FDX 10-K & 10-Q changes, risk factors and insider trading

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 operations,our financial results), financial condition, andcash theflows, price of our common stock. Additional risks not currently known to us or that we currently deem to be immaterial also may materially affect our business, results of operations, financial condition,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.

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 and; 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; and geopolitical tensions or conflicts.conflicts; emerging global trade corridors; and changes to social conditions and regulations. When individuals and companies purchase and produce fewer goods, we transport fewer goods,shipments, and as companies move manufacturing closer to consumer markets and expand the number of distribution centers, we transport goodsshipments shorter distances, which materially and adversely affects our yieldsrevenue 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. Additionally, in 2025, we continued to see customer preference for slower, less costly shipping services and experienced lower fuel surcharges at FedEx Freight and reduced demand surcharges at Federal Express. We expect service mix to shift further toward deferred service offerings in 2026. 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. For more information, see “Our businesses are capital intensive, and we must make capital decisions based upon projected volume levels.” below.

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,industry leading to lower freight and packageshipment volumes. Additionally, recent changes in U.S. and international trade policy,policy along with continued uncertainty surrounding such policies, could lead tohave further weakened business conditions for the transportation industry. WeInflation also continue to experience pressure on demand for our transportation services, particularly our priority services, from the impact ofand elevated inflation and interest rates onare negatively affecting consumer and business spending.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 UkraineUkraine, the United States and Iran, and other hostilities in the Middle East or escalations thereof,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, and we have exited our operations in Russia. While these conflicts have not had,Russia, and we do not expect these conflicts to have, a direct material effect on our businessservices or results of operations,in the Middle East are impacted. The broader consequencesconsequences, 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; and the extent of the conflict’s effect on our business and results of operations as well as the global economy,operate, cannot be predicted. Geopolitical uncertainty negatively affected our results of operations in recent years.

To the extent the continued conflicts between Russia and UkraineUkraine, and the United States and Iran, and hostilities in the Middle East, or subsequent similar conflicts,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 FedExFederal 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 with respect to tariffs, and relations could significantly reduce the volume of goods transported globally, increase our costs, and materially and adversely affect our business, resultsfinancial of operations,condition, cash flows, and financialresults condition.of operations. The U.S.United States government has taken certain actions that have negatively affected U.S.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, tariffsnew, 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. AdditionalContinued uncertainty and changes toin 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 havematerially anand adverseadversely effect onaffect our business, financial condition, cash flows, and results of operations, and financial condition, as well as on 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. Lower fuel prices have negatively affected yields through lower fuel surcharges at each of our transportation segments in recent years. 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, 2025,2026, 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 shortagesprice increases and price increasesshortages in the future: weather-related events; natural disasters; political disruptions or wars involving oil-producing countries;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.

The failure to successfully execute our DRIVEtransformation transformation, including Network 2.0 and Tricolor,initiatives in the expected time frame and at the expected cost may materially and adversely affect our future results. InOur 2023,transformation FedExinitiatives announced DRIVE, a comprehensive programaim to improve long-term profitability.profitability, Thedrive programefficiency, includeslower our overhead and support costs, and transform our digital capabilities. Network 2.0,2.0 theis our multi-year effort to improve the efficiency with which FedExFederal Express picks up, transports, and delivers packages in the U.S.United States and Canada,Canada. asTricolor wellis asour Tricolor, theglobal redesign of theour Federal Express internationalintercontinental air network toacross improvethree efficiencydistinct systems focused on priority parcel service, priority freight, and assetdeferred utilization.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 “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of this Annual Report for more information.

•our ability to maintain coverage of U.S. employees at Federal Express 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;

•managing the closure and consolidation of certain buildings and the movement of certain positionspositions, 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 integrationtransformation process; andprocess.

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.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 DRIVEtransformation 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 FedEx’sour 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 DRIVE transformation, and compete effectively increasingly depend 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 (including personal information), and to maintain customer confidence in our ability to protect our systems and to provide services consistent with their expectations. For example, we rely on information technology to receive shipment information in advance of physical receipt of packages, to track items that move through our delivery systems, to efficiently plan deliveries, to clear shipments through customs, to execute billing processes, and to track and report financial and operational data. 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 FedExFederal Express or third-party service providers, and other groups and individuals. Data breaches and other technologytechnological 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,parties for a variety of reasons, including ourAI-enabled customerstechnologies, encryption and third-partyauthentication servicetechnology, providersemployee suchemail, asand other communication technologies, cloud serviceservices, providersdelivery services, back-office support, and deliveryother services.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 down 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 providersproviders, vendors, or suppliers to perform as expected, or disruptions in our relationships with thosesuch providersthird parties or their provision of services to FedEx,Federal Express, could havematerially aand materialadversely adverse effect onaffect our businessbusiness, financial condition, cash flows, and results of operations.” below for more information. In 2025, the information systems of one of our third-party service providers experienced a security breach that resulted in unauthorized access to the third-party’s cloud environment, including certain systems that contained our data. This incident did not have a material adverse effect on our business or results of operations. However, there can be no assurance that similar events will not have such an effect in the future.

