Effective June 1, 2024, FedEx Ground Package System, Inc. and FedEx Corporate Services, Inc. merged into Federal Express Corporation, creating a unified air-ground express network. Additionally, in December 2024, FedEx announced plans to spin off FedEx Freight into a new publicly traded company by June 2026, aiming for tax-free treatment for U.S. federal income tax purposes for stockholders.

FedEx continues to invest in Network 2.0 initiatives, having implemented optimization in approximately 290 U.S. and Canadian locations by May 31, 2025, with full U.S. implementation expected by calendar 2027. The company also launched 'fdx,' a data-driven commerce platform in September 2024, and formed a new enterprise-wide Data & Technology team in early 2025 to streamline operations and enhance customer experience.

In February 2025, FedEx acquired RouteSmart Technologies, Inc. for $113 million in common shares and cash, a global leader in route planning and optimization solutions. This acquisition is expected to enhance the efficiency of the FedEx network and improve customer supply chains, aligning with the DRIVE transformation strategy.

Business optimization costs, part of the DRIVE program aimed at long-term profitability, increased by 30% to $756 million in 2025 from $582 million in 2024. These costs include $235 million related to a European workforce reduction plan expected to yield $150 million in annualized savings starting in calendar 2026, demonstrating management's commitment to structural cost reduction.

Despite increased wage rates and purchased transportation costs (up 3% to $21,768 million), management's DRIVE initiatives, including network structural transformation and improved IT efficiency, provided savings that partially offset these pressures. Fuel expense, however, decreased by 20% to $3,775 million due to lower prices and usage, contributing positively to cost management.

In 2025, management decided to permanently retire 12 aircraft and eight related engines, incurring a noncash impairment charge of $21 million. This decision aligns with Federal Express's fleet reduction and modernization strategy to improve global network efficiency and better align air network capacity with anticipated demand, extending the MD-11 fleet retirement to 2032.

The transportation industry remains highly susceptible to macroeconomic trends, with weakened business conditions in 2025 due to declining U.S. imports and slowed global industrial production. Elevated inflation and interest rates continue to negatively affect consumer and business spending, and geopolitical conflicts in Russia/Ukraine and the Middle East contribute to global economic uncertainty, impacting demand for priority services.

FedEx's operations increasingly depend on sophisticated and secure technology networks, making it vulnerable to cyberattacks, data breaches, and operational disruptions. A security breach at a third-party service provider in 2025, though immaterial, highlights the ongoing risk, which is heightened by remote work models and the DRIVE transformation.

Ongoing bargaining with pilots (ALPA) and potential changes to labor laws, including the possibility of Federal Express employees being removed from RLA jurisdiction, could lead to sporadic labor disputes and increased operating costs. Additionally, challenges to the employment status of service providers' drivers could result in wage payments and tax liabilities for FedEx.

The U.S. domestic and international package and freight markets are highly competitive and price-sensitive, especially in periods of low macroeconomic growth. FedEx experienced a continued mix shift toward slower, less costly deferred package services and lower fuel surcharges, which negatively affected yields at FedEx Freight and constrained overall yield growth in 2025.

Competitors like Amazon.com are developing and implementing in-house delivery capabilities, including a network of hubs, aircraft, and vehicles, and have begun offering LTL freight services. This trend of high-volume shippers developing internal logistics capabilities could reduce FedEx's revenue and increase competition, potentially leading to lower prices.

FedEx leverages its global network, which connects over 99% of the world's GDP and is difficult and costly to replicate, as a significant competitive advantage. The company's strong brand, recognized as one of the most admired and ethical in the world (ranked 20th by FORTUNE in 2025), continues to be a powerful tool for sales, marketing, and recruitment.

Business optimization costs rose by 30% to $756 million in 2025 from $582 million in 2024, reflecting ongoing investments in the DRIVE program. These costs are primarily for professional services and severance, including $235 million for the European workforce reduction, as FedEx aims to drive efficiency and lower overhead.

Fuel expense decreased by 20% to $3,775 million in 2025 from $4,710 million in 2024, due to lower fuel prices and usage. However, purchased transportation expense increased by 3% to $21,768 million, driven by higher rates and increased U.S. ground volume, indicating mixed results in cost management.

