Good morning. FedEx is kicking off what CFO John Dietrich calls a “new era of value creation,” dialing back big capital spending and doubling down on its network, data, AI, and tighter financial discipline to hit its 2029 goals.
At its 2026 investor day last week, FedEx (No. 49 on the Fortune 500) projected 4% annual revenue growth to $98 billion (excluding FedEx Freight) between FY26 and 2029, $8 billion in operating income, and $6 billion in adjusted free cash flow by 2029.
The backdrop is a slower parcel market, normalized e-commerce demand, uneven global trade, and more delivery choices for large customers. For FedEx, the focus now is returns, not just revenue growth.
Rather than expanding its network—which already moves 17 million packages a day and about $2 trillion in goods annually—FedEx plans to monetize it more effectively, Dietrich told me. Priorities are margin expansion, operating income growth, lower capital intensity, and a targeted 11% ROIC. Free cash flow remains key, with capital expenditures near 4% of revenue and aircraft capex capped at $1 billion annually.
Removing $4 billion in structural costs
A big piece of the refocus is operational integration. FedEx is combining Express and Ground under a unified “One FedEx” structure through Network 2.0, aiming for “one neighborhood, one truck” instead of running parallel routes. That means consolidating facilities, linehaul, procurement, and capital planning.
It’s not simple. Express and Ground operate differently, with distinct cost structures and service models. Bringing them together without disrupting customers will be one of the company’s toughest execution tests.
FedEx has leverage as it builds on its multiyear DRIVE program. More than $4 billion in structural cost savings from the program reflects the combined total delivered across fiscal years 2024 and 2025. As Network 2.0 scales, FedEx expects roughly another $1 billion in permanent savings by the end of 2026 and about $2 billion total by the end of 2027, while pushing capital expenditures to a record-low share of revenue.
“We’ve made tremendous progress in establishing KPIs and measuring operational and financial results, which allows better business decisions,” Dietrich said. Clean, reliable data is pivotal.
Some key lessons? A robust, disciplined procurement function is critical, shifting from two buying organizations to a single centralized team leveraging FedEx’s full purchasing power, he explained. Capital allocation has also been centralized, with a capital review board vetting major projects requiring clear business cases and projected returns, he said.
AI, but with guardrails
If the physical network is the backbone, data and AI are the nervous system. FedEx uses AI in forecasting, scenario planning, FP&A analytics, invoice processing, predictive maintenance, and route optimization, Dietrich said. But leadership insists every AI project meet the same financial standards as any other investment before it scales, he said.
Turning AI pilots into measurable returns remains a challenge, which is why the company insists on financial rigor before scaling. Education on AI is a priority.
“I have a 25-year-old son who I’m constantly preaching to the need to keep up with AI, otherwise you’ll be left behind,” Dietrich said.
The company invests in training so employees at all levels can use AI tools. Dietrich mandates that his own weekly reports be compiled using AI. As steward of capital, he stresses AI projects face the same scrutiny as other investments.
“There should be rigorous financial analysis to ensure appropriate return,” he said, noting the capital review board serves as a gatekeeper for large digital and AI initiatives.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
David Liu was promoted to CFO of SuccessKPI, a workforce engagement management platform. Liu has more than 20 years of experience within the company and in finance roles at GE Capital, Citigroup and Amazon. He will oversee finance, corporate development and HR, driving financial strategy.
Kyle Wager was appointed CFO of Airwavz Solutions, a telecommunications infrastructure company. Current CFO Shawn Kocher will transition to chief financial strategist. Wager has more than a decade of leadership experience across finance, operations, and accounting, including senior roles at Agile Networks, InSite Wireless, and Summit Materials.
Big Deal
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"Lowe’s CEO used to make $4.35 an hour working at Target. His secret to climbing the corporate ladder was volunteering for jobs ‘nobody else wanted,’" is a Fortune article by Sydney Lake.
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