FedEx to reduce cost by $1bn in FY2026, net income drops 5% in FY2025

FedEx is planning permanent cost reductions of $1 billion in fiscal 2026 from the DRIVE and Network 2.0 transformation programmes as it reported a net income of $4.09 billion for fiscal year 2025 (year ending May 31, 2025) as against $4.33 billion in fiscal 2024, a decline of five percent.

Revenue, however, increased marginally to $87.9 billion from $87.7 billion in fiscal 2024, says an official release.

"Results include lower structural costs as the company achieved its $2.2 billion fiscal 2025 DRIVE target and delivered $4 billion in total DRIVE structural cost reductions relative to fiscal year 2023.

"Capital spending for fiscal 2025 was $4.1 billion, down $1.1 billion or 22 percent from $5.2 billion in fiscal 2024. Capital spending as a percentage of revenue declined to 4.6 percent, the lowest level in FedEx history."

Raj Subramaniam, President and Chief Executive Officer, FedEx says: "I am proud of the FedEx team for a solid finish to the fiscal year, delivering excellent service for our customers while achieving our structural cost reduction target, in the face of ongoing headwinds. We will continue to leverage the unique scale and flexibility of our global network to support our customers as the demand environment evolves. Looking ahead, I’m confident that our transformation initiatives, which are focused on integrating our networks and further reducing our cost-to-serve, will create meaningful long-term value."

Fourth quarter net income increased to $1.65 billion from $1.47 billion even as revenue was steady at $22.2 billion.

"Operating income and margin improved in the fourth quarter as the company achieved its DRIVE structural cost reduction targets. Fourth quarter results also benefited from higher volume at Federal Express and higher base yield at each transportation segment."

John Dietrich, Executive Vice President and Chief Financial Officer, FedEx says: "Our fourth quarter and full-year results illustrate our determination to manage costs, reduce capital intensity and increase earnings in order to unlock additional stockholder value. In fiscal 2026, we will remain focused on advancing our network transformation while maintaining a disciplined approach to capital spending and returning capital to our stockholders."

Fourth quarter results include a non-cash impairment charge of $21 million from the decision to permanently retire 12 aircraft, including seven A300-600 aircraft, three MD-11 aircraft and two Boeing 757-200 aircraft, plus eight related engines, the release added. "These retirements are aligned with the company's fleet reduction and modernisation strategy as the company continues to improve its global network efficiency and better align air network capacity with anticipated demand. Last year's fourth quarter results included a non-cash impairment charge of $157 million from the decision to permanently retire 22 Boeing 757-200 aircraft and seven related engines."