FedEx has implemented Network 2.0 optimization in approximately 290 locations in the U.S. and Canada by May 31, 2025, completing Canada's implementation in Q4 2025. This multi-year effort aims to improve efficiency in package pickup, transport, and delivery, with U.S. implementation expected by the end of calendar 2027.

In September 2024, FedEx launched 'fdx,' a fully integrated data-driven commerce platform leveraging FedEx Dataworks capabilities to connect the entire customer journey. This platform aims to improve visibility and provide insights for merchants to make more strategic logistics decisions, reflecting a strong focus on digital transformation.

FedEx is leveraging artificial intelligence and machine learning through FedEx Dataworks to improve operational efficiency, including enhanced tracking capabilities with greater estimated delivery date accuracy and AI-enabled virtual assistants. The company formed a new enterprise-wide Data & Technology team in early 2025 to streamline technology used in package delivery.

FedEx is actively exploring autonomous delivery technology, having begun a pilot program in 2022 with Aurora Innovation, Inc. and PACCAR Inc. to test autonomous driving technology in trucks for linehaul operations. This demonstrates a commitment to long-term technological advancements in its core business.

FedEx repurchased 10.9 million shares of common stock for a total of $3.0 billion in 2025, following $2.5 billion in 2024, under the $5.0 billion program authorized in March 2024. As of July 21, 2025, $1.6 billion remained available for repurchases, signaling continued confidence in shareholder returns.

Total capital expenditures decreased by 22% to $4,055 million in 2025 from $5,176 million in 2024, primarily due to reduced spending on aircraft, vehicles, and IT investments. However, capital expenditures are expected to increase to approximately $4.5 billion in 2026, driven by Network 2.0 initiatives and facility modernization.

The Board of Directors declared a quarterly cash dividend of $1.45 per share on June 9, 2025, consistent with its policy of regular dividend payments. Additionally, FedEx made voluntary contributions of $800 million to its U.S. Pension Plan in 2025 and expects to make up to $600 million in voluntary contributions in 2026, as no minimum contributions are required due to the plan being fully funded.

FedEx is committed to achieving carbon neutrality across its global operations by calendar 2040, with interim targets for key decarbonization levers. The company aims for 50% of all pickup-and-delivery purchase orders to be electric by 2025 and 100% by 2030, and began taking delivery of over three million gallons of blended Sustainable Aviation Fuel (SAF) in 2025 towards a 30% SAF procurement goal by 2030.

FedEx has achieved its revised target of a 30% reduction in aircraft emissions intensity from a calendar 2005 baseline, through fuel conservation and fleet modernization initiatives. In 2024, these efforts saved 130 million gallons of jet fuel through aircraft modernization and 11.1 million gallons through the Fuel Sense program, demonstrating progress in environmental impact reduction.

The FedEx Sustainability Insights (FSI) tool, launched globally in 2024 and available in over 100 markets, provides customers and suppliers with access to estimated CO2e emission data for their shipments. This tool, third-party verified to GHG Protocol standards, empowers customers to understand their carbon footprint and make informed supply chain decisions, fostering sustainability collaboration.

The global economy and geopolitical developments, including ongoing conflicts in Russia/Ukraine and the Middle East, continue to affect FedEx's business. The decline in U.S. imports of consumer goods and slowed global industrial production have led to weakened business conditions and lower freight and package volumes in 2025, with expectations for continued pressure in 2026.

Despite year-over-year deceleration, global inflation remains above historical levels, and interest rates remain elevated. These factors are negatively affecting consumer and business spending, which in turn pressures demand for FedEx's transportation services, particularly higher-yielding priority services, with expectations for continued negative impact in 2026.

New regulations like the EU's RefuelEU requiring minimum percentages of blended Sustainable Aviation Fuel (SAF) starting January 1, 2025, and the UK's similar mandate, are increasing operating expenses. The U.S. withdrawal from the Paris climate accord in January 2025 adds uncertainty to future U.S. policy, but compliance with international regulations will continue to increase costs.