FEDEX CORP 10-K

ITEM 1A. RISK FACTORS In addition to the other information set forth in this Annual Report, you should carefully consider the following factors, which could materially affect our business, reputation, operating results (including components of our financial results), financial condition, cash flows, liquidity, and the price of our common stock. Although the risks below are organized by headings and each risk is discussed separately, many are interrelated. Macroeconomic and Market Risks We are directly affected by the state of the global economy and geopolitical developments. While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth — key macroeconomic measurements influenced by, among other things: inflation and deflation; international trade policies and relations; supply chain disruptions; interest rates; currency exchange rates; labor costs and unemployment levels; fuel and energy prices; inventory levels; spending patterns (including shifts from goods to services and vice versa); disposable income; debt levels; credit availability; political uncertainty; public health crises; geopolitical tensions or conflicts; emerging global trade corridors; and changes to social conditions and regulations. When individuals and companies purchase and produce fewer goods, we transport fewer shipments, and as companies move manufacturing closer to consumer markets and expand the number of distribution centers, we transport shipments shorter distances, which materially and adversely affects our revenue per shipment and results of operations. Certain manufacturers and retailers are also making investments to produce and store goods in closer proximity to supply chains and consumers. Further, the scale of our operations and our relatively high fixed-cost structure, particularly with respect to our air network, make it difficult to quickly adjust to match shifting volume levels. The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to continued weakened business conditions for the transportation industry leading to lower shipment volumes. Additionally, recent changes in U.S. and international trade policy have further weakened business conditions for the transportation industry. Inflation and elevated interest rates are negatively affecting consumer and business spending, and we expect inflation and elevated interest rates to continue to negatively affect our results for the remainder of calendar year 2026. See “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition ” of this Annual Report for more information. Moreover, given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including international taxes, government-to-government relations, the typically more volatile economies of emerging markets, and geopolitical risks such as the ongoing conflicts between Russia and Ukraine, the United States and Iran, and other -18- hostilities in the Middle East, may materially and adversely affect our business and results of operations. For example, our services in Ukraine remain limited, our services in Belarus remain suspended, we have exited our operations in Russia, and our services in the Middle East are impacted. The broader consequences, duration, and evolving nature of these conflicts, which have included and may include further sanctions, embargoes, regional instability, and geopolitical shifts; airspace bans relating to certain routes, or strategic decisions to alter certain routes; potential retaliatory action by foreign governments and other groups against us; and the increased tensions between the United States and countries in which we operate, cannot be predicted. To the extent the continued conflicts between Russia and Ukraine, and the United States and Iran, and hostilities in the Middle East, or subsequent similar conflicts or hostilities, materially and adversely affect our business, they may also have the effect of heightening many other risks disclosed in this Annual Report, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, disruptions to our global technology infrastructure, including through cyberattack or cyber-intrusion, ransomware attack, or malware attack; adverse changes in international trade policies; increased costs and unavailability of fuel; our ability to implement and execute our business strategy, particularly with regard to our international business; disruptions in global supply chains, which can limit the access of Federal Express and our service providers to vehicles and other key capital resources and increase our costs and could affect our ability to achieve our goal of carbon neutrality for our global operations by calendar 2040; our ability to maintain our strong reputation and the value of the FedEx brand; terrorist activities targeting transportation infrastructure; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets. Additional changes in international trade policies, including tariffs, and relations could significantly reduce the volume of goods transported globally, increase our costs, and materially and adversely affect our business, financial condition, cash flows, and results of operations. The United States government has taken certain actions that have negatively affected United States trade, including imposing tariffs on many goods imported into the United States. Additionally, many foreign governments have imposed, and others have threatened to impose, new, expanded, or retaliatory tariffs, sanctions, embargoes, and/or quotas or trade barriers on certain goods imported from the United States. These actions have contributed to weakness in the global economy that has adversely affected our results of operations. Increased tariffs or the imposition of sanctions, and/or quotas or trade barriers may lead to lower levels of trade or heightened political tensions. Continued uncertainty and changes in global trade policies have and could continue to lead to increased tariffs, export controls, quotas, embargoes, or sanctions, which may lead to increased or volatile prices or trade limitations for goods transported globally, potentially reducing customer demand for our services. See “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition ” of this Annual Report for more information. Additionally, the U.S. government has taken action to limit the ability of domestic companies to engage in commerce with certain foreign entities under certain circumstances, and foreign governments may investigate our compliance with these restrictions. Furthermore, given the nature of our business and our global recognizability, foreign governments may target FedEx by limiting the ability of foreign entities to do business with us in certain instances, imposing monetary or other penalties or taking other retaliatory action, which could materially and adversely affect our business, financial condition, cash flows, and results of operations, as well as the price of our common stock. Our transportation businesses and their profitability are affected by the price and availability of jet and vehicle fuel, as well as our ability to collect fuel surcharges. We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. In addition, our purchased transportation expense is affected by fuel costs. During 2026, higher fuel prices positively affected yields through increased fuel surcharges and negatively affected fuel expenses. To date, we have been mostly successful in mitigating over time the expense effect of higher fuel costs through our indexed fuel surcharges, as the amount of the surcharges is closely linked to the market prices for fuel. If we are unable to maintain or increase our fuel surcharges because of competitive pricing pressures or some other reason, fuel costs could materially and adversely affect our operating results. See “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition ” of this Annual Report for more information. As of May 31, 2026, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations, and we currently have no plans to use derivative financial instruments for this purpose in the future. Even if we are able to offset the cost of fuel with our surcharges, high fuel surcharges could move our customers away from our higher-yielding express services to our lower-yielding deferred or ground services or even reduce customer demand for our services altogether. In addition, disruptions in the supply of fuel could have a negative effect on our ability to operate our transportation networks. The following factors have and may continue to affect fuel prices and the supply of fuel, and have and could result in price increases and shortages in the future: weather-related events; natural disasters; political disruptions or wars involving oil-producing countries, including, economic sanctions imposed against oil-producing countries or specific industry participants; changes in governmental policy concerning fuel production, transportation, taxes, or marketing; changes in refining capacity; sustainability concerns; cyberattacks; and public and investor sentiment. -19- Operating Risks The failure to successfully execute our transformation initiatives in the expected time frame and at the expected cost may materially and adversely affect our future results. Our transformation initiatives aim to improve long-term profitability, drive efficiency, lower our overhead and support costs, and transform our digital capabilities. Network 2.0 is our multi-year effort to improve the efficiency with which Federal Express picks up, transports, and delivers packages in the United States and Canada. Tricolor is our global redesign of our intercontinental air network across three distinct systems focused on priority parcel service, priority freight, and deferred parcels and freight. In January 2026, we initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international domestic operations. See “ Item 1. Business ” and “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition ” of this Annual Report for more information. There can be no assurance that the Federal Express and legacy FedEx Ground businesses and networks, which historically operated separately and independently, can successfully be fully integrated as planned. Additionally, it is possible that the business and network integration and optimization process could result in higher-than-currently-expected costs, less-than-expected savings, the loss of customers, the disruption of ongoing businesses, union organizing, litigation, legal disputes with service providers, governmental agency challenges, the loss of key employees or service providers, or other unexpected issues. It is also possible that the overall process will take longer than currently anticipated. Additionally, the following issues, among others, must be addressed in order to realize the anticipated timing and projected benefits of our transformation initiatives: • our ability to maintain coverage of U.S. employees under the RLA and successfully manage challenges to the employment status of drivers employed by service providers utilized in certain linehaul and pickup-and-delivery