Q1 2026 FedEx Corp Earnings Call

September 18, 2025

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I would now like to turn the conference over to Fedex, Vice President of Investor Relations Jenny Hollander.

Good afternoon, and welcome to the Fedex Corporation first quarter earnings Conference call first quarter earnings release Form 10-Q, and Stat book are on our website at investors got Fedex Dot Com 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.

Jenifer Hollander: Please refer to the Investor Relations portion of our website at fedex.com for a reconciliation of the non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures. Joining us on the call today are Rajesh Subramaniam, President and CEO; Brie Carere, Executive Vice President and Chief Customer Officer; and John W. Dietrich, Executive Vice President and CFO. Now, I will turn the call over to Rajesh.

Certain statements in this conference call maybe 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.

Rajesh Subramaniam: Thank you, Jenifer. We delivered a solid quarter in line with the Q1 outlook we shared in June, despite significant volatility and uncertainty around the global trade environment. Our results demonstrate the resilience we have built into our network. They also reflect the dedication of our world-class team, who have adapted quickly to serve customers with excellence through an evolving demand environment. I'm very appreciative of Team FedEx. We continue to reduce structural costs while deploying Tricolor, advancing Network 2.0, and improving our European operations. These strategies are enabling us to flex the network faster than ever before and lowering our cost to serve, all while providing our customers with high-quality service. Importantly, we are continuing to win new business in high-value verticals, driven in part by our differentiated digital tools that are enhancing the FedEx value proposition and customer experience.

Today's presentation also includes certain non-GAAP financial measures. Please refer to the Investor relations portion of our website at Fedex Dot Com for a reconciliation of the non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures joy.

Joining us on the call today are Raj Subramaniam, President and CEO, three Crary executive Vice President and Chief customer Officer, and John Dietrich Executive Vice President and CFO now I will turn the call over to Raj.

Thank you Jenny.

We delivered a solid quarter in line with the Q1 outlook, we shared in June despite significant volatility and uncertainty around the global trade environment.

Our results demonstrate the resilience we have built into our network.

Joining us on the call today are Raj Subramaniam, President and CEO, Greg Crary, Executive Vice President and Chief customer Officer, and John <unk> Executive Vice President and CFO now I will turn the call over to Raj.

It also reflects the dedication of our world class team.

Who have adapted quickly to serve customers with excellence through an evolving demand environment.

I'm very appreciative of team Fedex.

Thank you Jenny.

We delivered a solid quarter in line with the Q1 outlook, we shared in June despite significant volatility and uncertainty around the global trade environment.

Rajesh Subramaniam: We also continue to make meaningful progress preparing for the spin-off of FedEx Freight, which remains on track. Following the spin-off, FedEx Freight will be a separate public company with the best customer value proposition in the LTL market and a proven track record of strong operational execution. Turning to our consolidated Q1 results, revenue is up 3% year-over-year, driven by strength across our U.S. domestic packaged services. We achieved our targeted $200 million in transformation-related savings and grew adjusted operating income by 7%. Similar to last quarter, the results at FedEx Express demonstrate the operating leverage that we built into our business. On a 4% year-over-year increase in FedEx Express revenue, we grew adjusted operating income by 17% and expanded adjusted operating margin by 70 basis points. Notably, we achieved this result despite continued headwinds from the trade environment and the U.S. Postal Service contract expiration.

We continued to reduce structural cost, while deploying tricolor advancing network <unk> and improving our European operations.

Our results demonstrate the resilience we have built into our network.

These strategies are enabling us to flex the network faster than ever before.

They also reflect the dedication of our world class team.

Knowing our cost to serve.

All while providing our customers with high quality service.

Adapted quickly to serve customers with excellence through an evolving demand environment.

Importantly, we're continuing to win new business and high value verticals driven in part by our differentiated digital tools for enhancing the fedex value proposition and customer experience.

I'm very appreciative of team Fedex.

We continued to reduce structural costs, while deploying tricolor.

Advancing network, <unk> and improving our European operations.

We also continued to make meaningful progress preparing for the spin off of Fedex freight which remains on track.

These strategies are enabling us to flex the network faster than ever before and lowering our cost to serve.

Following the spin off rate will be a separate public company with the best customer value proposition in the LTE market and a proven track record of strong operational execution.

All while providing our customers with high quality service.

Importantly, we are continuing to win new business and high value verticals.

Turning to our consolidated Q1 results.

Driven in part by our differentiated digital tools for enhancing the Fedex value proposition and customer experience.

Revenue was up 3% year over year, driven by strength across our U S domestic package services.

We also continued to make meaningful progress preparing for the spin off of Fedex freight which remains on track.

We achieved our targeted $200 million and transformation related savings and grew adjusted operating income by 7%.

Rajesh Subramaniam: Consistent with the industry trends that we have seen in recent quarters, revenue at FedEx Freight remained pressured. That said, despite the prolonged weakness in the industrial economy, the LTL market remains rational, and we are well-positioned with our disciplined approach to strategic growth. I'm proud of the results our team is delivering across the enterprise despite industrial economic weakness. While an industrial recovery is not required for long-term value creation at FedEx, I'm confident that we'll unlock significant upside across the enterprise when the demand environment improves. Last quarter, I spoke about the degree to which we flexed our networks to better match the demand environment amid global trade shifts. As policies and demand evolved throughout the first quarter, we further adjusted capacity thanks to our Tricolor strategy. For example, we reduced our purple tail Trans-Pacific Asia outbound capacity by 25% year-over-year and nearly 10% versus the prior quarter.

Following the spin off will.

There will be a separate public company with the best customer value proposition in the LTE market and a proven track record of strong operational execution.

Similar to last quarter.

At Federal Express Corporation or <unk>.

<unk>, the operating leverage that would be built into our business.

Turning to our consolidated Q1 results.

On a 4% year over year increase in <unk> revenue.

Revenue was up 3% year over year, driven by strength across our U S domestic package services.

We grew adjusted operating income by 17% and.

And expanded adjusted operating margin by 70 basis points.

We achieved our targeted $200 million and transformation related savings and grew adjusted operating income by 7%.

Notably we achieved this result, despite continued headwinds from the trade environment and the U S Postal service contract exploration.

Similar to last quarter the results at Federal Express Corporation, our MVC.

Consistent with the industry trends.

Demonstrating the operating leverage that we built into our business.

We have seen in recent quarters.

Revenue at freight remained pressured.

On a 4% year over year increase in <unk> revenue.

That's it.

Despite the prolonged weakness in the industrial economy, the LTE market remains rational and we are well positioned with our disciplined approach to strategic growth.

We grew adjusted operating income by 17%.

And expanded adjusted operating margin by 70 basis points.

Notably we achieved this result, despite continued headwinds from the trade environment and the U S Postal service contract exploration.

I'm proud of the results our team is delivering across the enterprise despite industrial economic weakness.

While an industrial recovery is not required for long term value creation and Fedex.

Consistent with the industry trends.

I'm confident that we'll unlock significant upside at cross enterprise when the demand environment improves.

We have seen in recent quarters.

Rajesh Subramaniam: We also decreased our third-party or white-tail capacity by similar percentages. At the same time, we shifted capacity to capture profitable revenue on the Asia to Europe lane. With the full removal of the de minimis exemption in the U.S. late last month, we have been working closely with our customers, helping them maintain effective and efficient access to the vital U.S. market. Given a significant portion of our de minimis volume exposure previously came from China, we were able to use learnings from our experiences in May to help shippers elsewhere navigate the more recent exemption elimination. This level of connectivity extends to how we're advancing the elements of our transformation that are unique to FedEx. The Network 2.0 rollout is progressing well, and customer feedback, especially when it comes to the consolidated pickup experience, remains very positive.

Revenue had freight remained pressured.

Asset.

Despite the prolonged weakness in the industrial economy, the LPL market remains rational and we are well positioned with our disciplined approach to strategic growth.

Last quarter I spoke about the degree to which we flexed our networks to better match the demand environment amid global trade shifts.

As policies and demand evolve throughout the first quarter, we further adjusted capacity thanks to our tricolor strategy.

I am proud of the results our team is delivering across the enterprise despite industrial economic weakness.

While an industrial recovery is not required for long term value creation and Fedex I'm confident it will unlock significant upside at cross enterprise when the demand environment improves.

For example.

We reduced our pulpwood to try and specific Asia outbound capacity by 25% year over year.

Nearly 10% versus the prior quarter.

Last quarter I spoke about the degree to which we flex down networks to better match the demand environment amid global trade shifts.

We also decreased our third party or white tailed capacity by similar percentages.

At the same time, we shifted capacity to capture profitable revenue on the Asia to Europe Lane.

As policies and demand evolve throughout the first quarter, we further adjusted capacity thanks to our tricolor strategy.

For the full removal of the de minimus exemption in the United States late last month.

For example.

We reduced our pulpwood tail trend specific Asia outbound capacity by 25% year over year, and nearly 10% versus the prior quarter.

We have been working closely with our customers.

Helping them maintain effective and efficient access to the vital U S market.

Rajesh Subramaniam: In the first quarter, as planned, we optimized approximately 70 additional U.S. stations. Our total optimized station count across the U.S. and Canada is now approximately 360, enabling us to exit September with nearly 3 million in average daily volume flowing through Network 2.0 optimized operations. Looking beyond Network 2.0, improving profitability in Europe remains a top priority, and I am especially pleased with the team's year-over-year improvements in labor and on-road productivity metrics. Q1 also marked our best new business quarter in Europe in the last two years, driven by express parcel growth on both the intra-European and transatlantic lanes. Importantly, this business was well-balanced between B2B and B2C customers, demonstrating our focus on growing in premium B2B and longer-haul export B2C segments. This commercial strategy, combined with our rigorous focus on cost management, led to a meaningful contribution to our year-over-year FedEx profit improvement.

Given our significant significant portion of our de Minimis volume exposure previously came from China.

We also decreased our third party or white tail capacity by similar percentages.

At the same time, we shifted capacity to capture profitable revenue on the Asia to Europe Lane.

We were able to use learnings from my experiences in may to help shippers elsewhere navigate the more recent exemption elimination.

For the full removal of the de Minimis exception in the United States late last month we.

This level of connectivity extends to how we are advancing the elements of our transformation that are unique to Fedex.

We have been working closely with our customers, helping them maintain effective and efficient access to the vital U S market.

The network to our own rollout is progressing well and customer feedback, especially when it comes to the consolidated pick up experience remains very positive.

Given our significant significant portion of our de Minimis volume exposure previously came from China.

In the first quarter as planned we optimized approximately 70 additional U S stations.

We were able to use learnings from our experiences in may to help shippers elsewhere navigate the more recent exemption elimination.

Our total optimized station count across the U S and Canada is now approximately 360.

This level of connectivity extends to how we are advancing the elements of our transformation that are unique to Fedex.

Enabling us to exit September with nearly $3 million in average daily volume flowing through network to the auto optimized operations.

The network <unk> rollout is progressing well and customer feedback, especially when it comes to the consolidated pickup experience remains very positive.

Looking beyond network Gerardo.

Improving profitability in Europe remains a top priority and IMS, especially pleased with the team's year over year improvements in labor and on road productivity metrics.

In the first quarter as planned we optimized approximately 70 additional U S stations.

Our total optimized station count across the U S and Canada is now approximately 360.

Rajesh Subramaniam: I talked earlier about how our Tricolor strategy enabled us to flex the network to adapt to changing demand patterns. Tricolor is also driving greater densification and reduced unit costs across our purple, orange, and white networks. The strategy is simultaneously focused on enhancing service quality and mitigating congestion at major sort locations. Our execution on this important initiative is bolstering end-to-end solutions for global customers as we grow profitably in the global air freight market. This strategy supported an impressive 14% year-over-year Q1 revenue growth in international priority and economy freight with high flow-through. Data and technology remain foundational to our business, but we are entering a new chapter in how we leverage them. Our founders' vision more than 45 years ago was that information about the package is as important as the package itself has proven crucial. Today, FedEx operates an advanced digital twin that goes beyond tracking.

One also marked our best new business quarter in Europe in the last two years.

Enabling us to exit September with nearly $3 million in average daily volume flowing through network <unk> auto optimized operations.

Driven by express parcel growth on both the intra European and Trans Atlantic lanes.

Importantly, this business was well balanced between b to B and B to C customers, demonstrating our focus on growing in premium b to b and longer haul export b to C segments.

Looking beyond network Gerardo.

Improving profitability in Europe remains a top priority.

Im, especially pleased with the team's year over year improvements in labor and on road productivity metrics.

This commercial strategy combined with our rigorous focus on cost management led to a meaningful contribution to our year over year FCC profit improvement.

Q1 also marked our best new business quarter in Europe in the last two years.

Driven by express parcel growth on both the intra European and Trans Atlantic lanes.

I talked earlier about how our tricolor strategy enabled us to flex the network to adapt to changing demand patterns.

Importantly, this business was well balanced between <unk> and <unk> customers, demonstrating our focus on growing in premium b to b and longer haul export b to C segments.

The color is also driving greater densification and reduced unit costs across our purple orange and white networks.

Strategy is simultaneously focused on enhancing service quality and mitigating congestion and major sort locations.

This commercial strategy combined with our rigorous focus on cost management led to a meaningful contribution to our year over year SEC profit improvement.

Our execution on this important initiative is bolstering end to end solutions for our global customers as we grow profitably in the global airfreight market.

I talked earlier about how our tricolor strategy enabled us to flex the network to adapt to changing demand patterns.

Rajesh Subramaniam: It is becoming an intelligent system that anticipates disruptions, provides optimized route information in real time, and creates predictive customer experiences. We move 17 million packages through our network daily, generating 2 petabytes of data and 100 billion transactions across software applications. The real value isn't in the volume; it is in the unique nature of this data. Our position at the intersection of global commerce gives us an unmatched view of physical supply chain patterns, seasonal demand shifts, and emerging trade corridors. This real-world operational data platform cannot be replicated by any competitor or a tech solution. Simply put, FedEx owns one of the richest logistics intelligence assets in the world. I'm excited to welcome Vishal Talwar, our new Chief Digital and Information Officer and President of FedEx Dataworks, who joined us last month.

This strategy supported an impressive 14% year over year Q1 revenue growth in international priority and economy freight with high flow through.

<unk> is also driving greater densification and reduced unit costs across our purple orange and white networks.

The strategy is simultaneously focused on enhancing service quality and mitigating congestion at major salt locations.

Data and technology remain foundational to our business, but we are entering a new chapter in how we leverage them.

Our execution on this important initiative is bolstering end to end solutions for our global customers as we grow profitably in the global airfreight market.

Our founders' vision more than 45 years ago that information about the package is as important as the package itself has proven <unk>.

This strategy supported an impressive 14% year over year Q1 revenue growth in international priority and economy freight with high flow through.

