This ranking evaluates how Fortune 500 companies are deploying AI, and how technology leaders value those investments relative to industry peers.

Fortune AIQ 75

The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

America's Most Innovative Companies

AI is a major force shaping this year’s list—but it’s far from the only story.

World's Most Admired Companies

Fortune AIQ 50

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are airlines, transportation equipment, logistics, mail and freight delivery, railroads, shipping, and trucking.

Fortune Sector Leaders: Transportation

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 200 companies on this list are transforming industries from the inside out.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

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The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

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The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

The 300 companies on this list are transforming industries from the inside out.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500-2023-041-FedEx

The parcel delivery giant reported revenue of $93.5 billion (up 11.4%) and profits of $3.8 billion (down 26.9%). Rajesh Subramaniam succeeded founder Frederick Smith as CEO on June 1, 2022. 
<ul> 
 	<li>In February 2023, FedEx cut 10% of global officer and director jobs, a cost-cutting move prompted in part by diminishing revenue from e-commerce.</li> 
 	<li>Subramaniam announced in April 2023 that FedEx would combine its express and ground businesses. Smith had long defended keeping the units separate, even as analysts and investors urged their merger to simplify operations. Subramaniam says the move will help consumers understand pricing and shipping options more easily.</li> 
 	<li>FedEx is the fourth largest employer on the Fortune 500.</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

WMAC-2022-16-FedEx

When it comes to supporting employees, flexibility, diversity, and a few extra paid days off go a long way.

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As one of the largest delivery services companies in the U.S., FedEx has employed thousands of workers on the front lines of the pandemic. To support them, the company debuted a new health care advocate program called Choose Well Care Connect, which provides those workers with a single point of contact whenever they have a health care need, helping them navigate a complex system of vendors. It’s also made 24/7 confidential counseling available to all employees, eligible dependents, and household members, even if they aren’t actively participating in the plan. The company facilitates career advancement through the FedEx Learning Center, which offers over 25,000 online courses; Aspire, which provides hourly employees access to experiential learning, coaching, and development opportunities; and direct tuition assistance for higher education. “I greatly appreciate the mentoring and guidance the managers at FedEx offer to everyone,” says one staffer. “I feel there is a sense of caring from management to their employees.”

Fortune 100 Best Companies to Work For

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

Organizations on this annual list positively impact people and communities across multiple countries.

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World’s 25 Best Workplaces

This year’s Fortune 500 marks the 68th running of the list.

F500 2022-FedEx

The delivery services giant climbed six spots to No. 39 on this year’s Fortune 500. Thanks to an increase in e-commerce during the pandemic; the company predicts its deliveries could exceed 100 million a day in calendar 2022. FedEx will experience an epochal change in leadership on June 1, 2022, when founder and CEO Frederick W. Smith will step down after more than 50 years at the helm. Raj Subramaniam will succeed Smith, who remained the largest shareholder in FedEx as of March 2022, with a stake of about 7.3%.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

WMAC 2021-16-FedEx

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500 135 Fedex

Second only to United Parcel Service in the U.S. package-shipping business, FedEx said COVID-19 affected “virtually all revenue and expense line items” during the final quarter of its latest fiscal year, which ended May 31, 2020, dinging revenues 0.7% to $69.2 billion versus the year prior. Despite the disruption, profits surged an eye-popping 138% to $1.29 billion, nearly rivaling much bigger UPS’s $1.34 billion in profits. The jump is mostly due to earlier costly investments FedEx made to revamp its historically business-centric delivery network so it can better cater to residential customers.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-45-FedEx

Second only to United Parcel Service in the package-shipping business, FedEx inched up two spots to No. 45 on this year’s Fortune 500 list. The company said COVID-19 affected “virtually all revenue and expense line items” during the final quarter of its latest fiscal year, which ended May 31, 2020, dinging revenues 0.7% to $69.2 billion versus the year prior. Despite the disruption, profits surged an eye-popping 138% to $1.29 billion, nearly rivaling much bigger UPS’s $1.34 billion in profits. The jump is mostly due to earlier costly investments FedEx made to revamp its historically business-centric delivery network so it can better cater to residential customers.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-148-FedEx