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 FedExFederal 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 DRIVE transformation and the planned spin-off of FedEx Freight into a separate, publicly traded company.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 U.S.United States and foreign laws and regulations regarding data protection.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.

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. See “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended May 31, 2021 for information regarding the 2017 NotPetya cyberattack at TNT Express and immaterial cyber incidents we experienced in 2017 and 2018.

Additionally, we and our third-party service providers, vendors, and suppliers have experienced repeated attempts by cyber criminals,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 or franchisee accounts, and fraudulently sending e-mails to recipients purporting to be from FedEx. ToOur date,security noneprocesses ofand theseinitiatives fraudulentmay cyberbe activitiesunable haveto causeddetect or prevent a materialbreach or disruption to our systems or resulted in anythe material costs to FedEx.future.

We are self-insured for certain costs associated with our operations, and insurance and claims expenses could havematerially aand materialadversely adverseaffect effectour onbusiness, us.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 materially 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.

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 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. For example, the TSA requires FedExFederal 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 attackattack, or acts of sabotage by nation state actors using hybrid operations, directed at FedExFederal Express or other aspects of the transportation infrastructure could disrupt our operations and adversely affect demand for our services.

Failure of third-party service providersproviders, vendors, and suppliers to perform as expected, or disruptions in our relationships with thosesuch providersthird parties or their provision of services to FedEx, could havematerially aand materialadversely adverse effect onaffect our businessbusiness, financial condition, cash flows, and results of operations. FedEx has engaged third-party service providersproviders, vendors, and suppliers to perform certain functionskey that are integral to our business,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 providersproviders, vendors, and suppliers will adhere toperform contractual service performanceobligations or adhere to compliance requirements, and such service providersproviders, vendors, and suppliers may suffer disruptions to their systems, labor groups, or supply chains that could adversely affect their services. WeFedEx 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 suchthird-party service providersproviders, 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 oncould materially and adversely affect our business, results of operations, cash flows, and financial condition are highly unpredictable.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 economyeconomies 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 economy,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, such asincluding 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 global 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 chainschains, 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 DRIVEtransformation 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. See “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of our Annual Reports on Form 10-K for the years ended May 31, 2020, May 31, 2021, May 31, 2022, and May 31, 2023 for information regarding the COVID-19 pandemic and its effects on our business, results of operations, and financial condition.

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 DRIVEtransformation transformation, including Network 2.0 and Tricolor.initiatives. See “The failure to successfully execute our DRIVEtransformation transformation, including Network 2.0 and Tricolor,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.

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 JuneJanuary 2024,2026, Federalwe Expressinitiated announcedoperational atransformation workforce reduction planprograms in Europecertain asinternational partlocations of its ongoing measuresdesigned to reducemodernize, structuralstreamline, costs.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 planprograms is subject to a consultation process that is expected to occur over an 18-month period 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 artificial intelligenceAI 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.”

•Results of operations includes an overview of our consolidated 20252026 results compared to 20242025 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 20232024 results and year-over-year comparisons between 20242025 results and 20232024 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, 2024.2025.

•The overview is followed by a discussion of both historical operating results for our business segments during 20252026 and 2024 and our outlook for 2026,2025, as well as a financial summary and analysis for each of our transportation segments in place during 20252026 and 2024.2025. 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.

•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.

We provide a broad portfolio of transportation, e-commerce, and business services, offering integrated business solutions utilizing our flexible, efficient, and intelligent global network. OurDuring 2026 and 2025, our primary operating companies arewere 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.

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.

