FedEx Q3 2026 Earnings: Yields Up 7–17%, Net Income Down 55% on the Freight Stake

FedEx's first quarter on its new calendar, July through September 2026, had two different results. The delivery business improved: revenue rose 12% to $22.9 billion and operating income 10% to $1.07 billion, because FedEx charged more per package, by 7% in the United States and 17% abroad. Net income fell 55% to $290 million. The cause was a $1.24 billion loss on the 19.9% of FedEx Freight it kept after spinning that business off on June 1, a stake it now marks to market every quarter. For the next few quarters, FedEx's bottom line will move with another company's share price.

A new calendar, and a quarter without Freight​

FedEx's fiscal year used to end on May 31. Starting June 1, 2026, it ends on December 31, so June through December 2026 is a transition period, and this 10-Q reports the three and four months to September 30, with June shown separately as a one-month stub. Every figure here is continuing operations: FedEx Freight, the less-than-truckload business, is a separate public company now, and its results are reported as discontinued operations for all periods (10-Q). The ledger records the quarter as FY2026TQ3 and will fold it into the full transition period when FedEx files that report.

Prices carried revenue; volume barely moved​

Revenue was $22,855 million against $20,432 million (earnings release). In the Express U.S. Domestic segment, revenue rose 10% to $14.7 billion while average daily packages rose only 2%, to 14.4 million. Revenue per package rose 7% to $15.32. Express International revenue rose 17% to $7.5 billion even though daily packages fell 4%. Package yield rose 17%, international priority by 16%, and freight pounds rose 15%. The 10-Q credits higher base rates and "higher fuel surcharges": when fuel prices rise, FedEx's indexed surcharges raise what customers pay.

Those surcharges come back out as cost. Fuel expense rose 64% to $1,270 million and purchased transportation, the contractors who move FedEx's packages, rose 19% to $6,455 million. Total operating expense grew 12%, the same as revenue, so the operating margin was 4.7% against 4.8%. By our computation, the rest of the cost base grew 6%, from $13,267 million to $14,063 million, half the rate of revenue. That gap is the cost-cutting FedEx keeps describing, and rising fuel and contractor costs absorbed it. Restructuring costs of $130 million were included; without them, the company's adjusted operating margin was 5.3% against 5.1%.

Below the operating line, the Freight stake moved earnings​

FedEx's stake in FedEx Freight was marked up by $4,492 million in June, the one-month stub, and down by $1,238 million in this quarter, leaving it at $3,254 million on the balance sheet. None of those amounts is cash: they track FedEx Freight's share price, and FedEx says it expects to sell the whole stake within 12 months. Other non-operating income includes a $627 million gain from buying back $4.9 billion of its bonds for less than their carrying value, paid for mostly with a $4.1 billion dividend FedEx Freight sent FedEx before the spin. The $134 million tax charge includes a $263 million deferred tax benefit tied to the sale of FedEx Supply Chain.

FedEx's adjusted net income, which excludes the stake, the debt gain, restructuring and the tax benefit, was $896 million, or $3.74 a share, against $2.93. GAAP diluted EPS was $1.21 against $2.73. Both describe the same quarter: the adjusted figure is a better read of the delivery business, and the GAAP figure shows how much a single investment can swing reported results.

The ledger shows a richer equity line and less cash​

A credit balance, so growing retained earnings plots as a deeper line. Retained earnings rose to $49,677 million on September 30 from $44,461 million on May 31 while the quarter itself earned $290 million. The rest came from June: four months of net income totalled $5,331 million, mostly the paper gain on the stake, plus a $464 million adjustment from the spin-off, less $579 million of dividends declared.

Cash moved the other way, to $7,961 million from $13,060 million for continuing operations at the end of May. Over those four months FedEx repurchased $2.0 billion of stock, about 6.3 million shares, paid $2.5 billion for a 37% interest in the holding company of the European parcel-locker operator InPost, and spent $1.0 billion on capital projects. Long-term debt, including the current portion, was carried at $17.6 billion against $19.2 billion. The cash also includes about $2.7 billion of IEEPA tariff refunds that FedEx holds to pass back to its customers, so it is not money FedEx can spend. A small business that collects sales tax or deposits faces the same distinction: cash in the account can still belong to someone else.

The longer arc in the ledger explains why pricing matters. Revenue rose from $83,959 million in fiscal 2021 to $94,720 million in fiscal 2026, but net income fell from $5,231 million to $4,433 million, and operating margin, by our computation, fell from 7.0% to 5.8%. Those annual figures include FedEx Freight, so they are not directly comparable with this quarter's 4.7%, but they show a company whose costs kept pace with its revenue for five years.

What to watch through December​

• The guide. FedEx raised its calendar-2026 forecast to about 12% revenue growth from about 11%, and adjusted EPS to $18.00–$18.60 from $16.90–$18.10; GAAP EPS of $35.30–$35.90 includes the stake's gain so far and will move with it.
• Prices in January. Parcel rates rise by an average of 5.9% on January 4, 2027. Volume growth of 2% in the U.S. and a 4% decline abroad leave yields as the main driver.
• The stake. Each quarter until it is sold, the FedEx Freight shares can add or remove hundreds of millions of dollars from net income.
• Portfolio changes. FedEx Supply Chain was sold to CMA CGM on October 1 for about $1.4 billion; the transition report for June–December 2026 will be the first full picture of the smaller company.