Second only to United Parcel Service in the package-shipping business, FedEx grew faster than its rival in 2019. The delivery dynamo brought in nearly $69.7 billion in its most recent fiscal year, up 6.5% from FY 2018. Still, FedEx investors despaired over a once marquee customer, Amazon, turning to a competitor. Readying itself for the fight of its life, FedEx spent big sums to revamp its delivery network, known primarily for catering to businesses, to go the “last mile” and drop off boxes on residential doorsteps. Costly investments, in part, caused profits to plummet more than 88%, to $540 million. On a December earnings call, FedEx’s chief financial officer described the hit as “horrific.” But instead of slashing costs, FedEx has swelled its ranks, adding nearly 30,000 more employees over the past year.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-047-FedEx

Second only to United Parcel Service in the package-shipping business, FedEx grew faster than its rival in 2019. The delivery dynamo brought in nearly $69.7 billion in its most recent year fiscal year, up 6.5% from fiscal year 2018—thereby maintaining the No. 47 spot on this year’s list. But FedEx investors despaired over a former marquee customer, Amazon, flipping into a competitor. Readying itself for the fight of its life, FedEx spent big sums to revamp its delivery network, known primarily for catering to businesses, to go the “last mile” and drop off boxes on residential doorsteps. Costly investments, in part, caused profits to plummet 88.2% to $540 million. On a December earnings call, FedEx’s chief financial officer described the hit as “horrific.” But instead of slashing costs, FedEx has swelled its ranks, adding nearly 30,000 more employees over the past year.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

Our 2019 list of the 100 best companies as ranked by their employees. See which companies made the list.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

Our 2018 list of the 100 best companies as ranked by their employees. See which companies made the list.

This year's Fortune 500 marks the 64th running of the list.

We surveyed tens of thousands of young employees to create this list of millennials’ favorite workplaces.

best-workplaces-millennials-2018-FedEx

Employees say: 
 
&nbsp; 
 
"It is quite unique how well FedEx takes cares of its employees. I have never worked somewhere where I have been paid so well and been given so many benefits, even as a part-time employee. I feel taken care of and that the company respects what I do." 
 
&nbsp; 
 
"Since I started working for FedEx Freight as a part-time dock worker over four years ago. I have received nothing but great advice, as well as great opportunities to move up. I climbed my way to management with the support of my uppers. The co-workers I have met along the way have been the friendliest with my best interests in mind. I have never worked for a company that I've been so proud of." 
 
&nbsp;

100 Best Large Workplaces for Millennials

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

Our 2017 list of the 100 best companies as ranked by their employees. See which companies made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Best Companies

Years on list

U.S. employees

U.S. job openings

Year founded

Perks

100% health coverage

Unlimited sick days

Telecommuting

Job sharing

Subsidized childcare

Compressed work weeks

Fully-paid sabbaticals

On-site fitness/subsidized gym

On-site medical care facility

Non-discrimination policy includes sexual orientation

Sick days for part-timers

College tuition reimbursement

Student loan debt repayment

Paid Time Off: Full-time Employees

# Sick days

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# of job applicants

Company Info

Industry

Founded

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Millennials In The Organization

# of millennial employees

Millennials as % of total workforce

Sector

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FedEx, founded in 1971, is a multinational delivery services company known for its overnight shipping and pioneering tracking systems. Headquartered in Memphis, FedEx operates in more than 220 countries and territories, providing an array of services including express transportation, freight, e-commerce, and business solutions.