Today Fedex operates an advanced digital twin that goes beyond tracking it is becoming an intelligent system that anticipates disruptions provides optimized route information in real time and creates predictive customer experiences.

Data and technology remain foundational to our business, but we are entering a new chapter in how we leverage them.

We moved 17 million packages through our network daily generating two petabytes of data and 100 billion transactions across software applications.

Our founders' vision more than 45 years ago that information about the package is as important as the package itself has proven <unk>.

But the real value in.

<unk> Fedex operates an advanced digital twin that goes beyond tracking it is becoming an intelligent system that anticipates disruptions provides optimized route information in real time and creates predictive customer experiences.

In the volume.

It is in the unique nature of this data.

Our position at the intersection of Global Commerce.

Rajesh Subramaniam: As the former Chief Growth Officer at Accenture Technology, Vishal brings deep expertise in enterprise AI and understands how to leverage our unique physical digital assets into next-generation AI-led capabilities. Under Vishal's leadership, we will continue accelerating two key priorities: scaling AI across the enterprise, from enterprise function to how we operate and serve our customers, and exploring new revenue models that leverage our unique assets. We're also strengthening our cybersecurity posture to protect our strategic advantages. Before I turn the call over to Brie, I'd like to update you on our expectations for the remainder of the fiscal year. Based on our current assumptions, we expect full-year adjusted earnings to be $17.20 to $19 per diluted share. This reflects a range of scenarios in what remains a dynamic global operating environment.

<unk> us an unmatched view of physical supply chain patterns.

Seasonal demand shifts and emerging trade cargos.

We moved 17 million packages through our network daily generating two petabytes of data and 100 billion transactions across software applications.

This real world operational data platform cannot be replicated by any competitor or a tech solutions.

Simply put Fedex.

But the real value.

Fedex owns one of the richest logistics intelligence assets in the world.

And the volume.

It is in the unique nature of this data.

Our position at the intersection of Global Commerce gives us an unmatched view of physical supply chain patterns.

I'm excited to welcome Vishal <unk>, our new Chief Digital and information Officer, and President of Fedex networks, who joined US last month.

Seasonal demand shifts and emerging trade cargos.

As the former Chief growth officer at Accenture technology, which all brings deep expertise in enterprise AI and understands how to leverage our unique physical digital assets into next generation AI led capabilities.

This real world operational data platform cannot be replicated by any competitor or a tech solutions.

Simply put Fedex owns one of the richest logistics intelligence assets in the world.

Under <unk> leadership, we will continue accelerating two key priorities.

I am excited to welcome Vishal Tulwar, our new Chief Digital and information Officer, and President of Fedex data works, who joined US last month.

Scaling AI across the enterprise from.

From enterprise function to how we operate and so our customers.

As the former Chief growth officer at Accenture technology, Wishaw brings deep expertise in enterprise AI and understands how to leverage our unique physical digital assets into next generation AI led capabilities.

Rajesh Subramaniam: As it continues to evolve, we will remain focused on executing on our commercial priorities, dynamically matching capacity with demand, and delivering on the $1 billion in transformation-related savings we shared previously. Brie and John will provide more details on the key variables and underlying assumptions for this outlook shortly. We have made tremendous progress on our transformation, and there is much more to come. To that end, we are excited to announce that our next FedEx Corporation Investor Day will be held in Memphis on February 11 and 12, 2026. I look forward to seeing many of you there, where we will provide more detailed updates on our strategic initiatives and our longer-term financial targets. Now, over to you, Brie.

And exploring new revenue models that leverage our unique assets.

We're also strengthening our cyber security posture to protect our strategic advantages.

Before I turn the call over debris I'd like to update you on our expectations for the remainder of the fiscal year.

Under <unk> leadership, we will continue accelerating two key priorities.

Based on our current assumptions, we expect full year adjusted earnings to be $17 22 to $19 per diluted share.

Scaling AI across the enterprise from.

From enterprise function to how we operate and serve our customers.

And exploring new revenue models that leverage our unique assets.

This reflects a range of scenarios in what remains a dynamic global operating environment.

We're also strengthening our cyber security posture to protect our strategic advantages.

As it continues to evolve we will remain focused on executing on our commercial priorities dynamically matching capacity with demand and delivering on the $1 billion and transformation related savings we shared previously.

Before I turn the call over debris I'd like to update you on our expectations for the remainder of the fiscal year.

Based on our current assumptions, we expect full year adjusted earnings to be $17 22 to $19 per diluted share.

Jenifer Hollander: Thank you, Raj. I'm very proud of our entire global team for how they are supporting our customers in the current trade environment. Our strong value proposition, including superior weekend coverage, supported 3% year-over-year revenue growth across the enterprise. This is the highest quarterly rate we have seen since the pandemic. At FedEx Corporation, revenue was up 4%, driven by U.S. domestic package revenue strength. This was a direct result of profitable share growth in the U.S. domestic market. This strength was partially offset by continued weakness at FedEx Freight due to the continued pressure from the industrial economy. Our value proposition is helping us deepen our customer relationships and win business. For example, in Q1, Best Buy named FedEx as their primary national parcel carrier. Leveraging our advanced visibility tools, Best Buy will provide real-time tracking data and customer order communication, improving their customers' experiences.

Brian John will provide more details on the key variables and underlying assumptions for this outlook shortly.

We have made tremendous progress on our transformation and there is much more to come.

This reflects a range of scenarios in what remains a dynamic global operating environment.

To that end, we're excited to announce that our next Fedex Corp, Investor Day will be held in Memphis on February 11, and 12 <unk> 2006.

Look forward to seeing many of you there where we will provide more detailed updates on our strategic initiatives and our longer term financial targets.

Brian John will provide more details on the key variables and underlying assumptions for this outlook shortly.

Now over to you Barry.

Thank you Raj I'm very proud of our entire global team for how they are supporting our customers in the current trade environment.

We have made tremendous progress on our transformation and there is much more to come.

To that end, we're excited to announce that our next Fedex Corp, Investor Day will be held in Memphis on February 11, and 12 <unk> 2006.

Our strong value proposition, including superior weekend coverage supported 3% year over year revenue growth across the enterprise. This is the highest quarterly rate we have seen since the pandemic.

Jenifer Hollander: By providing customers with more timely and accurate updates, the company also expects to reduce support calls, cancellations, and reship costs. We are excited to partner with Best Buy to create a smarter, more reliable supply chain that further strengthens their customer trust. We were pleased to deliver a 5% increase in U.S. domestic ADV year-over-year with growth across the majority of our services. In line with our expectations and consistent with the trends we saw in May, international export volumes declined, particularly on the China to U.S. lane. Knowing our strongest international lane would be under pressure, we pivoted the commercial team, and they have done a tremendous job capturing demand out of Southeast Asia and Europe. This provided a partial offset against the headwinds to demand on the China to U.S. export lane. The team has also done a great job maximizing U.S. outbound capacity.

Look forward to seeing many of you there where we will provide more detailed updates on our strategic initiatives and our longer term financial targets.

At SEC revenue was up 4% driven by U S. Domestic package revenue strength. This was a direct result of profitable share growth in the U S domestic market.

Now over to you Barry.

This strength was partially offset by continued weakness at Fedex freight due to the continued pressure in the industrial economy.

Thank you Raj I'm very proud of our entire global team for how they are supporting our customers in the current trade environment.

Our value proposition is helping us deepen our customer relationships and win business. For example in Q1 best buy named Fedex as their primary national parcel carrier.

Our strong value proposition, including superior weekend coverage supported 3% year over year revenue growth across the enterprise. This is the highest quarterly rate we have seen since the pandemic.

Leveraging our advanced visibility to all best buy will provide real time tracking data and customer order communications improving their customer experience by.

That said revenue was up 4% driven by U S. Domestic package revenue strength. This was a direct result of profitable share growth in the U S domestic market.

By providing customers with more timely and accurate updates the company also expects to reduce support calls cancellations and reshape costs.

This strength was partially offset by continued weakness at Fedex freight due to the continued pressure for the industrial economy.

We are excited to partner with best buy to create a smarter more reliable supply chain that further strengthen their customer trust.

Our value proposition is helping us deepen our customer relationships and win business. For example in Q1 best buy names Fedex as their primary national parcel carrier.

Jenifer Hollander: We are seeing improving trends in both outbound weight and volume, supported by strong growth in our healthcare vertical. At FedEx Freight, along with broader industry trends, average daily shipments declined. Weakness in the industrial economy and excess capacity in the truckload market continue to pressure our results. That said, Freight made excellent progress in the quarter, continuing to stand up its dedicated sales team. This team is focused on improving the customer experience and maintaining strong yields. As the industrial economy improves, Freight is poised for growth and margin expansion. The parcel pricing environment continues to improve. We have achieved strong capture from our pricing changes in the quarter, which included an increase in our fuel surcharge index. At FedEx Express, U.S. domestic package yield was up 3%, driven by strength across all services.

We were pleased to deliver a 5% increase in U S domestic adv year over year with growth across the majority of our services.

Leveraging our advanced visibility towards the best buy will provide real time tracking data and customer order communications, improving their customer experience by providing customers.

In line with our expectations and consistent with the trends we saw in May international export volumes declined, particularly on the China to U S Lane.

Customers with more timely and accurate update the company also expects to reduce support calls cancellations and reshape costs.

Knowing our strongest international lane would be under pressure and we pivoted the commercial team and they have done a tremendous job capturing demand out of southeast Asia and Europe.

We are excited to partner with best buy to create a smarter more reliable supply chain that further strengthen their customer trust.

This provided a partial offset against the headwinds to demand on the China. The U S export Lane.

We were pleased to deliver a 5% increase in U S domestic adv year over year with growth across the majority of our services and.

Team has also done a great job maximizing U S outbound capacity.

We are seeing improving trends in both outbound weight and volume supported by strong growth in our health care vertical.

In line with our expectations and consistent with the trends we saw in May international export volumes declined, particularly on the China to U S Lane.

At Fedex freight align with broader industry trends average daily shipments declined.

Knowing our strongest international lane would be under pressure, we pivoted the commercial team and they have done a tremendous job capturing demand out of southeast Asia and Europe.

Jenifer Hollander: International export package yield grew 4%, driven by higher fuel surcharges, favorable exchange rate impacts, and the reduction in lightweight e-commerce volume due to the change in the de minimis exemption. Our Tricolor strategy continued to drive growth in international priority and economy freight, where we delivered a 9% increase in revenue per pound. At FedEx Freight, revenue per shipment declined 1%, driven by lower revenue per hundredweight and lower fuel surcharges. While weight per shipment was flat year-over-year, we are encouraged by the sequential improvement in weight per shipment over the past few quarters, and FedEx Freight revenue per hundredweight remains amongst the highest in the industry. We announced our demand surcharges in July, which are needed to offset the incremental cost at peak to deliver outstanding service while protecting profitability. Earlier this month, we announced a 5.9% general rate increase effective in January.

Weakness in the industrial economy, and excess capacity in the truckload market continue to pressure our results that said freight made excellent progress in the quarter continuing to stand up a dedicated sales team. This team is focused on improving the customer experience and maintaining strong yield as.

This provided a partial offset against the headwinds to demand on the China. The U S export Lane.

The team has also done a great job maximizing U S outbound capacity.

As the industrial economy improves freight is poised for growth and margin expansion.

We are seeing improving trends in both outbound weight and volume supported by strong growth in our health care vertical.

The parcel pricing environment continues to improve.

We have achieved strong capture from our pricing changes in the quarter, which included an increase in our fuel surcharge index.

At Fedex freight align with broader industry trends average daily shipments decline weakness in the industrial economy and excess capacity in the truckload market continue to pressure our results that.

At FSC U S domestic package yield was up 3% driven by strength across all services.

That said freight made excellent progress in the quarter continuing to standup a dedicated sales team. This.

International export package yield grew 4% driven by higher fuel surcharges favorable exchange rate impacts and the reduction in lightweight e-commerce volume due to the change in the de minimus exemption.

This team is focused on improving the customer experience and maintaining strong yields.

As the industrial economy improves freight is poised for growth and margin expansion.

Our tricolor strategy continued to drive growth in international priority and economy freight, where we delivered a 9% increase in revenue per pound.

The parcel pricing environment continues to improve.

We have achieved strong capture from our pricing changes in the quarter, which included an increase in our fuel surcharge index.

Jenifer Hollander: We expect strong capture from both. In Q1, we prepared for the ramping of our new Amazon business, which was minimal in the first quarter as we expected. We believe the onboarding will be complete by the third quarter, which will support continued U.S. domestic revenue growth in the quarters ahead. This profitable business will skew towards larger, heavier weight packages. We are cautiously optimistic about peak season growth based on what we are hearing from our customers currently. As a reminder, this year's peak season will last one day longer than last year's. With that in mind, we are expecting a modest increase in peak average daily volume versus fiscal year 2025 and a mid to high single-digit increase in year-over-year total peak volume, with growth driven by our larger B2C customers. Regarding the full-year outlook, we are currently planning for revenue growth of 4% to 6%.

At Fedex freight revenue per shipment declined 1% driven by lower revenue per hundredweight and lower fuel surcharges.

At SEC U S domestic package yield was up 3% driven by strength across all services.

International export package yield grew 4% driven by higher fuel surcharges favorable exchange rate impact and the reduction in lightweight e-commerce volume due to the change in the de minimus exemption.

Weight per shipment was flat year over year, we are encouraged by the sequential improvement in weight per shipment over the past few quarters.

Fedex freight revenue per hundredweight remains amongst the highest in the industry.

We announced our demand surcharges in July which are needed to offset the incremental cost at peak to deliver outstanding service, while protecting profitability.

Our tricolor strategy continued to drive growth in international priority and economy freight, where we delivered a 9% increase in revenue per pound.

Earlier this month, we announced a five 9% general rate increase effective in January we expect strong capture from both.

At Fedex freight revenue per shipment declined 1% driven by lower revenue per hundred weight and lower fuel surcharges.

In Q1, we prepared for the ramping of our new Amazon business, which was minimal in the first quarter as we expected.

Weight per shipment was flat year over year, we are encouraged by the sequential improvement in weight per shipment over the past few quarters and Fedex freight revenue per hundred weight remains amongst the highest in the industry.

We believe the Onboarding won't be complete by the third quarter, which will support continued U S domestic revenue growth in the quarters ahead.

Jenifer Hollander: The top of this range assumes that current favorable trends in the U.S. domestic segment continue, and the lower end assumes incremental pressure on U.S. demand, particularly in the second half of the fiscal year. On the international side, the top of the revenue range assumes the current level of international export revenue pressures continue through the rest of the fiscal year, while the lower end assumes an acceleration in these pressures. At FedEx Freight, we expect revenue to be flat to up modestly year-over-year, depending largely on the market conditions in the second half of the year. We continue to advance our commercial priorities, sharply focused on B2B, small and medium-sized businesses, Europe, and, of course, global air freight. Within B2B, we continue to onboard new healthcare business in Q1, building on our momentum from prior quarters. This includes strong healthcare-related growth within our global air freight business.

