FEDEX CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting includes, among other things, defined policies and procedures for conducting and governing our business, sophisticated information systems for processing transactions, and a properly staffed, professional internal audit department. Mechanisms are in place to monitor the effectiveness of our internal control over financial reporting and actions are taken to correct all identified deficiencies. Our procedures for financial reporting include the active involvement of senior management, our Audit and Finance Committee, and our staff of highly qualified financial and legal professionals. Management, with the participation of our principal executive and financial officers, assessed our internal control over financial reporting as of May 31, 2026, the end of our fiscal year. Management based its assessment on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Based on this assessment, management has concluded that our internal control over financial reporting was effective as of May 31, 2026. The effectiveness of our internal control over financial reporting as of May 31, 2026, has been audited by Ernst & Young LLP (PCAOB ID: 42 ), the independent registered public accounting firm who also audited the Company’s consolidated financial statements included in this Annual Report. Ernst & Young LLP’s report on the Company’s internal control over financial reporting is included in this Annual Report. -66- Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of FedEx Corporation Opinion on Internal Control Over Financial Reporting We have audited FedEx Corporation’s internal control over financial reporting as of May 31, 2026, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, FedEx Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of May 31, 2026, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 31, 2026 and 2025, the related consolidated statements of income, comprehensive income, cash flows and changes in common stockholders’ investment for each of the three years in the period ended May 31, 2026, and the related notes and our report dated July 20, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Memphis, Tennessee July 20, 2026 -67- Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of FedEx Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of FedEx Corporation (the Company) as of May 31, 2026 and 2025, the related consolidated statements of income, comprehensive income, cash flows and changes in common stockholders’ investment for each of the three years in the period ended May 31, 2026, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2026 and 2025, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2026, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of May 31, 2026, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated July 20, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. U.S. Pension Projected Benefit Obligation Description of the Matter The Company sponsors defined benefit pension plans that provide retirement benefits to certain U.S. employees. At May 31, 2026, the Company’s aggregated projected benefit obligation for U.S. pension plans was $27.1 billion, which was less than the $28.5 billion fair value of U.S. pension plan assets, resulting in a funded status of $1.4 billion. As explained in Note 1 and Note 1 2 to the consolidated financial statements, the Company’s projected benefit obligation for the U.S. pension plans is measured using actuarial techniques that reflect management’s assumptions. Auditing the projected benefit obligation of the U.S. pension plans was complex due to the highly judgmental nature and significant effect of the discount rate used in the measurement process. The discount rate has a significant effect on the projected benefit obligation and is developed by utilizing the yield on a theoretical portfolio of high-grade corporate bonds with cash flows that are designed to match expected benefit payments in future years. -68- How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s process for estimating the projected benefit obligation of the U.S. pension plans, including management’s review of the discount rate and assessment of the data inputs provided to the actuary. To test the projected benefit obligation of the U.S. pension plans, our audit procedures included, among others, evaluating the methodologies, discount rate, and the underlying data used by the Company. We compared the actuarial assumptions used by management to historical trends and evaluated the change in the projected benefit obligation of the U.S. pension plans from the prior year due to the change in service cost, interest cost, actuarial gains, and benefit payments. In addition, we involved our actuarial specialists to assist in evaluating management’s methodology for determining the discount rate. As part of this assessment, we compared management’s selected discount rate to an independently developed range of reasonable discount rates. Additionally, we compared the projected future cash flows of the U.S. pension plans to the prior year projections and compared the current year benefits paid to the prior year projected cash flows. We also tested the completeness and accuracy of the underlying data, including the participant data provided to management’s actuarial specialists. Valuation of Self-Insurance Accruals Description of the Matter At May 31, 2026, the Company’s self-insurance accruals reflected in the balance sheet were $6.4 billion. As explained in Note 1 to the consolidated financial statements, self-insurance accruals include costs associated with vehicle accidents, workers’ compensation claims, property and cargo loss, general business liabilities, and benefits paid under employee disability programs. These accrued liabilities are primarily based on the actuarially estimated cost of claims, including incurred-but-not-reported (IBNR) claims. Auditing the Company’s self-insurance accruals for vehicle accidents and workers’ compensation claims is complex due to the significant measurement uncertainty inherent to the estimate, the application of management judgment, and the use of various actuarial methods. In addition, the accruals are sensitive due to the volume of claims and the amount of time that can pass before the final cost is known. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s process for estimating self-insurance accruals for vehicle accidents and workers’ compensation claims, including management’s review of actuarial estimates and assessment of data underlying the accruals. To evaluate the self-insurance accruals for vehicle accidents and workers’ compensation claims, our audit procedures included, among others, testing the completeness and accuracy of the underlying claims data used by the Company. We involved our actuarial specialists to assist in our evaluation of the methodologies applied by management in establishing the actuarially determined accrual and in reviewing the Company’s reinsurance contracts by policy year to assess the Company’s self-insured retentions, deductibles, and coverage limits. We compared the Company’s accrued amounts to a range developed by our actuarial specialists. Furthermore, we compared the Company’s historical estimates of expected incurred losses to actual losses experienced during the current year. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2002. Memphis, Tennessee July 20, 2026 -69- FEDEX CORPORATION CONSOLIDATED BALANCE SHEETS (IN MILLIONS) May 31, 2026 2025 ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,311 $ 5,502 Receivables, less allowances of $ 864 and $ 773 12,672 11,368 Spare parts, supplies, and fuel, less allowances of $ 324 and $ 308 669 602 Prepaid expenses and other 1,251 914 Total current assets 27,903 18,386 PROPERTY AND EQUIPMENT, AT COST Aircraft and related equipment 32,107 31,584 Package handling and ground support equipment 19,816 18,878 Information technology 9,942 9,706 Vehicles and trailers 11,150 10,949 Facilities and other 17,911 16,505 Total property and equipment, at cost 90,926 87,622 Less accumulated depreciation and amortization 48,882 45,980 Net property and equipment 42,044 41,642 OTHER LONG-TERM ASSETS Operating lease right-of-use assets, net 16,822 16,453 Goodwill 6,733 6,603 Other assets 5,435 4,543 Total other long-term assets 28,990 27,599 TOTAL ASSETS $ 98,937 $ 87,627 The accompanying notes are an integral part of these consolidated financial statements. -70- FEDEX CORPORATION CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA) May 31, 2026 2025 LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT CURRENT LIABILITIES Accrued expenses $ 5,725 $ 4,995 Accounts payable 4,327 3,692 Accrued salaries and employee benefits 3,759 2,731 Operating lease liabilities 2,680 2,565 Current portion of long-term debt 1,676 1,428 Short-term borrowings 745 — Total current liabilities 18,912 15,411 LONG-TERM DEBT, LESS CURRENT PORTION 23,293 19,151 OTHER LONG-TERM LIABILITIES Operating lease liabilities 14,549 14,272 Self-insurance accruals 4,413 4,033 Deferred income taxes 3,664 4,205 Pension, postretirement healthcare, and other benefit obligations 1,625 1,698 Other liabilities 834 783 Total other long-term liabilities 25,085 24,991 COMMITMENTS AND CONTINGENCIES COMMON STOCKHOLDERS’ INVESTMENT Preferred stock, no par value; 4 million shares authorized; no shares issued or outstanding — — Common stock, $ 0.10 par value; 800 million shares authorized; 318 million shares issued as of May 31, 2026 and 2025 32 32 Additional paid-in capital 4,717 4,290 Retained earnings 44,461 41,402 Accumulated other comprehensive loss ( 1,227 ) ( 1,362 ) Treasury stock, at cost; 78 million shares as of May 31, 2026 and 80 million shares as of May 31, 2025 ( 16,336 ) ( 16,288 ) Total common stockholders’ investment 31,647 28,074 TOTAL LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT $ 98,937 $ 87,627 The accompanying notes are an integral part of these consolidated financial statements. -71- FEDEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Years ended May 31, 2026 2025 2024 REVENUE $ 94,720 $ 87,926 $ 87,693 OPERATING EXPENSES: Salaries and employee benefits 33,844 31,232 30,961 Purchased transportation 23,620 21,768 20,921 Rentals and landing fees 4,883 4,647 4,571 Depreciation and amortization 4,369 4,264 4,287 Fuel 4,052 3,775 4,710 Maintenance and repairs 3,330 3,245 3,291 Separation and other costs 771 38 — Business optimization and realignment costs 366 756 582 Goodwill and other asset impairment charges 23 21 157 Other 13,999 12,963 12,654 TOTAL OPERATING EXPENSES 89,257 82,709 82,134 OPERATING INCOME 5,463 5,217 5,559 OTHER INCOME (EXPENSE): Interest expense ( 970 ) ( 789 ) ( 745 ) Other retirement plans income 885 713 722 Interest income 437 363 370 Other, net ( 22 ) ( 63 ) ( 70 ) TOTAL OTHER INCOME (EXPENSE) 330 224 277 INCOME BEFORE INCOME TAXES 5,793 5,441 5,836 PROVISION FOR INCOME TAXES 1,360 1,349 1,505 NET INCOME $ 4,433 $ 4,092 $ 4,331 EARNINGS PER COMMON SHARE: Basic $ 18.71 $ 16.96 $ 17.41 Diluted $ 18.55 $ 16.81 $ 17.21 The accompanying notes are an integral part of these consolidated financial statements. -72- FEDEX CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN MILLIONS) Years ended May 31, 2026 2025 2024 NET INCOME $ 4,433 $ 4,092 $ 4,331 OTHER COMPREHENSIVE INCOME (LOSS): Foreign currency translation adjustments, net of tax benefits of $ 6 in 2026, $ 13 in 2025, and $ 5 in 2024 145 2 ( 60 ) Prior service credit arising during period, net of tax (expense) of $ 0 in 2026, $ 0 in 2025, and ($ 11 ) in 2024 — — 36 Amortization of prior service credits and other, net of tax benefit of $ 1 in 2026, $ 6 in 2025, and $ 2 in 2024 ( 10 ) ( 5 ) ( 8 ) TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 135 ( 3 ) ( 32 ) COMPREHENSIVE INCOME $ 4,568 $ 4,089 $ 4,299 The accompanying notes are an integral part of these consolidated financial statements. -73- FEDEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) Years ended May 31, 2026 2025 2024 OPERATING ACTIVITIES Net income $ 4,433 $ 4,092 $ 4,331 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 4,369 4,264 4,287 Provision for uncollectible accounts 946 521 421 Other noncash items including leases and deferred income taxes 2,937 3,156 2,919 Stock-based compensation 177 154 163 Retirement plans mark-to-market adjustments ( 647 ) ( 515 ) ( 561 ) Goodwill and other asset impairment charges 23 21 157 Separation and other costs, net of payments 248 15 — Business optimization and realignment costs, net of payments ( 48 ) 43 26 Changes in assets and liabilities: Receivables ( 2,247 ) ( 1,780 ) ( 270 ) Other current assets ( 121 ) 90 ( 43 ) Pension and postretirement healthcare assets and liabilities, net ( 169 ) ( 553 ) ( 522 ) Accounts payable and other liabilities ( 933 ) ( 2,460 ) ( 2,553 ) Other, net ( 43 ) ( 12 ) ( 43 ) Cash provided by operating activities 8,925 7,036 8,312 INVESTING ACTIVITIES Capital expenditures ( 3,809 ) ( 4,055 ) ( 5,176 ) Purchase of investments ( 682 ) ( 262 ) ( 176 ) Proceeds from sale of investments 483 110 38 Proceeds from asset dispositions, and other investing activities, net 97 115 114 Cash used in investing activities ( 3,911 ) ( 4,092 ) ( 5,200 ) FINANCING ACTIVITIES Proceeds from debt issuances 5,289 — — Short-term borrowings, net 742 — — Principal payments on debt ( 2,049 ) ( 157 ) ( 147 ) Proceeds from stock issuances 992 524 491 Dividends paid ( 1,374 ) ( 1,339 ) ( 1,259 ) Purchase of common stock ( 796 ) ( 3,017 ) ( 2,500 ) Other, net ( 55 ) ( 30 ) ( 11 ) Cash provided by (used in) financing activities 2,749 ( 4,019 ) ( 3,426 ) Effect of exchange rate changes on cash 46 76 ( 41 ) Net increase (decrease) in cash and cash equivalents 7,809 ( 999 ) ( 355 ) Cash and cash equivalents at beginning of period 5,502 6,501 6,856 Cash and cash equivalents at end of period $ 13,311 $ 5,502 $ 6,501 The accompanying notes are an integral part of these consolidated financial statements. -74- FEDEX CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT (IN MILLIONS, EXCEPT SHARE DATA) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Balance at May 31, 2023 $ 32 $ 3,769 $ 35,259 $ ( 1,327 ) $ ( 11,645 ) $ 26,088 Net income — — 4,331 — — 4,331 Other comprehensive loss, net of tax of $ 4 — — — ( 32 ) — ( 32 ) Purchases of common stock ( 9.8 million shares) — ( 22 ) — — ( 2,495 ) ( 2,517 ) Cash dividends declared ($ 3.78 per share) — — ( 941 ) — — ( 941 ) Employee incentive plans and other ( 3.1 million shares issued) — 241 — — 412 653 Balance at May 31, 2024 32 3,988 38,649 ( 1,359 ) ( 13,728 ) 27,582 Net income — — 4,092 — — 4,092 Other comprehensive loss, net of tax of $ 19 — — — ( 3 ) — ( 3 ) Purchases of common stock ( 10.9 million shares) — ( 21 ) — — ( 2,999 ) ( 3,020 ) Issuance of treasury stock for acquisition — 42 — — 48 90 Cash dividends declared ($ 5.52 per share) — — ( 1,339 ) — — ( 1,339 ) Employee incentive plans and other ( 2.9 million shares issued) — 281 — — 391 672 Balance at May 31, 2025 32 4,290 41,402 ( 1,362 ) ( 16,288 ) 28,074 Net income — — 4,433 — — 4,433 Other comprehensive income, net of tax of $ 7 — — — 135 — 135 Purchases of common stock ( 3.3 million shares) — — — — ( 775 ) ( 775 ) Cash dividends declared ($ 5.80 per share) — — ( 1,374 ) — — ( 1,374 ) Employee incentive plans and other ( 5.0 million shares issued) — 427 — — 727 1,154 Balance at May 31, 2026 $ 32 $ 4,717 $ 44,461 $ ( 1,227 ) $ ( 16,336 ) $ 31,647 The accompanying notes are an integral part of these consolidated financial statements. -75- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: DESCRIPTION OF BUSINESS SEGMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS SEGMENTS. FedEx Corporation (“FedEx”) provides a broad portfolio of transportation, e-commerce, and business services, offering integrated business solutions utilizing our flexible, efficient, and intelligent global network. During the fiscal years ended May 31, 2026 and 2025, our primary operating companies were Federal Express Corporation (“Federal Express”), the world’s largest express transportation company and a leading North American provider of small-package ground delivery services, and FedEx Freight, Inc. (“FedEx Freight”), a leading North American provider of less-than-truckload (“LTL”) freight transportation services. Federal Express operates a unified, fully integrated air-ground express network under the respected FedEx brand. FedEx Freight provides LTL freight transportation services as a separate subsidiary. Prior to June 1, 2026, Federal Express and FedEx Freight represented our major service lines and constituted our reportable segments. On June 1, 2026, we completed the spin-off of FedEx Freight into a new, publicly traded company (the “Spin-Off”). As a result of the Spin-Off, effective June 1, 2026, FedEx will no longer consolidate the FedEx Freight business, and FedEx Freight will no longer be a reportable segment. Following the Spin-Off, we realigned our internal reporting and management structure, resulting in the identification of two new reportable segments: Express U.S. Domestic and Express International. These changes had no impact on our consolidated results of operations or financial position. See Note 20 for additional information. FISCAL YEARS . Except as otherwise specified, references to years indicate our fiscal year ended May 31, 2026 or ended May 31 of the year referenced, and comparisons are to the corresponding period of the prior year. Effective June 1, 2026, we changed our fiscal year end from May 31 to December 31. As a result, we will report operating results covering the seven-month transition period from June 1, 2026 through December 31, 2026 (the “Transition Period”) in a Transition Report on Form 10-K. Following the Transition Period, we will report our operating results on a calendar-year basis, beginning with the fiscal year ending December 31, 2027. PRINCIPLES OF CONSOLIDATION . The consolidated financial statements include the accounts of FedEx and its subsidiaries, substantially all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in consolidation. REVENUE RECOGNITION . Satisfaction of Performance Obligation A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the basis of revenue recognition in accordance with U.S. generally accepted accounting principles (“GAAP”). To determine the proper revenue recognition method for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. For most of our contracts, the customer contracts with us to provide distinct services within a single contract, primarily transportation services. Substantially all of our contracts with customers for transportation services include only one performance obligation, the transportation services themselves. However, if a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. We frequently sell standard transportation services with observable standalone sales prices. In these instances, the observable standalone sales are used to determine the standalone selling price. For transportation services, revenue is recognized over time as we perform the services in the contract because of the continuous transfer of control to the customer. Our customers receive the benefit of our services as the goods are transported from one location to another. If we were unable to complete delivery to the final location, another entity would not need to reperform the transportation service already performed. As control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We use the cost-to-cost measure of progress for our package delivery contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue, including ancillary or accessorial fees and reductions for estimated customer incentives, is recorded proportionally as costs are incurred. Costs to fulfill include labor and other direct costs and an allocation of indirect costs. For our FedEx Freight and freight forwarding contracts, an output method of progress based on time-in-transit is utilized as the timing of costs incurred does not best depict the transfer of control to the customer. We also provide customized customer-specific solutions, such as supply chain management solutions and inventory and service parts logistics, through which we provide the service of integrating a complex set of tasks and components into a single capability. For these -76- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS arrangements, the majority of which are conducted by our FedEx Logistics operating segment, the entire contract is accounted for as one performance obligation. For these performance obligations, we typically have a right to consideration from customers in an amount that corresponds directly with the value to the customers of our performance completed to date, and as such we recognize revenue in the amount to which we have a right to invoice the customer. Contract Modification Contracts are often modified to account for changes in the rates we charge our customers or to add additional distinct services. We consider contract modifications to exist when the modification either creates new enforceable rights and obligations or alters the existing arrangement. Contract modifications that add distinct goods or services are treated as separate contracts. Contract modifications that do not add distinct goods or services typically change the price of existing services. These contract modifications are accounted for prospectively as the remaining performance obligations are distinct. Variable Consideration Certain contracts contain customer incentives, guaranteed service refunds, and other provisions that can either increase or decrease the transaction price. These incentives are generally awarded based upon achieving certain performance metrics. We estimate variable consideration as the most likely amount to which we expect to be entitled. We include estimated amounts of revenue, which may be reduced by incentives or other contract provisions, in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of anticipated customer spending and all information (historical, current, and forecasted) that is reasonably available to us. Principal vs. Agent Considerations Transportation services are provided with the use of employees and independent businesses that contract with FedEx. GAAP requires us to evaluate whether our businesses themselves promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent) using a control model. Based on our evaluation of the control model, we determined that FedEx is the principal to the transaction for most of these services and revenue is recognized on a gross basis based on the transfer of control to the customer. Costs associated with independent businesses providing transportation services are recognized as incurred and included within “Purchased transportation” in the accompanying consolidated statements of income. Our contract logistics, global trade services, and certain transportation businesses engage in certain transactions wherein they act as agents. Revenue from these transactions is recorded on a net basis. Net revenue includes billings to customers less third-party charges, including transportation or handling costs, fees, commissions, and taxes and duties. Contract Assets and Liabilities Contract assets include unbilled amounts resulting from in-transit shipments, as we have an unconditional right to payment only once all performance obligations have been completed (e.g., packages have been delivered). Contract assets are generally classified as current, and the full balance is converted each quarter based on the short-term nature of the transactions. Our contract liabilities consist of advance payments and billings in excess of revenue. The full balance of deferred revenue is converted each quarter based on the short-term nature of the transactions. Contract assets were $ 760 million and $ 526 million at May 31, 2026 and May 31, 2025, respectively. Contract assets are included within “Receivables” in the accompanying consolidated balance sheets. Contract liabilities related to advance payments from customers were $ 20 million and $ 23 million at May 31, 2026 and May 31, 2025, respectively. Contract liabilities are included within “Accrued expenses” in the accompanying consolidated balance sheets. Payment Terms Certain of our revenue-producing transactions are subject to taxes and duties, such as sales tax, assessed by governmental authorities. We present these revenues net of tax. Under the typical payment terms of our customer contracts, the customer pays at periodic intervals (e.g., every 15 days, 30 days, 45 days, etc.) for shipments included on invoices received. It is not customary business practice to extend payment terms past 90 days, and as such, we do not have a practice of including a significant financing component within our revenue contracts with customers. Disaggregation of Revenue See Note 13 for disclosure of disaggregated revenue for the periods ended May 31. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance. -77- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CREDIT RISK. We routinely grant credit to many of our customers for transportation and business services without collateral. The risk of credit loss in our trade receivables is substantially mitigated by our credit evaluation process, short collection terms, and sales to a large number of customers, as well as the low revenue per transaction for most of our services. Allowances for potential credit losses are determined based on historical experience and the impact of current economic conditions. Historically, credit losses have been within management’s expectations. ADVERTISING. Advertising and promotion costs are expensed as incurred and are classified in other operating expenses. Advertising and promotion expenses were $ 436 million in 2026, $ 425 million in 2025, and $ 421 million in 2024. CASH EQUIVALENTS. Cash in excess of current operating requirements is invested in short-term, interest-bearing instruments with maturities of three months or less at the date of purchase and is stated at cost, which approximates market value. SPARE PARTS, SUPPLIES, AND FUEL. Spare parts (principally aircraft-related) are reported at weighted-average cost. Allowances for obsolescence are provided for spare parts currently identified as excess or obsolete as well as expected to be on hand at the date the aircraft are retired from service. These allowances are provided over the estimated useful life of the related aircraft and engines. The majority of our supplies and fuel are reported at weighted-average cost. PROPERTY AND EQUIPMENT . Expenditures for major additions, improvements, and flight equipment modifications are capitalized when such costs are determined to extend the useful life of the asset or are part of the cost of acquiring the asset. Expenditures for equipment overhaul costs of engines or airframes prior to their operational use are capitalized as part of the cost of such assets as they are costs required to ready the asset for its intended use. Maintenance and repairs costs are charged to expense as incurred, except for certain aircraft engine maintenance costs incurred under third-party service agreements. These agreements result in costs being expensed based on cycles or hours flown and are subject to annual escalation. These service contracts transfer risk to third-party service providers and generally fix the amount we pay for maintenance to the service provider as a rate per cycle or flight hour, in exchange for maintenance and repairs under a predefined maintenance program. We capitalize certain direct internal and external costs associated with the development of internal-use software, including implementation of cloud computing service arrangements. Gains and losses on sales of property used in operations are classified within operating expenses and historically have been nominal. For financial reporting purposes, we record depreciation and amortization of property and equipment on a straight-line basis over the asset’s service life or related lease term, if shorter. For income tax purposes, depreciation is computed using accelerated methods when applicable. The depreciable lives and net book value of our property and equipment are as follows (dollars in millions): Net Book Value at May 31, Range 2026 2025 Wide-body aircraft and related equipment 18 to 30 years $ 18,027 $ 18,202 Narrow-body and feeder aircraft and related equipment 5 to 30 years 1,635 1,750 Package handling and ground support equipment 3 to 15 years 7,430 7,573 Information technology 3 to 7 years 1,422 1,568 Vehicles and trailers 3 to 15 years 4,285 4,075 Facilities and other 1 to 33 years 9,245 8,474 Substantially all property and equipment have no material residual values. The majority of aircraft costs are depreciated on a straight-line basis over 18 to 30 years . We periodically evaluate the estimated service lives and residual values used to depreciate our property and equipment. Depreciation and amortization expense, excluding gains and losses on sales of property and equipment used in operations, was $ 4.4 billion in 2026, $ 4.3 billion in 2025, and $ 4.3 billion in 2024. Depreciation and amortization expense includes amortization of assets under finance leases. CAPITALIZED INTEREST . Interest on funds used to finance the acquisition and modification of aircraft, including purchase deposits, construction of certain facilities, and development of certain software up to the date the asset is ready for its intended use, is capitalized and included in the cost of the asset if the asset is actively under construction. Capitalized interest was $ 52 million in 2026, $ 55 million in 2025, and $ 81 million in 2024. IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an -78- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows, or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. We operate integrated transportation networks so cash flows for most of our operating assets to be held and used are assessed at a network level, not at an individual asset level, for our analysis of impairment. In 2026, we made the decision to permanently retire from service ten aircraft, resulting in a noncash impairment charge of $ 23 million ($ 18 million, net of tax, or $ 0.08 per diluted share). These retirements included four Boeing 757 aircraft, one Airbus A300 aircraft, and five Boeing MD-11 aircraft, and align with Federal Express’s fleet reduction and modernization strategy as we continue to improve our global network efficiency and better align air network capacity with anticipated demand. Eight of these permanently retired aircraft were temporarily idled and not in revenue service. In 2025, we made the decision to permanently retire from service 12 aircraft and eight related engines, resulting in a noncash impairment charge of $ 21 million ($ 16 million, net of tax, or $ 0.06 per diluted share). These retirements included two Boeing 757-200 aircraft, seven Airbus A300-600 aircraft, three Boeing MD-11 aircraft, and align with Federal Express’s fleet reduction and modernization strategy. All of these permanently retired aircraft were temporarily idled and not in revenue service. In 2024, we made the decision to permanently retire from service 22 Boeing 757-200 aircraft and seven related engines to align with Federal Express’s fleet reduction and modernization strategy. As a consequence of this decision, a noncash impairment charge of $ 157 million ($ 120 million, net of tax, or $ 0.48 per diluted share) was recorded in 2024. In the normal management of our aircraft fleet, we routinely idle aircraft and engines temporarily due to maintenance cycles and adjustments of our network capacity to match seasonality and overall customer demand levels. Temporarily idled assets are classified as available-for-use, and we continue to record depreciation expense associated with these assets. These temporarily idled assets are assessed for impairment and remaining life on a quarterly basis. The criteria for determining whether an asset has been permanently removed from service (and, as a result, is potentially impaired) include, but are not limited to, our global economic outlook and the impact of our outlook on our current and projected volume levels, including capacity needs during our peak shipping seasons; the introduction of new fleet types or decisions to permanently retire an aircraft fleet from operations; and changes to planned service expansion activities. At May 31, 2026, we had 13 jet aircraft temporarily idled. These aircraft have been idled for an average of 23 months and are expected to return to revenue service in order to meet expected demand. GOODWILL. Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. Several factors give rise to goodwill in our acquisitions, such as the expected benefits from synergies of the combination and the existing workforce of the acquired business. Goodwill is reviewed at least annually for impairment. In our evaluation of goodwill impairment, we perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, we proceed to test goodwill for impairment, including comparing the fair value of the reporting unit to its carrying value (including attributable goodwill). Fair value for our reporting units is determined using an income or market approach incorporating market participant considerations and management’s assumptions on revenue growth rates, operating margins, discount rates, and expected capital expenditures. Fair value determinations may include both internal and third-party valuations. Unless circumstances otherwise dictate, we perform our annual impairment testing in the fourth quarter. See Note 4 for additional information. INTANGIBLE ASSETS . Intangible assets primarily include customer relationships, technology assets, and trademarks acquired in business combinations. Intangible assets are amortized over periods ranging from 1 to 15 years , either on a straight-line basis or on a basis consistent with the pattern in which the economic benefits are realized. See Note 4 for additional information. PENSION AND POSTRETIREMENT HEALTHCARE PLANS. Our defined benefit pension and other postretirement benefit plans are measured using actuarial techniques that reflect management’s assumptions for discount rate, investment returns on plan assets, salary increases, expected retirement, mortality, and employee turnover. We determine the discount rate (which is required to be the rate at which the projected benefit obligation (“PBO”) could be effectively settled as of the measurement date) with the assistance of actuaries, who calculate the yield on a theoretical portfolio of high-grade corporate bonds (rated Aa or better) with cash flows that are designed to match our expected benefit payments in future years. We use the fair value of plan assets to calculate the expected return on assets (“EROA”) for interim and segment reporting purposes. Our EROA is a judgmental estimate which is reviewed on an annual basis and revised as appropriate. The accounting guidance related to employers’ accounting for defined benefit pension and other postretirement plans requires recognition in the balance sheet of the funded status of these plans. We use “mark-to-market” (or “MTM”) accounting and immediately recognize changes in the fair value of plan assets and actuarial gains or losses in our results annually in the fourth quarter each year. The annual MTM adjustment is recognized at the corporate level and does not impact segment results. The remaining -79- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS components of pension and postretirement healthcare expense, primarily service and interest costs and the EROA, are recorded on a quarterly basis. Only service cost is recognized in segment level operating results. INCOME TAXES. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The liability method is used to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss, capital loss, and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. These sources of income rely heavily on estimates to make this determination and, as a result, there is a risk that these estimates will have to be revised as new information is received. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. We believe we will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in the consolidated balance sheets that are not subject to valuation allowances. We record taxes for net controlled foreign corporation (“CFC”) tested income (formerly global intangible low-taxed income) as a period cost. We recognize liabilities for uncertain income tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we must determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis or when new information becomes available to management. These reevaluations are based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, successfully settled issues under audit, and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an increase to the related provision. We classify interest related to income tax liabilities as interest expense, and if applicable, penalties are recognized as a component of income tax expense. The income tax liabilities and accrued interest and penalties that are due within one year of the balance sheet date are presented as current liabilities. The noncurrent portion of our income tax liabilities and accrued interest and penalties are included within “Other liabilities” in the accompanying consolidated balance sheets. SELF-INSURANCE ACCRUALS. We are self-insured for costs associated with workers’ compensation claims, vehicle accidents, property and cargo loss, general business liabilities, and benefits paid under employee disability programs. Accruals are primarily based on the actuarially estimated cost of claims, which includes incurred-but-not-reported claims. Current workers’ compensation claims, vehicle and general liability, and long-term disability are included