FedEx (FDX): Uncertain demand environment and inflationary pressures dampen outlook

Shares of FedEx Corp. (NYSE: FDX) were down 6% on Friday after the company reported its earnings results for the third quarter of 2025 and lowered its outlook for the full year. The cargo giant faced a challenging operating environment during the quarter, which it sees persisting for the remainder of the year, thereby leading to a bleak forecast.

Revenue and earnings growth

FedEx delivered revenue and earnings growth in Q3 2025, despite a tough operating environment that included a compressed peak season and adverse weather. Consolidated revenue increased 2% year-over-year to $22.2 billion, driven by higher volume at the Federal Express segment, partly offset by Freight. Adjusted earnings grew 17% to $4.51 per share, helped by a 12% rise in adjusted operating profit.

Challenging environment

As mentioned on the quarterly call, weakness in the industrial economy continued to put pressure on FedEx’s high-margin business-to-business (B2B) volumes. The quarterly results were also negatively impacted by the expiration of the United States Postal Service contract and adverse weather conditions.

The company had a compressed peak season, where it handled more packages per day year-over-year, and although demand during peak surpassed expectations, post-peak trends remained in line with the market weakness seen over the past few quarters.

The Federal Express segment saw revenues increase by 3% in Q3, driven by increased volume in deferred services. On the flip side, the Freight segment saw a 5% drop in revenue due to lower volumes, fuel surcharges and weight per shipment.

DRIVE savings   

FedEx’s quarterly results benefited from cost savings generated from the DRIVE program. The company achieved savings of $600 million in the third quarter, which were up sequentially from the first two quarters of fiscal year 2025. It remains on track to achieve its goal of $2.2 billion in savings for FY2025.

Guidance cut

Challenges in the global industrial economy, inflationary pressures, and the uncertainty surrounding global trade policies led FedEx to lower its outlook for fiscal year 2025. The company now expects revenue to be flat to slightly down YoY versus its previous expectation of flat revenues. GAAP EPS is now expected to be $15.15-15.75 and adjusted EPS is expected to be $18.00-18.60 versus the previous expectations for GAAP EPS of $16.45-17.45 and adjusted EPS of $19.00-20.00.

FedEx expects revenues in the Federal Express segment to remain flat in the fourth quarter of 2025, driven by continued volume growth in deferred services. In Freight, the company expects revenue to continue to decline on a year-over-year basis in Q4, but expects this decline to moderate sequentially.