We announced our demand surcharges in July which are needed to offset the incremental cost at peak to deliver outstanding service, while protecting profitability.

This profitable business will skew towards larger heavier weight packages.

We are cautiously optimistic about peak season growth based on what we are hearing from our customers currently.

Earlier this month, we announced a five 9% general rate increase effective in January we expect strong capture from both.

As a reminder, this year's peak season will last one day longer than last year with that in mind, we are expecting a modest increase in peak adv versus fiscal year, 'twenty five and a mid to high single digit increase in year over year total peak volume with growth driven by our larger BDC customers.

In Q1, we prepared for the ramping of our new Amazon business, which was minimal in the first quarter as we expected.

We believe the Onboarding will be complete by the third quarter, which will support continued U S domestic revenue growth in the quarters ahead.

Regarding our full year outlook. We are currently planning for revenue growth of 4% to 6%.

This profitable business will skew towards larger heavier weight packages.

The top of this range assumes that current favorable trends in the U S. Domestic segment continue and the lower end assumes incremental pressure on U S demand, particularly in the second half of the fiscal year.

We are cautiously optimistic about peak season growth based on what we are hearing from our customers currently.

On the international side, the top of the revenue range assumes the current level of international export revenue pressures continue through the rest of the fiscal year, while the lower end assumes an acceleration in these pressures.

Jenifer Hollander: Later this month, we are launching a new flight linking Dublin and Indianapolis. This new flight will move goods one day faster, supporting healthcare and other high-value verticals with shipments between Ireland and the U.S. We grew our U.S. domestic small business revenue by more than 10% year-over-year in the first quarter. This was fueled by focused and targeted sales execution and a close alignment between our sales and our operations teams. This collaboration is accelerating onboarding, shortening deal cycles, and driving meaningful new acquisitions. We are also scaling high-impact support to deliver exceptional customer experiences during this complex environment. FedEx Rewards, our loyalty program, which is unique in the industry, continues to see significant growth while deepening our SMB customer relationship. In closing, I'm very proud of our team's strong execution in this dynamic environment. We are helping our customers manage through evolving policies and changing demand patterns.

At Fedex freight, we expect revenue to be flat to up modestly year over year, depending largely on the market conditions in the second half of the year.

Regarding our full year outlook. We are currently planning for revenue growth of 4% to 6%.

Of this range assumes that current favorable trends in the U S. Domestic segment continue and the lower end assumes incremental pressure on U S demand, particularly in the second half of the fiscal year.

We continue to advance our commercial priorities sharply focused on D to be small and medium sized businesses Europe and of course global airfreight.

And then B to B, we continue to onboard new health care business in Q1 building on our momentum from prior quarters.

On the international side, the top of the revenue range assumes the current level of international export revenue pressures continue through the rest of the fiscal year, but a lower end assumes an acceleration in these pressures.

This includes strong health care related growth within our global Airfreight business.

Later this month, we are launching a new flight linking Dublin in Indianapolis.

At Fedex freight, we expect revenue to be flat to up modestly year over year, depending largely on the market conditions in the second half of the year.

This new flight will move goods, one day faster supporting health care and other high value verticals with shipments between Ireland and the U S.

We continue to advance our commercial priorities sharply focused on D to be small and medium sized businesses Europe and of course global airfreight.

We grew our U S domestic small business revenue by more than 10% year over year in the first quarter. This was fueled by focused and targeted sales execution and a close alignment between ourselves and our operations teams. This collaboration is accelerating onboarding shortening sales cycles and driving meaningful new acquisition.

Jenifer Hollander: We remain disciplined in our approach to revenue quality. We are ready to continue providing outstanding service to our customers before, during, and after peak. With that, I'll turn it over to John.

With <unk>, we continue to onboard new healthcare business in Q1 building on our momentum from prior quarters. This includes strong healthcare related growth within our global Airfreight business.

John W. Dietrich: Thanks, Brie. Our Q1 results reflect the tenacity and agility of the FedEx team in providing outstanding service while delivering on our strategic initiatives and increasing stockholder returns. We executed very well in Q1, with results above the midpoint of our adjusted EPS outlook range. We also maintained our disciplined approach to capital expenditure, continued to repurchase stock, and grew our quarterly dividend. Turning to our financial results, on a consolidated basis, in the first quarter, we delivered $3.83 in adjusted earnings per share, up 6% year-over-year. We delivered these positive results despite significant headwinds from reduced international export demand and the expiration of the U.S. Postal Service contract. Overall, we delivered revenue growth of 3%, which supported 20 basis points of adjusted margin expansion and 7% adjusted operating income growth. As Brie mentioned, our yield management and strong commercial execution resulted in higher revenue growth from U.S.

Later this month, we are launching a new flight linking Dublin in Indianapolis. This new flight will move goods, one day faster supporting health care and other high value verticals with shipments between Ireland and the U S.

We are also scaling high impact support to deliver exceptional customer experiences during this complex environment.

Fedex rewards our loyalty program, which is unique in the industry continues to see significant growth, while deepening our SMB customer relationship.

We grew our U S domestic small business revenue by more than 10% year over year in the first quarter.

In closing I'm very proud of our team's strong execution in this dynamic environment, we are helping our customers manage through evolving policies and changing demand patterns. We remain disciplined in our approach to revenue quality. We are ready to continue providing outstanding service to our customers before during and after peak and with that I'll turn it over.

Fueled by focused and targeted sales execution and a close alignment between our sales and our operations teams. This collaboration is accelerating onboarding shortening deal cycles and driving meaningful new acquisition.

We are also scaling high impacts support to deliver exceptional customer experiences during this complex environment.

Back to John.

Thanks Bree.

Fedex rewards our loyalty program, which is unique in the industry continues to see significant growth, while deepening our SMB customer relationships.

Our Q1 results reflect the tenacity and agility of the Fedex team and providing outstanding service, while delivering on our strategic initiatives and increasing stockholder returns.

We executed very well in Q1 with results above the midpoint of our adjusted EPS outlook range. We also maintained our disciplined approach to capital expenditure.

Continued to repurchase stock.

And grew our quarterly dividend.

Ron.

Turning to our financial results on a consolidated basis in the first quarter, we delivered $3 83, and adjusted earnings per share.

Thanks Bree.

John W. Dietrich: domestic package services, which contributed to our year-over-year adjusted operating income improvement. We grew adjusted operating income by approximately $90 million, despite the $150 million headwind from the global trade environment, $130 million of headwind from the U.S. Postal Service contract expiration, and continued softness at FedEx Freight. As a reminder, we'll lap the expiration of the Postal Service contract at the end of this month. Additionally, our Q1 results reflect a higher-than-expected Q1 GAAP tax rate of 27.3%, which was unfavorably impacted by a non-recurring income tax expense related to the examination of prior year tax return filings. Turning to performance by segment, at FedEx Express, adjusted operating income increased by $168 million, up 17%, and adjusted operating margin expanded by 70 basis points. This marks the fourth consecutive quarter of year-over-year adjusted margin expansion for FedEx Express.

Our Q1 results reflect the tenacity and agility of the Fedex team and providing outstanding service, while delivering on our strategic initiatives and increasing stockholder returns.

Up 6% year over year.

And we delivered these positive results despite significant headwinds from reduced international export demand and the expiration of the U S Postal service contract.

We executed very well in Q1 with results above the midpoint of our adjusted EPS outlook range.

We also maintained our disciplined approach to capital expenditure continue to repurchase stock.

Overall, we delivered revenue growth of 3%, which supported 20 basis points of adjusted margin expansion and 7% adjusted operating income growth.

And grew our quarterly dividend.

Turning to our financial results on a consolidated basis in the first quarter, we delivered $3 83, and adjusted earnings per share up.

As Barry mentioned, our yield management and strong commercial execution.

Resulted in higher revenue growth from U S domestic package services.

Up 6% year over year.

And we delivered these positive results despite significant headwinds from reduced international export demand and the expiration of the U S Postal service contract.

Which contributed to our year over year adjusted operating income improvement.

We grew adjusted operating income by approximately $90 million, despite the $150 million headwind from the global trade environment.

Overall, we delivered revenue growth of 3%.

Which supported 20 basis points of adjusted margin expansion and 7% adjusted operating income growth.

$130 million of headwind from the U S postal service contract exploration.

And continued softness at Fedex freight.

As Brad mentioned, our yield management and strong commercial execution.

As a reminder, we will lap the exploration of the postal service contract at the end of this month.

Resulted in higher revenue growth from U S domestic package services.

John W. Dietrich: This was driven by higher yields, continued cost reduction efforts, and increased U.S. domestic package volume. These drivers were partially offset by higher wage and purchase transportation rates and the headwinds I mentioned earlier. As expected, due to the evolving trade environment in the quarter, we experienced a material headwind on our Asia to U.S. lane, largely from China outbound, driving most of the $150 million international export headwind to adjusted operating income. At FedEx Freight, adjusted operating income declined by just over $70 million, and adjusted operating margin contracted 250 basis points. Though the current operating environment is challenging for the entire LTL sector, FedEx Freight is uniquely positioned to see strong incremental margins in the eventual market upswing. Moving on to capital allocation, during the quarter, we opportunistically purchased $500 million worth of stock, which, alongside our increased dividend payout, demonstrates our unwavering commitment to increasing stockholder value.

Additionally, our Q1 results reflect a higher than expected Q1, GAAP tax rate of 27, 3%, which was unfavorably impacted by a nonrecurring income tax expense.

Which contributed to our year over year adjusted operating income improvement.

We grew adjusted operating income by approximately $90 million, despite the $150 million headwind from the global trade environment.

Related to the examination of prior year tax return filings.

$130 million of headwind from the U S postal service contract exploration.

Turning to performance by segment at SEC, adjusted operating income increased by $168 million up 17%.

And continued softness at Fedex freight.

As a reminder, we will lap the exploration of the postal service contract at the end of this month.

And adjusted operating margin expanded by 70 basis points.

Additionally, our Q1 results reflect a higher than expected Q1, GAAP tax rate of 27, 3%, which was unfavorable impacted by a nonrecurring income tax expense.

This marks the fourth consecutive quarter of year over year adjusted margin expansion for a SEC.

This was driven by higher yields.

Continued cost reduction efforts and increased U S domestic package volume.

<unk> to the examination of prior year tax return filings.

These drivers were partially offset by higher wage and purchase transportation rates and the headwinds I mentioned earlier.

Turning to performance by segment at SEC, adjusted operating income increased by $168 million up 17%.

As expected due to the evolving trade environment in the quarter, we experienced a material headwind on our Asia to U S Lane.

And adjusted operating margin expanded by 70 basis points.

This marks the fourth consecutive quarter of year over year adjusted margin expansion for a SEC.

Largely from China outbound driving most of the $150 million international export headwind to adjusted operating income.

This was driven by higher yields.

John W. Dietrich: We have $1.6 billion remaining under our 2024 stock repurchase authorization, and subject to business and market conditions, we expect to continue repurchasing shares during the remainder of FY26. FedEx maintains a healthy balance sheet with $6.2 billion of cash on hand exiting Q1 and with investment-grade credit ratings from the major agencies. I'm also very pleased that our recent euro-denominated bond offering was significantly oversubscribed, a testament to the strength of our business, balance sheet, and capital allocation strategy. Q1 CapEx was $623 million, driven by Network 2.0 related facility enhancements, hub modernization, and continued investments to maintain our fleet of aircraft and vehicles. We continue to target $4.5 billion in annual CapEx for FedEx Corporation in FY26. With regard to pension contributions, given the well-funded status of our pension plan, we are reducing our expected pension cash contribution.

Continued cost reduction efforts and increased U S domestic package volume.

At Fedex freight.

Adjusted operating income declined by just over $70 million and adjusted operating margin contracted 250 basis points.

These drivers were partially offset by higher wage and purchase transportation rates and the headwinds I mentioned earlier.

Though the current operating environment is challenging for the entire L TL sector.

As expected due to the evolving trade environment in the quarter, we experienced a material headwind on our Asia to U S Lane.

Fedex freight is uniquely positioned to see strong incremental margins in the eventual market upswing.

Largely from China outbound driving most of the $150 million international export headwind to adjusted operating income.

Moving on to capital allocation.

During the quarter, we opportunistically purchased $500 million worth of stock.

At Fedex freight.

Which alongside our increased dividend payout.

Adjusted operating income declined by just over $70 million and adjusted operating margin contracted 250 basis points.

Constraints, our unwavering commitment to increasing stockholder value.

We have $1 $6 billion remaining under our 2020 for stock repurchase authorization.

Though the current operating environment is challenging for the entire <unk> sector.

And subject to business and market conditions, we expect to continue.

Fedex freight is uniquely positioned to see strong incremental margins in the eventual market upswing.

Purchasing shares during the remainder of FY 'twenty six.

Fedex maintains a healthy balance sheet with $6 $2 billion of cash on hand, exiting Q1, and with investment grade credit ratings from the major agencies.

Moving on to capital allocation.

During the quarter, we opportunistically purchased $500 million worth of stock.

Which alongside our increased dividend payout demonstrates.

I'm also very pleased that our recent euro denominated bond offering was significantly oversubscribed.

Demonstrates our unwavering commitment to increasing stockholder value.

John W. Dietrich: We now anticipate making up to $400 million in voluntary pension contributions to our U.S. qualified plans in fiscal 2026, compared to our prior forecast of up to $600 million. Moving to our FY26 adjusted EPS outlook, which is based on the information that is known to us today. Though the global operating environment remains fluid, with dynamic economic conditions across geographies, our value proposition remains strong, and we continue to execute effectively. As a result, we expect to deliver adjusted EPS of $17.20 to $19, which reflects a range of potential scenarios for the year. Factors that will determine where we ultimately fall in the outlook range include the evolution of global trade, the health of the industrial economy, the U.S. domestic demand environment, traction in our higher margin B2B verticals, and inflation.

We have $1 6 billion remaining under our 2020 for stock repurchase authorization and.

A testament to the strength of our business balance sheet and capital allocation strategy.

And subject to business and market conditions, we expect to continue repurchasing shares during the remainder of FY 'twenty six.

Q1, Capex was $623 million driven by network to Dot O related facility enhancements hub modernization and continued investments to maintain our fleet of aircraft and vehicles.

Fedex maintains a healthy balance sheet with $6 $2 billion of cash on hand, exiting Q1, and with investment grade credit ratings from the major agencies.

And we continue to target four 5 billion in annual Capex for Fedex Corp. In FY 'twenty six.

I'm also very pleased that our recent euro denominated bond offering was significantly oversubscribed.

With regard to pension contributions given the well funded status of our pension plan, we are reducing our expected pension cash contribution.

Estimate to the strength of our business balance sheet and capital allocation strategy.

We now anticipate making up to $400 million and voluntary pension contributions to our U S qualified plans in fiscal 2026 compared to our prior forecast of up to $600 million.