Q1 2027

Q4 2026

Q3 2026

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Q1 2026

Q4 2025

Q3 2025

Q2 2025

FedEx (FDX): Company Profile, Stock Price, News, Rankings

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FedEx

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Good day, and welcome to the FedEx Third Quarter Calendar Year 2026 earnings call. All participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Jeni Hollander, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to FedEx Corporation's Calendar 2026 Third Quarter Earnings Conference Call, our first earnings call that aligns our results with a calendar year-end fiscal year. The third quarter earnings release, stat book, and Form 10-Q, which also includes June 2026 results, are on our website at investors.fedex.com. Additionally, this afternoon, we released an 8-K filing with our recasted and resegmented financials for Q1 and Q2 of this calendar year. This call and the accompanying slides are being streamed from our website. During our Q&A session, callers will be limited to one question to allow us to accommodate all those who would like to participate. Certain statements during this conference call may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press releases and filings with the SEC. Today's presentation also includes certain non-GAAP financial measures. Please refer to investors.fedex.com for a reconciliation of the non-GAAP financial measures discussed during this call to the most directly comparable GAAP measures. Joining us for prepared remarks on the call today are Raj Subramaniam, President and CEO, Brie Carere, Executive Vice President and Chief Customer Officer, and Claude Russ, Enterprise Vice President and Interim CFO. Now, I will turn the call over to Raj.

Thank you, Jeni, and well done to Team FedEx for delivering another strong quarter. We're serving our customers well, driving significant free cash flow, and sustaining momentum toward our 2029 financial commitments. The third quarter, we grew revenue across key B2B verticals and premium B2C, which supported double-digit growth in consolidated adjusted operating income. From Network 2.0 to the optimization of our European network to our global air freight strategy, we continue to transform FedEx, driving greater density, flexibility, and efficiency. Building on our data and technology advantage, we announced new collaborations to provide value-added services for existing and new customers. We've also taken meaningful strategic actions to become a more focused company while deliberately allocating capital to create stockholder value. On June 1st, we successfully spun off FedEx Freight. Earlier this month, we closed the sale of FedEx Supply Chain to CMA CGM Group.

We are nearing completion of the InPost transaction. This investment and subsequent commercial agreements will provide FedEx with access to InPost's expansive European B2C network while enabling us to deploy our assets more effectively across the European B2B space. Our earnings performance, solid execution from these portfolio-shaping actions, and CapEx discipline are driving strong adjusted free cash flow. With this cash generation, we are focused on rewarding our stockholders. Since June, we have repurchased $2 billion worth of FedEx stock. Our June through September repurchases were greater than our original plan and a reflection of our conviction in the substantial value that exists in our shares. Turning to our Q3 consolidated results. On a year-over-year basis, we grew revenue by 12%, supported by strong base yields across both our Express U.S. Domestic and international segments.

We more than offset cost headwinds from purchased transportation rates, the new pilot agreement, and variable compensation, growing adjusted operating income by 16%. With Express U.S. Domestic, we grew revenue by 10% and adjusted operating income by 7%. Within Express International, we grew revenue by 17% and adjusted operating income by 52%. We are focusing our commentary today on calendar Q3, covering the July through September period. However, given it has been four months since we last reported earnings, it's also important to acknowledge the strength, as expected, in our June results. Based on our performance over the four-month transition period and increased visibility into the remainder of the calendar year, we are raising and tightening our CY 2026 outlook to $18-$18.60. The midpoint of this range implies 23% adjusted earnings per share growth year over year for the full year.

Additionally, we expect to generate approximately $4 billion in adjusted free cash flow this calendar year. Consistent with our strategy, B2B service drove the majority of our quarterly revenue growth, reflecting strong execution by our commercial and operations teams. Our expanding capabilities across key verticals are enabling us to address more of our customers' logistic needs, unlocking air freight demand from traditionally parcel-centric customers. For example, we drove a 15-fold increase in aircraft engine moves and won new air freight business with an AI data center customer after more than a 40-year largely parcel-centric relationship. Differentiation is increasingly centered on deep customer relationships and tailored service experiences, positioning us to capture more freight volume as we address customers' needs beyond parcel. Our network transformation initiatives remain on track. We now have nearly 65% of eligible volume flowing through about 630 Network 2.0 optimized stations.