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. Consequently,Inflation thisand environmentelevated hasinterest ledrates to lower shipments at FedEx Freight,are negatively affecting consumer and business spending, and we expect inflation and elevated interest rates to continue to negatively affect our results in 2025. Infor the latter halfremainder of 2025,calendar the U.S. government began the process of significantly increasing the rates and broadening the scope of tariffs imposed on goods imported into the United States. In response, several foreign governments imposed new tariffs on certain goods imported from the United States, and additional U.S. and retaliatory measures are possible inyear 2026. Additional changes to global trade policies could lead to increased tariffs, export controls, quotas, embargoes, or sanctions, which may lead to increased prices or trade limitations for goods transported globally, potentially reducing customer demand for our services.

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 expense captionsexpenses 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, facility services,labor and security), insurance, professional fees, and operationalcredit supplies.losses.

The following table shows changes in revenue and operating income results by reportable segment for 20252026 compared to 20242025 (in millions):

(1) 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):

WeOperating 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 planned spin-off of FedEx FreightSpin-Off of $56 million ($44 million, net of tax, or $0.18 per diluted share) in 2025.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 operating expensescosts and $18 million related to the debt exchange offer and consent solicitation transactions discussed in Note 76 of the accompanying financial statements included in other, net. WeSee didthe not“Separation incurand any FedEx Freight spin-offother costs” insection 2024.of this MD&A for more information.

Net income in 2026 and 2025 includes a pre-tax, noncash gain of $515$647 million inand 2025 ($390$515 million, net of tax, or $1.60 per diluted share) and a gain of $561 million in 2024 ($426 million, net of tax, or $1.69 per diluted share)respectively, associated with our MTM retirement plans accounting adjustments. See the “Retirement Plans MTM Adjustments” section of this MD&A and Note 1412 of the accompanying consolidated financial statements for more information.

During 2025,fiscal year 2026, we repurchased 10.93.3 million shares of FedEx common stock under acceleratedASR share repurchase ("ASR") andor open market transactions at an average price of $274.34$233.07 per share for a total of $3.0$776 billion.million. Share repurchases had a benefit of $0.44$0.21 per diluted share in 2025.2026. InSee fiscal“Item 20265. weMarket havefor completedRegistrant's $500Common millionEquity, Related Stockholder Matters, and Issuer Purchases of shareEquity repurchases through open market transactionsSecurities” and as of July 21, 2025, $1.6 billion remained available to be used for repurchases under the stock repurchase program approved by our Board of Directors in March 2024. See 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.repurchases during fiscal year 2026.

(21)Includes costs associated with our DRIVEtransformation programinitiatives in 20252026 and 2024 and the workforce reduction plan in Europe in 2025.

ThereOther than the risk factors set forth below, there have been no material changes from the risk factors disclosed in our Annual Report in response to Part I, Item 1A of Form 10-K. Additional risks not currently known to us or that we currently deem to be immaterial also may materially affect our business, results of operations,reporting, financial condition, and the price of our common stock.

Following our one FedEx consolidation on June 1, 2024, Federal Express operates a unified, fully integrated air-ground express network under the respected FedEx brand. FedEx Freight provides LTL freight transportation services as a separate subsidiary. Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments.

The following trends significantly affect the indicators discussed above, as well as our business and operating results. See the risk factors identified under Part I, Item 1A. “Risk Factors” in our Annual Report, as updated by our quarterly reports on Form 10-Q, for more information. Additionally, see “Results of Operations – 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.

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 weakened business conditions for the transportation industry. Consequently, this environment has led to lower shipments at FedEx Freight, negatively affecting our results in the secondthird quarter and firstnine halfmonths of 2026.

Additionally, sinceSince the third quarter of 2025 there have been significant changes within the global trade environment, such as the August 2025 removal of the de minimis exemption for goods imported into the U.S. from countries other than China. The uncertain and evolving global trade environment is negatively affectingaffected our results in the secondthird quarter and firstnine halfmonths of 2026. Continued uncertainty and volatility in the global trade environment could lead to further weakened business conditions for the transportation industry.

During the secondthird quarter and firstnine halfmonths of 2026, global inflation sloweddeclined year-over-year but continued to be elevated. Additionally, global interest rates remaineddeclined relatively steadymodestly in an effort to curb inflation. We are experiencing pressure on demand for our transportation services, particularly our international export package services, as elevated inflation and interest rates continue to negatively affect consumer and business spending. We expect inflation and elevated interest rates to continue to negatively affect our results of operations for the remainder of 2026. TheAdditional changes in trade policy discussedand abovethe underglobal “Macroeconomictrade Conditions”environment could also exacerbate global inflation.inflation and interest rates.

