the completion of certain transactions, which may be higher than initially expected. While we expect our past and future acquisitions and strategic transactions to enhance our value proposition to customers and improve our business and long-term profitability, there can be no assurance that we will realize our expectations within the time frame we have established, if at all, or that we can continue to support the value we allocate to acquired businesses, including their goodwill or other intangible assets. We have previously incurred goodwill impairment charges related to certain of our acquisitions, some of which have been material, and may incur additional goodwill impairment charges in the future.
We may not achieve the expected strategic or financial benefits relating to our InPost investment. We, as a member of a consortium, have entered into a conditional agreement on a recommended all-cash public offer for all issued and outstanding shares of InPost S.A. (“InPost’’), which offer is subject to regulatory approvals and other conditions. Following the completion of the offer, the consortium will be structured with us holding 37%, and thereafter we and InPost intend to enter into arm’s length commercial agreements.
Because InPost would continue to operate as a standalone company and we would not control this entity and must rely on the actions of other investors and the management of the entity, we may not be able to influence key strategic or operational decisions. In addition, delays in obtaining required regulatory approvals or completing the related commercial arrangements (or failure to obtain such approvals or complete such arrangements) could materially and adversely affect the timing or value of the investment.
Even if the regulatory approvals are obtained, other conditions are met, and our commercial arrangements with InPost are finalized, there can be no assurance that our investment and the commercial agreements will achieve the strategic or financial benefits we currently expect.
Human Resource Management Risks
Labor-related disruptions and potential changes in labor laws may materially and adversely affect our business, financial condition, cash flows, and results of operations. Our business is labor intensive in nature, utilizing large numbers of employees across numerous classes, as well as service providers. Despite continual organizing attempts by labor unions, our employees in the U.S. and Canada, with the exception of our pilots, are not unionized (we acquired FedEx Supply Chain in 2015, which already had a small number of unionized employees). Additionally, certain of our employees outside of the United States and Canada are unionized. For information regarding our agreement with the union representing our pilots, see “Item 1. Business” under the caption “Business Segments — Federal Express” and Note 20 of the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. If we are unable to reach an agreement with any of our unionized work groups in future negotiations regarding the terms of their collective bargaining agreements, or if additional groups within our workforce become
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unionized, we may be subject to actual or threatened strikes, work interruptions or stoppages, which could materially and adversely affect our business, financial condition, cash flows, and results of operations.
Labor unions have continued to make attempts to organize employees at businesses and in industries that have not traditionally been unionized, and in certain instances have been successful. Such attempts could continue in 2027. Additionally, the U.S. Congress has, in the past, considered adopting changes in labor laws that would make it easier for unions to organize units of our employees. For example, there is always a possibility that legislative or administrative actions, or judicial decisions, could attempt to remove our employees from the jurisdiction of the RLA. Additionally, this jurisdiction could be challenged in connection with our recently completed one FedEx consolidation and ongoing Network 2.0 transformation initiative. For additional discussion of the RLA, see “Ttem 1. Business” of this Annual Report under the caption “Regulation.” Such legislation or challenge could expose our customers to the type of service disruptions that the RLA was designed to prevent — local work stoppages in key areas that interrupt the timely flow of shipments of time-sensitive, high-value goods throughout our global network. Such disruptions could threaten our ability to provide competitively priced shipping options and ready access to global markets.
There is also the possibility that Congress could pass other labor legislation that could materially and adversely affect our operations with employees governed by the NLRA. In addition, the NMB and the NLRB have and may continue to take actions that could make it easier for our employees, as well as vendor, service provider, and supplier workforces, to organize under the RLA or NLRA. Finally, changes to federal or state laws, regulations, rules, judicial or administrative precedent, decisions or guidance governing employee classification could affect the status of service providers as independent employers of their drivers. If we are deemed to be an employer or joint employer of the drivers of these service providers, labor organizations could more easily organize these individuals, our operating costs could increase materially, and we could incur significant capital outlays and experience material and adverse effects to service levels.
Our failure to attract and retain employee talent, meet our purchased transportation needs, or maintain our company culture, as well as increases in labor and purchased transportation costs, could materially and adversely affect our business and results of operations. Our success depends upon the efforts and abilities of our high-quality employees, many of whom are longstanding FedEx team members. Difficulties in motivating, rewarding, recruiting, and retaining employee talent, including members of senior management and successors to members of senior management; failure to protect members of senior management from security threats (which certain executive officers have experienced in the past); the unexpected loss of such individuals resulting in the depletion of our institutional knowledge base; and/or our inability to successfully transition key roles could materially and adversely affect our business, results of operations, reputation, and the price of our common stock. To meet operational needs and service standards, we regularly seek to hire a large number of part-time and seasonal workers in our stations and hubs, and to contract service providers that conduct linehaul and pickup-and-delivery services.
Certain positions at FedEx have historically experienced high turnover rates, which can lead to increased recruiting, training, and retention costs. Additionally, our culture is important to providing high-quality customer service and having a productive workforce and could be materially and adversely affected by our evolving operations and other factors. If we fail to maintain the strength of our culture, our competitive ability and our business may be harmed.
Our ability to meet our labor and purchased transportation needs while controlling related costs is generally subject to numerous external factors, including the availability of qualified service providers and persons in the markets where we and our service providers operate and unemployment levels within these markets, prevailing and competitive wage rates and other benefits, health and other insurance costs, inflation, fuel and energy prices and availability, behavioral changes, adoption of new or revised employment and labor laws and regulations (including increased minimum wage requirements) or government programs, safety, and security levels of our operations, our reputation within the labor and transportation markets, changes in the business or financial soundness of service providers, interest in contracting with FedEx, and the effect of a widespread public health crisis. Additionally, certain service providers (acting collectively or in coordination in some instances) may seek to increase financial rates or modify contract terms and may refuse to provide service to Federal Express.
Our inability to effectively meet our labor and purchased transportation needs can increase our costs, hinder our ability to execute our business strategy, negatively affect service levels, and could materially and adversely affect our business, financial condition, cash flows, and results of operations. Certain of these risks may be heightened by our transformation initiatives.
In connection with the Spin-Off, we experienced and continue to experience changes in personnel and management that may involve organizational disruption and uncertainty. These changes have the potential to disrupt our business. If we fail to manage these changes successfully, we could experience significant delays or difficulty in the achievement of our strategic objectives and our business, financial condition and results of operations could be materially and adversely harmed.
We contract with service providers to conduct certain linehaul and pickup-and-delivery operations, and the status of these service providers as direct and exclusive employers of drivers providing these services is being challenged. We are defending joint-employer cases where it is alleged that we should be treated as an employer or joint employer of the drivers employed by service providers with whom we contract to conduct certain linehaul and pickup-and-delivery operations. We incur certain costs, including legal fees, in
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defending the status of service providers as direct and exclusive employers of their drivers. We continue to believe that we are not an employer or joint employer of the drivers of these independent businesses. However, adverse determinations in these matters or regulatory developments could, among other things, entitle service providers’ drivers to certain wage payments and penalties from the service providers and us, and result in wages, overtime, penalties, withholding tax and benefits, and other employment-related liabilities for us. The status of the drivers employed by these service providers could be further challenged in connection with Network 2.0 transformation.
Potential changes to pilot flight and duty time regulations could impair our operations and impose substantial costs on us. In 2010, the FAA proposed regulations that would change the flight and duty time rules applicable to all-cargo air carriers. When the FAA issued final regulations in 2011 (the “2011 regulations”), all-cargo carriers, including Federal Express, were exempt from these new requirements. Instead, all-cargo carriers were required to continue complying with previously enacted flight and duty time rules and allowed to pursue the development of fatigue risk management systems to develop fatigue mitigations unique to each operation. In 2012, the FAA reaffirmed the exclusion of all-cargo carriers from the 2011 regulations, and litigation in the U.S. Court of Appeals for the District of Columbia affirmed the FAA’s decision. However, this issue remains a policy priority for certain labor groups, and the U.S. Congress periodically considers legislation that, if adopted, would require all-cargo carriers to comply with the 2011 regulations. Required compliance with the 2011 regulations could impose substantial costs on us in order to maintain operational reliability and manage pilot fatigue.