Additionally, we have closed more than 260 stations. Combined with our effective commercial strategy, this network optimization is leading to tighter capacity utilization across our surface network. We continue to expect Network 2.0 progress to translate to nearly $1 billion of Network 2.0 and associated One FedEx savings by the end of this calendar year, and a cumulative $2 billion by the end of 2027. In Europe, we are replacing a fragmented domestic structure with a lean, digitally enabled network built for high-margin cross-border flow and long-term European market competitiveness. This includes simplifying the service we provide our customers and operating as one integrated, modernized network. In January, we announced a transformation program for our domestic French operations, and we recently finished our social consultation process there. As of this month, we closed 17 French stations.

We also modernized two hubs and 16 key stations with advanced sorting automation and equipped 32 facilities with new tracking and visibility technology. In Italy, similar to France, we are fundamentally simplifying our operating model to prioritize higher-value international B2B and export services. As part of this process, we are transitioning from an eight-hub footprint to a highly streamlined three-hub model and actively reducing our station count. In June, we reached an important milestone when we consolidated two Milan area stations into a newly upgraded facility that allows us to optimize our pickup and delivery within one of the most densely populated areas of the country. Taking these examples together, we are re-engineering the region for service and profitability at the right scale.

While a transformation of this size takes time, we are on track to achieve our target of $650 million Europe revenue improvement in international adjusted operating income by end of 2029. The size and scope of our global end-to-end network, combined with the vast amount of data we generate, allows us to provide customers with actionable insights and visibility tools to better manage their own supply chains. These interactions, in turn, present us with incremental revenue opportunities, creating an unrivaled virtuous cycle. Demonstrating the unique power of our physical and digital networks, we recently announced a collaboration with the U.S. Army. Our team of logistics and technology experts is supporting a sweeping modernization of the Army's U.S. non-tactical logistics networks, supply chain procedures, and organic industrial-based sites.

This is just one example of our leadership role in logistics orchestration, which we view as a new market opportunity that complements our traditional shipping business. When it comes to physical AI, our network is already one of the most automated in the world. We are making notable strides in automating our load and unload operations to help create a safer and more efficient environment for our team members. For example, in collaboration with Dexterity, we are deploying robotic loaders at our Hagerstown, Maryland hub to support peak and post-peak operations, allowing us to prove this technology in the coming months. As we head into peak, I want to thank Team FedEx for their continued hard work. I remain very excited about the momentum in our business as we serve our customers with excellence, generate significant free cash flow, and create value for our stockholders.

Before I turn the call over to Brie, I want to welcome Jamere Jackson, whom we announced on Monday as our next chief financial officer, effective November 30th. Jamere brings a wealth of experience, having served as CFO at several public companies. Most recently, he served as CFO of AutoZone, where his responsibilities also included leadership of store development, providing a valuable combination of financial and operational experience. I look forward to working with Jamere as we continue to execute on the strategic priorities we outlined at our Investor Day in February. I also want to offer my sincere thanks to Claude Russ for his extraordinary leadership as interim chief financial officer. Over the past five months, his commitment to FedEx, our team members, and our stockholders has helped ensure a seamless transition while continuing to move our strategic priorities forward.

Claude, thank you for your partnership during this important period. I am deeply appreciative. Now, over to Brie.

Thank you, Raj. My sincere thanks to the team for their outstanding work serving our customers in Q3 and their tremendous efforts as we prepare for peak. As our results indicate, we are deepening partnerships with customers who value speed, precision, and the capabilities we offer at FedEx, allowing us to profitably grow Q3 revenue by $2.4 billion year-over-year in a very dynamic market. With rapidly evolving global trade policies and geopolitical developments, customers require a trusted partner to help them navigate changing requirements, manage cross-border costs, and maintain resilient supply chains. Our end-to-end network, customs and trade expertise, and integrated technology capabilities uniquely position us to help customers respond with speed, flexibility, and confidence. Turning to our Q3 results, revenue was up 12%, which includes a 4 percentage point boost from fuel price-driven surcharge revenue.