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. The timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges can significantly affect our operating results either positively or negatively in the short-term. During the secondthird quarter and nine months of 2026, higher fuel prices positively affected yields due to increased fuel surcharges and negatively affected fuel expense at Federal Express. During the first half of 2026, lower fuel prices negatively affected yields due to lower fuel surcharges and positively affected fuel expense at Federal Express.

Given the nature of our business and global operations, geopolitical conflicts and instability may adversely affect our business and results of operations. While we do not expect ongoing geopolitical conflicts between Russia and Ukraine and in the Middle East, or escalations or expansions thereof, to have a direct material effect on our business or results of operations, the broader consequencesconsequences, including increased fuel prices and volatility in shipping patterns, are adversely affecting the global economy and may also have the effect of heightening other risks disclosed under Part I,II, Item 1A. “Risk Factors.”

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 expense captions 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, temporaryfacilities labor,services, security, and facilitiestemporary serviceslabor), insurance, professional fees, and credit losses.

The following tables compare summary operating results and changes in revenue and operating income (loss) (dollars in millions, except per share amounts) for the periods ended NovemberFebruary 30,28, 20252026 and 20242025:

Operating income increased 31%4% in the secondthird quarter and 20%14% in the firstnine halfmonths of 2026 primarily due to improvedhigher yields for our U.S. domestic and international priority package services, continued structural cost reductions from business optimization initiatives, including from DRIVE initiatives commenced in prior years, and higherincreased U.S. domestic package demand at Federal Express. Operating income for the secondthird quarter and firstnine halfmonths of 2026 was negatively affected by higher salaries and employee benefit expense, the financial impact of global trade policy changes, increased wage rates, variable incentive compensation, and purchased transportation rates, and higher costs related to the planned spin-off of FedEx Freight.Freight, higher purchased transportation rates, and the grounding of our MD-11 fleet. The increase in salaries and employee benefits was primarily driven by higher variable incentive compensation, wage rates, and employee benefit expenses.

Operating income includes business optimization expenses of $30$65 million ($25 million, net of tax, or $0.10 per diluted share) in the secondthird quarter and $97$162 million ($77 million, net of tax, or $0.32 per diluted share) in the firstnine halfmonths of 2026 related to initiativesongoing tonetwork reduceoptimization through Network 2.0, international operational transformation initiatives, and structural and overhead costscost‑reduction andinitiatives tounder driveour efficiencyDRIVE throughprogram Networkcommenced 2.0.in prior years. We incurred business optimization costs of $326$179 million ($249 million, net of tax, or $1.02 per diluted share) in the secondthird quarter and $454$633 million ($347 million, net of tax, or $1.41 per diluted share) in the firstnine halfmonths of 2025 related to our transformation initiatives. See the “Business Optimization Costs” section of this MD&A for more information.

We repurchased an aggregate of $276 million of our common stock through open market transactions during the second quarter of 2026. During the six-monthnine-month period ended NovemberFebruary 30,28, 2025,2026, we repurchased 3.3 million shares of FedEx common stock through open market transactions at an average price of $233.07 per share for a total of $776 million. We did not repurchase common stock in the three-month period ended February 28, 2026. Share repurchases had a benefit of $0.05 per diluted share for the second quarter and $0.07$0.12 per diluted share for the first halfnine months of 2026. As of NovemberFebruary 30,28, 2025,2026, $1.3 billion remained available to be used for repurchases under the stock repurchase program approved by our Board of Directors in 2024. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Financial Condition – Liquidity and – Liquidity Outlook” below, and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for additional information.

Revenue increased 7%8% in the secondthird quarter and 5%6% in the firstnine halfmonths of 2026 primarily due to U.S. domestic and international priority base yield improvements, increased U.S domestic package volume, and favorable exchange rates at Federal Express, partially offset by international export volume decreases, the expiration of our contract with the USPS, and lower shipments at FedEx Freight.Freight and decreased fuel surcharges at Federal Express.

Federal Express segment revenue increased 10% in the third quarter and 8% in the secondnine quarter and 6% in the first halfmonths of 2026 primarily due to higher U.S. domestic and international priority package base yield improvements from revenue quality initiatives,yields, increased U.S. domestic package volumesvolumes, and favorable exchange rates, partially offset by internationalthe exportnegative volumeimpacts decreases due to ongoing effects offrom global trade policies,policy changes and the expiration of our contract with the USPS. FedEx Freight revenue decreased 2% in the second quarter and first half of 2026 primarily due to lower volume from continued weak industrial production, offset by improved weight per shipment and fuel surcharges. Revenue at Corporate, other, and eliminations decreased in the second quarter of 2026 primarily due to lower demand and yields at FedEx Logistics, Inc. (“FedEx Logistics”).