Increasing costs, the volatility of costs and funding requirements, and other legal mandates for employee benefits, especially pension and healthcare benefits, could materially and adversely affect our results of operations, financial condition, and liquidity. We sponsor programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans, and postretirement healthcare plans. The costs of providing pension and other retirement benefit plans are dependent on numerous assumptions, such as discount rates, expected long-term investment returns on plan assets, future salary increases, employee turnover, mortality, and retirement ages. Changes in actuarial assumptions and differences between the assumptions and actual values, as well as significant declines in the value of investments that fund our pension and other postretirement plans, if not offset or mitigated by a decline in plan liabilities, could increase pension and other postretirement expense, and we could be required from time to time to fund the pension plans with significant amounts of cash. Such cash funding obligations could materially and adversely affect our results of operations and liquidity. Additionally, the rules for pension and retirement benefit plan accounting are complex, involve numerous assumptions, and can produce volatility in our results of operations, financial condition, and liquidity. For example, we recognized a pre-tax, noncash MTM gain of $647 million in 2026 ($497 million, net of tax, or $2.08 per diluted share). For additional information on our MTM retirement plans accounting adjustments, see “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition - Results of Operations and Outlook - Consolidated Results - Retirement Plans MTM Adjustments” and Note 12 of the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
Environmental, Climate, and Weather Risks
We may be affected by global climate change or by legal, regulatory, or market responses to such change. Concern over climate change, including the effect of global warming, has led to significant U.S. and international governmental efforts to limit GHG emissions, including our aircraft and vehicle engine emissions. Increasingly, state and local governments are also considering environmental-related regulatory and reporting requirements. Compliance with such regulation and the associated potential cost is complicated by the fact that various countries and regions are following different approaches to the regulation and reporting of climate and other environmental matters. Increased regulation and reporting obligations regarding GHG emissions, especially aircraft or vehicle engine emissions, could impose substantial taxes, fees, and other costs on us. These include an increase in the cost of the fuel and other energy we purchase, investments required to obtain electricity capacity, and capital and impairment costs associated with updating or replacing our aircraft, vehicles, or infrastructure prematurely. Until the timing, scope, and extent of such possible regulation becomes known, we cannot predict its effect on our cost structure or our operating results. It is reasonably possible, however, that it could materially increase our operating expenses and directly or indirectly materially and adversely affect our business, if instituted. For additional discussion of regulatory responses to climate change, including CORSIA and the Paris climate accord, see “Item 1. Business” of this Annual Report under the caption “Regulation.”
We may also incur additional expenses as a result of new or expanded policies and laws in the United States and abroad regarding GHG emissions and other environmental matters. Furthermore, many countries and U.S. states in which we operate or are subject to regulation, such as Australia and California, have adopted, or are expected to adopt, additional requirements related to the disclosure of GHG emission and related matters. In many cases these requirements differ and may conflict from country to country, increasing our costs or requiring significant management time and attention. Additionally, we could be subject to climate litigation or regulatory enforcement actions, as groups, individuals, and governmental authorities affected by climate change seek to recover climate-related damages from entities they perceive as being partially responsible for human-induced climate change because of the emission of GHGs from their operations.
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Moreover, even without such regulation, increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our reputation, reduce customer demand for our services, especially our air express services, and increase our liability. Finally, given the broad and global scope of our operations and our susceptibility to global macroeconomic trends, we are particularly vulnerable to the physical risks of climate change that could affect all of humankind, such as shifts in weather patterns and world ecosystems.
We may be unable to achieve or demonstrate progress on our goal of carbon neutrality for our global operations by calendar 2040. In 2021, we set an ambitious goal to achieve carbon neutrality for our global operations by calendar 2040 and have also set interim targets across our main decarbonization levers, such as electric pickup-and-delivery vehicle purchases, aviation fleet emissions intensity and fleet retirement, and sustainable energy and fuel procurement, to help us progress toward the goal. Achievement of this goal depends on our execution of operational strategies relating to vehicle electrification; sustainable fuel procurement; fuel conservation and aircraft modernization; facilities; sustainable customer solutions; and potentially voluntary carbon credits. Execution of these strategies, as well as demonstrable progress on and achievement of our calendar 2040 goal, is subject to risks and uncertainties, many of which are outside of our control. See “The Environment” under “Item 1. Business” of this Annual Report for information on the status of our previously disclosed vehicle fuel efficiency targets. These risks and uncertainties include, but are not limited to: our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and achieve the anticipated benefits and associated cost savings of such strategies and actions; the availability and cost of, and our ability to acquire, alternative fuel vehicles, alternative fuels, fuel-efficient aircraft, global electrical charging infrastructure and requisite power grid capacity, off-site renewable energy, and other materials and components, many of which are not presently in existence or available at scale to meet the required global and regulatory demand creating intense competition that may significantly increase the costs; unforeseen production, design, operational, and technological difficulties; the outcome of research efforts and future technology developments, including the ability to scale projects and technologies on a commercially competitive basis such as carbon sequestration and/or other related processes; compliance with, and changes or additions to, global and regional regulations, taxes, charges, mandates, or requirements relating to GHG emissions, carbon costs, or climate-related goals; labor-related regulations and requirements that restrict or prohibit our ability to impose requirements on third parties who provide contracted transportation for our transportation networks; the availability of incentives to enhance the production and affordability of alternative fuel vehicles, alternative fuels, global electrical charging infrastructure and requisite power grid capacity, and other materials and components; adapting products to customer preferences and customer acceptance of sustainable supply chain solutions and potentially increased prices for our services; and the actions of competitors and competitive pressures. Purchase of carbon credits to meet our 2040 carbon neutrality goal could add significant fluctuating annualized costs due to the uncertain price of carbon and any voluntary or regulatory schemes to offset emissions, lead to increased regulatory attention, and inhibit the development of other carbon reduction approaches that we may otherwise pursue. There also is a risk that any voluntary carbon credits purchased, even if accepted by regulators, could be viewed by some third parties as not sufficiently reflecting real, verifiable, and additional GHG reductions, leading to reputational harm.
There is no assurance that we will be able to successfully execute our strategies and achieve or demonstrate progress on our calendar 2040 goal of carbon neutrality for our global operations. Additionally, we may determine that it is in our best interests to prioritize other business, social, governance, or sustainable investments and/or initiatives (such as our transformation initiatives) over the achievement of our calendar 2040 goal based on economic, regulatory, or social factors, business strategy, or other reasons. Failure to achieve or demonstrate progress on our calendar 2040 goal could damage our reputation and customer and other stakeholder relationships. Further, given investors’ and other stakeholders’ increased focus related to sustainability matters, such a failure could cause large stockholders to reduce their ownership of FedEx common stock and limit our access to financing. Such conditions could materially and adversely affect our business, results of operations, and financial condition, as well as the price of our common stock.
We may be affected by harsh weather conditions, natural disasters, conflicts or other unrest, or other terrorist or other physical attacks, and our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography could materially and adversely affect our business and results of operations, cash flows, and financial condition. Our operations are exposed to adverse weather conditions and localized risks from natural or man-made disasters such as earthquakes, volcanoes, wildfires, hurricanes, tornadoes, wind gusts, floods, severe winter weather, heat waves, or extended droughts, conflicts or unrest, or subject to terrorist or other physical attacks, or other disturbances, actual or threatened. Disruptions to government agencies or personnel (including as a result of government shutdowns), disruptions at airport facilities used by us to manage our operations, labor relations and market constraints, power supplies, fuel inventory levels or other factors could result in the cancellation or delay of a significant portion of our flights and, as a result, could materially and adversely affect our business, results of operations, cash flows, and financial condition. Additionally, shifts in weather patterns caused by climate change could increase the frequency, severity, or duration of certain adverse weather conditions. We may experience reduced availability and/or increases in the cost of insurance due to such changes. Prolonged interruptions or disruptions at a key location such as our FedEx Memphis World Hub or one of our information-technology centers could materially and adversely affect our business, financial condition, cash flows and results of operations. We also may incur significant costs to reestablish or relocate these functions. Moreover, resulting economic dislocations, including supply chain and fuel disruptions, could materially and adversely affect demand for our services resulting in a material and adverse effect on our business, financial condition, cash flows and results of operations.
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Other Legal, Regulatory, and Miscellaneous Risks
Government regulation and enforcement are evolving and unfavorable changes could harm our business. We are subject to regulation under a wide variety of United States federal, state, and local and non-United States government regulations, laws, policies, enforcement priorities, and actions (including through executive orders and investigations). There can be no assurance that such regulations, laws, policies, enforcement priorities, and actions will not be changed, or implemented, in ways that will decrease the demand for, or affect the provision of, our services, subject us to increased or unexpected costs, affect our reputation, or require us to modify our business models and objectives (such as our transformation initiatives), harming our financial results. In particular, legislative, executive, regulatory, judicial or other actions that the United States and non-United States governments have undertaken or could undertake, including in areas such as data privacy and sovereignty, the use of AI and other emerging technologies, taxes, foreign exchange intervention in response to currency volatility, currency controls that could restrict the movement of liquidity from particular jurisdictions, trade controls, tariffs, quotas, embargoes, or sanctions in the United States or other countries, complex economic sanctions, import and export controls, customs standards, additional security or workplace and transportation health and safety requirements, labor and employment standards (including with respect to our pilots and our service providers and their employees), enforcement of civil rights laws (such as Title VII of the Civil Rights Act of 1964) in the United States, scrutiny of human resources policies and practices, challenges to diversity-related initiatives, False Claims Act, expanded obligations under state or federal wage and hour laws, immigration and worker eligibility standards, limitations on the ability to perform work in certain locations, prohibitions against vendor or service provider engagements, worker classification, joint employment standards and liability, government contracting, state and federal antitrust, regulated commodities, environmental, climate-related, or emission standards, and accounting materially and adversely affect our results of operations, transformation initiatives, financial results or condition, capital requirements, effective tax rate, and service levels. Furthermore, some of our operations are in high-risk legal compliance environments, and the Foreign Corrupt Practices Act (the “FCPA”), similar anti-bribery laws in non-United States jurisdictions, and other compliance-related laws or regulations could result in litigation, investigations, assessment of damages, imposition of penalties, or other consequences. For additional discussion, see “Item 1. Business” of this Annual Report under the caption “Regulation.” Additionally, in light of the recently held and upcoming elections in the United States and various international jurisdictions and the issuance of Executive Orders in the United States, including those which are being litigated or courts have held are not supported by law, have caused and may continue to cause considerable uncertainty regarding changes to various aspects of existing laws, regulations, and enforcement priorities and strategies that could affect trade policies, labor matters, human resources and related policies and practices, immigration, taxes, and technological advancements, among other areas, and have a material effect on our business and results of operations, as well as on the price of our common stock.