operations, in addition to other labor-related risks; • combining the Federal Express and legacy FedEx Ground physical networks and operations, including consolidating or optimizing pickup-and-delivery and linehaul operations; • integrating, consolidating, and implementing new administrative and back-office support functions, information-technology infrastructure, and computer systems; • harmonizing certain operating practices; human resource management practices such as employee recruitment, development, and compensation programs; internal controls; and other policies, procedures, and processes; • maintaining or amending existing agreements with customers and service providers and avoiding delays in entering into new agreements with prospective customers and service providers; • legal challenges by service providers or governmental agencies seeking to slow or stop plans related to Network 2.0; • addressing employee issues so as to promote retention and maintain efficient and effective labor and employee relations; • maintaining access to ports of call and railroads for intermodal support; • managing the closure and consolidation of certain buildings and the movement of certain positions, functions, or work to different locations or to third party vendors; • obtaining any required regulatory licenses, operating authority, or contractual consents; and • managing unforeseen increased expenses or delays associated with the transformation process. We may be unable to achieve the expected operational efficiencies and network flexibility, alignment of our cost base with demand, cost savings and reductions to our permanent cost structure, and other benefits from our transformation initiatives (including our technology infrastructure, adopting and utilizing AI and machine learning technologies). The actual amount and timing of costs to be incurred and related cost savings and reductions to our permanent cost structure resulting from these initiatives and enhancements may differ from our current expectations and estimates. These initiatives and enhancements could also result in asset impairment charges and changes to our tax liabilities and deferred tax balances and subject us to litigation. If we are not able to successfully implement our transformation initiatives, our future financial results will suffer and we may not be able to achieve our financial performance goals. All of these factors could adversely affect our results of operations and negatively affect the price of our common stock. In addition, at times the attention of certain members of our management may be focused on our transformation initiatives and diverted from day-to-day business operations, which may disrupt our business. A significant data breach or other disruption to our technology infrastructure could disrupt our operations and result in the loss of critical sensitive or confidential information, adversely affecting our reputation, business, or results of operations. Our ability to attract and retain customers, efficiently operate our businesses, execute our business strategy, conduct transformation initiatives, and compete effectively increasingly depends in part upon the sophistication, security, and reliability of our technology network, including our ability to provide features of service that are important to our customers, to protect our confidential business information including the sensitive and personal information provided by our customers, and to maintain customer confidence in our ability to protect our systems and to provide services consistent with their expectations. -20- We are subject to risks imposed by data breaches and operational disruptions, both random and targeted, including through cyberattack or cyber-intrusion, ransomware attack, malware attack, or denial-of-service attack by computer hackers, foreign governments and state-sponsored actors, cyber terrorists and hacktivists, cyber criminals, malicious employees or other insiders of Federal Express or third-party service providers, and other groups and individuals. Data breaches and other technological disruptions of companies and governments continue to increase as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased and we, our customers, and third parties increasingly store and transmit data by means of connected information technology systems. Additionally, risks such as code anomalies, “Acts of God,” transitional challenges in migrating operating company functionality to our FedEx enterprise automation platforms, data leakage, cyber-fraud, and human error pose a direct threat to our products, services, systems, and data and could result in unauthorized intrusion or block legitimate access to sensitive or confidential data regarding our operations, customers, employees, and suppliers, including personal information. The rapid evolution and increased sophistication, availability, and use of emerging technologies such as AI technologies and machine learning by us, our customers, suppliers, business partners, third-party providers, and bad actors may increase the likelihood of the occurrence of data breaches and operational disruptions. We also depend on and interact with the technology and systems of third parties for a variety of reasons, including AI-enabled technologies, encryption and authentication technology, employee email, and other communication technologies, cloud services, delivery services, back-office support, and other functions. Certain third parties host, process, or have access to information we maintain about our company, customers, employees, and vendors and/or operate systems that are critical to our business operations and services. Like us, these third parties are subject to risks imposed by data breaches, cyberattacks, and other events or actions that could damage, disrupt, or close their networks or systems. We have security processes, protocols, and standards in place, including contractual provisions requiring such security measures, that are applicable to such third parties and are designed to protect information that is held by them, or to which they have access, as a result of their engagements with us. A cyberattack has and may in the future defeat one or more of such third parties’ security measures, allowing an attacker to obtain information about our company, customers, employees, and vendors or disrupt our operations. Certain third parties also have and may in the future experience operational disruptions or human error that could result in unauthorized access to sensitive or confidential data regarding our operations, customers, employees, and suppliers, including personal information. See “Failure of third-party service providers, vendors, or suppliers to perform as expected, or disruptions in our relationships with such third parties or their provision of services to Federal Express, could materially and adversely affect our business, financial condition, cash flows, and results of operations.” From time to time we experience disruptions to our complex, global technology infrastructure, including our computer systems and websites. Such events could result in the loss of confidential business or customer information; require substantial repairs or replacements, resulting in significant costs; and lead to the temporary or permanent transfer by customers of some or all of their business to our competitors. The foregoing could harm our reputation and adversely affect our business, customer service, and results of operations. Additionally, a security breach could require us to devote significant management resources to address the problems created. These types of adverse effects could also occur in the event the confidentiality, integrity, or availability of company and customer information was compromised due to a data loss by Federal Express or a trusted third party. We or the third parties with which we share information may not discover any security breach and loss of information for a significant period of time after the security breach occurs. Even if we detect a cybersecurity incident, the nature and extent of the incident may not be immediately clear. It may also not be clear how best to contain and remediate any harm caused by the cybersecurity incident, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Based on the sophistication of these threat actors and the size and complexity of our information systems and network environment, among other factors, an investigation into a cybersecurity incident could take a significant amount of time to complete. In addition, while the investigation of a cybersecurity incident is ongoing, we may not know the full extent of the harm caused by a threat actor, and such harm may spread both internally and to certain customers, vendors, or other third parties. Additionally, our logging capabilities and the logging capabilities of third parties are not always complete or sufficiently detailed, which could affect our ability to fully investigate and understand the scope of security events. Given the age, size, and complexity of our network environment, operational technology, and computer systems, patches for certain vulnerabilities may not exist and, even where patches or other risk-mitigating activities are available, the development of patches or execution of risk-mitigating actions may not occur before an underlying vulnerability is exploited and results in the disruption of our operations or compromise of our information systems or data. A significant number of our employees as well as customers and others with whom we do business continue to work remotely or in hybrid models, which may heighten these risks. These risks may also be heightened by our transformation initiatives. Furthermore, we are subject to an increasing number of cybersecurity compliance and reporting obligations in different jurisdictions that vary in their scope and application, creating conflicting reporting requirements. These factors and the time spent to comply may inhibit our ability to quickly provide complete and reliable information about the cybersecurity incident to customers, counterparties, and regulators, as well as the public. Any or all of these factors could further increase the costs and consequences of a cybersecurity incident on our business and results of operations. See “Our business is subject to complex and evolving United States and foreign laws and regulations regarding data protection and cybersecurity, which impose significant costs and regulatory risks that are likely to increase over time” for additional information on risks related to legal and regulatory developments with respect to data protection. -21- We have invested and continue to invest in technology security initiatives, information-technology risk management, business continuity, and disaster recovery plans, including investments to retire and replace end-of-life systems. The development and maintenance of these measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly more frequent, intense, and sophisticated. Despite our efforts, we