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended NovemberFebruary 30,28, 20252026 and 20242025:

Salaries and employee benefits expense increased 12% in the third quarter and 7% in the secondnine months of 2026 primarily driven by higher variable incentive compensation, wage rates, and employee benefit expenses, and unfavorable exchange rate impacts. Purchased transportation expense increased 8% in the third quarter and 5%6% in the firstnine halfmonths of 2026 primarily due to anvolume-related increasecosts into wage rates,support higher variablepackage incentive compensation,volume and unfavorablecontracted exchangeservice provider rates. PurchasedOther transportationoperating expenseexpenses increased 7%8% in the secondthird quarter and 6%8% in the firstnine halfmonths of 2026 primarily due to higher volumeoutside service contracts and rates.professional Other operating expensesfees, increased 10% in the second quarter and 8% in the first half of 2026 primarily due to higher credit losses, professional fees, and outsideunfavorable serviceexchange contracts. Fuel expense decreased 6% in the second quarter and 13% in the first half of 2026 due to lower fuel usage and the expiration of our contract with the USPS.rates.

We incurred costs related to the planned spin-off of FedEx Freight of $205$195 million ($171$147 million, net of tax, or $0.72$0.61 per diluted share) in the secondthird quarter of 2026 and $248$443 million ($204$351 million, net of tax, or $0.86$1.47 per diluted share) in the firstnine halfmonths of 2026. These costs primarily consist of professional services.services and an employee incentive plan related to the planned spin-off. Separation costs of $205$194 million and $246$440 million for the three- and six-monthnine-month periods ended NovemberFebruary 30,28, 2025,2026, respectively, are included within the “Separation and other costs” caption and separation costs of $2$1 million and $3 million for the six-monththree- periodand nine-month periods ended NovemberFebruary 30,28, 20252026, respectively, are included in the “Other, net” caption of the accompanying unaudited condensed consolidated statements of income. These costs are included in FedEx Freight; Corporate, other, and eliminations; and Federal Express. WeIn didthe notthird incurquarter anyof FedEx2025, Freightwe spin-offincurred $23 million ($17 million, net of tax, or $0.07 per diluted share) of costs related to the planned spin-off, consisting of $18 million included in the first“Other, halfnet” caption, related to the debt exchange offer and consent solicitation transactions and $5 million of professional fees included in the “Separation and other costs” caption. Costs included in the “Separation and other costs” caption for the three- and nine-month periods ended February 28, 2025 were reclassified from the “Other” caption to conform to the current period presentation. This change had no impact on total operating income or net income. These costs are included in Corporate, other, and eliminations. Additionally, “Separation and other costs, net of payments” of $4 million were reclassified from “Changes in assets and liabilities: Accounts payable and other liabilities” in the unaudited condensed consolidated statements of cash flows for the nine-month period ended February 28, 2025.

We incurred costs related to the fiscal year change of $8 million ($6 million, net of tax, or $0.03$0.02 per diluted share) in the secondthird quarter of 2026 and $12$20 million ($9$15 million, net of tax, or $0.04$0.06 per diluted share) in the firstnine halfmonths of 2026. These costs were primarily related to professional fees and are included in Federal Express and Corporate, other, and eliminations. We did not incur any fiscal year change costs in the firstnine halfmonths of 2025.

Our business optimization costs relatedrelate 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 the “Business optimization costs” caption of the accompanying unaudited condensed consolidated statements of income relate to our Network 2.0 program, our international operational transformation programs, our DRIVE initiatives commenced in prior years, and the Europe workforce reduction plan announced in June 2024, and our Network 2.0 program.2024.

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 355390 locations in the U.SU.S. and Canada as of NovemberFebruary 30,28, 2025.2026. 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 2025 and expect to complete the U.S. implementation by the end of calendar 2027.

Our workforce reduction plan in Europe to reduce structural costs announced in June 2024 is substantially complete as of NovemberFebruary 30,28, 2025.2026. 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. Execution was carried out in accordance with local country processes and regulations. We expect savings from the plan to be approximately $150 million on an annualized basis beginning in calendar 2026.

