FedEx Corporation Citi’s 2026 Global TMT Conference

John Thornton, Citi’s Industrial Specialist. I get to play the substitute transportation analyst for the moment for a little fun. With me, I have the joys on stage of the management from FedEx, both CEO Raj, Chief Digital Information Officer Vishal, and Jenifer from IR, who I believe you had a few minutes or a few comments to kick us off with.

It'll be less than a few minutes.

Okay. Thanks, John. We're delighted to be here.

I promised the lawyers I would read a quick disclaimer. Certain statements may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act, and are subject to factors that could cause actual results to differ materially from those expressed or implied. For additional information, please refer to our press releases and filings with the SEC.

Okay. For the purpose of the conversation here, I think a lot of it's going to focus on the tech stack you guys are working through, but to get the near-term comment out of the way. You noted on your 4Q earnings call that you expect EPS growth to accelerate to 20% year-on-year for the remaining seven months of CY '26. How is that tracking so far into year-end, and any comments you'd like to add to that?

Well, thank you very much, and thank you for having us here today. We are pleased with the underlying momentum in our business. As far as we're concerned, we think about our trajectory towards the CY '29 targets that we have set aside. We have modest revenue growth, but double-digit earnings growth because of our transformation. Most importantly, generating $6 billion of free cash flow by CY '29. So those are the targets that we are absolutely laser-focused on, and I'm pleased to say that we are well on our way towards that.

Being we're at the tech conference, we'll spend some time there. FedEx is most often thought of as an asset-heavy transportation company. I think people generally understand that there's a lot of complexity involved in global logistics. But give us context to how technology plays a role in your operations or, simply put, why is it appropriate for FedEx to be at a tech conference?

Yeah. Well, that's a terrific question. I think from a point of view of what FedEx, we have built over the last 53 years an unparalleled network that connects every part of the globe to every other part. That's a true definition of a network, and that's a large moat that FedEx has got. It's impossible, or not impossible. It's very, very difficult to replicate the network that we have built over the years. We move the high-value commerce of the day. We connect roughly 3 million active shippers to about 225 million consumers around the world, and we move $2 trillion worth of commerce every single year. This is the high-value supply chains that we are moving. What's important about that is also the fact that we generate 2 petabytes of data every single day in our system.

We realize that the value of this data is very important, and most importantly, the insights that we generate from that. So we started this process back in 2020. We have been on this journey for now more than six years. Of course, along comes the revolution in AI along the way, and the important thing to fuel AI is data. So we have now taken on a whole another level from marrying our physical capabilities that every single day generates these incredible insights about global supply chain. Then we evolved our vision to make supply chains smarter for everyone. Think about this. Prior to the pandemic, the word supply chain were not as exciting, but the pandemic really changed that. Today, it's a boardroom conversation, and there's a significant inefficiency in global supply chain. There's $1.9 trillion worth of inefficiency in global supply chains.

Because of the data, the insights, and technology now that we have, we think we can make a difference in orchestrating global supply chains, and the physical network that we have every single day powers this technology story.

Thank you. You mentioned the cash before, so let's maybe circle back to that. FedEx has taken a tremendous amount of cost out of the network in recent years with the $4 billion of savings from the DRIVE initiative and an additional $2 billion related to the Network 2.0. For those who are not familiar, could you discuss these initiatives and give some metrics on the efficiency gains that have been realized? What role did technology play in achieving these savings?

Yeah. Back in 2022, we embarked on a very significant structural cost reduction program, and ever since then, in the last four years, we have taken billions and billions of dollars off our cost structure. The team has done a really remarkable job of doing and executing against that. That's not the exciting part. The exciting part was the beginning of the transformation journey that we went on. I know a lot of you have not followed FedEx before, but before this time, we were operating two relatively independent networks in the U.S., an Express network and a Ground-based network. We have decided back in 2022 to put these together as one. It's one of the biggest industrial transformations in recent history, not in our industry, just look in general, even though it's happening within one company.

We are extremely pleased with the way that it's going so far. As we have said in the last earnings call that we were about 42% of the way done then. By the end of this year, we'll be 62% done, and we are on track to get it complete by next year. The important thing is the question you asked is what's the role of technology? I think this is a very critical point because without the journey that we began on our technology and creating that digital twin of our network, we couldn't have done this. So whether it's our cost savings that we have structurally taken out of our network or the execution of our transformation program, of which Network 2.0 or the integration of our networks is a big part, we couldn't have done it without technology.

That is a very critical component of it. In fact, that is going to enable us to then provide new value-added services on top of what we have built so far.