We could be subject to adverse changes in regulations and interpretations or challenges to our tax positions. We are subject to taxation in the United States and numerous foreign jurisdictions. From time to time, changes in tax laws or regulations may be enacted that could significantly affect our overall tax liabilities and our effective tax rate. United States and foreign governmental agencies maintain focus on the taxation of multinational companies, including statutory tax rates, digital taxes, global minimum taxes (such as the framework agreed to by members of the Organization for Economic Cooperation and Development), and transactions between affiliated companies. Such changes may require new and complex computations to be performed, significant judgments, estimates, and calculations to be made, and the preparation and analysis of information not previously relevant or regularly produced.
Standard-setting bodies could interpret or issue guidance on how provisions of certain tax laws and regulations will be applied or otherwise administered that is different from our interpretation, and we may be required to make adjustments to amounts that we have recorded that may materially and adversely affect our business, financial condition, cash flows, and results of operations. See “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition - Results of Operations and Outlook - Consolidated Results - Income Taxes” of this Annual Report for additional information regarding ongoing tax examinations and challenges. Additionally, see “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition— Critical Accounting Estimates - Income Taxes” of this Annual Report for information regarding estimates and potential adjustments related to our tax positions.
Our business is subject to complex and evolving United States and foreign laws and regulations regarding data protection and cybersecurity, which impose significant costs and regulatory risks that are likely to increase over time. There has recently been heightened regulatory and enforcement focus relating to the collection, use, storage, retention, transfer, and processing of personal data in the United States (at both the state and federal level) and internationally, including the EU’s General Data Protection Regulation, the United States executive order relating to sharing information with China and other covered countries, the California Consumer Privacy Act (as amended by the California Privacy Rights Act, the “CCPA”), the Virginia Consumer Data Protection Act, the Canada Personal Information Protection and Electronic Documents Act (“PIPEDA”’), and other similar laws that have been or will be enacted by other jurisdictions. In addition, in the United States and internationally, there has been increased legislative and regulatory activity related to Cybersecurity and AI and the risks and challenges AI poses, including the European Union’s Artificial Intelligence Act, the Colorado AI Act, and other similar state laws that have been or will be enacted. Also, China and certain other jurisdictions have enacted more stringent data localization requirements. An actual or alleged failure to comply with applicable United States or foreign data protection laws, regulations, or other data protection standards or cybersecurity regulations may expose us or our applicable third- party providers to litigation (including, in some instances, class action litigation), fines, sanctions, or other penalties, which could
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materially and adversely affect our business, reputation, results of operations, cash flows, and financial condition. This regulatory environment is increasingly challenging, based on discretionary factors, and difficult to predict. Consequently, compliance with all applicable regulations in the various jurisdictions in which we do business may present material obligations and risks to our business, including: significantly expanded compliance burdens, costs, and enforcement risks; extensive system or operational changes; or increased costs and/or reduced attractiveness of the services we offer. All of these evolving compliance and operational requirements, as well as the uncertain interpretation and enforcement of laws, impose significant costs and regulatory risks that are likely to increase over time. Developing privacy and AI legislation within the United States and in other jurisdictions may also create limitations or added requirements on the use of personal data by FedEx Dataworks and the other FedEx operating companies.
The regulatory environment for global aviation or other transportation rights may affect our operations and increase our operating costs. Our extensive air network is critical to our success. Our right to serve foreign points is subject to the approval of the DOT and generally requires a bilateral agreement between the United States and foreign governments. In addition, we must obtain the permission of foreign governments to provide specific flights and services. Our operations outside of the United States, such as FedEx’s international domestic operations, are also subject to current and potential regulations, including certain postal regulations and licensing requirements, that restrict, make difficult, and sometimes prohibit, the ability of foreign-owned companies such as FedEx to compete effectively in parts of the international domestic transportation and logistics market. Regulatory or executive actions affecting global aviation or transportation rights or a failure to obtain or maintain aviation or other transportation rights in important international markets could impair our ability to operate our networks. Further, our ability to obtain or maintain aviation or other transportation rights internationally may be materially and adversely affected by changes in international trade policies and relations. We are subject to other extensive regulatory and legal compliance requirements that may result in significant costs. For instance, the FAA from time-to-time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures in order to comply. High-profile accidents, catastrophes, or incidents involving aircraft may trigger increased regulatory and legal compliance requirements. These requirements can be issued with little or no notice, or can otherwise affect our ability to efficiently or fully utilize our aircraft, and in some instances have resulted in the temporary grounding of aircraft types altogether. Further, our business may be materially and adversely affected when governmental agencies and air traffic control and other systems they oversee cease to operate as expected, including due to partial shutdowns, sequestrations, or similar events. Lapses in government operations may result in, among other things, disruptions in the ability of governmental agencies to grant required regulatory approvals. For additional discussion, see “Item 1. Business” of this Annual Report under the caption “Regulation.”
We are also subject to other risks and uncertainties, including:
* the increasing costs of compliance with federal, state, and foreign governmental agency mandates (including the FCPA and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies;
¢ changes in foreign currency exchange rates, especially in the euro, Chinese yuan, British pound, Canadian dollar, Australian dollar, Mexican peso, Hong Kong dollar, and Japanese yen, which can affect our sales levels and foreign currency sales prices;
* — loss or delay in the collection of accounts receivable;
* any liability resulting from and the costs of defending against class-action, derivative, and other litigation, such as wage-and- hour, joint employment, securities, vehicle accident, and discrimination and retaliation claims, claims related to our reporting and disclosure of sustainability topics, and any other legal or governmental proceedings, including the matters discussed in Note 19 of the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report;
* adverse rulings on appeals and in other future judicial decisions, subsequent adverse jury findings, and changes in judicial precedent;
* — the sufficiency of insurance coverage we purchase; * various types of fraud with respect to unauthorized uses of another person’s identity;
* — the effect of technology developments (including AI and machine learning) on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization;
¢ disruptions in global supply chains, which can limit the access of Federal Express and our service providers to vehicles and other key capital resources and increase our costs;
¢ difficulties experienced by the companies with which we contract to fly smaller regional “feeder” aircraft in attracting and retaining pilots, which could cause a reduction of service offered to certain locations, service disruptions, increased costs of operations, and other difficulties;
* governmental underinvestment in transportation infrastructure, which could increase our costs and materially and adversely affect our service levels due to traffic congestion, prolonged closure of key thoroughfares, or sub-optimal routing of our vehicles and aircraft;
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¢ stockholder activism, which could divert the attention of management and our Board of Directors from our business, hinder execution of our business strategy, give rise to perceived uncertainties as to our future, and cause the price of our common stock to fluctuate significantly;
* — successful completion of our planned stock repurchases; and
* constraints, volatility, or disruption in the global capital and credit markets, our ability to maintain our current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and our ability to meet credit agreement financial covenants.
ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 1C. CYBERSECURITY
Our ability to attract and retain customers, efficiently operate our businesses, execute our transformation initiatives, and compete effectively increasingly depends in part upon the sophistication, security, and reliability of our technology network, including our ability to provide features of service that are important to our customers, to protect our confidential business information and the
information provided by our customers, and to maintain customer confidence in our ability to protect our systems and to provide
services consistent with their expectations.
Cybersecurity Risk Management and Strategy
FedEx has an information technology (“IT”) risk management process designed to identify and manage risk within its IT environment, including cybersecurity. The IT risk management process is based on an established framework for identification, measurement, and monitoring of cybersecurity and other risk areas and supplements our Enterprise Risk Management (“ERM”) process and framework. Our IT risk management, ERM, and compliance teams collaborate to regularly evaluate and manage cybersecurity-related risks using various tools and services. Leveraging components from multiple industry frameworks and best practices such as the International Organization for Standardization (“ISO”) 27001 and National Institute of Standards and Technology (“NIST”) standards, including the NIST Cybersecurity Framework, our cybersecurity program prioritizes governance, identification, protection, detection, response, and remediation measures.
FedEx increasingly utilizes artificial intelligence-enabled technologies (““AI’’) within its operations and also evaluates risks associated with the use of AI by third-party vendors and service providers. AI-related security and governance risks are considered as part of FedEx’s broader cybersecurity and enterprise risk management processes. These considerations include, among other factors, risks related to data integrity, model governance, access controls, third-party dependencies, and the potential misuse of Al-enabled systems. We have an AI policy to support the responsible use of AI technologies in our operations, with a focus on enhancing business effectiveness while managing ethical, legal, cybersecurity, data privacy, and other technology-related risks. We also established an AI Council comprised of a cross-functional group of employees to support the responsible evaluation, governance, and use of AI technologies across the enterprise.