Underlying revenue growth was supported by base yield expansion across both segments, along with U.S. domestic and international export volume growth. We were particularly encouraged by the strength from our B2B customers, including the fast-growing data center vertical, which supported 28% year-over-year growth in international freight revenue. Volume trends were broadly aligned with last quarter. U.S. domestic ADV increased 2% year-over-year, driven by 4% growth in U.S. Priority volume and 3% growth in Ground commercial. Consistent with our strategy to focus on differentiated premium services, Ground economy volume declined 4%. For the third consecutive quarter, international export volume increased, growing 8% year-over-year. International domestic volume declined 11%, part of our deliberate strategy to focus on higher-yielding cross-border volumes. Within global airfreight, we are solving customers' most complex challenges through specialized premium capabilities. This approach is resonating with customers and driving growth in the highest value segments.

For example, with international airfreight, we saw average daily freight pounds up 15% year-over-year. As our market-leading yields indicate, we remain focused on pricing services for the value we provide to our customers. While fuel was a meaningful driver of yield improvement, base yields remain strong. This highlights our continued pricing discipline in a competitive but rational environment. U.S. domestic package yield was up 7%, driven by mid to high single-digit yield growth across all services. International package yield increased 17%, driven by a 16% increase in international priority yield, along with the mix benefit from reducing lower-yielding international domestic volume. We do expect international yield growth to moderate in 2027 as we lap this mix shift. Additionally, we are winning share in the global airfreight market based on service and our unique end-to-end solutions while growing yield.

U.S. domestic freight revenue per pound was up 6%, and international freight revenue per pound was up 11% in Q3. We continue to take disciplined pricing action to support profitable growth. This summer, we announced our peak season demand surcharges, which enable us to provide outstanding customer service throughout the peak season, while of course, protecting profitability. We also implemented our first ever European domestic demand surcharge tied to peak. Last month, we announced a general rate increase of 5.9%, effective January 4th. We expect strong capture from these pricing actions. I am very excited about our outstanding Q3 results and continued momentum driven by our strategic focus on B2B and premium B2C verticals. Take automotive as one example. Twelve months ago, we began our journey to unlock a larger share of the automotive production market and build out our end-to-end capabilities to better serve this sector.

We quickly assembled a dedicated automotive team and created a specialized model that combines 24 by 7 support, flexible global pickup capabilities, enhanced visibility, and integrated logistic solutions tailored to the customer's needs in automotive. This team has since onboarded 13 major automotive customers to these value-added services, delivering long-term, profitable revenue growth within this vertical. Within our FedEx Life Sciences organization, we have now achieved 30 IATA CEIV Pharma certifications across our global air hubs and cargo handling facilities. This is a major milestone and supports our strong position in the healthcare transportation market. We are also solving broader customer challenges using our expertise in global trade and digital intelligence. Last month, we launched Global Trade Navigator, a great example of how we are making supply chains smarter for everyone.

By surfacing duties, taxes, documentation requirements, and potential clearance issues earlier in the shipping journey, Global Trade Navigator reduces complexity, improves cost transparency, and helps businesses expand across borders with confidence. Early adoption has been strong. Thousands of customers use this new suite of capabilities through fedex.com and our API suite. We also expect this enhanced customer experience to help reduce our clearance costs by improving data quality and reducing manual intervention. Additionally, we continue to support customers through IEEPA refund process, and we remain committed to distributing these refunds as quickly as possible. For customers seeking greater security and control over deliveries, we recently introduced FedEx Authenticated Delivery. It's a new paid delivery upgrade for customers in the U.S. and Canada.

This solution expands our proof of delivery portfolio with a secure digital verification process using a QR code to help ensure packages are released only to an authorized recipient. This is providing an additional layer of protection for high-value and sensitive shipments. These examples are strengthening our competitive positioning and set us up to deliver outstanding service throughout the upcoming peak season, and of course, well beyond. Turning to our revenue outlook for CY 2026. We now expect 12% full-year revenue growth, including approximately four percentage points for fuel price-driven surcharge revenue. We expect current volume and yield trends to remain directionally similar to Q3, with some moderation in year-over-year U.S. domestic volume growth, given tough comps.

