FedEx Corp. (NYSE: FDX) closed its fiscal year with a quarter that beat on both the top and bottom lines. The real story, however, is not the print itself. It is the structural transformation now complete: the spin-off of FedEx Freight, a $4.1 billion cash dividend from that unit, and a shift to a calendar fiscal year that begins June 1. The company enters this new chapter with momentum, but also with a thinner margin profile and a guidance range that suggests management is being deliberate, not exuberant.
Revenue for the fourth quarter ended May 31 hit $25.0 billion, up 13% from $22.2 billion a year ago and roughly $960 million above the consensus estimate of $24.04 billion. Adjusted diluted EPS of $6.31 came in $0.35 above the $5.96 estimate and rose 4% from $6.07 in the prior-year period. The beat was driven by the Federal Express segment, where U.S. domestic package revenue grew 13% and international export package revenue jumped 15%. Yield, not volume, was the lever. Composite package yield rose 11% to $17.90, with U.S. priority yield up 10% and international priority yield up 16%. Average daily package volume grew only 2%, meaning nearly all of the revenue growth came from pricing power.
That pricing power is the headline. The margin story is more nuanced. GAAP operating margin in the Federal Express segment fell to 7.7% from 8.4% a year ago, even as adjusted operating income improved. The compression came from purchased transportation costs up 14%, fuel expense up 70%, and higher variable incentive compensation. Adjusted operating margin for the segment was 8.9%, essentially flat with 9.0% a year ago. The company is holding margin steady while absorbing cost inflation, which is not a sign of structural weakness but does mean the yield gains are being partially consumed by input costs rather than flowing straight to the bottom line.
The Freight segment, now spun off, reported a GAAP operating margin of just 6.6% for the quarter, down from 20.8% a year ago. That collapse is almost entirely due to $205 million in spin-off related costs. Excluding those, adjusted operating margin was 15.1%, down from 20.8% as revenue per shipment rose 11% but average daily shipments fell 6%. The unit is pricing better on less volume, a classic peak-cycle signal. The spin-off removes this cyclical exposure from FedEx's consolidated results going forward, which will make year-over-year comparisons cleaner but also removes a high-margin business from the mix.
Full-year adjusted EPS of $20.24 was up 11% from $18.19, and the company returned $2.2 billion to shareholders through buybacks and dividends. The $1.3 billion remaining in the buyback authorization provides ongoing support, but the pace of repurchases slowed meaningfully: 3.3 million shares or 1.4% of outstanding, compared to a more aggressive pace in prior years. The company also ended the year with $13.3 billion in cash, including the $4.1 billion Freight dividend, but $800 million of that is held for tariff refunds to customers. The net cash position is strong, but the capital allocation priority appears to be balance sheet flexibility rather than aggressive buybacks.
The CY2026 guidance, covering the transition period from June through December, calls for adjusted EPS of $16.90 to $18.10 and revenue growth of roughly 11%. That midpoint of $17.50 implies a decline from the $20.24 adjusted EPS reported for FY2026, but the comparison is not apples-to-apples: the CY2025 baseline excludes Freight as discontinued operations, and the transition year includes only seven months of standalone FedEx results. The guidance also assumes capital spending of $3.9 billion, up slightly from $3.8 billion, and pension contributions of $475 million. Management is signaling caution by not raising guidance despite a beat, which is defensible given the macro uncertainty around global trade policy and fuel costs.
What to watch next is the pace of free cash flow generation. The company highlighted "unprecedented free cash flow growth" as a priority, and the Freight dividend provides a cushion, but the real test will be whether the Express segment can maintain yield growth as volume growth remains tepid. The fleet modernization and network optimization initiatives are designed to lower the cost to serve, but those savings take time to materialize. For now, FedEx has delivered a clean beat and a cleaner corporate structure. The next chapter is about execution on cost, not just pricing.