We regularly assess our cybersecurity program’s capabilities and tools to help us enhance reliability and scan our environment for vulnerabilities. Our IT risk management team, including our Corporate Vice President - Chief Information Security Officer (“CISO”), communicates with senior management on the cybersecurity risk posture of our IT assets, strives to ensure consistent risk remediation activities, and monitors the effectiveness of our IT-related controls. In addition, our internal audit team performs reviews of our information security organization to help ensure controls are operating effectively and as designed.
Enterprise-wide information security training (including with respect to cybersecurity), supplemented by awareness programs, is crucial for risk reduction and safeguarding customer, employee, and company information. We provide training to employees and certain third-party contractors based on access to our network, risk, roles, policies, standards, and behaviors, which is updated to address emerging technology and security issues.
We periodically engage with assessors, consultants, auditors, and other third parties to review and improve our cybersecurity program. Compliance with regulatory requirements involves regular third-party assessments. Our processes are also designed to address cybersecurity risks associated with third-party service providers, including risk assessment and due diligence during selection and oversight of activities throughout the vendor lifecycle. Key third parties undergo regular assessments to gauge cybersecurity control effectiveness, with heightened review of those with access to non-public data or critical systems.
We regularly conduct table-top simulation exercises to test our cybersecurity incident response processes with the aim of enhancing effectiveness against evolving threats. Our incident response procedures guide our preparedness, detection, response, and recovery actions. In the last four fiscal years to date, we have not identified any risks from cybersecurity threats or become aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business, results of operations, or financial condition.
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While we have significant security processes and initiatives in place, we may be unable to detect or prevent a breach or disruption in the future. For more information about cybersecurity-related risks, please see “Item 1A. Risk Factors” of this Annual Report.
Cybersecurity Governance
The FedEx Board of Directors has delegated to the Cyber and Technology Oversight Committee of the Board of Directors (““CyTOC’’) responsibility for overseeing the company’s cyber and technology-related risks, including network security, information and digital security, data privacy and protection, and risks related to emerging technologies such as artificial intelligence and machine learning; the technologies, policies, processes, and practices for managing and mitigating such risks; and the company’s cyber incident response and recovery plan. The CyTOC also oversees the cybersecurity, cyber-resiliency, and technology aspects of the company’s business continuity and disaster recovery capabilities and contingency plans. Several of our Board members, including certain members of our CyTOC, have technological, digital, and/or cybersecurity experience.
The CyTOC receives regular updates from our CISO and other members of management on risks related to these matters. Specific topics may include updates to FedEx’s cyber risks and threats, the status of existing or new strategies and associated projects intended to strengthen FedEx’s information security systems, assessments of FedEx’s cybersecurity program, risks associated with third-party service providers, and the emerging threat landscape. The CyTOC also receives regular updates on key metrics related to our cybersecurity-related risks. The results of the IT risk management process are also presented at least annually to the CyTOC. Additionally, members of the CyTOC participate in certain of the simulation exercises conducted by management. The Chair of the CyTOC briefs the full Board on certain of these matters. In addition, the Board periodically receives cybersecurity updates directly from management. Separately, through our ERM program, key enterprise risks, including with respect to cybersecurity, are communicated to the Board and its Audit and Finance Committee at least annually, and any significant changes to these risks are reported to the Board and its Audit and Finance Committee.
Our CISO, who reports to the Executive Vice President — Chief Digital and Information Officer, leads our information security team and has management responsibility for overseeing FedEx’s cybersecurity program, including assessing and managing material risks from cybersecurity threats. The CISO, who has over 25 years of experience at FedEx and has received industry-recognized information security certifications, oversees an information security organization of more than 400 security, risk, and compliance professionals based in the U.S. and internationally across the FedEx enterprise. The leadership team of our information security organization has extensive experience in IT and cybersecurity and possess certifications in cybersecurity and related fields.
The FedEx Data and Technology Risk Council (“DTRC”), which is sponsored by the CISO, oversees the execution of FedEx’s comprehensive IT risk management program. The DTRC, which receives quarterly reports on FedEx’s IT risk management, is responsible for assessing the overall risk framework on an annual basis, setting acceptable risk tolerance levels, approving risk prioritization and associated risk mitigation activities, and monitoring the changing risk landscape and posture.
Both our CISO and other members of our cybersecurity leadership team participate in threat intelligence briefings provided by various government and industry entities. Our Executive Vice President — Chief Digital and Information Officer is a member of the FedEx Executive Committee, which oversees our business risk, with cybersecurity threat risks being a regular topic of discussion. Our cybersecurity incident response plan includes processes for communicating cybersecurity incidents to relevant levels of management, including the DTRC, Executive Committee, the CyTOC, and the full Board of Directors, as appropriate, and consideration of external reporting and disclosure requirements.
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ITEM 2. PROPERTIES Federal Express
Federal Express’s principal owned and leased properties include its aircraft, vehicles, major sorting and handling facilities, administration buildings, FedEx Drop Boxes, and data processing and telecommunications equipment.
Aircraft and Vehicles As of May 31, 2026, Federal Express’s aircraft fleet consisted of the following:
Maximum Gross
Not Yet Placed Structural Payload
Description Owned Leased Total in Service (Pounds per Aircraft)
Boeing B777F 56 3 59 0 233,300 Boeing MD-11 29 0 29 0 192,600 Boeing 767F 152 0 152 1 127,100 Airbus A300-600 57 0 57 0 106,600 Boeing 757-200 86 0 86 0 63,000 ATR-72 600F 27 0 27 2 19,290 ATR-72 19 0 19 0 17,970 ATR-42 16 0 16 0 12,070 Cessna 408 39 0 39 2 6,000 Cessna 208B 216 0 216 0 2,830
Total 697 3 700 5
Includes five aircraft not currently in operation and undergoing pre-service modifications.
In 2026, we made the decision to permanently retire from service 10 aircraft, including four Boeing 757-200 aircraft, one Airbus A300-600 aircraft, and five Boeing MD-11 aircraft. These retirements are aligned with our fleet reduction and modernization strategy as we continue to improve our global network efficiency and better align air network capacity with anticipated demand. See the “Results of Operations and Outlook — Consolidated Results — Asset Impairment Charges” section of “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information regarding the retirements, and the “Business Segments — Federal Express” section of “Item 1. Business” for information regarding the ongoing redesign of the Federal Express international air network to improve efficiency and asset utilization.
As of May 31, 2026, Federal Express operated approximately 82,000 motorized vehicles in its global network and also conducts certain linehaul and pickup-and-delivery operations primarily with approximately 100,000 motorized vehicles owned or leased by independent service providers.
Aircraft Purchase Commitments
The following table is a summary of the number and type of aircraft we were committed to purchase as of May 31, 2026, with the year of expected delivery:
Cessna SkyCourier 408 ATR 72-600F B777F Total 2027 9 5 5 19 2028 2; 4 5 11 2029 0 4 0 4 2030 0 2 0 2: 2031 0 0 0 0 Thereafter 0 0 0 0 Total 11 15 10 36
As of May 31, 2026, we had $727 million in deposits and progress payments on aircraft purchases and other planned aircraft-related transactions. See Note 17 of the accompanying consolidated financial statements for more information about our purchase commitments and options.
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Sorting and Handling Facilities
At May 31, 2026, Federal Express operated the following major air sorting and handling facilities:
Sorting Capacity Lease Expiration Location Acres Square Feet (per hour) Lessor Calendar Year Primary Memphis, Tennessee 967 5,115,929 484,000 Memphis-Shelby County 2036 Airport Authority National Indianapolis, Indiana® 449 3,229,112 164,000 Indianapolis Airport 2053 Authority Miami, Florida 35 284,809 7,000 Aero Miami FX, LLC 2041 Regional Fort Worth, Texas 168 987,388 76,000 Fort Worth Alliance Airport 2041 Authority Newark, New Jersey 70 634,193 156,000 Port Authority of New York 2030 and New Jersey Oakland, California 75 587,700 63,000 Port of Oakland 2036 Metropolitan Chicago, Illinois 54 481,350 21,000 City of Chicago 2028 Los Angeles, California 34 305,300 23,000 City of Los Angeles 2025 Atlanta, Georgia 35 291,525 22,600 City of Atlanta 2030 International Anchorage, Alaska® 64 417,300 25,000 State of Alaska, Department of 2078 Transportation and Public Facilities Paris, France 123 1,798,368 59,000 Aeroports de Paris 2048 Cologne, Germany) 14 731,267 17,900 Cologne Bonn Airport 2040 Guangzhou, China‘) 155 873,006 36,000 Guangdong Airport 2029 Management Corp. Osaka, Japan” 17 425,206 9,000 Kansai Airports 2029 Liege, Belgium") 23 1,027,952 33,700 Liege Airport 2036
© Documents and packages.
®) In addition to U.S. domestic express package and freight shipments, handles certain international express package and freight shipments to and from Europe.
G) Handles international express package and freight shipments to and from Latin America and the Caribbean.
) Property is held under four separate leases — we continue to renew the leases for the sorting and handling facility on a month-to-month basis while a new lease is being negotiated.