Q1, Capex was $623 million driven by network <unk> related facility enhancements hub modernization and continued investments to maintain our fleet of aircraft and vehicles.

And we continue to target four 5 billion in annual Capex for Fedex Corp. In FY 'twenty six.

Moving to our FY 'twenty six adjusted EPS outlook, which is based on the information that is known to us today.

With regard to pension contributions given the well funded status of our pension plan, we are reducing our expected pension cash contribution.

So the global operating environment remains fluid with dynamic economic conditions across geographies are.

John W. Dietrich: Adjusted EPS of $18.10, which is the midpoint of our range, assumes consolidated revenue growth of 5% and $1 billion in transformation-related savings from our structural cost reductions and Network 2.0 and associated one FedEx savings in FY26. We expect adjusted operating income offsets to include a $1 billion headwind due to the global trade environment, recognizing this number could flex in either direction as the environment evolves, and a $160 million headwind to adjusted operating income from the expiration of the postal contract. We expect our FY26 effective tax rate to be approximately 25% and EPS to be supported by our share repurchase program, as I mentioned earlier. At the midpoint of our range, we anticipate a 6% increase in FedEx Express revenue, with adjusted operating margin down slightly. Also, at the midpoint, we expect low single-digit improvement in FedEx Freight revenue, with margin down year-over-year.

Our value proposition remains strong and we continue to execute effectively.

We now anticipate making up to $400 million and voluntary pension contributions to our U S qualified plans in fiscal 2026.

As a result, we expect to deliver adjusted EPS of $17 20 to $19.

Compared to our prior forecast of up to $600 million.

Which reflects a range of potential scenarios for the year.

Moving to our FY 'twenty six adjusted EPS outlook, which is based on the information that is known to us today.

Factors that will determine where we ultimately fall in the outlook range include.

The evolution of global trade.

So the global operating environment remains fluid with dynamic economic conditions across geographies our.

All of the industrial economy.

The U S domestic demand environment track.

Traction in our higher margin BW verticals and inflation.

Our value proposition remains strong and we continue to execute effectively.

Adjusted EPS of $18 10.

As a result, we expect to deliver adjusted EPS of $17 20 to $19.

Which is the midpoint of our range assumes consolidated revenue growth of 5%.

Which reflects a range of potential scenarios for the year.

And $1 billion and transformation related savings from our structural cost reductions and network to Dato and associated one Fedex savings in FY 'twenty six.

Factors that will determine where we ultimately fall in the outlook range include.

The evolution of global trade.

We expect adjusted operating income offsets to include a $1 billion headwind due to the global trade environment.

<unk> of the industrial economy.

The U S domestic demand environment.

Traction in our higher margin BTB verticals and inflation.

<unk> this number could flex in either direction as the environment evolves.

Adjusted EPS of $18 10.

And a $160 million headwind to adjusted operating income from the exploration of the postal contract.

Which is the midpoint of our range assumes consolidated revenue growth of 5%.

John W. Dietrich: Now turning to our FY26 adjusted operating income bridge, we're introducing a new view of this bridge to provide deeper insights into the expected drivers of profitability this year. The bridge shows the year-over-year elements embedded in our outlook in one of the scenarios at the midpoint, resulting in adjusted operating income of $6 billion. Of course, the assumptions behind the variables at the midpoint may flex as the environment changes. In this scenario, for FedEx Express volume-related revenue net of variable costs associated with this volume, we expect a $400 million tailwind, driven largely by U.S. domestic package services, offset by a material headwind from reduced international export demand. With respect to FedEx Express yield, we expect a $2.3 billion tailwind, demonstrating our commitment to revenue quality and continued pricing discipline.

And $1 billion and transformation related savings from our structural cost reductions and network <unk> and associated one Fedex savings in FY 'twenty six.

We expect our FY 'twenty six effective tax rate to be approximately 25% and EPS to be supported by our share repurchase program as I mentioned earlier.

We expect adjusted operating income offsets to include a $1 billion headwind due to the global trade environment.

At the midpoint of our range, we anticipate a 6% increase in federal Express revenue with adjusted operating margin down slightly.

<unk> this number could flex in either direction as the environment evolves.

Also at the midpoint, we expect low single digit improvement in Fedex freight revenue with margin down.

And a $160 million headwind to adjusted operating income from the exploration of the postal contract.

Year over year.

We expect our FY 'twenty six effective tax rate to be approximately 25% and EPS to be supported by our share repurchase program as I mentioned earlier.

Now turning to our FY 'twenty six adjusted operating income bridge.

We're introducing a new view of this bridge to provide deeper insights into the expected drivers of profitability. This year.

At the midpoint of our range, we anticipate a 6% increase in federal Express revenue with adjusted operating margin down slightly.

The bridge shows the year over year elements embedded in our outlook in one of the scenarios at the midpoint.

Resulting in adjusted operating income of $6 billion.

John W. Dietrich: Offsets to these tailwinds include a $2.1 billion base expense increase across the business, excluding FedEx Freight, a $300 million headwind from direct trade-related expenses, including higher customs clearance costs, a $160 million U.S. Postal Service contract expiration headwind I mentioned earlier, a $100 million decline in adjusted operating profit at freight, and a $100 million headwind from the net impact of foreign exchange fluctuations. Embedded in our assumptions are the previously mentioned $1 billion in headwind to adjusted operating profit from the global trade environment and $1 billion in transformation-related savings from DRIVE and Network 2.0. While DRIVE began as a cost reduction program, it is now fundamental to how we run our business. With regard to Q2, we anticipate a sequential improvement in adjusted EPS.

Also at the midpoint, we expect low single digit improvement in Fedex freight revenue with margin down year over year.

Of course, the assumptions behind the variables at the midpoint may flex as the environment changes.

In this scenario for FSC volume related revenue net of variable costs associated with this volume, we expect a $400 million tailwind driven largely by U S. Domestic package services offset by a material headwind from reduced international export demand.

Now turning to our FY 'twenty six adjusted operating income bridge.

We're introducing a new view of this bridge to provide deeper insights into the expected drivers of profitability. This year.

The bridge shows the year over year elements embedded in our outlook in one of the scenarios at the midpoint.

With respect to MPC yield, we expect a $2 3 billion tailwind demonstrating.

Resulting in adjusted operating income of $6 billion.

Demonstrating our commitment to revenue quality and continued pricing discipline.

Of course, the assumptions behind the variables at the midpoint may flex as the environment changes.

Offsets to these tail wins include a $2 $1 billion base expense increase across the business, excluding Fedex freight.

In this scenario for RPC volume related revenue net of variable costs associated with this volume, we expect a $400 million tailwind driven largely by U S. Domestic package services offset by a material headwind from reduced international export demand.

$300 million headwind from direct trade related expenses, including higher customs clearance costs.

$160 million U S postal service contract expiration headwind I mentioned earlier.

With respect to FSC yield, we expect a $2 $3 billion tailwind demonstrating.

A $100 million decline in adjusted operating profit at freight.

Demonstrating our commitment to revenue quality and continued pricing discipline.

John W. Dietrich: At FedEx Corporation, we expect to maintain or improve operating margin sequentially, and at FedEx Freight, we expect a year-over-year decline in adjusted operating margin to begin moderating sequentially in Q2. Before turning to Q&A, I want to provide an update on our spin-off of FedEx Freight, which is progressing well and on track for the June 2026 separation. In August, we submitted our confidential Form 10 to the FedEx Corporation, and in September, we submitted a request for a private letter ruling on the tax treatment of the transaction to the IRS. These are important milestones as we move toward the tax-efficient spin-off. FedEx Freight now has about 200 frontline LTL sales and sales support personnel on board and is well on its way toward our goal of 400 sales specialists prior to the spin-off.

And a $100 million headwind from the net impact of foreign exchange fluctuations.

Offsets to these tail wins include a $2 $1 billion base expense increase across the business, excluding Fedex freight.

Embedded in our assumptions are the previously mentioned $1 billion in headwind to adjusted operating profit from the global trade environment, and $1 billion and transformation related savings from drive and network to Dot O.

$300 million headwind from direct trade related expenses, including higher customs clearance costs.

$160 million U S postal service contract expiration headwind I mentioned earlier.

And while drive began as a cost reduction program.

It is now fundamental how we run our business.

A $100 million decline in adjusted operating profit at freight.

With regard to Q2, we anticipate a sequential improvement in adjusted EPS.

And a $100 million headwind from the net impact of foreign exchange fluctuations.

At FSC, we expect to maintain or improve operating margins sequentially.

And in Fedex freight, we expect the year over year decline in adjusted operating margins to begin moderating sequentially in Q2.

Before turning to Q&A I want to provide an update on our spinoff of Fedex freight, which is progressing well and on track for the June 2026 separation.

And while drive began as a cost reduction program.

John W. Dietrich: I'm confident that both the expanded dedicated sales force and our ramping technology investments will continue to improve the customer experience. Once separated, FedEx Freight will be a separately traded public company listed on the New York Stock Exchange under the ticker symbol FDXF. We plan to host our FedEx Freight Investor Day in New York City in spring of 2026 prior to the separation. Overall, I remain confident that the FedEx Freight separation and the continued execution of our strategic priorities will unlock significant stockholder value in the years ahead. With that, 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.

It is now fundamental how we run our business.

With regard to Q2, we anticipate a sequential improvement in adjusted EPS.

In August we submitted our confidential form 10 to the SEC and in September we submitted a request for a private letter ruling on the tax treatment of the transaction to the IRS.

At FSC, we expect to maintain or improve operating margin sequentially.

And at Fedex freight, we expect the year over year decline in adjusted operating margin to begin moderating sequentially in Q2.

These are important milestones as we move toward the tax efficient spin off.

Right now has about 200 frontline <unk> sales and sales support personnel on board and is well on its way toward our goal of 400 sales specialist prior to the spin off.

Before turning to Q&A I want to provide an update on our spinoff of Fedex freight, which is progressing well and on track for the June 2026 separation.

In August we submitted our confidential form 10 to the SEC and in September we submitted a request for a private letter ruling on the tax treatment of the transaction to the IRS.

I'm confident that both the expanded dedicated sales force and our ramping technology investments will continue to improve the customer experience.

Once separated Fedex freight will be a separately traded public company listed on the New York stock exchange under the ticker symbol F D access.

These are important milestones as we move towards the tax efficient spin off.

Right now has about 200 frontline <unk> sales and sales support personnel on board and is well on its way toward our goal of 400 sales specialists prior to the spin off.

And we plan to host our Fedex freight Investor Day in New York City in spring of 2026 prior to the separation.

John W. Dietrich: Please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question comes from Jordan Robert Alliger with Goldman Sachs. Please go ahead.

Overall, I remain confident that the Fedex freight separation and the continued execution of our strategic priorities will unlock significant stockholder value in the years ahead.

I'm confident that both the expanded dedicated sales force and our ramping technology investments will continue to improve the customer experience.

Rajesh Subramaniam: Hi, afternoon. Thanks for the call on the midpoint. I'm curious on the low and the high end of your EPS range. Is it simply a function of where it comes out in that revenue range, or is there other things that could help impact where it winds up sitting? Thanks.

With that let's open it up for questions.

Once separated Fedex freight will be a separately traded public company listed on the New York stock exchange under the ticker symbol F D access.

We will now begin the question and answer session to.

To ask a question you May Press Star then one on your Touchtone phone.

And we plan to host our Fedex freight Investor Day in New York City in spring of 2026 prior to the separation.

If you were using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

John W. Dietrich: Yeah, thank you, Jordan. It's John. It's really important to note that we're basing this outlook on the information available today. We did center on the midpoint of our range, and I think it's fair to say that where we ultimately land will be determined by a variety of variables. I touched on them in some of my prepared remarks, including the evolution of global trade and its impact on demand, the health of the industrial economy, U.S. domestic demand, and so forth. It's not any one factor. It's a variety of factors, and we're going to be monitoring those closely. It's going to be a very dynamic environment that we intend to capitalize on. The next question is from Ken Hoexter with Bank of America. Please go ahead.

Overall, I remain confident that the Fedex freight separation and the continued execution of our strategic priorities will unlock significant stockholder value in the years ahead.

Please limit yourself to one question.

At this time, we will pause momentarily to assemble our roster.

And with that let's open it up for questions.

The first question comes from Jordan <unk> with Goldman Sachs. Please go ahead.

We will now begin the question and answer session.

Hi afternoon.

To ask a question you May Press Star then one on your Touchtone phone.

Thanks for the color on the midpoint I'm curious on the low and the high end of your EPS range.

If you were using a speakerphone please pick up your handset before pressing the keys.

Is it simply a function of where it comes out in that revenue range or is there other things that could help impact.

To withdraw your question. Please press Star then two.

Please limit yourself to one question.

Impact where it winds up sitting thanks.

At this time, we will pause momentarily to assemble our roster.

Yeah. Thank you Jordan its John.

I'll start by saying, it's really important to note that we're basing this outlook on the information available today.

The first question comes from Jordan <unk> with Goldman Sachs. Please go ahead.

We did send around the midpoint of our range and I think it's fair to say that where we ultimately land will be determined by a variety of variables and I touched on them in some of my prepared remarks, including the evolution of global trade and its impact.

Rajesh Subramaniam: Hey, good afternoon, and thanks for the details on the cost there. I just want to dig into that a little bit to understand, because if I look at the incremental margin growth of 4% to 6%, yet the incremental operating gains are not keeping pace. Is that because of the headwinds that you ran through? Maybe, John, maybe you can refine that a little bit on the billion-dollar cost, the $300 million headwind on the trade expenses. I just want to maybe parse that out a little bit further.

Hi afternoon.

Thanks for the color on the midpoint I'm curious on the low and the high end of your EPS range.

Is it simply a function of where it comes out in that revenue range or is there other things that could help impact.

On demand the health of the industrial economy.

Impact where it lines up city. Thanks.

U S domestic demand and so forth. So it's not any one factor it's a variety of factors and we're gonna be monitoring those closely it's going to be a very dynamic environment that.

Yes, Thank you Jordan its John.

I'll start by saying, it's really important to note that we're basing this outlook on the information available today.

John W. Dietrich: Sure. Yeah, there will be pressure. I mean, what we're talking about here is $1 billion of headwind as a result of some of the environmental impacts. Our full-year assumption does include the removal of the de minimis exemption for the rest of the world that went into effect at the end of August. I think it's fair to say that that $1 billion will be something that will be focused on, but something that will be a challenge for us as we go forward.

We intend to capitalize on.

Yeah.

The next question is from Ken <unk> with Bank of America. Please go ahead.

Hey, good afternoon.

Thanks for the details on the costs there I just wanted to dig into that a little bit to understand because if I look at the incremental margin growth of four to five 4% to 6%.

On demand the health of the industrial economy.

