FedEx Corp. reported a slight year-over-year decline in revenue for its fiscal Q2 2025, which ended Nov. 30, 2024, as it faced several headwinds in the quarter.
Among those headwinds was the U.S. Postal Service (USPS) not renewing its air cargo contract with FedEx, which the latter held for more than 20 years. That deal expired Sept. 29, directly affecting year-over-year revenue comparisons. The USPS contract previously brought in about $2 billion annually for FedEx.
FedEx president and CEO Raj Subramaniam told investors on an earnings call that the timing shift of Cyber Week also challenged the company. Cyber Week refers to the week of Thanksgiving, which some define as including the Tuesday and Wednesday prior, or from the Wednesday prior through the Tuesday following Cyber Monday, called Giving Tuesday. This year, Cyber Monday fell in December, just days after the carrier’s fiscal quarter ended.
In another major change for FedEx, the carrier announced its intent to fully separate FedEx Freight from its business, creating a new publicly traded company.
Among FedEx’s plans to improve its revenue growth is a focus on the U.S. domestic ecommerce market, said Brie Carere, chief customer officer, in the earnings call.
“Ecommerce will continue to drive 90% of the market’s incremental parcel growth in the years ahead,” she said.
Close to half (940) of retailers in the Top 2000 use FedEx as a shipping carrier. The Top 2000 is Digital Commerce 360’s database ranking the largest online retailers in North America by web sales.
FedEx revenue in Q2
In Q2, FedEx consolidated revenue declined to $22.0 billion. That’s down 1% year over year from $22.2 billion in the company’s fiscal 2024.
Additionally, U.S. volumes declined 1% for domestic express services, as did ground volumes. On the other hand, FedEx international export package volumes increased 9% in Q2.
“While we recognize that ecommerce will continue to outpace B2B growth in the years ahead, we know that the priority customer base is stable with low rates of churn,” Carere said.
Similar to Q1, Subramaniam said, FedEx “experienced weakness in the industrial economy, which negatively affected our B2B volumes, particularly in the U.S. domestic package and the LTL [less-than-truckload] markets.”
FedEx B2B revenue comprises nearly 60% of the carrier’s package business, he said. It also comprises 90% of the carrier’s LTL business, he said. That positions FedEx well “for profitable when the industrial economy recovers,” he added.
At the end of September, FedEx reduced its U.S. domestic daytime flight hours by about 60% in an effort to match capacity with demand, Subramaniam told investors. That comes in response to the expiration of the FedEx contract with USPS.
Subramaniam also said he’s “pleased” with how FedEx teams have navigated the condensed period between Thanksgiving and Christmas. So far during the peak delivery period, they have delivered more packages per day, on average, he said. The ground average time in transit in the U.S. sits at two days during the period.
FedEx transports about $2 trillion worth of goods each year, connecting 3 million shippers to 225 million consumers, he said.
Separation of FedEx Freight
FedEx Freight saw a decrease in both weight per shipment (down 3%) and average daily shipments (down 8%) in Q2. Additionally, FedEx Freight revenue per shipment in Q2 decreased 4% year over year.
Still, Subramaniam told investors “it’s business as usual” for employees and customers as FedEx seeks a seamless transition in the separation.
He said the company believes it will “unlock significant value for stockholders, while allowing for continued commercial, operational and technological cooperation between both businesses. The separation will also enable both companies to benefit from enhanced focus and competitiveness.”
FedEx Freight has increased operating profit by about 25%, on average, per year over the last five years, Subramaniam said. As a separate company, it “will be better positioned to unlock its full-value potential,” he added.
It will also feature an enhanced less-than-truckload pricing and invoicing system “that drives faster speed to market,” he said. And with two separate companies, they can “ensure commercial collaboration.”
“The longstanding cooperation between FedEx and FedEx Freight will continue through commercial, operational and data and technology agreements to enable seamless continuity of service and capture existing benefits from the relationship,” Subramaniam said.
New FedEx sorting facility
In October, FedEx opened a new sorting facility in Memphis, Tennessee, called the Memphis World Hub. The carrier also continues to roll out Network 2.0, its effort to “streamline” its efficiency for package pickup, transport and delivery.
Over in Europe, it also introduced dimensional pricing at its Charles De Gaulle hub in Paris.
“This enhancement, enabled by new and updated technology, seamlessly captures package dimensions and weight and then applies and integrates applicable surcharges via standardized processes,” Subramaniam said. “As a result, we are now better and more accurately compensated for the goods we transport, especially for the higher margin packages with unique dimensions.”
FedEx will continue rolling out the capability in other European facilities over the next year, he said.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports. Here’s last quarter’s article on FedEx revenue.
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