FedEx Q2 2026: "One FedEx" Delivers Profits as Freight Prepares to Spin

Logistics serves as a vital barometer for the global economy, and few companies offer as clear a view into trade and consumption as FedEx Corporation. As the company undergoes one of the most significant transformations in its history—merging its distinct delivery networks and preparing to spin off its freight unit—the financial results become even more critical to parse.

Let’s unpack the numbers from their latest 10-Q filing to see how the company performed in the quarter ended November 30, 2025, and what these figures reveal about their strategic pivot.

To visualize how top-line revenue trickles down to net income, here is a flow diagram representing the quarterly results:

The "One FedEx" Strategy Pays Off

The headline number is strong: FedEx reported $23.47 billion in revenue, a 7% increase from the $21.97 billion reported in the same quarter last year. However, the real story lies in the profitability. Operating income surged 31% to $1.38 billion, driving diluted Earnings Per Share (EPS) to $4.04, a massive 33% jump year-over-year.

This improvement was largely driven by the Federal Express segment. Historically, FedEx operated its "Express" (air) and "Ground" (truck) networks separately. Under its "Network 2.0" initiative, these are being integrated. The results suggest the strategy is working: the segment's operating income skyrocketed 47% to $1.55 billion. The company cited improved "yield" (industry jargon for the average revenue earned per package) and successful cost reductions as primary drivers.

The Freight Spin-Off and Separation Costs

While the core delivery business thrived, the FedEx Freight segment faced headwinds, primarily due to corporate maneuvering rather than operational failure. Operating income for this segment plummeted 71% to $90 million, with operating margins collapsing from 14.3% down to 4.2%.

This drop is largely attributed to $152 million in "separation and other costs" incurred during the quarter. FedEx is in the process of spinning off FedEx Freight into a standalone public company. A spin-off occurs when a parent company separates a division into an independent entity, distributing shares of the new company to existing shareholders. While this creates short-term expenses (legal, consulting, and restructuring fees), the goal is to unlock value by allowing the freight business to operate independently. Excluding these one-time costs, the underlying performance would look significantly better, though volume was still soft.

Rising Costs and Strategic Shifts

Despite the profit growth, operating expenses remain substantial. Salaries and employee benefits rose 7% to $8.4 billion, reflecting wage inflation and a competitive labor market. Purchased transportation—money paid to third-party carriers and independent contractors to move goods—also increased 7% to $5.9 billion.

In a move to align with standard business practices, the filing also confirmed that FedEx is changing its fiscal year-end from May 31 to December 31, effective June 2026. While an administrative change, it will make comparing FedEx’s results against competitors like UPS and DHL more straightforward for investors in the future.

Conclusion

FedEx is effectively renovating the airplane while flying it. The company is managing a massive network integration and a major corporate breakup simultaneously. The data from this quarter suggests that the operational efficiencies from merging Ground and Express are beginning to materialize on the bottom line, offsetting the heavy costs associated with the Freight spin-off. As the global logistics landscape faces pressure from inflation and geopolitical uncertainty, FedEx's ability to maintain this improved profitability while finalizing its restructuring will be the key metric to watch.