are not fully insulated from data breaches, technology disruptions, data loss, and cyber-fraud, which could adversely affect our competitiveness and results of operations. Additionally, we and our third-party service providers, vendors, and suppliers have experienced repeated attempts, some of which have been successful, by cyber criminals to gain access to customer accounts for the purposes of fraudulently diverting and misappropriating items being transported in our network, fraudulently charging shipment fees to customer accounts, and fraudulently sending e-mails to recipients purporting to be from FedEx. Our security processes and initiatives may be unable to detect or prevent a breach or disruption in the future. Although we do not believe the cyber incidents and other systems disruptions that we and our third-party service providers have experienced to date have had a material effect on our business, there is no guarantee that a future cybersecurity threat or incident will be detected and remediated to not materially and adversely affect our business strategy, reputation, results of operations, or financial condition. While we believe we devote significant resources to network security, disaster recovery, employee training and other measures to secure our information technology systems and prevent unauthorized access to or loss of data, there are no guarantees that they will be adequate to safeguard against all cyber incidents, systems disruptions, system compromises or misuses of data. We are increasingly utilizing AI within our operations. The development and deployment of AI technologies involve significant risks and uncertainties, and our ability to successfully implement and use AI technologies depends on a variety of factors, including the reliability, accuracy, security, and effectiveness of the technologies; the availability of qualified personnel and technical infrastructure; the performance of third-party vendors and service providers; evolving regulatory requirements and industry standards; and customer and market acceptance. AI technologies are rapidly evolving and may produce inaccurate, flawed, or unintended outputs or outcomes. Our use of AI may also increase risks related to cybersecurity, data privacy, intellectual property, confidentiality, regulatory compliance, and reputational harm. In addition, evolving laws, regulations, and governmental guidance relating to AI may require us to incur additional compliance costs, change our business practices, or limit our ability to develop or use AI technologies. Our competitors may also adopt AI technologies more quickly or more effectively than we do. Further, our investments in AI technologies may not improve our services, operations, efficiency, or profitability to the extent anticipated and may divert resources from other strategic initiatives. Any failure to successfully develop, implement, manage, or use AI technologies in a timely, compliant, and responsible manner could adversely affect our business, reputation, results of operations, or financial condition. We are self-insured for certain costs associated with our operations, and insurance and claims expenses could materially and adversely affect our business, financial condition, cash flows, and results of operations. We are self-insured up to certain limits for costs associated with workers’ compensation claims, vehicle accidents, property and cargo loss, general business liabilities, and benefits paid under employee disability programs. Our self-insurance accruals are primarily based on estimated costs determined by actuarial methods. Estimated costs include consideration of a variety of factors and related assumptions such as the severity of claims, frequency and volume of claims, healthcare inflation, seasonality, and plan designs, which may be subject to a high degree of variability. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims involved and the length of time until the ultimate cost is known, which may be several years. Material increases in the magnitude of claims, changes to healthcare costs, accident frequency and severity, insurance retention levels, judgment and settlement amounts, associated legal expenses, and other factors could result in unfavorable differences between actual self-insurance costs and our reserve estimates. As a result, our insurance and claims costs could materially increase in the future, which could adversely affect our results of operations and financial condition. As a supplement to our self-insurance program, we maintain coverage with excess insurance carriers for potential losses that exceed the amounts we self-insure. Periodically, we evaluate the level of insurance coverage and adjust insurance levels based on risk tolerance, risk volatility, and premium expense. Although we believe our aggregate insurance limits should be sufficient to cover our historic claims amounts, we can provide no assurance that such coverage will be adequate to protect us from costs incurred with certain events. For example, the commercial trucking industry has experienced a wave of blockbuster or so-called “nuclear” verdicts, including some instances in which juries have awarded hundreds of millions of dollars to those injured in accidents and their families. Given this trend, it is possible that additional claims could exceed our aggregate coverage limits. If a claim were to exceed our aggregate insurance coverage, we would bear the excess exposure not covered by excess insurance carriers. Given the current claims environment, the amount of coverage available from excess insurance carriers is decreasing, the premiums for this excess coverage are increasing significantly, and excess insurance carriers are challenging insurance claims more frequently. Accordingly, our excess insurance and claims expenses may continue to increase, or we could further increase our exposure not covered by excess insurance carriers as policies are renewed or replaced. Our results of operations and financial condition could continue to be adversely affected if our costs or losses significantly exceed our aggregate coverage limits, we are unable to obtain excess insurance coverage in amounts we deem sufficient, our insurance carriers fail to pay on our insurance claims, or we experience a claim for which coverage is not provided. -22- The transportation infrastructure continues to be a target of terrorist activities. Because transportation assets continue to be a target of terrorist activities, governments around the world are adopting or are considering adopting stricter security requirements that will increase operating costs and potentially slow service for businesses, including those in the transportation industry. These security requirements change periodically as the result of regulatory and legislative requirements, imposing additional security costs and creating a level of uncertainty for our operations. For example, the TSA requires Federal Express to comply with a Full All-Cargo Aircraft Operator Standard Security Plan, which contains evolving and strict security requirements. It is reasonably possible that these rules or other future security requirements could impose material costs on us or slow our service to our customers. The effects on our operations of avoiding areas of the world, including airspace, in which there are geopolitical conflicts and the targeting of aircraft by parties to those conflicts can also be significant. Moreover, a terrorist attack, or acts of sabotage by nation state actors using hybrid operations, directed at Federal Express or other aspects of the transportation infrastructure could disrupt our operations and adversely affect demand for our services. Failure of third-party service providers, vendors, and suppliers to perform as expected, or disruptions in our relationships with such third parties or their provision of services to FedEx, could materially and adversely affect our business, financial condition, cash flows, and results of operations. FedEx has engaged third-party service providers, vendors, and suppliers to perform certain key functions, including the provision of information technology infrastructure, application development, maintenance and support, and end-user support services. There can be no assurance that our third-party service providers, vendors, and suppliers will perform contractual service obligations or adhere to compliance requirements, and such service providers, vendors, and suppliers may suffer disruptions to their systems, labor groups, or supply chains that could adversely affect their services. FedEx may also have disagreements with such service providers, vendors, or suppliers, and related contracts may be terminated or may not be extended or renewed. Additionally, from time to time third-party service providers, vendors, or suppliers have engaged in fraudulent activities in the course of their business relationships with FedEx. Any of the foregoing could disrupt our operations and result in a material adverse effect on our reputation, business, or results of operations. The effects of a widespread outbreak of an illness or any other communicable disease or public health crisis could materially and adversely affect our business, results of operations, cash flows, and financial condition. A widespread outbreak of an illness or any other communicable disease or public health crisis could have varying effects on the demand for our services, our business operations, and the North American and global economies and supply chains. The extent of the effect of such an event on our business, results of operations, and financial condition, as well as the North American and global economies, will be dictated by developments that cannot be predicted, such as: its duration and spread; the success of efforts to contain it and treat its effects, including travel bans and restrictions, quarantines, shelter-in-place orders, business and government shutdowns, and other restrictions; the possibility of additional subsequent widespread outbreaks and variant strains and the effect of actions taken in response; and the resulting effects on the economic conditions in the markets in which we operate. Our business is labor and capital intensive in nature, which may require us to incur higher costs to operate our networks during such an event. If we are unable to remain agile and flex our networks to align with shipping volumes, customer needs, disrupted global supply chains, and other network inefficiencies, market demands, and operating conditions, or are unable to continuously respond to evolving governmental policies, our business operations could be negatively affected, which could have a further adverse effect on our results of operations. Further, due to the size, scope, and geographically dispersed nature of our operations, the expenses we incur to protect the health and safety of our team members and customers may be higher than similar expenses incurred by companies in other industries. To the extent a widespread outbreak of an illness or any