A：The main challenges that FedEx addressed in the second quarter included the unexpected grounding of their MD 11 fleet, nationwide air traffic constraints, weakness in the industrial economy, and the impact of global trade policy changes.

A：The recent tragedy at UPS, along with the grounding of the MD 11 fleet, influenced FedEx to work closely with Boeing and the FAA to ensure the safety of their own MD 11 fleet.

A：Raj Subramanium highlighted that the key performance indicators for the second quarter included excellent service to customers, new business in high value verticals, high single-digit revenue growth, margin expansion, and high teens adjusted EPS growth.

A：Fed Express Corporation is planning to spin off FedEx Freight as a separately listed public company by June 1, 2026, with the goal of providing the best value proposition in the industry.

A：Revenue for the second quarter was up 7% year over year, driven by yield and volume strength. Adjusted operating income grew by 17% across US domestic package services.

A：The grounding of the MD 11 fleet pressured the Q2 adjusted operating income by about $25 million.

A：Post-peak season, the main focuses for maintaining service levels include cross-functional teams working around the clock to minimize any service disruptions and continued commitment to high service levels.

A：Kawhi Leonard was named executive vice president of planning, engineering, and transformation at FedEx. She has nearly 30 years of institutional and industry expertise, a proven track record of creating high-performance cultures, and is known for unlocking efficiencies and driving improved bottom-line results.

A：The purpose of the global centralized planning and engineering function at FedEx is to reduce inefficiencies, increase profitability, and provide enhanced oversight of ongoing cost-saving and network optimization efforts.

A：FedEx is integrating AI across the company to all 500,000 plus employees and has launched a global AI program to help teams innovate faster, serve customers better, and solve challenges effectively. The program is customized to be relevant to each team member’s role, experience level, and AI fluency.

A：FedEx announced a strategic collaboration with ServiceNow aimed at making life easier for those managing complex sourcing and procurement operations. The collaboration is designed to anticipate, adapt, and take action before supply chain disruptions occur and integrates with ServiceNow's procurement and supply chain solutions to monetize proprietary insights.

A：The projected adjusted earnings per share growth for the year is 19%, which reflects the benefits of the company's transformation and the strength of its industrial network.

A：The decline in FedEx's freight revenue was attributed to lower average daily shipments, with a 2% drop reported. This was partially offset by the robust growth in the United States priority and deferred express services due to a recent B2B healthcare win and the onboarding of a new Amazon business focused on large and heavyweight shipments. Additionally, international export volumes declined, with a particular mention of reduced volumes from China to the U.S. lane. However, shifting capacity to the Asia-Europe lane and strong growth on the Asia lane provided a partial offset. The company also managed to grow U.S. international outbound revenue, contributing further to the offset.

A：Despite the challenging market environment in the industrial economy, which led to a 4% decrease in average daily shipments, FedEx's Freight team is well-positioned for eventual recovery. The company has more than 85% of its planned LTL sales force in place, with the expectation to have the full team in place by June. FedEx is encouraged by service quality metrics at the Freight division, with claims and damage performance at some of the best levels in company history, and on-time service at the highest level since Q3 of fiscal year 21.

A：The strong yield performance indicates the benefits of prioritizing high-value shipments, the strength of the company's value proposition, and the improvement in the pricing environment. At FedEx's U.S. domestic services, package yield grew over 5%, while international export package yield increased 3%, driven by revenue quality actions and higher weight per shipment tied to the de minimis change, plus favorable currency. FedEx Freight revenue per shipment rose 2%, bolstered by higher weight per shipment and revenue per hundred weight.

A：FedEx's focus on B2B initiatives and vertical strategies, with dedicated leadership and resources in targeted growth areas, has contributed to nearly half of the revenue growth. This strategy is demonstrated to be effective in sustaining and winning new business in priority areas such as healthcare and automotive, evidenced by the win from BMW. Technology companies are investing significantly in data center infrastructure, prompting FedEx to formalize a team dedicated to this vertical to support existing customers and acquire new high-tech customers.