This outlook implies a 10% revenue growth in Q4 with U.S. domestic revenue up high single digits, including 3 points from fuel price-driven surcharge revenue and international up high teens, including 7 points from fuel price-driven surcharge revenue. We will remain very disciplined on pricing. We expect a sustained mid-single-digit decline in Ground economy and double-digit decline in international domestic volume in Q4 as we continue our efforts to improve our service mix. With a significant majority of our Network 2.0 conversion work complete heading into peak, I know that the team at FedEx is ready to deliver superior service for our customers and continued strong financial results for our investors. With that, I'll now turn it over to Claude.

Thank you, Brie. By strategically shifting our revenue mix toward higher-yielding services and lowering our cost to serve, we grew operating income in Q3 and remain firmly on track to achieve our 2029 financial targets. Our strong operating results, coupled with a disciplined approach to capital expenditures, are driving robust free cash flow and enhancing stockholder returns. Turning to our results in more detail, on a consolidated basis in Q3, we delivered $3.74 in adjusted earnings per share, up 28% year-over-year. Continued core yield strength, favorable trends from B2B parcel and air freight, benefits from transformation initiatives, and a lower effective tax rate supported these results. Consolidated adjusted operating income increased to $164 million, or 16% for Q3, despite a $100 million year-over-year headwind from our recent pilot agreement and a $75 million headwind from variable incentive compensation.

While fuel price-driven increases in surcharges drove higher revenue, they were not a material driver of the year-over-year change in our adjusted operating income in the quarter. Now taking a closer look at our segment performance. U.S. Domestic delivered higher Q3 adjusted operating income year-over-year of $67 million, or 7%, despite a headwind from higher over-the-road line haul purchase transportation rates. The unique pressures in U.S. domestic purchased transportation rates are largely tied to the broader tightening in the labor market for truck drivers from recent regulatory changes. Adjusted operating margin declined 20 basis points, driven by higher fuel price impacts, which represented a 30 basis point headwind to Q3 adjusted operating margin. Turning to our international business, we delivered a $101 million year-over-year increase in adjusted operating income, up 52% year-over-year with 80 basis points of margin expansion.

This robust adjusted operating income and margin performance was driven by continued strong base pricing and higher international export volume and air freight weight, primarily out of Asia and the U.S. I'm encouraged that our Tricolor strategy is driving better capacity utilization for B2B air freight services. This strong international performance demonstrates that our strategy, though still in the early innings, is working and highlights the opportunity ahead to drive greater profitability and ultimately stronger stockholder returns. Moving to capital allocation. Free cash flow growth is the bedrock of our capital returns framework. In deploying this cash, we continue to take a balanced approach across dividends, stock repurchases, and strategic growth investments. Since June, we repurchased $2 billion of FedEx stock. We have an additional $4.3 billion in buyback authorization from the board of directors and plan to continue to repurchase stock opportunistically.

Since FY 2013, we have reduced our share count by 25%. With a $6 billion adjusted free cash flow target by the end of 2029, we will allocate capital prudently in support of value creation for our stockholders. We continue to expect $3.9 billion of CapEx for CY 2026, of which 90% is maintenance or efficiency-related. We remain committed to our 4% CapEx-to-revenue target by the end of 2029 and for aircraft CapEx to remain at $1 billion or less annually. Our targeted strategy to grow B2B and premium B2C services enables us to utilize our existing capacity to facilitate volume growth, which supports sustained lower CapEx intensity. Our 19.9% retained ownership stake in FedEx Freight also provides meaningful optionality. To preserve the tax-efficient status of the separation, we are required to monetize the stake within 24 months of the spin date. We will deploy this capital to maximize value creation.