other communicable disease or public health crisis adversely affects our business and financial results, it may also have the effect of heightening many other risks described in this section, any of which could materially and adversely affect our business, results of operations, cash flows, and financial condition. Such risks include, but are not limited to, additional changes in the state of the global economy and international trade policies and relations; our ability to execute our transformation initiatives, implement our business strategy, and effectively respond to changes in market dynamics and customer preferences; our strong reputation and the value of the FedEx brand; our ability to meet our labor and purchased transportation needs while controlling related costs; our ability to achieve our goal of carbon neutrality for our global operations by calendar 2040; and the effect of litigation or claims from customers, team members, suppliers, regulators, or other third parties relating to the crisis or our actions in response. Strategic Risks Failure to successfully implement our business strategy and effectively respond to changes in market dynamics and customer preferences will cause our future financial results to suffer. We are making significant investments and other decisions in connection with our long-term business strategy, such as those related to our transformation initiatives. See “The failure to successfully execute our transformation initiatives in the expected time frame and at the expected cost may materially and adversely affect our future results.” above and “ Item 1. Business ” and “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition ” of this Annual Report for additional information. In addition, we are investing in data insight solutions intended to drive supply chain efficiency for our customers. -23- Such initiatives and enhancements may require us to make significant capital expenditures or incur significant expenses. We have also incurred, and may continue to incur, increased operating expenses in connection with certain changes to our business strategy. We may not be able to derive the expected operational efficiencies and network flexibility, alignment of our cost base with demand, cost savings and reductions to our permanent cost structure, digital revenue growth, and other benefits from our strategic investments and other decisions. For example, in January 2026, we initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international and domestic operations. See “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition ” of this Annual Report for more information. The execution of the programs is subject to a consultation process in accordance with local country processes and regulations. The actual amount and timing of business optimization costs and related cost savings resulting from the workforce reduction plan are dependent on local country consultation processes and regulations and negotiated social plans and may differ from our current expectations and estimates. If we are not able to successfully implement this plan, our future financial results may suffer. Further, in developing our business strategy, we make certain assumptions including, but not limited to, those related to customer demand and the mix of services to be purchased by our customers, the future rate of e-commerce growth and inventory restocking, passenger airline cargo capacity, competition, and the global economy, and actual market, economic, and other conditions may be different from our assumptions. As technology (including AI and machine learning), customer behavior, and market conditions continue to evolve, it is important that we maintain the relevance of our brand and service offerings to our customers. If we are not able to successfully implement our business strategy and effectively respond to changes in technology, customer preferences, and market dynamics, our future financial results will suffer. For additional discussion, see “ Item 1. Business ” of this Annual Report under the caption “Strategy.” We may not be able to achieve our calendar 2029 financial performance targets. On February 12, 2026, we announced a comprehensive multi-year financial framework with financial performance targets for 2029. Our ability to achieve these goals is dependent on a number of factors, including the other risk factors described in this Annual Report. We may fail to achieve our long-term financial performance targets if we are unsuccessful in implementing our strategies, our estimates or assumptions change, or for any other reason. Our inability to achieve these targets could materially and adversely affect our results of operations and financial condition, and the price of our common stock may be negatively affected. We may not realize the anticipated benefits from the Spin-Off, which could harm our business. On June 1, 2026, we completed the Spin-Off. We may incur significant additional expenses and challenges arising from and following the Spin-Off of the FedEx Freight business. We may not be able to achieve the full strategic, financial, operational, or other benefits that are expected to result from the Spin-Off, and the anticipated benefits of the Spin-Off are based on a number of assumptions, some of which may prove incorrect. A failure to realize all or some of the expected benefits of the Spin-Off, or if such benefits are delayed, could materially and adversely affect our business, financial condition, cash flows, and results of operations. In addition, there can be no assurance that the combined value of the shares of the two separated companies will be equal to or greater than the value of our common stock had the Spin-Off not occurred. In connection with the Spin-Off, we and FedEx Freight entered into various agreements that provide for the performance of certain services by each company for the benefit of the other, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property cross-license agreement, a trademark license agreement, stockholder and registration rights agreement, and an indemnification agreement. The separation and distribution agreement provides for cross-indemnities between us and FedEx Freight for liabilities allocated to the respective party pursuant to the terms of such agreement. If FedEx Freight or its successor entities are unable to satisfy their obligations under these agreements, we could incur operational difficulties or losses. In addition, the terms of the Spin-Off include licenses and other arrangements to provide for certain ongoing use of intellectual property in the operations of both businesses. For example, both us and FedEx Freight retain the ability to make ongoing use of certain brands and other intellectual property. As a result of this continuing shared use of brands and other intellectual property, there is a risk that conduct or events materially and adversely affecting the reputation of FedEx Freight could also materially and adversely affect our reputation. In addition, we retained an equity interest in FedEx Freight in connection with the Spin-Off. We cannot predict the trading price of shares of FedEx Freight’s common stock and the market value of the FedEx Freight shares is subject to market volatility and other factors outside of our control. As previously disclosed, we will divest our ownership interest in FedEx Freight within twenty-four months from the Spin-Off, but there can be no assurance regarding the timing of, or timeframe over which, such divestiture or divestitures may occur, or the amount of proceeds to be received by us in connection with any such divestitures within the twenty-four month timeframe. The Spin-Off could result in substantial tax liability to us and our stockholders. We received an opinion of counsel and a private letter ruling from the U.S. Internal Revenue Service (the “IRS”) regarding the qualification of the Spin-Off and certain related transactions as a transaction that is generally tax-free to us and our stockholders for U.S. federal income tax purposes. While the private letter ruling is generally binding on the IRS to the extent the factual representations and assumptions on which it is based are true and accurate, the opinion of our counsel is not binding on the IRS or the courts. There can be no assurance that the IRS or a court -24- will not take a contrary position with respect to the conclusions reached in the tax opinion. If the IRS ultimately determines that the Spin-Off is taxable, then the Spin-Off could be treated as a taxable dividend or capital gain to our stockholders for U.S. federal income tax purposes, and we could incur significant U.S. tax liabilities. In connection with the Spin-Off, we entered into a tax matters agreement with FedEx Freight, pursuant to which FedEx Freight agreed to not enter into transactions that could cause the Spin-Off or any related transactions to be taxable to us and to indemnify us for any tax liability resulting from any such transaction. However, there can be no assurance that FedEx Freight would have the resources or liquidity required to indemnify us for any such tax liability. We depend on our strong reputation and the value of the FedEx brand. FedEx is one of the most widely recognized, trusted, and respected brands in the world, and the FedEx brand is one of our most important and valuable assets. The FedEx brand name symbolizes high-quality service, reliability, and speed. In addition, we have a strong reputation among customers, team members, and the general public for high standards of corporate responsibility, governance, and ethics. The FedEx brand name and our corporate reputation are powerful tools for sales, marketing, and recruitment, and we devote significant resources to promoting and protecting them. Adverse publicity or sensationalism across media channels (whether or not justified) relating to activities including, but not limited to, the following by our team members or others with whom we do business (over whom we may have little or no control) could tarnish our reputation and reduce the value of our brand and goodwill: customer service mishaps, accidents, catastrophes, or incidents involving aircraft, vehicles, or facilities operated by us or our service providers; low safety or service levels; data breaches, cyberattacks, or technology infrastructure disruptions; utilization of emerging technologies such as AI; allegations of noncompliance with laws or claims that result in litigation; the shipment of certain items pursuant to our obligation as a common carrier operating under federal law; labor relations and workforce reductions or disruptions; our advertising campaigns, sponsorship arrangements, or marketing programs; our sustainability goals and related progress; our political activities and expenditures; or our executive compensation practices. With the rapid growth in the use of AI and the global influence of social media outlets such as Facebook, YouTube, Instagram, X, TikTok, and other platforms, adverse publicity, whether warranted or not, can