©) Handles international express package and freight shipments to and from Asia, Europe, and North America. ) Handles intra-Europe express package and freight shipments and international express package and freight shipments to and from Europe. Handles intra-Asia express package and freight shipments and international express package and freight shipments to and from Asia.
(8) Handles intra-Europe express package and freight shipments.
Federal Express’s primary sorting facility, which serves as the center of its multiple hub-and-spoke system and worldwide air network, is located at the Memphis International Airport. Federal Express’s facilities at the Memphis International Airport also include aircraft hangars, aircraft ramp areas, vehicle parking areas, flight training and fuel facilities, the FedEx Cold Chain Center, administrative offices, and warehouse space.
Federal Express leases these facilities from the Memphis-Shelby County Airport Authority (the “Authority”). The lease obligates Federal Express to maintain and insure the leased property and to pay all related taxes, assessments, and other charges. The lease is subordinate to, and Federal Express’s rights thereunder could be affected by, any future lease or agreement between the Authority and the U.S. government.
Federal Express has additional major international sorting and freight handling facilities located at Narita Airport in Tokyo and Stansted Airport outside London. Federal Express also has a substantial presence at airports in Hong Kong, Taiwan, and Dubai. A
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central air hub near Liege, Belgium connects specific large European markets. Additionally, central European road hubs are located in Duiven, The Netherlands and Novara, Italy, respectively.
As of May 31, 2026, Federal Express owned or leased approximately 1,085 facilities for operations in the U.S. and 96 sorting and distribution centers in Canada that support its Surface operations. See the “Business Segments — Federal Express” section of “Item 1. Business” for information regarding the ongoing consolidation of these operations. The leased facilities have a variety of lease term lengths and are strategically located to cover the geographic area served by the U.S. and Canada Surface operations of Federal Express. The facilities range in size from approximately 1,000 to 1,160,000 square feet, with an average size of approximately 130,000 square feet.
In addition, over 1,000 city stations are owned or leased throughout Federal Express’s international network. The majority of these leases are for terms of five to ten years. City stations serve as a sorting and distribution center for a particular city or region. We believe that suitable alternative facilities are available in each locale on satisfactory terms, if necessary.
Administrative and Other Properties and Facilities
The World Headquarters of Federal Express is located in southeastern Shelby County, Tennessee. Federal Express leases additional space to support our international operations, which are located in Hoofddorp, The Netherlands and Singapore. Federal Express leases a state-of-the-art technology center in Collierville, Tennessee. This facility houses personnel responsible for strategic software development and other functions that support FedEx’s technology and e-commerce solutions.
As of May 31, 2026, Federal Express had approximately 23,000 Drop Boxes. Federal Express customers can also ship from approximately 25,000 staffed drop-off locations, including FedEx Office stores and FedEx Authorized ShipCenters. Internationally, Federal Express had approximately 37,000 drop-off locations.
The FedEx Authorized ShipCenter program offers U.S. domestic and international Federal Express shipping and drop-off services through a network of approximately 5,000 franchised and independent “pack and ship” retail locations. The FedEx OnSite network includes over 15,000 drop-off locations at Walgreens and Dollar General. Additionally, Federal Express has an agreement with Office Depot, Inc. to offer U.S. domestic and international Federal Express shipping and drop-off services at nearly 800 Office Depot and OfficeMax retail locations.
As of May 31, 2026, FedEx Logistics operated approximately 100 offices and facilities in 34 countries and territories throughout North America and in Africa, Asia-Pacific, Europe, India, Latin America, the Middle East, and Australia/New Zealand. In addition, as of May 31, 2026, FedEx Supply Chain had approximately 70 facilities through which it operated its supply chain logistics services.
FedEx Dataworks FedEx Dataworks’ corporate headquarters are located in Memphis, Tennessee. FedEx Office
FedEx Office’s corporate headquarters are located in Plano, Texas. As of May 31, 2026, FedEx Office operated approximately 2,000 customer-facing stores and 16 manufacturing plants with expanded print capabilities (traditional electrophotography, digital and traditional offset, large and grand format, and dye sublimation printing), with 14 of the manufacturing plants also housing co-located signs and graphics production operations. Substantially all FedEx Office stores are leased, generally for terms of five to ten years with varying renewal options. FedEx Office operates over 220 stores at hotels, convention centers, hospitals, universities, and corporate campuses, with the remainder generally located in strip malls, office buildings, Walmart stores, and stand-alone structures. FedEx Office’s customer-facing stores average approximately 3,200 square feet in size.
FedEx Supply Chain
FedEx Supply Chain’s corporate headquarters are located in Memphis, Tennessee. As of May 31, 2026, FedEx Supply Chain operates over 150 facilities.
ITEM 3. LEGAL PROCEEDINGS
FedEx and its subsidiaries are subject to legal proceedings and claims that arise in the ordinary course of their business. See Note 19 of the accompanying consolidated financial statements, which is incorporated herein by reference, for a description of certain pending legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Information regarding executive officers of FedEx as of July 20, 2026 is as follows:
Name and Office Age
R. Brad Martin 74 Executive Chairman and Chair of the Board
Rajesh Subramaniam 60 President and Chief Executive Officer and Director
Gina F. Adams 67 Executive Vice President, General Counsel and Secretary
Tracy B. Brightman 63 Executive Vice President — Chief People Officer
Brie A. Carere 48 Executive Vice President — Chief Customer Officer
Positions and Offices Held and Business Experience
Executive Chairman of FedEx since September 2025 and Chairman of the FedEx Board since June 2025. Chairman of RBM Venture Company, a private investment company, since 2007. Chairman and Chief Executive Officer of Riverview Acquisition Corp., an investment company, from April 2021 to August 2022. Mr. Martin serves as Chairman of the Board and a director of FedEx Freight Holding Company, Inc., North America’s largest less-than-truckload carrier.
President of FedEx since March 2019 and Chief Executive Officer of FedEx since June 2022; President and Chief Executive Officer of Federal Express since June 1, 2024; director of FedEx since January 2020; Chief Executive Officer—Elect of FedEx from March 2022 to May 2022; Chief Operating Officer of FedEx from March 2019 to March 2022; President and Chief Executive Officer of Federal Express from January 2019 to March 2019; Executive Vice President — Chief Marketing and Communications Officer of FedEx from January 2017 to December 2018; Executive Vice President — Marketing & Communications of FedEx Services from 2013 to January 2017; Senior Vice President — Marketing of FedEx Services from 2006 to 2013; Senior Vice President — Canada of Federal Express from 2003 to 2006; Vice President — Marketing/APAC of Federal Express from 2000 to 2003; Vice President — APAC, EC & CS of Federal Express from 1999 to 2000; and various management and marketing analyst positions at Federal Express from 1991 to 1999. Mr. Subramaniam serves as a director of The Procter & Gamble Company, a consumer products company.
Executive Vice President, General Counsel and Secretary of FedEx since September 2024; Executive Vice President and General Counsel—Elect of FedEx during September 2024; Corporate Vice President, Government & Regulatory Affairs of FedEx from 2019 through August 2024; Corporate Vice President, Government Affairs of FedEx from 2001 to 2019; Staff Vice President, International Government Affairs of FedEx from 1999 to 2001; and various government and regulatory affairs positions with FedEx and Federal Express from 1992 to 1999. Prior to that, Ms. Adams worked in the Office of the General Counsel of the U.S. Department of Transportation for nine years. Ms. Adams serves as a director of Entergy Corporation, an integrated energy company.
Executive Vice President — Chief People Officer of FedEx since June 2023; Corporate Vice President — Chief People Officer of FedEx from November 2022 to June 2023; General Counsel & Senior Vice President — Legal and Human Resources of FedEx Office from October 2020 to November 2022; Senior Vice President — Human Resources and Communications of FedEx Office from April 2018 to October 2020; Senior Vice President — Human Resources of FedEx Office from July 2007 to March 2018; Vice President — Field Human Resources Operations of FedEx Office from January 2005 to June 2007; Vice President — Assistant General Counsel and Assistant Secretary of FedEx Office from April 2004 to January 2005; and Director, Litigation and Employment Counsel of FedEx Office from September 2002 to April 2004.
Executive Vice President — Chief Customer Officer of FedEx since June 2022; Executive Vice President — Chief Marketing and Communications Officer of FedEx from January 2019 to May 2022; Senior Vice President, Global Portfolio Marketing of FedEx Services from October 2016 to December 2018; Vice President, Marketing, Customer Experience and Corporate Communications for FedEx Express Canada from October 2010 to October 2016; and various positions in marketing, customer experience, and strategy with FedEx Express Canada from 2001 to October 2010. Ms. Carere serves as a director of ZipRecruiter, Inc., an online employment marketplace.