A：The revised revenue growth outlook for fiscal year 2026 is for 5 to 6% consolidated revenue growth, supported by sustained US domestic yield and volume growth. The second half is expected to be pressured due to the global trade environment, but there will be a partial offset from yield at FedEx Express (FEC). The midpoint of the range now implies a 7% revenue growth year over year, supported by peak trends and revenue quality actions. Peak surcharge revenue is expected to be strong, and there is a targeted adjustment to protect network integrity and service reliability.

A：Recent events such as the grounding of MD 11 aircraft have resulted in a targeted adjustment to protect network integrity and service reliability. As a result, the fiscal year 2026 revenue is now expected to be approximately flat to slightly down on a year-over-year basis. The revenue decline will be mitigated by yield growth, which will provide an offset to a low single-digit percentage decline in shipments.

A：For the second quarter, adjusted earnings per share grew to $4.82, a 19% increase year over year. Consolidated revenue increased by 7%, supporting a 60 basis point expansion in adjusted margin and 17% growth in adjusted operating income. The revenue growth was primarily driven by stronger execution in US domestic package services, which led to the year-over-year improvement in adjusted operating income.

A：Factors contributing to the variations in adjusted operating income at FedEx included higher variable incentive compensation accruals, weaker-than-expected LTL results, a $30 million headwind from the expiration of the Postal Service contract, and a $25 million impact from the grounding of the MD 11 fleet. At FedEx Express (FEC), adjusted operating income grew by $306 million, with a 24% increase and a 100-basis point expansion in adjusted operating margin, driven by higher yields, continued cost reduction efforts, and increased domestic package volume.

A：FedEx's approach to capital allocation and stockholder returns involves prudent capital allocation, as evidenced by the purchase of nearly $300 million worth of stock and an increased dividend payout during the quarter. There is $1.3 billion remaining under the 2024 stock repurchase authorization, and the company will continue to evaluate repurchasing additional shares throughout the remainder of fiscal year 2026.

A：The revised adjusted EPS outlook for fiscal year 2026 is $17.80 to $19.00, compared to the prior range of $17.20 to $19.00. At the adjusted EPS midpoint of $18.40, the outlook includes continued momentum in fiscal second-half revenue for FedEx Express (FEC), strong operational execution, and ongoing efficiency initiatives. However, there will be somewhat limited financial leverage in the second half compared to the first half due to discrete items that challenge year-over-year comparability.

A：The impact of the global trade environment is a $1 billion headwind to adjusted operating profit, but this is offset by $1 billion in transformation related savings.

A：The spinoff of FedEx Freight is on track for June 1, 2026. FedEx Corp will retain up to 19.9% of FedEx Freight's outstanding shares to preserve the tax-free nature of the spinoff and plans to monetize these shares within a time frame permitted by the IRS.

A：The company is very pleased with the profitable market share and the flow-through in the quarter, particularly proud of the incremental margin expansion of 100 basis points at FedEx, driven by continued focus on B2B and strong overall rate discipline.

A：The new B2B strategy, which has been focused on KPIs and metrics within the sales organization and the shift to a self-splicing model, has contributed to the B2B performance, along with overall rate discipline and surcharge capture.

A：The B2B revenue growth in Q2 was over half the total revenue growth and comprised the acquisition of new B2B business, share of wallet growth, and the strongest quarter from a small business B2B perspective, all combined with a revenue quality strategy.

A：The costs associated with the spin-off of FedEx Freight are reflected as a separate item and are included in the reported earnings. The $100 million to $150 million of incremental costs are included in the guidance and are in addition to the previously mentioned $600 million.

A：The anticipated costs related to the MD 11 grounding are $100 million to $150 million, with the substantial part of the remaining $175 million in the third quarter, particularly in December. The MD 11 is expected to return to service in the fourth quarter, with a significant increase in costs in December due to the peak season.