be disseminated quickly and broadly without context, making it increasingly difficult for us to effectively respond. Certain forms of technology and AI also allow users to alter or create images, videos, and other information relating to FedEx and present the information in a false or misleading manner that seems real, including attempts by third parties to masquerade as FedEx couriers and customer service agents for the purpose of deceiving and defrauding FedEx customers. Further, our actual or perceived position, lack of position, or perceived lack of transparency on environmental, social, political, public policy, labor relations, or other sensitive issues could harm our reputation with certain groups, including our customers, stockholders, team members, advocacy groups, government representatives, and regulatory bodies. Expectations regarding these matters continue to evolve and are not uniform. Although we try to adapt and maintain a balance that satisfies all of these stakeholders, we may not always be able or choose to move as quickly or in the direction that various competing interests desire or demand, which could materially and adversely impact our reputation. Damage to our reputation and loss of brand equity could reduce demand for our services and/or create difficulties in retaining and recruiting employee talent and could materially and adversely affect our business, financial condition, cash flows, and results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand and goodwill. We face intense competition. The transportation and business services markets are both highly competitive and sensitive to price and service, especially in periods of little or no macroeconomic growth. Some of our competitors have more financial resources and competitive advantages than we do, appear willing to operate at little or no margin to gain market share, or are owned, controlled, or subsidized by foreign governments, which enables them to raise capital more easily. We face intense competition from global air freight forwarders for air freight business. We also compete with regional transportation providers that operate smaller and less capital-intensive transportation networks and startup companies that combine technology with flexible labor solutions such as crowdsourcing to focus on local market needs. In addition, some high-volume package shippers are developing and implementing in-house delivery capabilities and utilizing independent contractors for deliveries, which could in turn materially and adversely affect our business, financial condition, cash flows, and results of operations. For example, Amazon has established a network of hubs, aircraft, and vehicles, recently began offering an LTL freight service for inbound shipments to its distribution facilities, and recently began offering its internal delivery capabilities broadly to third parties. See “ Item 1. Business ” of this Annual Report for additional information. We believe we compete effectively with these companies - for example, by providing more reliable service at compensatory prices. However, the existence of an irrational pricing environment could limit our ability to maintain or increase our prices (including our fuel surcharges in response to rising fuel costs), which could materially and adversely affect our results of operations. While we believe we compete effectively through our current and planned service offerings, if our current competitors or potential future competitors offer a broader range of services or better service levels, more effectively bundle their services, or offer services at lower prices, it could materially and adversely affect our business, financial condition, cash flows, and results of operations. Continued transportation industry consolidation may further increase competition. Moreover, if high-volume package shippers further develop or expand internal capabilities for the services we provide, it may reduce our revenue and could negatively affect our financial condition and results of operations. These effects could be exacerbated if high-volume package shippers offer such capabilities to third parties. News regarding such developments or expansions could also negatively affect the price of our common stock. -25- New and emerging technologies continue to create additional sources of competition, and if we fail to incorporate new and emerging technologies as effectively as our competitors, our competitive position may be harmed. Advancements in technology, such as advanced safety systems; automated package sorting, handling, and delivery; autonomous delivery; third-party supply chain insight and management; AI; vehicle platooning; alternative fuel vehicles; and digitization of freight services, may necessitate that we increase investments in order to remain competitive, and our customers may not be willing to accept higher rates to cover the cost of these investments. See “We may be unable to achieve or demonstrate progress on our goal of carbon neutrality for our global operations by calendar 2040.” below for additional information. Our businesses are capital intensive, and we must make capital decisions based upon projected volume levels. We make significant investments in aircraft, package handling facilities, vehicles, technology, sort equipment, acquired companies, and other assets to support our transportation and business networks. The amount and timing of capital investments depend on various factors, including our anticipated volume growth. We must make commitments to purchase or modify aircraft years before the aircraft are actually needed based on projections of volume levels and fleet requirements, which have become more difficult to make in light of recent macroeconomic, international trade and geopolitical uncertainty and volatility. Missing our projections could result in too much or too little capacity relative to our shipping volumes. Overcapacity could lead to below-market asset dispositions or write-downs, as well as negatively affect operating margins, and undercapacity could negatively affect service levels. See “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition - Results of Operations and Outlook - Consolidated Results - Asset Impairment Charges” of this Annual Report for information regarding the noncash impairment charges recorded in 2026 and 2025 in connection with our decision to permanently retire certain aircraft and related engines from service. Our inability to execute and effectively operate, integrate, leverage, and grow acquired businesses and realize the anticipated benefits of acquisitions, joint ventures, and strategic alliances and investments could materially and adversely affect us. Our strategy for long-term growth, productivity, and profitability depends in part on our ability to make prudent strategic acquisitions and investments, form joint ventures or strategic alliances, and realize the expected benefits from these transactions. We regularly acquire businesses, enter into strategic alliances, and make investments across the more than 220 countries and territories in which we provide services. Acquisitions and other strategic transactions involve special commercial, customer, accounting, regulatory, compliance, information technology, human resources, cultural, and other risks, including the potential assumption of unanticipated liabilities and contingencies. Additionally, we may be required to make significant capital expenditures and/or incur certain operating expenses following the completion of certain transactions, which may be higher than initially expected. While we expect our past and future acquisitions and strategic transactions to enhance our value proposition to customers and improve our business and long-term profitability, there can be no assurance that we will realize our expectations within the time frame we have established, if at all, or that we can continue to support the value we allocate to acquired businesses, including their goodwill or other intangible assets. We have previously incurred goodwill impairment charges related to certain of our acquisitions, some of which have been material, and may incur additional goodwill impairment charges in the future. We may not achieve the expected strategic or financial benefits relating to our InPost investment. We, as a member of a consortium, have entered into a conditional agreement on a recommended all-cash public offer for all issued and outstanding shares of InPost S.A. (“InPost”), which offer is subject to regulatory approvals and other conditions. Following the completion of the offer, the consortium will be structured with us holding 37%, and thereafter we and InPost intend to enter into arm’s length commercial agreements. Because InPost would continue to operate as a standalone company and we would not control this entity and must rely on the actions of other investors and the management of the entity, we may not be able to influence key strategic or operational decisions. In addition, delays in obtaining required regulatory approvals or completing the related commercial arrangements (or failure to obtain such approvals or complete such arrangements) could materially and adversely affect the timing or value of the investment. Even if the regulatory approvals are obtained, other conditions are met, and our commercial arrangements with InPost are finalized, there can be no assurance that our investment and the commercial agreements will achieve the strategic or financial benefits we currently expect. Human Resource Management Risks Labor-related disruptions and potential changes in labor laws may materially and adversely affect our business, financial condition, cash flows, and results of operations. Our business is labor intensive in nature, utilizing large numbers of employees across numerous classes, as well as service providers. Despite continual organizing attempts by labor unions, our employees in the U.S. and Canada, with the exception of our pilots, are not unionized (we acquired FedEx Supply Chain in 2015, which already had a small number of unionized employees). Additionally, certain of our employees outside of the United States and Canada are unionized. For information regarding our agreement with the union representing our pilots, see “ Item 1. Business ” under the caption “Business Segments – Federal Express” and Note 20 of the consolidated financial statements included in “ Item 8. Financial Statements and Supplementary Data ” of this Annual Report. If we are unable to reach an agreement with any of our unionized work groups in future negotiations regarding the terms of their collective bargaining agreements, or if additional groups within our workforce become -26- unionized, we may be subject to actual or threatened strikes, work interruptions or stoppages, which could materially and adversely affect our business, financial condition, cash flows, and results of operations. Labor unions have continued to make attempts to organize employees at businesses and in industries that have not traditionally