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Kawal Preet
Executive Vice President, Planning, Engineering, and Transformation
Scott Ray Chief Operating Officer — U.S. and Canada
Claude F. Russ
Enterprise Vice President, Finance and Interim Chief Financial Officer and Interim Chief Accounting Officer
Richard W. Smith
Chief Operating Officer — International and Chief Executive Officer — Airline, Federal Express
Vishal Talwar
Executive Vice President, Chief Digital and Information Officer
(CDIO) of FedEx, and President of FedEx Dataworks
51
57
50
48
49
Executive Vice President, Planning, Engineering, and Transformation of FedEx since October 2025; Regional President Asia Pacific from June 2024 to September 2025; Regional President Asia Pacific, Middle East, and Africa from June 2020 to May 2024; Senior Vice President, Operations from June 2017 to June 2020; Vice President, Planning & Engineering from July 2014 to May 2017; and various positions with FedEx from July 1997 to June 2014. Ms. Preet also serves as a director of Intertek Group PLC, a British multinational assurance, inspection, and product testing certification company.
Chief Operating Officer — U.S. and Canada since June 2026; Chief Operating Officer- Elect — U.S. and Canada from February 2026 to May 2026; President, FedEx Ground from April 2023 to January 2026; Executive Vice President and Chief Operating Officer, FedEx Ground, from January 2022 to April 2023; Senior Vice President, FedEx Ground from June 2012 to December 2021; and various positions with FedEx from July 1987 to May 2012.
Enterprise Vice President, Finance since July 2023 and Interim Chief Financial Officer and Interim Chief Accounting Officer since June 2026; Chief Operating Officer, FedEx Dataworks from January 2021 to July 2023; Senior Vice President — Revenue Management, FedEx Services from November 2018 to January 2021; Senior Vice President of Finance and Chief Financial Officer for FedEx Freight from November 2016 to November 2018; and various positions with FedEx from February 2002 to November 2016.
Chief Operating Officer — International and Chief Executive Officer — Airline of Federal Express since June 1, 2024; President and Chief Executive Officer — Airline and International of Federal Express from April 2023 to May 2024; President and Chief Executive Officer of Federal Express from September 2022 to April 2023; President and Chief Executive Officer—Elect of Federal Express from April 2022 to August 2022; Regional President, The Americas and Executive Vice President, Global Support of Federal Express from 2020 to March 2022; Regional President, U.S. and Executive Vice President, Global Support of Federal Express from 2019 to 2020; President and Chief Executive Officer of FedEx Logistics from July 2017 to 2019; Senior Vice President, Global Trade and Specialty Services of Federal Express from March 2017 to June 2017; Vice President, Global Trade Services of Federal Express from 2014 to 2017; Managing Director, Life Sciences and Specialty Services/U.S./International of Federal Express from 2009 to 2014; and various positions with FedEx from 2005 to 2009.
Executive Vice President, Chief Digital and Information Officer (CDIO) of FedEx, and President of FedEx Dataworks since August 2025; Senior Managing Director and Chief Growth Officer of Accenture Technology from April 2015 to August 2025. Mr. Talwar serves as a director of Fastenal Company, a distributor of fasteners and industrial and construction supplies.
Executive officers are elected by, and serve at the discretion of, the Board of Directors. There is no arrangement or understanding between any executive officer or person chosen to become an executive officer and any person, other than a director or executive officer of FedEx or of any of its subsidiaries acting solely in his or her official capacity, pursuant to which any executive officer or person chosen to become an executive officer was selected. There are no family relationships between any executive officer and any other executive officer or director of FedEx, or any person nominated or chosen to become a director or executive officer.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
FedEx’s common stock is listed on the New York Stock Exchange under the symbol “FDX.” As of July 16, 2026, there were 10,211 holders of record of our common stock. We expect to continue to pay regular quarterly cash dividends, though each quarterly dividend payment is subject to review and approval by our Board of Directors. We evaluate our dividend payment amount on an annual basis. There are no material restrictions on our ability to declare dividends, nor are there any material restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans, or advances.
Unregistered Sales of Equity Securities
We did not issue any of our equity securities during the year ended May 31, 2026 that were not registered under the Securities Act of 1933, as amended.
Issuer Purchases of Equity Securities
In March 2024, our Board of Directors authorized the repurchase of up to $5.0 billion of FedEx common stock (“2024 program’). As of May 31, 2026, $1.3 billion remained available to use for repurchases under the 2024 program. In June 2026, we repurchased
$0.3 billion of our common stock through open market transactions and executed an accelerated share repurchase agreement (“ASR”) to repurchase $1.0 billion of our common stock with a completion date by the end of September 2026. There are no amounts remaining available to be used for repurchases under the 2024 program.
On July 20, 2026, our Board of Directors authorized a new stock repurchase program for additional repurchases of up to $5.0 billion of FedEx common stock (“2026 program”). Shares under the 2026 program may be repurchased from time to time in the open market or in privately negotiated transactions. The program does not have any specified time limit and does not obligate us to purchase any particular amount of shares, but our Board of Directors may determine to suspend or discontinue the program at any time.
See “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” and Note 1 and Note 20 of the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report for additional information regarding our stock repurchase programs and purchases made under the 2024 program through July 20, 2026.
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Common Stock Performance Graph
The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission (the “SEC”), nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate such information by reference into such filing.
The following graph compares the cumulative total shareholder return on our common stock for the periods indicated with the Standard & Poor's ("S&P") 500 index and the Dow Jones Transportation Average index:
Comparison of Five-Year Cumulative Total Return‘
_ A
2021 2022 2023 2024 2025 2026
—m@- FedEx Corporation S&P 500 -e@ Dow Jones Transportation Average
May 31, 2021 2022 2023 2024 2025 2026 FedEx Corporation $ 100.0 $ 1D § 71.7 $ 85.2 §$ 74.8 $ 144.3 S&P 500 Index 100.0 99.7 102.6 131.5 149.3 193.8 Dow Jones Transportation Average Index 100.0 90.8 87.1 96.7 93.3 136.0
Assumes $100 invested in FedEx common stock and in each index on May 31, 2021 and that all dividends are reinvested.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT?’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ORGANIZATION OF INFORMATION
This Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) of FedEx Corporation (“FedEx”) is composed of three major sections: Results of Operations and Outlook, Financial Condition, and Critical Accounting Estimates. These sections include the following information:
* Results of operations includes an overview of our consolidated 2026 results compared to 2025 results. This section also includes a discussion of key actions and events that impacted our results. The results discussed for the year ended May 31, 2026 include the operations of FedEx Freight for the full fiscal year. Discussion and analysis of 2024 results and year-over- year comparisons between 2025 results and 2024 results can be found in “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of our Annual Report on Form 10-K (“Annual Report”) for the year ended
May 31, 2025.
¢ The overview is followed by a discussion of historical operating results for our business segments during 2026 and 2025, as well as a financial summary and analysis for each of our transportation segments in place during 2026 and 2025. In light of our change in fiscal year end from May 31 to December 31, the discussion includes our outlook for the twelve months ending December 31 (“calendar year’’). Except as otherwise specified, any reference to a year indicates our fiscal year ending May 31, 2026 or ended May 31 of the year referenced, and comparisons are to the corresponding period of the prior year.
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* Our financial condition is reviewed through an analysis of key elements of our liquidity and capital resources, financial commitments, and liquidity outlook for calendar year 2026.
* Critical accounting estimates discusses those financial statement elements that we believe are most important to understanding the material judgments and assumptions incorporated in our financial results.
The discussion in MD&A should be read in conjunction with the other sections of this Annual Report, particularly “Item 1. Business,” “Ttem 1A. Risk Factors,” and “Item 8. Financial Statements and Supplementary Data.”
DESCRIPTION OF BUSINESS SEGMENTS
We provide a broad portfolio of transportation, e-commerce, and business services, offering integrated business solutions utilizing our flexible, efficient, and intelligent global network. During 2026 and 2025, our primary operating companies were Federal Express Corporation (“Federal Express”), the world’s largest express transportation company and a leading North American provider of small- package ground delivery services, and FedEx Freight, Inc. (“FedEx Freight”), a leading North American provider of less-than- truckload (“LTL”) freight transportation services. For those periods, Federal Express and FedEx Freight represented our major service lines and constituted our reportable segments.
This MD&A is based on our segment reporting that was in effect during 2026 and 2025. On June 1, 2026, we completed the Spin-Off. Effective as of this date, we will no longer consolidate FedEx Freight and FedEx Freight is no longer a reportable segment. References to our transportation segments include, collectively, the Federal Express segment and the FedEx Freight segment. See “Reportable Segments” below and “Item 1. Business” for additional information.
The key indicators necessary to understand our operating results include: ¢ the overall customer demand for our various services based on macroeconomic factors and the global economy;
* the volumes of transportation services provided through our networks, primarily measured by our average daily volume and shipment weight and size;
¢ the mix of services purchased by our customers;
¢ the prices we obtain for our services, primarily measured by yield (revenue per package or pound or revenue per shipment or hundredweight for LTL freight shipments);
* our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and
* the timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges.
Trends Affecting Our Business
The following trends significantly affect the indicators discussed above, as well as our business and operating results. See the risk factors identified under Item 1A. Risk Factors” for more information. Additionally, see “Results of Operations and Outlook — Consolidated Results — Separation and Other Costs — Business Optimization Costs and — Outlook” and “Financial Condition — Liquidity Outlook” below for additional information on efforts we are taking to mitigate adverse trends.