A：The $600 million headwind is composed of three parts: $300 million already incurred in the first half of the year, and an additional $300 million embedded in the outlook. Of the remaining $300 million, $160 million is expected in Q3, primarily due to continued softness in the LTL business and the grounding of the MD 11, with the majority of the remaining amount expected in Q3 as well. The increase in variable compensation is also mentioned but not quantified in this part of the transcript.

A：The MD 11 grounding is expected to contribute to a $175 million headwind in Q3 and a further $265 million for increased variable compensation. Earnings are expected to be sequentially lower in Q3 compared to Q2, with the revenue expected to be essentially in line with Q2, and operating expenses increasing due to higher peak demand.

A：The company anticipates that Q4 will be the strongest dividend-paying quarter (DPS) for the fiscal year, which is consistent with typical patterns experienced in the past.

A：The company is not providing specific guidance on the incentive comp bucket but implies that it will likely experience a 'refilling' after a few quarters of higher expenses, as is common when momentum builds. This may present a headwind initially but should position the company well for future performance, particularly in fiscal year 2027 when network 2.0 savings are expected to take effect.

A：Earnings could be pushed above the midpoint of the guidance range if revenue is stronger and the cost environment is better than anticipated. The company aims to be within the range they've laid out and is focused on achieving the higher end of the range.

A：The company expects domestic parcel growth to continue and is optimistic about potential competitive advantages, such as the relationship with the Postal Service and the effects of the new Teamsters deal. They do not view the competitive dynamics as a threat to their primary growth strategy and are focused on taking profitable market share.

A：The LTL sector is benefiting from industry consolidation, especially in the truckload business, which is leading to a reduction of capacity and ultimately a benefit for the LTL sector. There has been a decrease in LTL rates due to capacity issues, but the yield has shown a positive inflection with pricing discipline in the LTL business.

A：It is very early to predict the potential impacts of a Supreme Court decision on tariffs. While an increase in international volume is beneficial, the company is not counting on it in their outlook. They are closely monitoring shifts in trade and supply chain patterns and are positioned to act quickly to adapt to changes in global trade.

A：Factors indicating a strong peak season include strong performance right after Black Friday, despite a slightly softer second week, and building momentum in the last week. The time in transit is two days, and the network is running well with the help of Scott and John who are doing a remarkable job.

A：The peak season performance is being tracked in line with the plan and execution is going as predicted.

A：The forecasted growth for the peak season was a mid single-digit year over year increase in advertising revenue. The actual growth is expected to be a high single-digit increase from a peak period, with the small and medium businesses slightly ahead of forecast and larger retailers slightly below.

A：The contribution of Network 2.0 to operational efficiency is significant, but it is not expected to have a material financial impact. However, it will result in great contributions to the company's operations.

A：FedEx has a strong position in the healthcare market with a digital portfolio that offers customized visibility and business rules for intervention and monitoring. New initiatives include a new quality program for the pharma segment, expanding cold chain capabilities to handle end-to-end shipments, and continuing to onboard healthcare customers with advanced tools for precision intervention.

A：The data center market is a rapidly growing segment for FedEx, with an expected global CapEx of about $550 billion. It is seen as an opportunity as it requires precision, which is a strength for FedEx. The market is currently valued between $7 and $8 billion and is expected to grow further.

A：The current status of network integration is that 24% of the volume is currently running through integrated facilities and the goal is to reach 40% by the end of FY 26. The company targets a 30% footprint reduction by the end of fiscal year 27, which is expected to deliver $2 billion in cost savings, with the majority skewed towards the following fiscal year.

A：The remaining non-sap add backs are mostly tied to freight separation, with a smaller portion related to the change in fiscal year and ongoing business optimization. The majority of these add backs are expected to be addressed in the current and upcoming fiscal third quarter.