Overall, our creditworthiness and balance sheet remain resilient, as demonstrated by our $3.5 billion bond offering in the quarter, which was multiple times oversubscribed. Moving to outlook. We are introducing a CY 2026 adjusted free cash flow outlook of approximately $4 billion. Free cash flow anchors our decision-making, and we believe should guide any assessment of our company's intrinsic value. Given our transition from a fiscal to calendar year reporting cycle, we have now disclosed our Q1 adjusted EPS was $3.25, up 16% year-over-year, and Q2 adjusted EPS was $4.98, up 56% year-over-year. Q2 included $2.03 of adjusted EPS for the month of June, supported by one extra operating day and healthy U.S. domestic demand, helped in part by a timing shift from July in sales by retailers.

Given this year-to-date performance and factoring in updated tax rate and share count assumptions, we are raising and tightening our CY 2026 adjusted EPS outlook range to $18-$18.60. As Brie shared, we expect consolidated CY 2026 revenue growth to be approximately 12%, including about four percentage points of assumed fuel price-driven surcharge benefit. For the full year, we expect adjusted operating margin to be up slightly year-over-year, despite the fuel-related impact. Additionally, we expect our CY 2026 effective tax rate to be approximately 22.5%, down 50 basis points from our prior assumption. Our revised CY 2026 adjusted operating income bridge shows the key year-over-year elements embedded in our outlook. This bridge reflects adjusted operating income of $5.9 billion, equivalent to $18.30 of adjusted EPS, the midpoint of our range.

In this scenario, volume-related revenue, net of variable cost, is now expected to be an $800 million tailwind in CY 2026, up $200 million compared to the estimate we shared in June. This change is driven by the strong year-to-date trends as our commercial team captured increased demand from the most premium B2B verticals of the global economy. With respect to yield, we continue to expect a $3.7 billion tailwind. This benefit demonstrates our ongoing commitment to improve our service mix and base pricing capture. Consistent with prior practice, our base yields do not factor in revenue from the fuel price-driven surcharge benefit, which we assume will be neutral to full-year adjusted operating income results. It also does not factor in revenue from currency exchange rate effects.

For base expenses, we now assume $2.7 billion in higher costs year-over-year compared to the $2.6 billion headwind we shared on our June bridge. This change primarily relates to higher purchase transportation rates. As a reminder, this bar continues to embed higher wage rates and other inflationary factors, as well as the ongoing structural cost reduction efforts, including savings from our Network 2.0 transformation. I will note that our yield versus base expense increase assumptions represent a 100-basis point spread, which signals our focus on revenue quality and rigorous cost management. We continue to expect variable incentive compensation to be an $800 million headwind, reflecting our commitment to rewarding employees for their outstanding performance. We are still anticipating a $200 million headwind from our new pilot agreement.

Additionally, we are pleased with our progress towards removing stranded costs related to the FedEx Freight spin-off and continue to forecast a $100 million benefit by the end of CY 2026. Our embedded Q4 adjusted EPS range is $6.03-$6.63. Results will depend upon yield, service mix, and continued traction on cost reduction initiatives, which are highly correlated with peak season demand. While we expect consolidated adjusted operating income to be up year-over-year, we anticipate several transitory headwinds that will pressure our results, including $130 million tied to higher over-the-road line haul rates, which shows up in purchase transportation, $100 million due to our recently ratified pilot agreement, and $80 million in aircraft maintenance expense. For international, we forecast Q4 adjusted operating margin expansion year-over-year.

We expect Q4 adjusted U.S. domestic operating margin to be down moderately year-over-year due to higher purchase transportation rates I just mentioned and the continued fuel impact. Importantly, we believe this pressure is transitory, and as we look to 2027, we forecast full-year adjusted U.S. domestic operating margin to be up year-over-year. We expect our CY 2026 Q4 average share count to be approximately 238 million shares. In closing, our business results and decisive actions to drive stockholder value in the quarter signal our confidence in the value creation opportunity ahead. Our strategy is sound, and I am confident in our continued execution. With that, operator, let's open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. Our first question comes from Richa Harnain with Deutsche Bank. Please go ahead.