been unionized, and in certain instances have been successful. Such attempts could continue in 2027. Additionally, the U.S. Congress has, in the past, considered adopting changes in labor laws that would make it easier for unions to organize units of our employees. For example, there is always a possibility that legislative or administrative actions, or judicial decisions, could attempt to remove our employees from the jurisdiction of the RLA. Additionally, this jurisdiction could be challenged in connection with our recently completed one FedEx consolidation and ongoing Network 2.0 transformation initiative. For additional discussion of the RLA, see “ Item 1. Business ” of this Annual Report under the caption “Regulation.” Such legislation or challenge could expose our customers to the type of service disruptions that the RLA was designed to prevent – local work stoppages in key areas that interrupt the timely flow of shipments of time-sensitive, high-value goods throughout our global network. Such disruptions could threaten our ability to provide competitively priced shipping options and ready access to global markets. There is also the possibility that Congress could pass other labor legislation that could materially and adversely affect our operations with employees governed by the NLRA. In addition, the NMB and the NLRB have and may continue to take actions that could make it easier for our employees, as well as vendor, service provider, and supplier workforces, to organize under the RLA or NLRA. Finally, changes to federal or state laws, regulations, rules, judicial or administrative precedent, decisions or guidance governing employee classification could affect the status of service providers as independent employers of their drivers. If we are deemed to be an employer or joint employer of the drivers of these service providers, labor organizations could more easily organize these individuals, our operating costs could increase materially, and we could incur significant capital outlays and experience material and adverse effects to service levels. Our failure to attract and retain employee talent, meet our purchased transportation needs, or maintain our company culture, as well as increases in labor and purchased transportation costs, could materially and adversely affect our business and results of operations. Our success depends upon the efforts and abilities of our high-quality employees, many of whom are longstanding FedEx team members. Difficulties in motivating, rewarding, recruiting, and retaining employee talent, including members of senior management and successors to members of senior management; failure to protect members of senior management from security threats (which certain executive officers have experienced in the past); the unexpected loss of such individuals resulting in the depletion of our institutional knowledge base; and/or our inability to successfully transition key roles could materially and adversely affect our business, results of operations, reputation, and the price of our common stock. To meet operational needs and service standards, we regularly seek to hire a large number of part-time and seasonal workers in our stations and hubs, and to contract service providers that conduct linehaul and pickup-and-delivery services. Certain positions at FedEx have historically experienced high turnover rates, which can lead to increased recruiting, training, and retention costs. Additionally, our culture is important to providing high-quality customer service and having a productive workforce and could be materially and adversely affected by our evolving operations and other factors. If we fail to maintain the strength of our culture, our competitive ability and our business may be harmed. Our ability to meet our labor and purchased transportation needs while controlling related costs is generally subject to numerous external factors, including the availability of qualified service providers and persons in the markets where we and our service providers operate and unemployment levels within these markets, prevailing and competitive wage rates and other benefits, health and other insurance costs, inflation, fuel and energy prices and availability, behavioral changes, adoption of new or revised employment and labor laws and regulations (including increased minimum wage requirements) or government programs, safety, and security levels of our operations, our reputation within the labor and transportation markets, changes in the business or financial soundness of service providers, interest in contracting with FedEx, and the effect of a widespread public health crisis. Additionally, certain service providers (acting collectively or in coordination in some instances) may seek to increase financial rates or modify contract terms and may refuse to provide service to Federal Express. Our inability to effectively meet our labor and purchased transportation needs can increase our costs, hinder our ability to execute our business strategy, negatively affect service levels, and could materially and adversely affect our business, financial condition, cash flows, and results of operations. Certain of these risks may be heightened by our transformation initiatives. In connection with the Spin-Off, we experienced and continue to experience changes in personnel and management that may involve organizational disruption and uncertainty. These changes have the potential to disrupt our business. If we fail to manage these changes successfully, we could experience significant delays or difficulty in the achievement of our strategic objectives and our business, financial condition and results of operations could be materially and adversely harmed. We contract with service providers to conduct certain linehaul and pickup-and-delivery operations, and the status of these service providers as direct and exclusive employers of drivers providing these services is being challenged. We are defending joint-employer cases where it is alleged that we should be treated as an employer or joint employer of the drivers employed by service providers with whom we contract to conduct certain linehaul and pickup-and-delivery operations. We incur certain costs, including legal fees, in -27- defending the status of service providers as direct and exclusive employers of their drivers. We continue to believe that we are not an employer or joint employer of the drivers of these independent businesses. However, adverse determinations in these matters or regulatory developments could, among other things, entitle service providers’ drivers to certain wage payments and penalties from the service providers and us, and result in wages, overtime, penalties, withholding tax and benefits, and other employment-related liabilities for us. The status of the drivers employed by these service providers could be further challenged in connection with Network 2.0 transformation. Potential changes to pilot flight and duty time regulations could impair our operations and impose substantial costs on us . In 2010, the FAA proposed regulations that would change the flight and duty time rules applicable to all-cargo air carriers. When the FAA issued final regulations in 2011 (the “2011 regulations”), all-cargo carriers, including Federal Express, were exempt from these new requirements. Instead, all-cargo carriers were required to continue complying with previously enacted flight and duty time rules and allowed to pursue the development of fatigue risk management systems to develop fatigue mitigations unique to each operation. In 2012, the FAA reaffirmed the exclusion of all-cargo carriers from the 2011 regulations, and litigation in the U.S. Court of Appeals for the District of Columbia affirmed the FAA’s decision. However, this issue remains a policy priority for certain labor groups, and the U.S. Congress periodically considers legislation that, if adopted, would require all-cargo carriers to comply with the 2011 regulations. Required compliance with the 2011 regulations could impose substantial costs on us in order to maintain operational reliability and manage pilot fatigue. Increasing costs, the volatility of costs and funding requirements, and other legal mandates for employee benefits, especially pension and healthcare benefits, could materially and adversely affect our results of operations, financial condition, and liquidity. We sponsor programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans, and postretirement healthcare plans. The costs of providing pension and other retirement benefit plans are dependent on numerous assumptions, such as discount rates, expected long-term investment returns on plan assets, future salary increases, employee turnover, mortality, and retirement ages. Changes in actuarial assumptions and differences between the assumptions and actual values, as well as significant declines in the value of investments that fund our pension and other postretirement plans, if not offset or mitigated by a decline in plan liabilities, could increase pension and other postretirement expense, and we could be required from time to time to fund the pension plans with significant amounts of cash. Such cash funding obligations could materially and adversely affect our results of operations and liquidity. Additionally, the rules for pension and retirement benefit plan accounting are complex, involve numerous assumptions, and can produce volatility in our results of operations, financial condition, and liquidity. For example, we recognized a pre-tax, noncash MTM gain of $647 million in 2026 ($497 million, net of tax, or $2.08 per diluted share). For additional information on our MTM retirement plans accounting adjustments, see “ Item 7. Management’s Discussion and Analysis of Results of Operations and F inancial Condition - Results of Operations and Outlook - Consolidated Results - Retirement Plans MTM Adjustments” and Note 12 of the consolidated financial statements included in “ Item 8. Financial Statements and Supplementary Data ” of this Annual Report. Environmental, Climate, and Weather Risks We may be affected by global climate change or by legal, regulatory, or market responses to such change. Concern over climate change, including the effect of global warming, has led to significant U.S. and international governmental efforts to limit GHG emissions, including our aircraft and vehicle engine emissions. Increasingly, state and local governments are also considering environmental-related regulatory and reporting requirements. Compliance with such regulation and the associated potential cost is complicated by the fact that various countries and regions are following different approaches to the regulation and reporting of climate and other environmental matters. Increased regulation and reporting obligations regarding GHG emissions, especially aircraft or vehicle engine emissions, could impose substantial taxes, fees, and other costs on us. These include an increase in the cost of the fuel and other energy we purchase, investments required to obtain electricity capacity, and capital and impairment costs associated with updating or replacing our aircraft, vehicles, or infrastructure prematurely. Until the timing, scope, and extent of such possible regulation becomes known, we cannot predict its effect on our cost structure or our operating results. It is reasonably possible, however, that it could materially increase our operating expenses and directly or indirectly materially and adversely affect our business, if instituted. For additional discussion of regulatory responses to climate change, including CORSIA and the Paris climate accord, see “ Item 1. Business ” of this Annual Report under the caption “Regulation.” We may also incur additional expenses as a result of new or expanded policies and laws in the United States and abroad regarding GHG emissions and other environmental matters. Furthermore, many countries and U.S. states in which we operate or are subject to regulation, such as Australia and California, have adopted, or are expected to adopt, additional requirements related to the disclosure of GHG emission and related matters. In many cases these requirements differ and may conflict from country to country, increasing our costs or requiring significant management time and attention. Additionally, we could be subject to climate litigation or regulatory enforcement actions, as groups, individuals, and governmental authorities affected by climate change seek to recover climate-related damages from entities they perceive as being partially responsible for human-induced climate change because of the emission of GHGs from their operations. -28- Moreover, even without such regulation, increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our reputation, reduce customer demand for our services, especially our air express services, and increase our liability. Finally, given the broad and global scope of our operations and our susceptibility to global macroeconomic trends, we are particularly vulnerable to the physical risks of climate change that could affect all of humankind, such as shifts in weather patterns and world ecosystems. We may be unable to achieve or demonstrate progress on our goal of carbon neutrality for our global operations by calendar 2040. In 2021, we set an ambitious goal to achieve carbon neutrality for our global operations by calendar 2040 and have also set interim targets across our main decarbonization levers, such as electric pickup-and-delivery vehicle purchases, aviation fleet emissions intensity and fleet retirement, and sustainable energy and fuel procurement, to help us progress toward the goal. Achievement of this goal depends on our execution of operational strategies relating to vehicle electrification; sustainable fuel procurement; fuel conservation and aircraft modernization; facilities; sustainable customer solutions; and potentially voluntary carbon credits. Execution of these strategies, as well as demonstrable progress on and achievement of our calendar 2040 goal, is subject to risks and uncertainties, many of which are outside of our control. See “The Environment” under “ Item 1. Business ” of this Annual Report for information on the status of our previously disclosed vehicle fuel efficiency targets. These risks and uncertainties include, but are not limited to: our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and achieve the anticipated benefits and associated cost savings of such strategies and actions; the availability and cost of, and our ability to acquire, alternative fuel vehicles, alternative fuels, fuel-efficient aircraft, global electrical charging infrastructure and requisite power grid capacity, off-site renewable energy, and other materials and components, many of which are not presently in existence or available at scale to meet the required global and regulatory demand creating intense competition that may significantly increase the costs; unforeseen production, design, operational, and technological difficulties; the outcome of research efforts and future technology developments, including the ability to scale projects and technologies on a commercially competitive basis such as carbon sequestration and/or other related processes; compliance with, and changes or additions to, global and regional regulations, taxes, charges, mandates, or requirements relating to GHG emissions, carbon costs, or climate-related goals; labor-related regulations and requirements that restrict or prohibit our ability to impose requirements on third parties who provide contracted transportation for our transportation networks; the availability of incentives to enhance the production and affordability of alternative fuel vehicles, alternative fuels, global electrical charging infrastructure and requisite power grid capacity, and other materials and components; adapting products to customer preferences and customer acceptance of sustainable supply chain solutions and potentially increased prices for our services; and the actions of competitors and competitive pressures. Purchase of carbon credits to meet our 2040 carbon neutrality goal could add significant fluctuating annualized costs due to the uncertain price of carbon and any voluntary or regulatory schemes to offset emissions, lead to increased regulatory attention, and inhibit the development of other carbon reduction approaches that we may otherwise pursue. There also is a risk that any voluntary carbon credits purchased, even if accepted by regulators, could be viewed by some third parties as not sufficiently reflecting real, verifiable, and additional GHG reductions, leading to reputational harm. There is no assurance that we will be able to successfully execute our strategies and achieve or demonstrate progress on our calendar 2040 goal of carbon neutrality for our global operations. Additionally, we may determine that it is in our best interests to prioritize other business, social, governance, or sustainable investments and/or initiatives (such as our transformation initiatives) over the achievement of our calendar 2040 goal based on economic, regulatory, or social factors, business strategy, or other reasons. Failure to achieve or demonstrate progress on our calendar 2040 goal could damage our reputation and customer and other stakeholder relationships. Further, given investors’ and other stakeholders’ increased focus related to sustainability matters, such a failure could cause large stockholders to reduce their ownership of FedEx common stock and limit our access to financing. Such conditions could materially and adversely affect our business, results of operations, and financial condition, as well as the price of our common stock. We may be affected by harsh weather conditions, natural disasters, conflicts or other unrest, or other terrorist or other physical attacks, and our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography could materially and adversely affect our business and results of operations, cash flows, and financial condition. Our operations are exposed to adverse weather conditions and localized risks from natural or man-made disasters such as earthquakes, volcanoes, wildfires, hurricanes, tornadoes, wind gusts, floods, severe winter weather, heat waves, or extended droughts, conflicts or unrest, or subject to terrorist or other physical attacks, or other disturbances, actual or threatened. Disruptions to government agencies or personnel (including as a result of government shutdowns), disruptions at airport facilities used by us to manage our operations, labor relations and market constraints, power supplies, fuel inventory levels or other factors could result in the cancellation or delay of a significant portion of our flights and, as a result, could materially and adversely affect our business, results of operations, cash flows, and financial condition. Additionally, shifts in weather patterns caused by climate change could increase the frequency, severity, or duration of certain adverse weather conditions. We may experience reduced availability and/or increases in the cost of insurance due to such changes. Prolonged interruptions or disruptions at a key location such as our FedEx Memphis World Hub or one of our information-technology centers could materially and adversely affect our business, financial condition, cash flows and results of operations. We also may incur significant costs to reestablish or relocate these functions. Moreover, resulting economic dislocations, including supply chain and fuel disruptions, could materially and adversely affect demand for our services resulting in a material and adverse effect on our business, financial condition, cash flows and results of operations. -29- Other Legal, Regulatory, and Miscellaneous Risks Government regulation and enforcement are evolving and unfavorable changes could harm our business. We are subject to regulation under a wide variety of United States federal, state, and local and non-United States government regulations, laws, policies, enforcement priorities, and actions (including through executive orders and investigations). There can be no assurance that such regulations, laws, policies, enforcement priorities, and actions will not be changed, or implemented, in ways that will decrease the demand for, or affect the provision of, our services, subject us to increased or unexpected costs, affect our reputation, or require us to modify our business models and objectives (such as our transformation initiatives), harming our financial results. In particular, legislative, executive, regulatory, judicial or other actions that the United States and non-United States governments have undertaken or could undertake, including in areas such as data privacy and sovereignty, the use of AI and other emerging technologies, taxes, foreign exchange intervention in response to currency volatility, currency controls that could restrict the movement of liquidity from particular jurisdictions, trade controls, tariffs, quotas, embargoes, or sanctions in the United States or other countries, complex economic sanctions, import and export controls, customs standards, additional security or workplace and transportation health and safety requirements, labor and employment standards (including with respect to our pilots and our service providers and their employees), enforcement of civil rights laws (such as Title VII of the Civil Rights Act of 1964) in the United States, scrutiny of human resources policies and practices, challenges to diversity-related initiatives, False Claims Act, expanded obligations under state or federal wage and hour laws, immigration and worker eligibility standards, limitations on the ability to perform work in certain locations, prohibitions against vendor or service provider engagements, worker classification, joint employment standards and liability, government contracting, state and federal antitrust, regulated commodities, environmental, climate-related, or emission standards, and accounting materially and adversely affect our results of operations, transformation initiatives, financial results or condition, capital requirements, effective tax rate, and service levels. Furthermore, some of our operations are in high-risk legal compliance environments, and the Foreign Corrupt Practices Act (the “FCPA”), similar anti-bribery laws in non-United States jurisdictions, and other compliance-related laws or regulations could result in litigation, investigations, assessment of damages, imposition of penalties, or other consequences. For additional discussion, see “ Item 1. Business ” of this Annual Report under the caption “Regulation.” Additionally, in light of the recently held and upcoming elections in the United States and various international jurisdictions and the issuance of Executive Orders in the United States, including those which are being litigated or courts have held are not supported by law, have caused and may continue to cause considerable uncertainty regarding changes to various aspects of existing laws, regulations, and enforcement priorities and strategies that could affect trade policies, labor matters, human resources and related policies and practices, immigration, taxes, and technological advancements, among other areas, and have a material effect on our business and results of operations, as well as on the price of our common stock. We could be subject to adverse changes in regulations and interpretations or challenges to our tax positions. We are subject to taxation in the United States and numerous foreign jurisdictions. From time to time, changes in tax laws or regulations may be enacted that could significantly affect our overall tax liabilities and our effective tax rate. United States and foreign governmental agencies maintain focus on the taxation of multinational companies, including statutory tax rates, digital taxes, global minimum taxes (such as the framework agreed to by members of the Organization for Economic Cooperation and Development), and transactions between affiliated companies. Such changes may require new and complex computations to be performed, significant judgments, estimates, and calculations to be made, and the preparation and analysis of information not previously relevant or regularly produced. Standard-setting bodies could interpret or issue guidance on how provisions of certain tax laws and regulations will be applied or otherwise administered that is different from our interpretation, and we may be required to make adjustments to amounts that we have recorded that may materially and adversely affect our business, financial condition, cash flows, and results of operations. See “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition - Results of Operations and Outlook - Consolidated Results - Income Taxes” of this Annual Report for additional information regarding ongoing tax examinations and challenges. Additionally, see “ Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition—Critical Accounting Estimates - Income Taxes ” of this Annual Report for information regarding estimates and potential adjustments related to our tax positions. Our business is subject to complex and evolving United States and foreign laws and regulations regarding data protection and cybersecurity, which impose significant costs and regulatory risks that are likely to increase over time. There has recently been heightened regulatory and enforcement focus relating to the collection, use, storage, retention, transfer, and processing of personal data in the United States (at both the state and federal level) and internationally, including the EU’s General Data Protection Regulation, the United States executive order relating to sharing information with China and other covered countries, the California Consumer Privacy Act (as amended by the California Privacy Rights Act, the “CCPA”), the Virginia Consumer Data Protection Act, the Canada Personal Information Protection and Electronic Documents Act (“PIPEDA”), and other similar laws that have been or will be enacted by other jurisdictions. In addition, in the United States and internationally, there has been increased legislative and regulatory activity related to Cybersecurity and AI and the risks and challenges AI poses, including the European Union’s Artificial Intelligence Act, the Colorado AI Act, and other similar state laws that have been or will be enacted. Also, China and certain other jurisdictions have enacted more stringent data localization requirements. An actual or alleged failure to comply with applicable United States or foreign data protection laws, regulations, or other data protection standards or cybersecurity regulations may expose us or our applicable third-party providers to litigation (including, in some instances, class action litigation), fines, sanctions, or other penalties, which could -30- materially and adversely affect our business, reputation, results of operations, cash flows, and financial condition. This regulatory environment is increasingly challenging, based on discretionary factors, and difficult to predict. Consequently, compliance with all applicable regulations in the various jurisdictions in which we do business may present material obligations and risks to our business, including: significantly expanded compliance burdens, costs, and enforcement risks; extensive system or operational changes; or increased costs and/or reduced attractiveness of the services we offer. All of these evolving compliance and operational requirements, as well as the uncertain interpretation and enforcement of laws, impose significant costs and regulatory risks that are likely to increase over time. Developing privacy and AI legislation within the United States and in other jurisdictions may also create limitations or added requirements on the use of personal data by FedEx Dataworks and the other FedEx operating companies. The regulatory environment for global aviation or other transportation rights may affect our operations and increase our operating costs. Our extensive air network is critical to our success. Our right to serve foreign points is subject to the approval of the DOT and generally requires a bilateral agreement between the United States and foreign governments. In addition, we must obtain the permission of foreign governments to provide specific flights and services. Our operations outside of the United States, such as FedEx’s international domestic operations, are also subject to current and potential regulations, including certain postal regulations and licensing requirements, that restrict, make difficult, and sometimes prohibit, the ability of foreign-owned companies such as FedEx to compete effectively in parts of the international domestic transportation and logistics market. Regulatory or executive actions affecting global aviation or transportation rights or a failure to obtain or maintain aviation or other transportation rights in important international markets could impair our ability to operate our networks. Further, our ability to obtain or maintain aviation or other transportation rights internationally may be materially and adversely affected by changes in international trade policies and relations. We are subject to other extensive regulatory and legal compliance requirements that may result in significant costs. For instance, the FAA from time-to-time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures in order to comply. High-profile accidents, catastrophes, or incidents involving aircraft may trigger increased regulatory and legal compliance requirements. These requirements can be issued with little or no notice, or can otherwise affect our ability to efficiently or fully utilize our aircraft, and in some instances have resulted in the temporary grounding of aircraft types altogether. Further, our business may be materially and adversely affected when governmental agencies and air traffic control and other systems they oversee cease to operate as expected, including due to partial shutdowns, sequestrations, or similar events. Lapses in government operations may result in, among other things, disruptions in the ability of governmental agencies to grant required regulatory approvals. For additional discussion, see “ Item 1. Business ” of this Annual Report under the caption “Regulation.” We are also subject to other risks and uncertainties, including: • the increasing costs of compliance with federal, state, and foreign governmental agency mandates (including the FCPA and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies; • changes in foreign currency exchange rates, especially in the euro, Chinese yuan, British pound, Canadian dollar, Australian dollar, Mexican peso, Hong Kong dollar, and Japanese yen, which can affect our sales levels and foreign currency sales prices; • loss or delay in the collection of accounts receivable; • any liability resulting from and the costs of defending against class-action, derivative, and other litigation, such as wage-and-hour, joint employment, securities, vehicle accident, and discrimination and retaliation claims, claims related to our reporting and disclosure of sustainability topics, and any other legal or governmental proceedings, including the matters discussed in Note 19 of the consolidated financial statements included in “ Item 8. Financial Statements and Supplementary Data ” of this Annual Report; • adverse rulings on appeals and in other future judicial decisions, subsequent adverse jury findings, and changes in judicial precedent; • the sufficiency of insurance coverage we purchase; • various types of fraud with respect to unauthorized uses of another person’s identity; • the effect of technology developments (including AI and machine learning) on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization; • disruptions in global supply chains, which can limit the access of Federal Express and our service providers to vehicles and other key capital resources and increase our costs; • difficulties experienced by the companies with which we contract to fly smaller regional “feeder” aircraft in attracting and retaining pilots, which could cause a reduction of service offered to certain locations, service disruptions, increased costs of operations, and other difficulties; • governmental underinvestment in transportation infrastructure, which could increase our costs and materially and adversely affect our service levels due to traffic congestion, prolonged closure of key thoroughfares, or sub-optimal routing of our vehicles and aircraft; -31- • stockholder activism, which could divert the attention of management and our Board of Directors from our business, hinder execution of our business strategy, give rise to perceived uncertainties as to our future, and cause the price of our common stock to fluctuate significantly; • successful completion of our planned stock repurchases; and • constraints, volatility, or disruption in the global capital and credit markets, our ability to maintain our current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and our ability to meet credit agreement financial covenants.