Yet the incremental operating gains are not keeping pace. So is that because of those headwinds that you ran through maybe John maybe you can refine that a little bit on the the $1 billion cost of 300 million dollar headwind on the trade expenses I just wanted to maybe parse that out a little bit further.

U S domestic demand and so forth. So it's not any one factor it's a variety of factors and we're going to be monitoring those closely it's going to be a very dynamic environment that.

Rajesh Subramaniam: If I can add to that, Ken, I think that is a big headwind for fiscal year 2026. We're doing everything in our power to make sure that we can improve our customer experience and mitigate the costs as we move forward. The underlying business is very strong as we move into 2027 and beyond.

We intend to capitalize on.

Yeah.

The next question is from Ken <unk> with Bank of America. Please go ahead.

Sure.

Yeah.

There will be pressure I mean, what we're talking about here is a $1 billion of headwind as a result.

Hey, good afternoon.

Thanks for the details on the costs there I just wanted to dig into that a little bit to understand because if I look at the incremental margin growth of four to five 4% to 6%.

Some of the environmental impacts.

John W. Dietrich: The next question is from Bascome Majors with Susquehanna. Please go ahead.

No.

Our full year assumption.

Yet the incremental operating gains are not keeping pace. So is that because of the headwinds that you ran through maybe John maybe you can refine that a little bit on the $1 billion cost of $300 million headwind on the trade expenses I just wanted to maybe parse that out a little bit further.

It does include the removal of the de minimus exemption for the rest of the world that went to effect in the end of August.

Rajesh Subramaniam: Thanks for taking our questions here. You know, Raj, you leaned a little further into the data side of the business post the hire of Vishal. I know he just started a month ago. I don't know if he's on the call or could talk a little bit high level about strategy, particularly where you're talking about finding new revenue models to monetize that part of the FedEx story. If not him, just a little more thought on where you're heading in that and how big a business that might be for FedEx going forward. Thank you. Thank you, Bascome, for raising that question. One of the things that we are clear about is the value of the data that we have. We move 17 million packages a day, two petabytes of data. As I said earlier, it's not just the volume of the data.

But I think it's fair to say.

That that $1 billion will be something that will be.

Focused on but something that'll be a challenge for us as we go forward.

Sure.

Yeah.

If I can add to that Ken I think.

There will be pressure I mean, what we're talking about here is a $1 billion of headwind as a result.

That is you know a big headwind for fiscal year 'twenty six we're doing everything in our power to make sure that begin to improve our customer experience and mitigate the costs as we move forward. The underlying business is very strong as we move into 'twenty, one and beyond.

Some of the environmental impacts.

No.

Our full year assumption.

It does include the removal of the de minimus exemption for the rest of the world that went to effect in the end of August.

The next question is from Bascom majors with Susquehanna. Please go ahead.

But I think it's fair to say that that $1 billion will be something that will be.

Yeah. Thanks for taking our questions here you Raj you leaned a little further into the data side of the business post the higher vishal.

Focused on but something that'll be a challenge for us as we go forward.

If I can add to that Ken I think.

As you know a big headwind for fiscal year 'twenty six we're doing everything in our power to make sure that begin to improve our customer experience and mitigate the costs as we move forward. The underlying business is very strong as we move into 'twenty, one and beyond.

Rajesh Subramaniam: It's the value of the data, especially in the dynamic world that we live today. The important thing is that we started this work back in 2020, and we started organizing and engineering this data on a platform basis for some time now. That's what gives us the edge, especially as AI has now evolved and is moving quickly. The fuel for AI is data, and having engineered data and the high-value data of what we have is now super critical as we move forward. It's already bearing fruit. It's bearing fruit in our operations as deep learning models are enhancing our predictability. We couldn't have done Network 2.0 without the data platform that we have and the technology we have. It's already bearing fruit from a differentiation perspective.

I know, we just started a month ago I don't know if he's on the call or could talk a little bit high level about strategy, particularly where you're talking about finding new revenue models to monetize that part of the Fedex story or if not him just a little more thought on where you're heading in that and how big a business that might be for Fedex going forward. Thank you.

The next question is from Bascom majors with Susquehanna. Please go ahead.

Yeah, Thanks for taking our questions here.

Well. Thank you basket information that question one of the things that we are.

Raj you leaned a little further into the data side of the business post the higher ratio.

I'm clear about is the value of the data that we have we moved 17 million packages a day two petabytes of data as I said earlier, it's not just the volume of the data.

I know, we just started a month ago I don't know if he's on the call or could talk a little bit high level about strategy, particularly where you're talking about finding new revenue models to monetize that part of the Fedex story or if not him just a little more thought on where you are heading in that and how big a business that might be for Fedex going forward. Thank you.

The value of the data, especially in the dynamic world that we live today. The important thing is that we started this work back in 2020, and we started organizing in engineering. This data a platform basis for some time now and that's what gives us the edge, especially as AI has no <unk>.

Rajesh Subramaniam: We have premium monitoring and intervention tools for our customers, and the healthcare business that Brie's team is winning, 40% of them are on the Surround platform, which is essentially based on the data platform and AI tools that we have. We also launched the commerce platform fdx, and that essentially is now becoming a workflow tool for our customers for orchestrating their supply chains. Especially in this complex trade environment, those kind of added value as we improve our value proposition for moving things across borders and being predictive using GenAI to create value from HS classifications and so on. That area is quite nascent, and we have a long road as well as a runway ahead of us. Our mission and vision has evolved to make supply chain smarter for everyone.

Well. Thank you basket information that question one of the things that we are.

<unk> is moving quickly.

I'm clear about is the value of the data that we have we moved 17 million packages a day two petabytes of data as I said earlier, it's not just the volume of the data.

<unk> for AI is data and have engineered data in the higher value data. What we have is now a super critical as we move forward is already bearing fruit is bearing fruit in our operations.

The value of the data, especially in the dynamic world that we live today. The important thing is that we started this work back in 2020, and we started organizing in engineering. This data on a platform basis for some time now and that's what gives us the edge, especially as AI has no <unk>.

Deep learning models of enhancing our predictability, we couldnt have done networked corrado.

The plot data platform that we have on the technology. We have is already bearing fruit from a differentiation perspective, we have a premium monitoring and intervention tools for our customers.

<unk>.

It's moving quickly.

And the health care business that the Breeze team is winning 40% of them are on the surround platform, which is essentially based on the data platform and AI tools that we have we will also launch the commerce platform Dx and that essentially is now becoming a workflow tool for our customers we're orchestrating their supply chains.

Fuel for AI is data and have engineered data in the higher value data. What we have is super critical as we move forward is already bearing fruit is bearing fruit in our operations.

Rajesh Subramaniam: It begins with our data platform and the insights that we have on supply chain and the role of AI and the tools that we have. I think as we look ahead, we'll talk more about this in February as it becomes an enabler for our operations, a differentiator from our customers' point of view, and new revenue models that we can create based on this. Thank you again for that question.

Deep learning models of enhancing our predictability, we couldnt have done network Toronto.

The cloud data platform that we have on the technology. We have is already bearing fruit from a differentiation perspective, we have a premium monitoring and intervention tools for our customers.

And especially in this complex trade.

Ironman those kind of.

The added value as we improve our value proposition for moving things across borders and being productivity we're seeing.

And the health care business that the Breeze team is winning 40% of them are on the surround platform, which is essentially based on the data platform and AI tools that we have we also launched the commerce platform Dx and that essentially is now becoming a workflow tool for our customers are orchestrating their supply chains.

Then AI to create value from them from Hs classification, and so on that area is quite nascent and we have a long road and that's what all of US a runway ahead of us.

John W. Dietrich: The next question is from Scott H. Group with Wolfe Research. Please go ahead.

Rajesh Subramaniam: Hey, thanks. Afternoon. Any color on the magnitude of sequential earnings growth that you'd expect? That was for Q2. Bigger picture, if I think about the last couple of years, we've heard we're reducing costs and growing earnings despite lower revenue. Whenever we get the revenue growth, the operating leverage is going to be really strong. Now we've got 5% revenue growth and a billion of cost reduction and buyback, but earnings are flat. I guess why aren't we seeing the better operating leverage? I get the global headwind, but you're still growing revenue 5% even with that billion-dollar global headwind.

So our mission and vision is.

All to make supply chain smarter for everyone and begins.

And especially in this complex.

With our data platform and the insights that we ever in supply chain and the role of AI and the tools that we have so I think as we look ahead, we will talk more about this in February as it becomes an enabler for our operations a differentiator for our.

Rate environment, those kind of.

The added value as we improve our value proposition for moving things across borders and being productivity you're seeing.

In AI to create value from them from Hs classification, and so on that area is quite nascent and we have a long road and that's what all of US a runway ahead of us.

From a customer's point of view and the new revenue models that we can create based on based on those but thank you again for that question.

So our mission and vision is.

The next question is from Scott Group with Wolfe Research. Please go ahead.

Ball to make supply chain smarter for everyone and begins.

With our data platform and the insights that we have on supply chain and the role of AI and the tools that we have so I think as we look ahead, we will talk more about this in February as it becomes an enabler for our operations a differentiator for our.

Hey, thanks.

So.

Any color on the magnitude of sequential earnings growth that you would expect and then just that was for Q2 and then just bigger picture if I think about the last couple of years.

John W. Dietrich: Scott, thanks for that. Let me start with Q2. We have focused our commentary on the full-year guidance and are not giving Q2 guidance. That said, as Brie mentioned, we're cautiously optimistic about peak season demand. We do expect, consistent with last year, sequential earnings improvement in Q2 versus Q1 383. We're not guiding to Q2 being up or down on a year-over-year basis. We expect continued benefits from our transformation-related savings and large trade-related operating income headwind that in Q1 of the $150 million. Pivoting to your second question on the flow-through, I'll repeat what I said before. We're facing a $1 billion headwind due to the trade environment. In Q1, we experienced $150 million of that to adjusted operating income, primarily driven by reduced demand out of China on the U.S. lane.

We've heard we're reducing costs and growing earnings <unk>.

Customers point of view and new revenue models that we can create based on based on those but thank you again for that question.

Fight lower revenue and then whenever we get the revenue growth. The operating leverage is going to be really strong and now we've got 5% revenue growth and a $1 billion of cost reduction and buyback, but earnings are flat I guess why aren't we seeing better operating leverage I get the <unk>.

The next question is from Scott Group with Wolfe Research. Please go ahead.

Hey, thanks.

So.

Any color on the magnitude of sequential earnings growth that you would expect and then just that was for Q2 and then just bigger picture if I think about the last couple of years.

Global headwind, but youre still youre growing revenue, 5%, even with that billion dollar global headwinds.

You've heard we are reducing costs and growing earnings despite lower revenue and then whenever we get the revenue growth. The operating leverage is going to be really strong and now we've got 5% revenue growth and a $1 billion of cost reduction and buyback, but earnings are flat I guess why.

So Scott Thanks for that let me, let me start with the Q2.

And we have focused our commentary on the full year guidance and are not giving Q2 guidance, but that said as brie mentioned.

We're cautiously optimistic about peak season demand.

And we do expect consistent with last year's sequential earnings improvement in Q2.

Are we seeing the better operating leverage I get the global headwind, but youre still youre growing revenue, 5%, even with that billion dollar global headwinds.

Versus Q1, 383, but we're not.

Guiding to Q2 being up or down on a year over year basis, We expect continued benefits from our transformation related savings.

John W. Dietrich: For the full year, and just to give a little bit more detail, we're assuming a material revenue headwind from the global trade environment. Operating income at the midpoint of the range will require us to execute, but there's going to be pressure. The flow-through is not as great given some of the pressures. The $1 billion is embedded in lost opportunity in our FedEx Corporation volume net of cost line, the direct trade-related expenses for things like customs clearance and staffing, and base expense increases. There's a fair amount of pressure there from which we intend to deliver on and will be focused on staying in the range. The next question is from Thomas Richard Wadewitz with UBS. Please go ahead.

So Scott Thanks for that let me, let me start with the Q2.

Large trade related Oi headwind than in Q1 of the $150 million, but.

And we have focused our commentary on the full year guidance and are not giving Q2 guidance, but that said as brie mentioned.

Just pivoting to your second question on kind of the flow through.

We're cautiously optimistic about peak season demand.

Yeah.

And we do expect consistent with last year's sequential earnings improvement in Q2.

I'll repeat what I said before we're facing a $1 billion headwind due to the trade environment in Q1, we experienced $150 million of that to adjusted op income, primarily driven by reduced demand out of China and the U S Lane.

Versus Q1, and 383, but we're not guiding to Q2 being up or down on a year over year basis.

We expect continued benefits from our transformation related savings and large trade related oi headwind than in Q1 of the $150 million, but.

And so for the full year and just to give a little bit more detail, where we're assuming a material revenue headwind from the global trade environment.

Just pivoting to your second question on kind of the flow through.

Operating income at the midpoint of the range.

Rajesh Subramaniam: Yeah, good afternoon. John, I guess it's maybe a little more on that same topic that Scott was just asking about. The global trade headwind, I still feel like I don't really understand what it is. If I look at your international export revenue, I think was up a little bit in Q1. I think on one of your slides, you were pointing to some nice reduction in hours in flight hours on Asia-U.S. in both purple tail and white tail. It's not clear to me what that $150 million in Q1 is. It doesn't seem to be revenue. It doesn't seem to be clear where the cost impact is. I really just wanted to see if you could help us understand that a little bit better and also why that gets meaningfully worse on a full-year basis to like $1 billion instead of versus the $150 million in Q1.

We will require us to.

I'll repeat what I said before we're facing a $1 billion headwind due to the trade environment in Q1, we experienced a $150 million of that to adjusted op income, primarily driven by reduced demand out of China and the U S Lane.

Execute.

But theres going to be pressure. So the flow through is not as great given some of the pressures the $1 billion.

Is embedded in lost opportunity in our FCC volume net of cost line.

The direct trade related expenses for things like customers clearance and staffing.

And so for the full year and just to give a little bit more detail.

And base expense increases so there is a fair amount of pressure there from.

We're assuming a material revenue headwind from the global trade environment.

From which we.

We intend to deliver on and we'll be focused on staying in the range.

Operating income at the midpoint of the range.

We will require us to.

The next question is from Tom <unk> with UBS. Please go ahead.

Execute.

But theres going to be pressure. So the flow through is not as great given some of the pressures the $1 billion.

Yes, good afternoon.

John I guess, it's maybe a little more on that same.

Is embedded in lost opportunity in our FCC volume net of cost line.

Same topic.

Thanks, Scott I was just asking about the.

The direct trade related expenses for things like customers clearance and staffing.

Global trade headwind still.

Still feel like I don't really understand what it is if I look at your <unk>.

And base expense increases so there is a fair amount of pressure there from.

Rajesh Subramaniam: Thank you.

International export revenue I think was up a little bit in <unk>.

Brie Carere: Hey, Tom, it's Brie. I'll take the top line question and then certainly let John kind of add in the color on the expense increase. What we saw in the first quarter is the vast majority of that $150 million was impact from reduction in top line revenue. Specifically, the majority of that is de minimis impacted in coming out of the China lane. We anticipate that will continue to flow through the year in addition to the $150 million per quarter as we are planning for incremental pressure because of the global de minimis change, which took place at the end of August. We've got $100 million of bottom line pressure throughout the year, and then we have $300 million of incremental expense. To be really clear, that $1 billion of headwind is predominantly an impact of top line revenue reduction because China to the U.S.

From which we.

We intend to deliver on and we'll be focused on staying in the range.

And then I think on one of your slides you were pointing to some some nice reduction in hours.

The next question is from Tom <unk> with UBS. Please go ahead.

In flight hours on Asia U S and both purple tail and white tail. So.

Hi, yes, good afternoon.

I guess, it's not clear to me what that $150 million in <unk> is it doesn't seem to be revenue. It doesn't seem to be clear. We are the cost impact is so really just wanted to see if you could just help us understand that a little bit better and also why that that gets meaningfully worse on a full year basis like one.

John I guess, it's maybe a little more on that same.

Same topic.

Scott I was just asking about the.

Global trade headwind still.

Still feel like I don't really understand what it is if I look at your <unk>.

International export revenue I think was up a little bit in <unk>.

Billion instead of versus the 150 <unk>. Thank you.

And then I think on one of your slides you were pointing to some some nice reduction in hours.

Hey, Tom It's Barry I'll take the top line question and then certainly let John kind of add in the color on the expense increase so what we saw in the first quarter is the vast majority of that $150 million was impact from reduction in top line revenue specifically the majority of that is de minimus impacted income.

In flight hours on Asia U S and both purple tail and white tail. So.

I guess, it's not clear to me what that $150 million in <unk> is it doesn't seem to be revenue. It doesn't seem to be clear. We are the cost impact is so really just wanted to see if you could.

Brie Carere: is a very profitable lane for us. John?

John W. Dietrich: Yeah, no, Brie, just to add what I mentioned before, I mean, you touched on it. The direct trade-related expenses are the $300 million for additional customs clearance and related capabilities and also running through the base expense increases that coupled with the top line that you mentioned. The next question is from Jonathan B. Chappell with Evercore ISI. Please go ahead.

Just help us understand that a little bit better and also why that that gets meaningfully worse on a full year basis like $1 billion instead of versus the 150 <unk>. Thank you.

Out of the China Lane, we anticipate that that will continue to flow through the year. In addition to the 150 per quarter as we are planning for incremental pressure because of the global de Minimis change took place at the end of August with about $100 million.

Hey, Tom It's Brian I'll take the top line question and then certainly let John kind of add in the color on the expense increase so what we saw in the first quarter is the vast majority of that $150 million was impact from reduction in top line revenue specifically the majority of that is de minimus impacted in coming.

Bottom line pressure throughout the year and then we have $300 million am I think incremental expense. So give you a really clear that that $1 billion of headwind is predominantly an impact of top line revenue reduction because China to the U S is a very profitable aim right John Yes no.

[Analyst]: Thank you. Good afternoon. I think we're all trying to get to the same place here, so I'll just layer on top of Tom and Scott. If this is all a top line impact from the global trade, $150 million in the first quarter, $850 million for the rest of the year, which is close to $300 million. It's almost doubling the impact in fiscal Q2, Q3, Q4, Q2. You have to get to the midpoint or even the low end of the full-year revenue guide. The rate of change will have to accelerate from the 3% in the first quarter, and your year-over-year comps and even two-year stack comps are more difficult. Can you just help us bridge where the revenue acceleration comes from if this anomalous headwind is intensifying, potentially doubling? Is it all from price and yield?

Out of the China Lane, we anticipate that that will continue to flow through the year. In addition to the 150 per quarter as we are planning or incremental pressure because of the global de Minimis change that took place at the end of August to be about $100 million.

Just to add what I mentioned before I mean, you touched on is the direct trade related expenses of $300 million for additional customer clears and related capabilities and also running through the base.

Bottom line pressure throughout the year and then we have $300 million am I think.

Spence increases that coupled with the top line that you mentioned.

Yeah.

Incremental expense. So you didn't really clear that that $1 billion of headwind is predominantly an impact of top line revenue reduction because China to the U S is a very profitable aim right John Yes no.

The next question is from Jonathan Chapell with Evercore ISI. Please go ahead.

Thank you good afternoon, I think we're all trying to get to the same place here. So I'll just layer on top of Tom and Ann Scott. If this is all the topline impact from the global trade to $1 50 in the first quarter $8 58.

[Analyst]: Are you expecting some significant volume pickup at some point absent the global tariff headwinds and de minimis?

Just to add what I mentioned before I mean, you touched on is that the direct trade related expenses of $300 million for additional custom clears and related capabilities and also running through the base expense.

<unk> hundred 50 for the rest of the year, which is close to 300 million. So it's almost doubling the impact in fiscal 223 and four Q yet.

Brie Carere: Hey, Jonathan, it's Brie. Great question. Yes, we were very pleased with the 3% revenue growth in the first quarter. To get to the midpoint of 5%, first of all, we do expect the majority of trends will continue. Right now, what we're seeing in September looks a lot like August. It's a continuation of trend with a couple of really important notes. Number one, in the first quarter, we had a $280 million top line headwind because of USPS. That goes away in Q2 and beyond. Two, we are still onboarding some of the wins from Q4 of last year and early Q1. As I mentioned, as an example, Amazon is still onboarding and had very little impact in Q1. There are several other examples of onboarding.

Expense increases that coupled with the top line that you mentioned.

You have to get to the midpoint or even the low end of the full year revenue guide.

Yeah.

The next question is from Jonathan Chapell with Evercore ISI. Please go ahead.

Rate of change will have to accelerate from the 3% in the first quarter and year over year comps and even two year stack comps are more difficult. So can you just help us bridge, where the revenue acceleration comes from if this anomalous headwinds is intensifying potentially doubling is that all from price and yield are you expecting some significant volume.

Thank you good afternoon, I think we're all trying to get to the same place here. So I'll just layer on top of Tom and Ann Scott. If this is all a topline impact from the global <unk>.

<unk> to $1 50 in the first quarter 850.

<unk> hundred 50 for the rest of the year, which is close to 300 million. So it's almost doubling the impact in fiscal <unk>.

Up at some point.

No.

Absent the global tariff headwinds and de Minimis.

You have to get to the midpoint or even the low end of the full year revenue guide.

Hey, Jonathan its Greg So great question. So yes, we were very pleased with the 3%.

Rate of change will have to accelerate from the 3% in the first quarter and year over year comps and even two year stack comps are more difficult. So can you just help US bridge what are the revenue acceleration comes from if this anomalous headwinds is intensifying potentially doubling is that all from price and yield are you expecting some significant volume.

Revenue growth in the first quarter to get to the midpoint of 5% first of all we do expect the majority of trend will continue so right now what we're seeing in September looks a lot like August two with that it's a continuation of trend with a couple of really important note number one in the first quarter, we had a $280 million topline.

Brie Carere: In the back half of the year, we do expect FedEx Freight to have modest yield improvement and better than the first quarter or the first quarter and the second quarters from an expectation perspective. We do think the midpoint is very realistic, and we're clear-eyed about how to get from Q1 to the rest of the year's range.

Up at some point.

Wind because of U S. Yes that goes away in Q2 and beyond <unk>. We are still onboarding. Some of the wins from Q1 or Q4 of last year and early Q1 as I mentioned as an example, Amazon is still Onboarding and it had very little impact in Q1, there are several other examples of.

Absent the global tariff headwinds and de Minimis.

John W. Dietrich: The next question is from Brandon Robert Oglenski with Barclays. Please go ahead.

Hey, Jonathan its Greg So great question. So yes, we were very pleased with the 3%.

Rajesh Subramaniam: Hi, good evening, and thanks for taking my question. Brie, I appreciate all the details. I was wondering if maybe you could walk through the outlook for domestic volumes on the package side again. It's no secret that your largest competitor is shrinking here. Can you talk about maybe the competitive landscape, what's presenting for market share opportunities and in pricing? Thank you.

Revenue growth in the first quarter to get to the midpoint of 5% first of all we do expect the majority of trend will continue so right now what we're seeing in September looks a lot like August to where its at its continuation of trend with a couple of really important note number one in the first quarter, we had a $280 million top line headwind.

Onboarding and then in the back half of the year, we do expect Fedex rates you have modest.

And then and better than the first quarter first quarter and the second quarters from an expectation perspective. So we do think the midpoint is I'm very realistic and that we're clear eyed about how to get from Q1, the rest of the year's range.

Brie Carere: Great question. From a domestic perspective, we're not, and I'm speaking specifically to parcel, we're not expecting a massive trend change. We are expecting, as I mentioned, the onboarding. I think you'll see the mix look very similar from a different package profile. A couple of things, the team has done a really good job from an execution perspective. We've had the best momentum in SMB in the last quarter that I've seen for a while. That's helping our yield growth. The other thing to note is, of course, fuel was very helpful in the first quarter, and that will continue through the year. In addition to that, we executed some price changes that came in in the middle of the quarter, and those will be helpful Q2 and beyond. Net takeaway, I don't see a massive trend change. This is self-help, if you will.

And because of U S. Yes that goes away in Q2 and beyond <unk>. We are still onboarding. Some of the wins from Q1 or Q4 of last year and early Q1 as I mentioned as an example, Amazon is still Onboarding and it had very little impact in Q1, there are several other examples of.

The next question is from Brandon <unk> with Barclays. Please go ahead.

Hi, good evening and thanks for taking my question.

I appreciate all those details I was wondering if maybe you could walk through the outlook for domestic volumes on the package side again.

On boarding and then in the back half of the year, we do expect Fedex rapes you'd have modest yield improvement and better than the first quarter, our first quarter and the second quarters from an expectation perspective. So we do think the midpoint is very realistic and that we're clear eyed about how to get from Q1 to the rest of the year's range.

It's no secret that your largest competitor is shrinking here. So can you talk about maybe the competitive landscape was presenting for market share opportunities and pricing. Thank you.

Yeah, Great question, so from a domestic perspective, we're not and I'm speaking specifically to parcel we're not expecting a massive trends chain I am we are expecting as I mentioned, the Onboarding I think youll see the next look very similar from a different package profile a couple of things the team done.

The next question is from Brandon <unk> with Barclays. Please go ahead.

Brie Carere: This is market share, strategic, profitable market share acquisition, and we expect it to continue. To your point on price, we're really focused on winning with value proposition. We're winning in healthcare. We're winning in small business. We're winning because of our seven-day, I think you all heard the Best Buy example. Pricing is improving in the market, and we think very rational, competitive, but rational.

Hi, good evening and thanks for taking my question.

I appreciate all those details I was wondering if maybe you could walk through the outlook for domestic volumes on the package side again.

Really good job from an execution perspective, we've had the best momentum in F&B and the last quarter that I've seen for a while so that's helping our R&D old Crow from a yield and the other thing to note is of course fuel with very helpful. In the first quarter and that will continue through the year. In addition to that we executed some price changes that.

It's no secret that your largest competitor is shrinking here. So can you talk about maybe the competitive landscape was presenting for market share opportunities and pricing. Thank you.

Yeah, Great question, so from a domestic perspective, we're not and I'm speaking specifically to parcel, we're not expecting a massive trends chain Ah.

John W. Dietrich: The next question is from Chris Weatherby with Wells Fargo. Please go ahead.

Came in in the middle of the quarter and are those will be helpful Q2, and beyond so not takeaway I don't see a massive trend change. This is a self help if you will this is market share a strategic profitable market share acquisition, and we expect it to continue and to your point on price and we're really focused on winning.

[Analyst]: Yeah, thanks. Good afternoon. I guess maybe just wanted to ask about the range. 4% to 6% on the top line and 17% to 19% on the bottom line. Midpoint is 5% of revenue for the midpoint of the EPS. Should we assume that 4% of revenue growth lines up with 17%, and 6% is at the 19% side? Maybe just a quick clarification point. What exactly is the $300 million of direct-related expenses on the trade side? Just want to get a sense of what that is.

We are expecting as I mentioned, the Onboarding I think youll see the next look very similar from a different package profile a couple of things the team's done a really good job from an execution perspective, we've had the best momentum in F&B and the last quarter that I've seen for a while so that's helping our yield CRO.

With value proposition, we're winning in health care, we're winning in small business, we're winning because of our seven day I think you all heard the best by example pricing is improving in the market and we think very rational competitive but rational.

That yield the other thing to note is of course fuel was very helpful. In the first quarter and that will continue through the year. In addition to that we executed some price changes that came in in the middle of the quarter and those will be helpful Q2, and beyond so net takeaway I don't see a massive trend change. This is a self help.

Rajesh Subramaniam: Yeah, hey, Chris, it's John. I would not make that direct connection between the factor you described on the 4% leading to on the low end. As I said before, this is a dynamic environment. There's going to be a lot of puts and takes as we go forward here, and we're going to be aggressively monitoring and managing it. That was just, we just gave one scenario, as we mentioned when we talked about how we get to the midpoint. There could be a number of others as well. With regard to your second question, I'm just trying to recall if you could go to the $300 million. I'm sorry. That was customs clearance and related staffing and related administrative expenses as a result of adapting to the current trade environment.

The next question is from Chris Wetherbee with Wells Fargo. Please go ahead.

Yeah, Hey, Thanks, Good afternoon, I guess, maybe just wanted to ask about the range of 4% to 6% on the top line and 17 2019 on the bottom line midpoint is 5% of revenue for the midpoint of the EPS should we assume that 4% revenue growth lines up with 17, 26% as of the 19 side and then maybe just a quick clarification.

If you will this is market share at strategic profitable market share acquisition, and we expect it to continue to your point on price and we're really focused on winning with value proposition. We're winning in health care, we're winning in small business, we're winning because of our seven day I think you all heard that that's fine example, pricing is improving.

Point.

In the market and we think very rational competitive but rational.

What exactly is the $300 million of direct related expenses on the trade side, just wanted to get a sense of what that is.

The next question is from Chris Wetherbee with Wells Fargo. Please go ahead.

Yeah, Hey, Chris It's John I would not make that direct connection between the fact that you described on the 4% leading to on the low end as I said before this is a dynamic environment theres going to be a lot of puts and takes as we go forward here and we're gonna be aggressively monitoring and managing it.

Yeah, Hey, thanks. Thanks, Good afternoon, I guess, maybe just wanted to ask about the range of 4% to 6% on the top line and 17 2019 on the Bottomline midpoint is 5% of revenue for the midpoint of the EPS should we assume that 4% revenue growth lines up with 17, 26% as of the 19 side and then maybe just a quick clarification.

John W. Dietrich: The next question is from Risha Harnain with Deutsche Bank. Please go ahead.

[Analyst]: Hey, thanks. Regarding the top end of your guidance, you said it's predicated on a continuation of strength in domestic. I guess this question's for Brie. You saw some of the best conditions you said since like COVID period. Your pricing was certainly the best, we believe, since 2022. Volume growth, third consecutive quarter of mid-single-digit plus growth in domestic volumes. You said SMB best momentum you've seen in a while. Maybe you can help us understand what's really driving the share gain. What do we need to see to make it sustainable? Regarding the onboarded, the business you're onboarding, what does it look like? What's the profitability profile, et cetera? Thank you.

That was just we just gave one scenario as we mentioned when we talked about how we get to the midpoint there could be a number of others as well.

<unk> point, what exactly is the $300 million of direct related expenses on the trade side, just wanted to get a sense of what that is.

You know with.

With regard to your.

Your second question I'm, just trying to recall if you could.

So the $300 million I'm, sorry that was customs clearance and related staffing and related administrative expenses as a result of adapting to the current trade environment.

The next question is from Richard Jorge <unk> with Deutsche Bank. Please go ahead.

That was just we just gave one scenario as we mentioned when we talked about how we get to the midpoint there could be a number of others as well.

Paul.

Oh look I don't know harp on the guidance.

Can you kind of predicated on a continuation of strength on the last call I asked this question separately.

Brie Carere: Thanks for the question, Risha. Honestly, from an execution perspective, we're really focused on strategic segments. SMB, we are selling direct. Our primary competitor sells through more platforms than third parties, and we've really seen some just outstanding execution momentum. We have a loyalty program that is highly effective, and we've been very focused on making sure customers are aware and engaged in the loyalty program, and that is working. From a healthcare, that's why you're seeing the premium volume momentum that we have seen over the last two quarters, essentially. We're pleased with that. Healthcare is very sticky revenue. It is high service expectations, very, very custom SOP, and it is profitable, but it's also very sticky. Of course, from an e-commerce perspective, you have seen that HD Ground Economy bundle working. We are growing there. We are faster than our primary competitor.

With regard to.

Your second question I'm, just trying to recall if you could.

From the best conditions your question Frank.

The $300 million Im sorry that was a customs clearance and related staffing and related administrative expenses as a result of adapting to the current trade environment.

Yes.

Hum.

You guys.

Guys congrats on the quarter of mixing I'll take your question.

Volumes.

But he said F&B background like what you've seen in a while global can help us understand what's really driving the channel what.

The next question is from ratio Jorge <unk> with Deutsche Bank. Please go ahead.

What do we need to coordinate the testing.

And then regarding Onboarding.

Hello.

The business, you're Onboarding, what does it look like.

Regarding the harp on the guidance predicated on a conglomeration of strength on the last call. I asked. This question is hopefully you saw from the best conditions Your question Frank.

What's the profitability profile okay.

You pay for a second.

Thanks for the question Richard.

In the past.

Honestly from an execution perspective, we're really focused on strategic segment SMB, we are selling direct them our primary competitor sell through more platforms and third parties and we've really seen some just outstanding execution and momentum we have a loyalty program that is a highly effective and we've been very focused on making.

Thank you Bonnie.

Second quarter of next thing I'll take your question.

I think volumes.

But he said you know F&B background like what we've seen in a while global can help us understand what's really driving that chantal.

Brie Carere: We have rural coverage that they don't have, and we now cover about 65% of GDP on Sunday. Really pleased with the team's focus, equally pleased with their revenue quality. We've been pulling pricing levers as appropriate, and that definitely benefited us in the first quarter, and we anticipate that we'll get a high capture throughout the year. We're also planning very rigorously for peak. Peak surcharges are in place. They are working. The team's got a very, very focused plan for peak that I'm excited about.

And you can see it in multiple stable and then regarding onboarding.

The business, you're Onboarding, what does that look like.

Customers are aware and engaged in the loyalty program and that is working from a health care, that's why you're seeing the premium volume.

What's the profitability profile.

Okay.

The momentum that we have seen you know over the last two quarters essentially so we're pleased with that health care is very sticky revenue is high service expectations.

Thanks for the question.

Honestly from an execution perspective, we're really focused on strategic segment SMB, we are selling direct.

They are a competitor sell through them.

Very very accustomed and S. L. P M food, it's profitable, but it's also very sticky and then of course from an ecommerce perspective, you have seen them that HD band economy unknown working we are growing there, we our aster and our primary competitor we have rural coverage that they don't have and of course, we now cover about 65% of GDP on Sunday.

More platforms and third parties and we've really seen some just outstanding execution and momentum we have a loyalty program that is a highly effective and we've been very focused on making sure customers are aware and engaged in the loyalty program and that is working from a health care, that's why you're seeing the premium volume momentum.

John W. Dietrich: The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.

Rajesh Subramaniam: Great, thanks, guys. Two-parter, if I may. On the de minimis, what has been the customer reaction to the expiry of the rule, and do you think that is a new normal going forward? Also, does it feel like there has been much pull forward in international volumes that may have benefited you in fiscal Q1? What does that normal run rate look like for the next several quarters as well?

Momentum that we are seeing you know over the last two quarters essentially so we're pleased with that health care is very sticky revenue.

So really pleased with the team's focus equally pleased with the revenue quality and we've been pulling pricing leavers as appropriate and that definitely benefited us in the first quarter and we anticipate that we'll get a high capture throughout the year fourth Rama, earning very rigorously for peak and peak surcharges are in place there.

Hi surface expectation.

Very very customer S. L P and fluid it's profitable, but it's also very sticky and then of course from an ecommerce perspective, you have seen that HD band economy unknown working we are growing there, we our aster and our primary competitor we have rural coverage that they don't have and of course, we now cover about 65% of GDP on Sunday.

Brie Carere: Thanks for the question. I'm certainly not going to speculate on the future trade environment, but I will tell you, obviously, from a customer perspective, it has been a very stressful period. I'm really proud of our clearance operations team and our commercial team because they are lockstep with customers. It has been particularly challenging for small exporters because they do not have the expertise and the staffing, and that's where our teams have come in and really partnered with them to help, as Raj talked about, automate some of their clearance inputs from a digital perspective. We're very, very focused from a partnership perspective, but it has been really tough on small customers and exporters. As far as the pull forward, I will remain optimistic. The American consumer from our numbers has been resilient.

Working the teams that are very very focused plan for peak and I'm excited about.

The next question.

<unk> is from Ravi Shanker with Morgan Stanley. Please go ahead.

Oh, great. Thanks, guys.

If I may.

On the de Minimis can I ask what has been the customer reaction to the expiry of the of the rule and do you think that is the new normal going forward and also how does it feel like there's been much pull forward any international volumes that may have benefited you in fiscal <unk>.

Our charges are in place. They are working the teams that are very very focused plan for peak time I'm excited about.

Where does that kind of normal run rate looks like for the next several quarters as well.

The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.

Thanks for the question you know I'm, certainly not going to speculate on the future trade environment, but I will tell you obviously from a customer perspective. It has been a very stressful period I'm really proud of our clearance operations team and our commercial team because they are lock step with customers and had been particularly.

Great. Thanks, guys.

If I may.

Brie Carere: We do not see any indication in either air freight or domestic parcel business that this is a pull forward. I will absolutely acknowledge July was quite strong for us, especially the prime week. We saw a lot of U.S. retailers put sales in market, and they were affected. We saw strong volumes in July, but I don't necessarily see that as a pull forward. Like I said, right now, from our forecasting for both peak and the back half, we're confident in the range we put out from the top line perspective.

On the de Minimis can I ask what has been the customer reaction to the expiry of the of the rule and do you think that is the new normal going forward and also how does it feel like there's been much pull forward in international volumes that may have benefited you in fiscal <unk>.

<unk> for small X borders because they do not have the expertise and the staffing and that's where our teams come in and really partner with them to her.

Where does that kind of normal run rate looks like for the next several quarters as well.

As Raj talked about automate some of their clearance.

From a digital perspective, we're very very focused from a partnership perspective, but it has and it has been really tough on small customers and export as far as the pull forward I will remain optimistic that the American consumer from our numbers has been resilient, we do not see any indication in either airfreight.

John W. Dietrich: The next question is from Brian Patrick Ossenbeck with J.P. Morgan. Please go ahead.

[Analyst]: Hey, afternoon. Thanks for taking questions. Maybe, Brie, just to start off by elaborating a bit more on the peak. It sounds like some of its visibility to maybe some of these new contracts that are onboarding, some of it's more of a macro. Maybe you can separate just how much of the peak strength is FedEx-related versus what you see in the underlying market. I think that'd be helpful. Also, maybe a little bit of context on freight. We didn't get too much color on that, but certainly a tough market and tough quarter. It sounds like you expect things to stabilize and improve pretty significantly from here. I wanted to get some additional thoughts on what's embedded in that outlook. Thanks.

Challenging for small exporters, because they do not have the expertise and the staffing and that's where our teams come in and really partner with them to help us Raj talked about.

Our domestic parcel business.

Forward I will absolutely acknowledge July was quite strong for us, especially prime week, we saw a lot of U S retailers, but sales and marketing. They were affected we saw strong volumes in July, but I don't necessarily see that as a pull forward and like I said right now from our forecasting of off peak in the back half we're confident in arrangement put at the top.

Automate some of their clearance.

From a digital perspective, we're very very focused from a partnership perspective, but it has and it has been really tough on small customers and export as far as the pull forward.

I will remain optimistic that the American consumer from our numbers has been resilient, we do not see any indication in either airfreight, where our domestic parcel business.

Perspective.

The next question is from Brian <unk> with Jpmorgan. Please go ahead.

Hi afternoon, Thanks for taking questions. So maybe just to start off by elaborating a bit more on the peak it it sounds like some of its visibility to maybe some of these new contracts there on boarding some of it's more of a macro. So maybe you can separate just how much of a peak strength is that X related versus.

Brie Carere: Okay. I think I got it all, Brian, but stop me if I don't hit all of it. From a peak perspective, yes, when we look at kind of the number of operating days in the season of peak, we are expecting kind of from an ADV perspective, sort of a low to moderate growth from an ADV, but total volume will be up because we have that extra day. I do think a relatively significant portion of this volume growth is our acquisition that we took in the back half of last year, and you're going to have that lapping benefit for us from a peak perspective. I anticipate that our numbers will be slightly elevated versus market. I also, from a performance perspective, we do see this driven by large B2C retailers and brands. That's definitely heavy from a peak perspective.

Forward I will absolutely acknowledged July was quite strong for us, especially in time week, we saw a lot of U S retailer, but sales and marketing. They were affected we saw strong volumes in July, but I don't necessarily see that as a pull forward and like I said right now from our forecasting of off peak in the back half we're confident in our arrangement, but at the top.

What you see in the underlying market I think that'd be helpful and also maybe a little bit of.

Line perspective.

Context on on freight and didn't get too much color on that but certainly a tough market and tough quarter, but it sounds like you expect things to stabilize improve pretty significantly from here. So wanted to get some additional thoughts on what's embedded in that outlook.

The next question is from Brian <unk> with Jpmorgan. Please go ahead.

Hey, good afternoon. Thanks for taking questions. So maybe just to start off by elaborating a bit more on the peak it sounds like some of its visibility to maybe some of these new contracts there on boarding some of it's more of a macro. So maybe you can separate just how much of the peak strengths is that X related versus.

<unk>.

Okay, I think I got it all Brian but stop me if I don't hit all of it.

From a peak perspective, yes, I when we look at kind of a number of operating days in the season. A peak we are expecting kind of from an EV perspective sort of that low to moderate growth and then ADP, but total volume will be up because we have that extra day.

Brie Carere: Rest assured, we have the revenue quality strategy and the peak surcharges in place. The team has done a really good job. We're locked step with Scott Ray and the surface team to manage capacity and service. We feel very good from a peak perspective. To your point, I don't necessarily think that it's an indicator of overall market performance. From a FedEx Freight perspective, you've all tracked the pressures on the industrial economy. We are the FedEx, well, FedEx is the market share leader in the LTL industry, and of course, we are feeling that pressure. The team's number one priority at FedEx Freight, and we take this responsibility very seriously, is revenue quality. We will have the benefit of the lapping in the back half. We do anticipate that yields will increase in the back half, but we remain very disciplined and very focused.

What you see in the underlying market I think that'd be helpful and also maybe a little bit of calm.

Context on on freight, but didn't get too much color on that but it didn't.

A tough market and tough quarter, but it sounds like you expect things to stabilize improve pretty significantly from here. So wanted to get some additional thoughts on what's embedded in that outlook.

I do think a relatively significant portion of this volume growth is our acquisition that we took on the back half of last year, and so youre going to have that lapping benefit for us from a peak perspective, I anticipate that our numbers will be slightly elevated versus market.

Okay, I think I got it all Brian but stop me if I don't hit all of it.

From a peak perspective, yes, I when we look at kind of a number of operating days in the season. A peak we are expecting kind of from an EV perspective sort of that low to moderate growth from an adv, but total volume will be up because we have that extra day.

I also from a performance perspective, we do see that driven by large E retailers and brand that's definitely having from a peak perspective rest assured we have the revenue quality strategy in the peak surcharges in place. The team has done a really good job. We're in lockstep with Scott ran the surface team to manage capacity in <unk>.

So we feel very good from a peak perspective, but to your point I don't necessarily think that that is.

John W. Dietrich: The next question is from Bruce Chan with Stifel. Please go ahead.

Rajesh Subramaniam: Good afternoon, and thanks for the question. Maybe just one on the broader air freight market. We've been hearing about some potential supply constraints as the global air freight fleet sort of ages here. I guess first, are you seeing signs of that? If so, how do you think about the flow-through with Tricolor? I imagine you've got some good flexibility to shift volumes between the purple tails and third-party capacity.

As an indicator of overall market performance.

Fedex freight perspective, all tracked and the pressures on the industrial economy, where the fed at Fedex is the market share leader in the L. T outlet industry and of course, we are feeling that I'm sure. The team's number one priority at Fedex freight and take this responsibility very seriously as revenue quality and we will have the benefit of.

I also from a performance perspective, we do see that driven by large E retailers and brand that's definitely having from a peak perspective rest assured we have the revenue quality strategy in the peak surcharges in place a team has done really good job. We're lockstep with Scott ran the surface team to manage capacity in <unk>.

Laughing in the back half and we do anticipate that that yields will increase in the back half, but we remain very disciplined and very focused.

So we feel very good from a peak perspective, but to your point I don't necessarily think that that is an indicator of overall market performance from our Fedex freight perspective.

Brie Carere: Yeah, from an air freight perspective, again, we're a relatively small market share participant from a global air freight perspective. We are being selective and really focused on premium freight. I am particularly proud of the airline team this quarter. They shifted capacity, and equally proud of the commercial team. We knew because of the trade environment that our China to U.S. lane, and we are the market share leader there, would be pressured. We pivoted. We are growing between Asia and Europe, which is a large lane. We're being selective there. Equally important on the purple tail that we balance capacity, and the team did a really good job from a U.S. perspective. I'll give the healthcare team a shout-out. Almost 50% of the weight growth from a U.S. export perspective came from healthcare air freight. Our healthcare strategy is working there too.

The next question is from Bruce Chan with Stifel. Please go ahead.

The pressures on the industrial economy, where the fed at Fedex is the market share leader in the L. T outlet industry and so of course, we are feeling that I'm sure. The team's number one priority at Fedex freight and take this responsibility very seriously as revenue quality and we will have the benefit of lapping in the back half. So we do anticipate.

Yeah, good afternoon, and thanks for the question.

Maybe just one on the broader airfreight market, we've been hearing about some potential supply constraints as the global fleet.

Ages here I guess first are you seeing signs of that and then.

So how do you think about the flow through with tricolor I imagine you have got some good flexibility to shift volumes between the purple tails and third party capacity.

That's that yields will increase in the back half, but we remain very disciplined and very focused.

The next question is from Bruce Chan with Stifel. Please go ahead.

Yeah from an airfreight perspective, again, where a relatively small market share participant from our global airframe perspective, we are being selective and really focused on premium freight I am, particularly proud of the airline team this quarter they shifted capacity.

Good afternoon, and thanks for the question maybe.

Maybe just one on the broader airfreight market, we've been hearing about some potential supply constraints as the global fleet.

Rajesh Subramaniam: If I can jump in on this Tricolor, if you remember the conversations that we have had before, the idea was to decongest the hubs and to have a truck-fly-truck network so that it links all our networks together optimally and densification of our network. All those are being tracked at KPI level very carefully, and I'm happy to report that the team has done a tremendous job and it is working. That is what enables us to provide the value proposition to our customers to strategically and profitably grow in these segments. We are in early innings on Tricolor, but the implementation has been stellar.

<unk> here I guess first are you seeing signs of that and then.

And then equally proud of the commercial team we knew because of the trade environment that are trying to the U S Lane and we are the market share leader there would be pressured and so we pivoted pivoted, we are growing between Asia, and Europe, which is the large lane, we're being selective there and then equally important.

So how do you think about the flow through with Tri color I imagine you have got some good flexibility to shift volumes sort of between the purple tails and third party capacity.

Yeah from an airfreight perspective, again, where a relatively small market share participant for my global airframe perspective, we are being selective and really focused on premium freight I am, particularly proud of the airline team this quarter they shifted capacity.

On the purple tail that can be balanced capacity and the team did a really good job from a U S perspective, I'll give the health care team a shout out almost 50% of the weight growth from the U S. Export perspective came from healthcare airframe. So our health care strategy is working there too.

And then equally proud of the commercial team, we knew because of the trade environment that our China. The U S Lane and we are the market share leader there would be pressured and so we pivoted pivoted, we are rowing between Asia, and Europe, which is the large lane, we're being selective there and then equally important on the purple tail that can be bad.

Bruce if I can jump in on the strike or thrown by the conversations that we ever had before the idea was to decon just the hubs and to have a truck flight truck network. So that it links all our networks together optimally and Densification of our network.

John W. Dietrich: The next question is from Jason Seidl with TD Cowen. Please go ahead.

Rajesh Subramaniam: Thank you. This is Elliot Opperon for Jason Seidel. In terms of Network 2.0 and heading into peak season, are you planning for any changes in the process? I like putting some stations on hold in busier markets as you work through peak. Could that affect any timing in terms of the cadence of the $1 billion in cost savings or anything to think about there? Thank you for the question. We are very encouraged by the progress on Network 2.0. The Canada transition is complete, and the service levels there are very strong. We are obviously moving forward in the U.S. market underway as we planned. There is no change to the plans that we have set in place. We have exiting Q1 with 18% of our U.S. ADV running through the Network 2.0 model. We have close to about 140 facilities and integrated 360 stations in the process.

Alan its capacity and the team did a really good job from a U S perspective, I'll give the health care team a shout out almost 50% of the way growth from the U S. Export perspective came on health care error rates, our health care strategy is working there too.

All of those are being tracked and kpis level very carefully and I'm happy to report that the team has done tremendous job and it is working.

And that's what enables us to provide the value proposition to our customers to strategically and profitably grow in these segments. So again, we are in early innings on tricolor, but the implementation has been stellar.

Bruce if I can jump in on the strike or thrown by the conversations that we've had before the idea was to decon just the hubs and to have a truck flight truck network. So that it links all our networks together optimally.

The next question is from Jason Seidl with TD Cowen. Please go ahead.

Thank you. This is Elliot alper on for Jason Seidl. So in terms of network to point out one heading into peak season are you planning for any changes in the process I like putting some stations on hold in denser markets as you've worked through peak could that affect any timing in terms of the cadence of the 1 billion in cost savings or anything to think about there.

And Densification of our network all of those are being tracked and kpis level very carefully and I'm happy to report that the team has done tremendous job and it is working and that's what enables us to provide the value proposition to our customers to strategically and profitably grow in these segments. So again we are in.

Rajesh Subramaniam: At the end of the day, that's pretty much as planned, and that's what we'll continue to execute going forward. You have to remember that Network 2.0 is an efficiency story, but also a growth story as we improve our customer value and customer experience, that this becomes both an efficiency part of the equation and also an ability for us to grow in this segment. Thank you.

Well thank you for the question.

Early innings on tricolor, but the implementation has been stellar.

We're very encouraged by the progress on network to auto.

The next question is from Jason Seidl with TD Cowen. Please go ahead.

<unk>, Canada transition is complete and the service levels. There are very strong you're obviously moving forward in the U S market underway as we planned there is no change to the plans that we have set in place that we have exiting Q1 with 18% of our U S. A D V running through the networked with auto Marvel.

Thank you. This is Elliot alper on for Jason Seidl. So in terms of network to point out one heading into peak season are you planning for any changes in the process I like putting some stations on hold and busier markets as you've worked through peak could that affect any timing in terms of the cadence of the 1 billion in cost savings or anything to think about there.

Brie Carere: I think it's important to note we never plan for a new optimization in the middle of peak. Our rollout schedule, it's a given that that just doesn't happen in peak because service is our top priority for our customers.

We have closed about 140 facilities and integrated 360 stations in the process.

Well. Thank you for the question we are very encouraged by the progress on network. Two at auto are the Canada transition is complete and the service levels. There are very strong.

At the end of the day.

John W. Dietrich: The next question is from David Vernon with Bernstein. Please go ahead.

That's pretty much as planned and that's what we will continue to execute going forward.

Rajesh Subramaniam: Hey, good afternoon, and thanks for taking the question. John, I wanted to kind of come back to this question on operating leverage and try to help better understand the bridge that you laid out here. When we think about first quarter, is there anything in the comp on a year-over-year basis that may be added to the leverage, whether it's incentives or anything like that? As we think about the remainder of the year, obviously, there's a lot of things happening on trade and things happening top line and bottom line. Is the answer here of why we're not getting more leverage just that the mix is shifting to less profitable traffic? I'm just trying to kind of really understand this thing at a high level.

You're a rumor that network to Lotto is an efficiency story, but also a growth story as we improve over customer value.

Obviously moving forward in the U S market underway as we planned there is no change to the plans that we have set in place that we have exiting Q1 with 18% of our U S. A D V running through the network to an auto Marvel.

On the customer experience that this becomes you know.

What the efficiency part of the equation and also our ability for us to grow in this segment. Thank you.

Close to about 140 facilities and integrated 360 stations in the process.

I think it's important to note we never plan for a new optimization in the middle of peak. So our rollout schedule. It's a given that that just doesn't happen in P. Because service is our top priority for our customers.

At the end of the day.

That's pretty much as planned and that's what we will continue to execute going forward.

Rajesh Subramaniam: If we've got a billion dollars worth of cost taking out that would offset the headwind and then we got 5% of revenue growth, why isn't there more falling to the bottom line?

The next question is from David Vernon with Bernstein. Please go ahead.

Romo the Metro Toronto is an efficiency story, but also a growth story as we improve over customer value.

Hey, good afternoon, and thanks for taking the questions. So John I wanted to kind of come back to this question of operating leverage do you try to help better understand the bridge that you laid out here when.

Our customer experience that this becomes.

John W. Dietrich: Yeah, as I mentioned before, there's a variety of factors in play here, including the opportunity cost of the hit to revenue as a result of the change in the trade environment. Mix shift is a factor to lower yielding mix, but I should say it's profitable. It's a profitable mix. I want to be clear on that. That is certainly a consideration. There's a whole dynamic environment of factors that are putting pressure on us that run the range that are factored into that $1 billion. The next question is from RA Rosa with CITI. Please go ahead.

Hey.

Efficiency part of the equation and also our ability for us to grow in this segment. Thank you.

When we think about first quarter is there anything in the comp on a year over year basis that may be added to the leverage whether it's incentives or anything like that and then as we think about the remainder of the year right. Obviously theres a lot of things happening on trade and things happening topline Bottomline is the answer here of why we're not getting more leverage just that the mix is shifting too.

The next question is from David Vernon with Bernstein. Please go ahead.

Less profitable traffic I'm, just trying to kind of really understand this thing at a high level like.

Hey, good afternoon, and thanks for taking the question. So John I wanted to kind of come back to the question on operating leverage she tried to help better understand the bridge that you laid out here when.

If you've got $1 billion worth of cost taking out that would offset the headwind and then we got 5% of revenue growth like why isn't there more falling to the bottom line.

Yeah.

As I mentioned before there's a variety of factors in play here.

<unk> kind of the opportunity.

Rajesh Subramaniam: Hi, good afternoon. On the revenue growth target, maybe you could help us understand how much of that is coming from new business wins because I don't think that's been totally clear. Is there a way to segment how much of the 4% to 6% is driven organic versus kind of new business wins? Anything you can give us on the margin contribution of that? If I can squeeze one other one in, the $600 million of freight spin costs, maybe you could just give a little bit of color on what that is. Thank you.

Cost of of the hit to revenue as a result of the change in the trade environment.

Shift is a factor to lower yielding.

So less profitable traffic I'm, just trying to kind of really understand this thing at a high level like.

Mix.

But I should say, it's profitable it's profitable mix I want to be clear on that but that is.

If we're if we got $1 billion worth of cost taken out that would offset the headwind and then we've got 5% of revenue growth like why isn't there more falling to the bottom line.

Certainly a consideration.

But there is a whole dynamic environment are factors that are putting pressure on us that run the range.

Yeah.

As I mentioned before there's a variety of factors in play here.

That are factored into that $1 billion.

<unk> kind of the opportunity.

John W. Dietrich: I'll start with the freight spin costs and then turn it over to you. As with any large transaction, there's a significant amount of costs that's incurred. It's largely driven by the IT and the systems and enhancing the systems at FedEx Freight to improve the customer experience. There are some staffing costs, but I would say those are small in the scheme of things. We talked about the sales force and so forth, but largely IT-related and systems-related.

Cost of of the hit to revenue as a result of the change in the trade environment.

The next question is from Ari Rosa with Citi. Please go ahead.

Shift is a factor to lower yielding mix.

Hi, good afternoon, so just on the revenue growth target.

Mix, but.

But I should say, it's profitable it's profitable mix I want to be clear on that but that is.

If you could help us understand how much of that is coming from new business wins, because I don't I don't think that's been totally clear. So like is there a way to segment.

Certainly a consideration.

How much of the 4% to 6% is driven is organic versus kind of new business wins anything you can give us on kind of the margin contribution of that and then if I can squeeze one other one in the $600 million of.

But there is a whole dynamic environment of factors that are putting pressure on us that run the range.

Brie Carere: As far as the revenue range, it's a combination of factors, as I talked about. We've got execution from a share gain perspective, we've got execution on getting the right business in, and then yield. The one thing that I can emphasize is that as we look at the difference between Q1 and Q2 through Q4, the domestic momentum, one of the larger factors there will be continued onboarding, but we'll also be pushing on yield.

That are factored into that $1 billion.

Spin costs, maybe you could just give a little bit of color on what that is.

The next question is from Ari Rosa with Citi. Please go ahead.

Hi, good afternoon, so just on the revenue growth target.

Well I'll start with the phrase spin cost and then turn it over to that.

If you could help us understand how much of that is coming from new business wins, because I don't I don't think that's been totally clear. So like is there a way to segment.

Like with any large transaction, there's a significant amount of costs incurred and it's largely driven by the I T and the systems and enhancing.

The systems at freight to improve the customer experience.

John W. Dietrich: This concludes our question and answer session. I would like to turn the conference back over to Rajesh Subramaniam for any closing remarks.

There are some staffing costs, but I would say those are small in the scheme of things.

<unk> talked about the sales force and so forth, but largely it related and systems related.

Spin costs, maybe you could just give a little bit of color on what that is.

Rajesh Subramaniam: Thank you, operator. In closing, our Q1 results demonstrate our ability to support customers through this dynamic environment. I'm incredibly proud of the FedEx team for their outstanding commitment to our customers and for driving such strong performance in this quarter. I'm confident that the momentum we have established positions us well for the peak season ahead. Thank you very much.

Yeah.

Yeah as far as the revenue range you know, it's a combination of factors as I talked about we've got execution on a share gain perspective, it's about execution execution on getting the right business N and then yield the one thing that I can emphasize that as we look at the difference between Q1 and Q2 through Q4, the domestic MAU.

Well I'll start with the phrase spin costs and turn it over to that like with any large transaction. There is a significant amount of costs incurred it's largely driven by the <unk> and the systems and enhancing.

The systems at freight to improve the customer experience.

John W. Dietrich: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

One of the larger factors there will be continued onboarding them, but will also pushing on yields.

There are some staffing costs, but I would say those are small in the scheme of things.

Talked about the sales force and so forth, but largely it related and systems related.

This concludes our question and answer session I would like to turn the conference back over to Raj Subramaniam for any closing remarks.

Yeah.

Yeah as far as the revenue range you know, it's a combination of factors as I talked about we've got execution on a share gain perspective, we've got execution execution on getting the right isn't S. N and then yield the one thing that I can emphasize that as we look at the difference between Q1 and Q2 through Q4, the domestic MAU.

Okay.

Well. Thank you operator in closing our Q1 results demonstrate our ability to support customers through this dynamic environment.

I'm incredibly proud of the Fedex team for their outstanding commitment to our customers and for driving such strong performance in this quarter I am confident that the momentum we have established positions us well for the peak season had thank you very much.

One of the larger factors there will be continued onboarding them, but will also pushing on yields.

This concludes our question and answer session I would like to turn the conference back over to Raj Subramaniam for any closing remarks.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

Well. Thank you operator in closing our Q1 results demonstrate our ability to support customers through this dynamic environment.

Thank you very much.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

[music].

Q1 2026 FedEx Corp Earnings Call

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