Hey. Thanks everyone for the time. Maybe we could start with one for Brie. Brie, you discussed competitive but still strong pricing environment. I am not sure if you can unpack that some more. How much was the fuel tailwind to headline yields? How much was core up? I know you said 12% revenue outlook for the year assumes a 4 percentage point boost from fuel, but curious what it was in Q3. On the year-over-year improvement, very impressive EPS growth, but margins in the domestic market did stall a bit in the quarter. Claude, it sounds like there were some headwinds from line haul rate and PT that are creeping into Q4 as well. But talk about how much those were, and you made a comment that 2027 margins could be still up year over year. We can look forward to that in the domestic market.

Just how should we expect them to roll off, and what are some offsets we can look forward to in 2027? Thank you.

Richa, thank you for the question. I will cover pricing and then I will turn it over to Claude to answer the second part of your question. I think from a headline perspective, we continue to see that calendar year 2026 has an improved pricing environment over calendar year 2025. It is competitive but rational. From a yield perspective here in the U.S., we were very pleased with the base yield growth, which was about half of our year-over-year yield growth in the domestic mix. Of that half, the vast majority of it was actually base yield. We did benefit a little bit from some self-help in the mix. What do I mean by that? We have consciously focused on premium e-commerce.

When you look at the home delivery and Ground economy volume mix, it is really important to understand that the Ground economy volume was down 4%, and that was intentional as we really lean into the premium. So we feel really good about the domestic pricing environment. When you look at the international export yield increase, it was also really strong. About half of that was fuel. Of the other half, you have two primary factors. One was we saw a great mix shift, both incremental volume coming out of Asia, and then again, a focus away from international domestic. Towards intra-Europe and international Europe volumes. So we think the market is competitive, it is improved over 2025, and we feel really good about the overall performance from the team. Claude?

No. Thanks, Brie, and then thanks for the question. Overall, as Brie said, very pleased with our Q3 results. If you think about year to date, both our overall margin, our domestic margin, and international margin were all up September year to date. I did call out a few things in my prepared remarks about the transitory nature of a couple headwinds. First and foremost, for Q3, the domestic margin would have been up, except for the fuel surcharge. In addition, we had the $100 million headwind from our pilot agreement. We had $75 million from variable compensation, and we started to see the higher purchase transportation rates that I've talked about. Those will accelerate into Q4. I think it's important to note that about 70% of our over-the-road line haul miles are provided by either FedEx employees or contracted service providers.

The remaining 30% is split between rail, and then a little over 10% is over the road. That's really the miles that we're talking about here. So while not a huge portion of the overall miles, due to the labor market conditions we talked about, those rates really started going higher as we got into Q3, and we expect that to have a bigger impact during peak in Q4. But we have both operational and commercial levers as we get into CY 2027 to address that. So we're confident both in our overall margin expansion as well as our U.S. domestic margin expansion plans for CY 2027.

The next question is from Brian Ossenbeck with JPMorgan. Please go ahead.

Hey, thanks. Evening. Appreciate you taking the question. Maybe this is for Raj. New CFO won't quite be there for another month or so. But clearly, there's a good amount of dry powder on the balance sheet from all the strategic and tough decisions you guys have been executing on the last couple of years. So maybe you can walk us through some of the options you have for monetizing the stake in FedEx Freight. And then also how you would consider the leverage profile of the business going forward. Would you consider taking out some additional debt to potentially further fund the buyback? Thank you.

Thank you, Brian. I very appreciate the question. Firstly, as I have mentioned in my remarks and you heard throughout, that we are focused significantly on our free cash flow, and we are targeting $4 billion of free cash flow this calendar year. As you know, our goals for CY 2029 have a $6 billion free cash flow, and this is being driven by our performance on our core business. That is what is driving it. We are excited about that because it now gives us a lot more optionality for us, and we have an opportunity to now significantly focus our efforts on our capital allocation. We are going to have a North Star of making sure that we create a lot of value for our stockholders, even as evidenced by our $2 billion buyback in this quarter, which is higher than we originally had communicated.

FedEx (FDX) Q1 2027 Earnings Call Transcript

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