We expect the pre-tax cost of the severance benefits and legal and professional fees to be provided under and related to the plan to be approximately $250 million in cash expenditures. These activities have been recorded as business optimization expenses. In the secondthird quarter of 2026 and 2025, we incurred $6$2 million and $173$44 millionmillion, respectively, of costs related to this plan. In addition, in the firstnine halfmonths of 2026 and 2025, we incurred $9$11 million and $176$220 million, respectively. The timing and amount of our business optimization expenses and the related cost savings from the workforce reduction plan may change as we revise and implement our plans.

Our effective tax rate was 25.8%16.4% for the secondthird quarter and 26.5%23.1% for the firstnine halfmonths of 2026 compared to 24.5%23.0% for the secondthird quarter and 24.6%24.1% for the firstnine halfmonths of 2025. The secondthird quarter 2026 tax rate is higherlower than the secondthird quarter 2025 tax rate due to the inclusion of incremental favorable one-time itemstax benefits, which includes $99 million from the reduction of a valuation allowance on certain foreign tax loss carryforwards due to operational changes which impacted the determination of the realizability of the deferred tax asset in thethat 2025 tax rate.jurisdiction.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law. Certain provisions within the act are interdependent and have implications for both the effective tax rate and cash taxes. We are currently in the process of evaluating these provisions.

During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit sought to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $249 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. On February 13, 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. On June 4, 2025, the District Court validated the amount of refunds owed for 2018 and 2019, which includes the foreign tax credits previously denied. On August 1, 2025, the U.S. government filed a notice to appeal the decision to the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

Based on current trends, we expect revenue growth to continue into the second halfremainder of 2026, driven by U.S. Domestic service offerings. We expect international revenue to remain constrainedpressured as the current trade and geopolitical environment remains highly uncertain, drivingincluding increasedrecent escalation in the Middle East, which continued to increase fuel prices and drive high volatility in shipping patterns globally. In addition, softness in the industrial economy is expected to continue pressuring demand for our Freight LTL services.

To mitigate demand challenges, we willWe continue to execute on our revenue quality strategy through surcharge management and optimizing our customer and service mix, and we will continue to alignaligning our cost base with demand. We will also continue our focus on business optimization, where we expectare on track to seeachieve an incremental $1.0 billion in structural cost reduction benefits from DRIVE and Network 2.0 in 2026.

Our capital expenditures for 2026 are now expected to be approximately $4.5$4.1 billion, $0.4consistent billionwith higher2025 than 2025. The increase is driven by investment in Network 2.0 initiatives and other efforts to modernize our facilities and package handling equipment in the U.S. and international locations.levels. Aircraft spend is expected to decline to approximately $1.0 billion, $0.3 billion lower than 2025. This reduction will be offset by an increase of $0.3 billion to support ongoing Network 2.0 initiatives, as well as modernization of global facilities and package handling equipment.

The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges,challenges including recent escalation in the Middle East, developments in international trade, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2026 inherently less certain. See Part I “Item 1A. Risk Factors” in our Annual Report for more information.

Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, certain other costs and credits not attributed to our core business, and certain costs associated with developing integrated business solutions through our FedEx Dataworks, Inc. (“FedEx Dataworks”) operating segment. FedEx Dataworks is focused on creating new digital solutionsrevenue streams using proven FedEx intelligence to optimize operations, digitize supply chains,chains and create new opportunities for our customers and team members.

Operating results in Corporate, other, and eliminations improved in the secondthird quarter and firstnine halfmonths of 2026 reflecting lower business optimization costs at FedExcorporate Dataworksheadquarters and corporateFedEx headquarters,Dataworks, and decreased purchased transportation at FedEx Logistics.

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the secondthird quarter of 2026 FedEx Freight provided road and intermodal support for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

Federal Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority, deferred, and economy services, which provide delivery on a time-definite or day-definite basis. The following table compares revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the periods ended NovemberFebruary 30,28, 20252026 and 20242025:

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended NovemberFebruary 30,28, 20252026 and 20242025:

Federal Express segment revenue increased 10% in the third quarter and 8% in the secondnine quarter and 6% in the first halfmonths of 2026 primarily due to improved U.S. domestic and international priority package base yields, increased U.S. domestic package volumes, and favorable exchange rates, partially offset by lower international export package volume including the negative impacts from global trade policiespolicy changes and thedecreased expirationfuel ofsurcharges. ourImproved contractbase withyields and U.S. domestic package volumes reflect strong residential e‑commerce growth in the USPS.U.S. domestic business, while international performance benefitted from increased business‑to‑business demand.

Volume: