FedEx wrapped its fiscal year on a strong note, reporting fourth-quarter results that beat Wall Street expectations and capped off a transformative 12 months for the global delivery giant. The Memphis-based company not only delivered better-than-expected earnings and margin expansion but also reached its ambitious $2.2 billion structural cost reduction target under the DRIVE program.
Revenue for Q4 came in at $22.2 billion, up slightly from the prior year, while adjusted EPS hit $6.07, ahead of analyst forecasts. The company’s operating margin improved to 9.1%, boosted by growth in Express volume, higher yield per package, and aircraft retirements that reduced overhead.
Full-year revenue stayed flat at $87.9 billion, but FedEx returned $4.3 billion to shareholders and posted strong free cash flow, aided by leaner spending and a more disciplined network strategy.
The quarter was also marked by a major emotional moment: the passing of Frederick W. Smith, the company’s iconic founder, at the age of 80.
Key Takeaways
Adjusted EPS: $6.07, up from $5.41 YoY
Operating margin (adjusted): 9.1% in Q4
FY2025 capital spend: $4.1B (down 22% YoY)
Aircraft retirements: 12 aircraft grounded, $21M impairment
FedEx Freight spin-off on track; $1B in new cost cuts targeted for FY26
Express and margin gains carry the quarter
The Express segment did much of the heavy lifting in Q4. Higher U.S. and international export volumes helped drive a 22% YoY increase in Express operating income, as average daily package volume rose 5% to nearly 17 million packages per day.
FedEx also posted gains in pricing, with international priority yields rising 11%. Combined with a favorable mix shift and lower fuel costs, the result was a meaningful rebound in margins. However, the expiration of the USPS contract created a short-term drag, particularly on network utilization.
By contrast, the Freight segment struggled, posting a 6% drop in operating income and weaker shipment trends. That business is now being prepared for a tax-free spin-off, which the company expects to complete in FY2026.
Cost cuts on target, more savings ahead
This quarter marked the completion of FedEx’s $2.2B DRIVE program, a multiyear initiative aimed at slashing structural costs. Achievements include facility rationalization, fleet modernization, reduced purchased transportation spend, and integration of overlapping operations.
In FY2026, FedEx now plans to cut another $1 billion in structural costs through its Network 2.0 and digital optimization efforts. Capex is expected to tick up to $4.5B, with continued investment in automation, facility upgrades, and aircraft renewal.
“Our strong finish to the year reflects disciplined execution and a sharp focus on cost,” said CEO Raj Subramaniam. “We’re confident that our transformation efforts will deliver long-term value — for customers and shareholders alike.”
Capital discipline, rising debt
FedEx maintained a capital-light posture in FY2025, reducing capital spending by $1.1 billion from the previous year, even as it boosted shareholder returns. The company repurchased $3 billion in stock and paid out $1.3 billion in dividends, contributing to a 4.5% reduction in shares outstanding.
But that came at a cost: total debt climbed, and FedEx’s net debt-to-EBITDA ratio rose to 1.69x, up from 1.25x a year ago. Management said it expects debt levels to stabilize in FY2026, supported by continued free cash flow generation and measured capex.
Dividend payouts will also rise, with the board approving a 5% increase to $5.80 per share annually
Outlook
FedEx issued cautious but stable guidance for the year ahead. Revenue growth is expected to be flat to 2%, with adjusted EPS forecasted between $18.25 and $19.25 for the full year.
First quarter guidance calls for EPS of $3.40 to $4.00 (adjusted), though management cited fuel price volatility and macro uncertainty as key watch items.
FedEx also said it would continue pension contributions (up to $600M) and focus its spending on yield-rich segments, such as premium air freight, e-commerce fulfillment, and automation.