Macroeconomic Conditions
While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth. The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to continued weakened business conditions for the transportation industry leading to lower shipment volumes. Additionally, recent changes in U.S. and international trade policy have further weakened business conditions for the transportation industry. Inflation and elevated interest rates are negatively affecting consumer and business spending, and we expect inflation and elevated interest rates to continue to negatively affect our results for the remainder of calendar year 2026.
Global Trade Policies
The United States government has taken certain actions that have negatively affected United States trade, including imposing tariffs on many goods imported into the United States. Additionally, many foreign governments have imposed, and others have threatened to impose, new, expanded, or retaliatory tariffs, sanctions, embargoes, and/or quotas or trade barriers on certain goods imported from the United States. These actions have contributed to weakness in the global economy that has adversely affected our results of operations.
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On February 20, 2026 the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). On February 23, 2026, FedEx filed a lawsuit in the U.S. Court of International Trade against the U.S. Customs and Border Protection (“CBP”), the CBP commissioner, and the United States of America seeking a full refund of all IEEPA tariffs paid. On April 20, 2026, FedEx began filing refund claims through the CBP’s Consolidated Administration and Processing of Entries (“CAPE”) system.
As of May 31, 2026, we have submitted claims totaling $3.3 billion and we have received cash refunds of approximately $800 million. FedEx recognizes amounts associated with these claims when cash is received or when realization is otherwise considered probable and estimable. We continue to submit additional refund claims, pursuant to the CBP process, and expect to receive additional refunds as these claims are processed by CBP. The ultimate amount and timing of refunds remain uncertain due to ongoing administrative processes and potential legal developments.
To the extent customers have previously paid amounts associated with these tariffs, FedEx plans to remit corresponding refunds as soon as practicable. Accordingly, FedEx has recorded $749 million as of May 31, 2026 within current liabilities representing estimated customer refund obligations for cash refunds received. Certain amounts associated with these tariffs were not collected from customers and were previously written off as credit losses. Recoveries of such amounts are recognized in the period cash is received or when realization is reasonably assured which is generally when cash is received and are recorded as reductions of bad debt expense.
Additionally, fourteen nationwide class action lawsuits seeking refunds of IEEPA tariffs from FedEx were filed in U.S. district courts in various states. Thirteen of those lawsuits were consolidated into a single case pending in Tennessee federal court. The remaining lawsuit is pending in the Court of International Trade. The financial impact of these events is uncertain, as it is unclear to what extent duties will be refunded by CBP, what processes will govern such refunds in upcoming CAPE phases, or if we can fully collect related accounts receivable. We are evaluating the impact of these developments on our business and financial statements. No adjustments have been recorded in the accompanying consolidated financial statements as we cannot reasonably estimate the financial impact; however, it is reasonably possible that it could be material.
MD-11 Operational Impact
In November 2025, the U.S. Federal Aviation Administration issued an emergency Airworthiness Directive to address a potentially unsafe condition on all Boeing MD-11 aircraft, prohibiting further flight until the aircraft are inspected and all corrective actions are performed. Consequently, we experienced operational disruptions during fiscal 2026 related to the grounding of our MD-11 aircraft fleet which had an adverse impact on our financial results. In May 2026, following FAA approval of Boeing developed inspection and return-to-service protocols for MD-11 aircraft, we began systematically returning our MD-11 fleet to active commercial service. We expect our MD-11 fleet to be fully returned to service by the end of calendar year 2026.
Fuel
We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. In addition, our purchased transportation expense is affected by fuel costs. During 2026, higher fuel prices positively affected yields through increased fuel surcharges and negatively affected fuel expenses. To date, we have been mostly successful in mitigating over time the expense effect of higher fuel costs through our indexed fuel surcharges, as the amount of the surcharges is closely linked to the market prices for fuel. If we are unable to maintain or increase our fuel surcharges because of competitive pricing pressures or some other reason, fuel costs could materially and adversely affect our operating results.
Geopolitical Conflicts
Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including international taxes, government-to-government relations, the typically more volatile economies of emerging markets, and geopolitical risks such as the ongoing conflicts between Russia and Ukraine, the United States and Iran, and other hostilities in the Middle East, may materially and adversely affect our business and results of operations.
RESULTS OF OPERATIONS AND OUTLOOK
Many of our operating expenses are directly affected by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in revenue and volumes. Therefore, the discussion of operating expenses focuses on the key drivers and trends affecting expenses other than those factors strictly related to changes in revenue and volumes. The line item “Other” includes costs associated with outside service contracts (such as information technology services, facilities services, security, temporary labor and security), insurance, professional fees, and credit losses.
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CONSOLIDATED RESULTS
The following table compares summary operating results (dollars in millions, except per share amounts) for the years ended May 31:
Percent 2026 2025 Change Consolidated revenue $ 94,720 $ 87,926 8 Operating income (loss): Federal Express segment 5,912 4,885 Pall FedEx Freight segment 616 1,489 (59) Corporate, other, and eliminations (1,065) (1,157) (8) Consolidated operating income $ 5,463 $ 5,217 5 Operating margin: Federal Express segment 7.2% 6.5 % 70 bp FedEx Freight segment 7.0 % 16.7 % (970) bp Consolidated operating margin 5.8 % 5.9 % (10) bp Consolidated net income $ 4,433 $ 4,092 8 Diluted earnings per share $ 18.55 $ 16.81 10
The following table shows changes in revenue and operating income results by reportable segment for 2026 compared to 2025 (in millions):
Year-over-Year Changes
Revenue Operating Income
Federal Express segment $ 6,969 $ 1,027 FedEx Freight segment (97) (873) Corporate, other, and eliminations (78) 92 $ 6,794 $§$ 246
The following is a summary of the effects of the (costs) benefits of certain items affecting our financial results for the years ended May 31 (in millions):
2026 2025 Items affecting Operating Income: Spin-Off costs $ (738) $ (38) Business optimization costs (366) (756) Asset impairment charges (23) (21) International regulatory and legacy FedEx Ground legal matters 12 (88) Fiscal year change costs (33) — $ (1,148) $ (903) Items affecting Net Income: Spin-Off costs, net of tax $ (589) $ (44) Mark-to-market (“MTM”’) retirement plans accounting adjustments, net of tax 497 390 Business optimization costs, net of tax (285) (577) Asset impairment charges, net of tax (18) (16) International regulatory and legacy FedEx Ground legal matters, net of tax 16 (90) Fiscal year change costs, net of tax (26) = S$ (405) $ G37)
Overview
Operating income increased in 2026 primarily due to improved base yields for our package services, increased U.S. domestic package volumes and higher fuel surcharges, combined with the continued structural cost reductions from business optimization initiatives, including from DRIVE initiatives commenced in prior years. Operating income for 2026 was negatively affected by higher salaries and employee benefit expense, higher purchased transportation expense, the financial impact of global trade policy changes, and
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increased costs related to the Spin-Off. The increase in salaries and employee benefits was primarily driven by higher wage rates, variable incentive compensation, and employee benefit expenses.
Operating income includes separation and other costs of $771 million in 2026. These costs are related to the Spin-Off and fiscal year change and are primarily related to professional services and an employee incentive plan. In 2025, we incurred costs related to the Spin-Off of $56 million. These costs are included in Corporate, other, and eliminations and consist of $38 million of professional and legal fees included in separation and other costs and $18 million related to the debt exchange offer and consent solicitation transactions discussed in Note 6 of the accompanying financial statements included in other, net. See the “Separation and other costs” section of this MD&A for more information.
Operating income in 2026 and 2025 includes $366 million and $756 million, respectively, of business optimization expenses related to ongoing network optimization through Network 2.0, international operational transformation initiatives, and structural and overhead cost-reduction initiatives under our DRIVE program commenced in prior years. See the “Business Optimization Costs” section of this MD&A for more information.
Operating income in 2026 and 2025 includes $23 million and $21 million, respectively, of asset impairment charges associated with the decision to permanently retire certain aircraft and related engines at Federal Express. See the “Asset Impairment Charges” section of this MD&A for more information.
Operating income in 2026 and 2025 includes a gain of $12 million and net expense of $88 million, respectively, associated with certain international regulatory and other legal matters.
Net income in 2026 and 2025 includes a pre-tax, noncash gain of $647 million and $515 million, respectively, associated with our MTM retirement plans accounting adjustments. See the “Retirement Plans MTM Adjustments” section of this MD&A and Note 12 of the accompanying consolidated financial statements for more information.
During fiscal year 2026, we repurchased 3.3 million shares of FedEx common stock under ASR or open market transactions at an average price of $233.07 per share for a total of $776 million. Share repurchases had a benefit of $0.21 per diluted share in 2026. See “Ttem 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” and Note 1 of the accompanying consolidated financial statements and the “Financial Condition—Liquidity” section of this MD&A for additional information on our stock repurchases during fiscal year 2026.
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The following graphs for Federal Express and FedEx Freight show selected volume trends (in thousands) calculated on a 5-day-per-
week basis for the years ended May 31:
Federal Express U.S. Domestic Average Daily Package Volume
7,041 pee
1,015 1,052 1,136
2024 2025 2026 =H Ground home delivery/ = Ground commercial
economy
Priority =H Deferred
Federal Express Average Daily Freight Pounds”?
16,979
2025 ——— = International
Federal Express International“) Average Daily Package Volume
2024 2026
——— International domestic
International export
FedEx Freight Average Daily Shipments
2024
—f— Priority
Economy
() International domestic average daily package volume relates to our international intra-country operations. International export average daily package volume relates to our international priority and economy services.
@) International average daily freight pounds relate to our international priority and economy services.
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The following graphs for Federal Express and FedEx Freight show selected yield trends for the years ended May 31:
Federal Express Federal Express U.S. Domestic International“) Revenue per Package - Yield Revenue per Package - Yield
$27.22
$18.97 afer $19.75
2024 2025 2026 2024 2025 2026
=H Priority Deferred = Ground International export composite = International domestic
Federal Express FedEx Freight Freight Revenue per Shipment Revenue per Pound - Yield?
$460.00
$440.00 $421.78 $420.00 Sal» $405.53
$400.00
$380.00
$360.00 —__g—— $370.90
$340.00 Sele $358.84
$320.00 2025 2025
U.S. = International Economy === Priority
“International export revenue per package relates to our international priority and economy services. International domestic revenue per package relates to our international intra-country operations.
@) — International freight revenue per pound relates to our international priority and economy services. Revenue
Revenue increased 8% in 2026 primarily due to improved base yields for our package services, increased U.S. domestic package volumes, higher fuel surcharges, and favorable exchange rates, partially offset by the negative impacts from the expiration of our contract with the U.S. Postal Service and lower shipments at FedEx Freight.
Federal Express segment revenue increased 9% in 2026 primarily due to improved package base yields, increased U.S. domestic package volumes, higher fuel surcharges, favorable exchange rates, and growth in international freight volumes, partially offset by negative impacts from the expiration of our contract with the U.S. Postal Service and global trade policy changes.
FedEx Freight segment revenue decreased 1% in 2026 primarily due to lower volume resulting from macroeconomic conditions, partially offset by higher fuel surcharges and base yield improvement.
Revenue at Corporate, other, and eliminations decreased in 2026 primarily due to lower demand at FedEx Logistics.
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Operating Expenses
The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the years ended May 31:
Percent of Revenue
Percent a 2026 2025 Change 2026 2025 Operating expenses: Salaries and employee benefits $ 33,844 $§$ 31,232 8 35.7 % 35.5 % Purchased transportation 23,620 21,768 9 24.9 24.8 Rentals and landing fees 4,883 4,647 5 5.2 5,3 Depreciation and amortization 4,369 4,264 2 4.6 4.8 Fuel 4,052 3,775 7 43 4.3 Maintenance and repairs 3,330 3,245 3 3.5 3.7 Separation and other costs 771 38 NM 0.8 — Business optimization and realignment costs“) 366 756 (52) 0.4 0.9 Asset impairment charges) 23 21 10 — — Other®) 13,999 12,963 8 14.8 14.7 Total operating expenses 89,257 82,709 8 94.2 94.1 Total operating income $ 5,463 $ 5,217 5 5.8 % 5.9 %
© Includes costs associated with our transformation initiatives in 2026 and 2025. ®) Includes asset impairment charges in 2026 and 2025 associated with the Federal Express operating segment.
@ Includes a gain of $12 million in 2026 for an international regulatory matter in Federal Express. Includes $88 million of net expenses in 2025 associated with international regulatory and legacy FedEx Ground legal matters.
Salaries and employee benefits expense increased 8% in 2026 primarily driven by higher wage rates, variable incentive compensation, and employee benefit expenses, and unfavorable exchange rate impacts. Purchased transportation expense increased 9% in 2026 primarily due to volume-related costs to support higher package volume and contracted service provider rates. Other operating expenses increased 8% in 2026 primarily due to increased credit losses, higher outside service contracts and professional fees, and unfavorable exchange rates.
Fuel
We apply a fuel surcharge on our air and ground services, most of which are adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price from ten days prior to the week in which it is assessed. Some Federal Express international fuel surcharges are updated on a monthly basis. We routinely review our fuel surcharges and periodically update the tables used to determine our fuel surcharges at all of our transportation segments.
While fluctuations in fuel surcharge percentages can be significant from period to period, fuel surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield. Additional components include the mix of services sold, the base price, and extra service charges we obtain for these services and level of pricing discounts offered.
Fuel expense increased 7% during 2026 primarily due to higher fuel prices. In addition to variability in usage and market prices, the manner in which we purchase fuel also influences our results. For example, our contracts for jet fuel purchases at Federal Express are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual arrangements, approximately 61% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of our purchases tied primarily to the index price for the preceding month and preceding day, rather than based on daily spot rates. These contractual provisions mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.
Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our earnings either positively or negatively in the short term. For more information, see “Item 1A. Risk Factors.”
Separation and Other Costs Spin-Off
We incurred costs related to the Spin-Off of $744 million ($589 million, net of tax, or $2.46 per diluted share) in 2026. These costs primarily consist of professional services and an employee incentive plan related to the Spin-Off. Separation costs of $738 million in
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2026 are included within “Separation and other costs” and separation costs of $6 million are included in “Other, net” in the accompanying audited consolidated statements of income. These costs are included in FedEx Freight; Corporate, other, and eliminations; and Federal Express. In 2025, we incurred costs related to the Spin-Off of $56 million ($44 million, net of tax, or $0.18 per diluted share). Professional and legal fees of $38 million are included within “Separation and other costs,” and $18 million related to a debt exchange offer and consent solicitation transactions discussed in Note 6 are included within “Other, net” in the accompanying consolidated statements of income. These costs are included in Corporate, other, and eliminations. Costs included in “Separation and other costs” for 2025 were reclassified from “Other” to conform to the current period presentation. This change had no impact on total operating income or net income. Additionally, “Separation and other costs, net of payments” of $15 million were reclassified from “Changes in assets and liabilities: Accounts payable and other liabilities” in the consolidated statements of cash flows for 2025.
Fiscal year change
We incurred costs related to the fiscal year change of $33 million ($26 million, net of tax, or $0.11 per diluted share) in 2026. These costs, included in Federal Express and Corporate, other, and eliminations were primarily related to professional fees. We did not incur any fiscal year change costs in 2025.
Business Optimization and Realignment Costs
Our business optimization and realignment costs relate to transformation initiatives aimed to improve long-term profitability, drive efficiency within and between our transportation segments, lower our overhead and support costs, and transform our digital capabilities. Costs included in “Business optimization and realignment costs” in the accompanying consolidated statements of income relate to our Network 2.0 program, our international operational transformation programs, and the Europe workforce reduction plan announced in June 2024.
We incurred business optimization and realignment costs of $366 million ($285 million, net of tax, or $1.19 per diluted share) in 2026. These costs, included in Federal Express and Corporate, other, and eliminations, were primarily related to severance, professional services, and incentive payments to our contracted service providers in support of Network 2.0. We incurred business optimization and realignment costs of $756 million ($577 million, net of tax, or $2.37 per diluted share) in 2025. These costs, included in Federal Express and Corporate, other, and eliminations, were primarily related to professional services.
Network 2.0
Network 2.0 is our multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada. Through Network 2.0, we continue to consolidate our sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network. We have implemented Network 2.0 optimization in approximately 410 locations in the U.S. and Canada as of May 31, 2026. Service providers will handle the pickup and delivery of Federal Express packages in some locations while employee couriers will handle others. We completed Canada’s implementation of Network 2.0 in the fourth quarter of fiscal year 2025 and expect to complete the U.S. implementation by the end of calendar 2027.
International operational transformation programs
In January 2026, FedEx initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international domestic operations. These transformation programs may reduce approximately 5,000 operational employees, as well as changing working locations and schedules for up to 800 operational employees and is expected to occur over approximately 18 months, subject to required consultation processes in accordance with local regulations.
We expect the combined pre-tax costs of severance benefits, legal and professional fees, and facilities-related exit costs to range from $225 million to $325 million, substantially all of which are cash expenditures. These charges are expected to be incurred through calendar year 2028 and will be recorded as business optimization expenses. In 2026, we incurred $147 million of costs related to this program. The timing and amount of our business optimization expenses and the related cost savings associated with this operational transformation program are dependent on local country consultation processes, regulations and the negotiation of social plans, and may change as we revise and implement our plans.
Europe workforce reduction plan
Our workforce reduction plan in Europe to reduce structural costs announced in June 2024 is now fully complete as of May 31, 2026. The plan occurred over an 18-month period in accordance with local country processes and regulations and impacted approximately 1,400 employees across back-office and commercial functions. Savings from the plan are expected to be approximately $150 million on an annualized basis beginning in calendar 2026.
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The pre-tax cost of the severance benefits and legal and professional fees related to the plan have been recorded as business optimization expenses. In 2026 and 2025, we incurred $13 million and $235 million, respectively, of costs related to this plan.
Retirement Plans MT Adjustments
In 2026, we incurred a pre-tax, noncash MTM gain of $647 million ($497 million, net of tax, or $2.08 per diluted share) related to the year-end actuarial adjustments of pension and postretirement healthcare plans’ assets and liabilities. These actuarial adjustments were due to higher asset returns, partially offset by lower discount rates.