within “Accrued expenses” in the accompanying consolidated balance sheets. We self-insure up to certain limits that vary by operating company and type of risk. Claims costs are recognized on a gross basis and a receivable is recorded for amounts covered by third-party insurance. Periodically, we evaluate the level of insurance coverage and adjust insurance levels based on risk tolerance and premium expense. We are also self-insured for certain short-term employee healthcare claims, which are included within “Accrued expenses” in the accompanying consolidated balance sheets. LEASES. We lease certain facilities, aircraft, equipment, and vehicles under operating and finance leases. A determination of whether a contract contains a lease is made at the inception of the arrangement. Our leased facilities include national, regional, and metropolitan sorting facilities; retail facilities; and administrative buildings. Our leases generally contain options to extend or terminate the lease. We reevaluate our leases on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and how they align with our operating strategy. Therefore, substantially all the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the right-of-use asset and lease liability as the options to extend are not reasonably certain at lease commencement. Short-term leases with an initial term of 12 months or less are not recognized in the right-of-use asset and lease liability within the consolidated balance sheets. The lease liabilities are measured at the lease commencement date and determined using the present value of the minimum lease payments not yet paid and our incremental borrowing rate, which approximates the rate at which we would borrow, on a collateralized basis, over the term of a lease in the applicable currency environment. The interest rate implicit in the lease is generally not determinable in transactions where we are the lessee. -80- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For real estate leases, we account for lease components and non-lease components (such as common area maintenance) as a single lease component. Certain real estate leases require additional payments based on sales volume and index-based rate increases, as well as reimbursement for real estate taxes, common area maintenance, and insurance, which are expensed as incurred as variable lease costs. Certain leases contain fixed lease payments for items such as real estate taxes, common area maintenance, and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use asset and lease liability. See Note 7 for additional information. DERIVATIVE FINANCIAL INSTRUMENTS. We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of our risk, even though hedge accounting does not apply or we elect not to apply hedge accounting. We are not subject to any master netting agreements. SUPPLIER FINANCE PROGRAM. We offer voluntary Supply Chain Finance (“SCF”) programs through financial institutions to certain of our suppliers. We agree to commercial terms with our suppliers, including prices, quantities, and payment terms, and they issue invoices to us based on the agreed-upon contractual terms. If our suppliers choose to participate in the SCF programs, they determine which invoices, if any, to sell to the financial institutions to receive an early discounted payment, while we settle the invoice amount with the financial institutions on the payment due dates. We guarantee these payments with the financial institutions. Amounts due to our suppliers that participate in the SCF programs are included within “Accounts payable” in the accompanying consolidated balance sheets. We have been informed by the participating financial institutions that as of May 31, 2026 and May 31, 2025, suppliers have been approved to sell to them $ 109 million and $ 71 million, respectively, of our outstanding payment obligations. A rollforward of obligations confirmed and paid during the years ended May 31 is presented below (in millions): 2026 2025 Confirmed obligations outstanding at the beginning of the year $ 71 $ 94 Invoices confirmed during the year 748 625 Confirmed invoices paid during the year ( 711 ) ( 651 ) Currency translation adjustments 1 3 Confirmed obligations outstanding at the end of the year $ 109 $ 71 FOREIGN CURRENCY TRANSLATION. Translation gains and losses of foreign operations that use local currencies as the functional currency are accumulated and reported, net of applicable deferred income taxes, as a component of accumulated other comprehensive loss (“AOCL”) within “Common stockholders’ investment” in the accompanying consolidated balance sheets. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local currency are included within “Other, net” in the accompanying consolidated statements of income and were immaterial for each period presented. EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots at Federal Express, who are a small number of its total employees, are represented by the Air Line Pilots Association, International (“ALPA”) and are employed under a newly ratified collective bargaining agreement (“CBA”). The new CBA was ratified by Federal Express pilots in a vote concluded on June 9, 2026, and is the product of several years of bargaining under the Railway Labor Act of 1926, as amended (“RLA”), including mediation by the National Mediation Board (the U.S. governmental agency that oversees labor agreements for entities covered by the RLA). The new CBA took effect June 29, 2026, and is scheduled to become amendable in December 2030. For more information, see Note 20 . In addition to our pilots, certain of Federal Express’s non-U.S. employees are unionized. FedEx believes its employee relations are excellent. See “ Item 1A. Risk Factors ” of this Annual Report for more information. INVESTMENTS IN EQUITY AND DEBT SECURITIES. Investments in equity securities with a readily determinable fair value are carried at fair value and are classified as Level 1 investments in the fair value hierarchy. Level 1 investments are valued at the closing price or last trade reported on the major market on which the individual securities are traded. For equity securities without readily determinable fair values that qualify for the net asset value (“NAV”) practical expedient, we have elected to apply the NAV practical -81- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS expedient to estimate fair value. Changes in fair value are included in “Other, net” in the accompanying consolidated statements of income. We apply the measurement alternative to all other investments in equity securities without a readily determinable fair value. Under the measurement alternative these equity securities are accounted for at cost, with adjustments for observable changes in prices and impairments included within “Other, net” in the accompanying consolidated statements of income. We perform a qualitative assessment each reporting period to evaluate whether these equity securities are impaired. Our assessment includes a review of recent operating results and trends and other publicly available data. If an investment is impaired, we write it down to its estimated fair value. Investments in debt securities, which are considered short-term investments, are classified as “available-for-sale” and are carried at fair value. Realized gains and losses on available-for-sale debt securities are included within “Other, net” in the accompanying consolidated statements of income while unrealized gains and losses, net of tax, are included within AOCL in the accompanying consolidated balance sheet. Investments in equity securities and debt securities are included within “Other assets” and “Prepaid expenses and other,” respectively, in the accompanying consolidated balance sheets. On February 9, 2026, InPost S.A. (“InPost”) and a consortium including FedEx announced a conditional agreement on an intended recommended all-cash public offer for all issued and outstanding shares of InPost at an offer price of € 15.60 (cum dividend) per share (the “Offer”). Post-completion, the consortium will be structured with FedEx holding 37 %. InPost will continue to operate as a standalone company. The Offer and the transactions contemplated thereby (the “Transaction”) are subject to certain customary closing conditions, including, among others, the receipt of regulatory approvals. Based upon the proposed Offer price, FedEx’s investment is valued at approximately € 2.20 billion. FedEx intends to fund its portion of the Offer by utilizing available cash balances, existing or new liquidity sources, or a combination thereof. The Transaction is expected to be completed in the second half of calendar 2026. STOCK-BASED COMPENSATION. The accounting guidance related to share-based payments requires recognition of compensation expense for stock-based awards using a fair value method. We use the Black-Scholes option pricing model to calculate the fair value of stock options. The value of restricted stock awards, restricted stock units (“RSUs”), and performance stock units (“PSUs”) are based on the stock price of the award on the grant date. We record stock-based compensation expense within “Salaries and employee benefits” in the accompanying consolidated statements of income. We issue new shares or treasury shares from stock repurchases to cover employee stock option exercises and restricted stock grants. Shares not issued for restricted stock grants are available to be issued for stock option grants. TREASURY SHARES. In March 2024, our Board of Directors authorized a stock repurchase program for repurchases of up to $ 5.0 billion of FedEx common stock. As of May 31, 2026, $ 1.3 billion remained available to use for repurchases under our 2024 stock repurchase program. During fiscal year 2026, 3.3 million shares were repurchased through accelerated share repurchase (“ASR”) agreements or open market transactions under this program at an average price of $ 233.07 per share for a total of $ 776 million. Share repurchases had a benefit of $ 0.21 per diluted share in 2026. During fiscal year 2025, 10.9 million shares were repurchased under the stock repurchase program through ASR agreements or open market transactions at an average price of $ 274.34 per share for a total of $ 3.0 billion. Share repurchases had a benefit of $ 0.44 per diluted share in 2025. During fiscal year 2024, 9.8 million shares were repurchased at an average price of $ 255.34 per share for a total of $ 2.5 billion. The final number of shares delivered upon settlement of the ASR agreements was determined based on a discount to the volume-weighted average price of our stock during the term of the transaction. The repurchased shares were accounted for as a reduction to “Common stockholders’ investment” in the accompanying consolidated balance sheets and resulted in a reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. DIVIDENDS DECLARED PER COMMON SHARE. On June 8, 2026, our Board of Directors declared a quarterly cash dividend of $ 1.22 per share of common stock. The dividend was paid on July 7, 2026 to stockholders of record as of the close of business on June 22, 2026. Each quarterly dividend payment is subject to review and approval by our Board of Directors, and we evaluate our dividend payment amount on an annual basis. There are no material restrictions on our ability to declare dividends, nor are there any material restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans, or advances. BUSINESS OPTIMIZATION AND REALIGNMENT COSTS . Our business optimization and realignment costs relate to transformation initiatives aimed to improve long-term profitability, drive efficiency within and between our transportation segments, lower our overhead and support costs, and transform our digital capabilities. Costs included in “Business optimization and realignment costs” in the accompanying consolidated statements of income relate to our Network 2.0 program, our international operational transformation programs, our DRIVE initiatives commenced in prior years, and the Europe workforce reduction plan announced in June 2024. -82- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table below summarizes the changes to amounts accrued associated with business optimization and realignment costs during 2026 and 2025: 2026 2025 Business optimization and realignment costs accrued, beginning of period $ ( 227 ) $ ( 155 ) Expense incurred ( 352 ) ( 756 ) Amounts paid 419 684 Business optimization and realignment costs accrued, end of period $ ( 160 ) $ ( 227 ) We incurred business optimization and realignment costs of $ 366 million ($ 285 million, net of tax, or $ 1.19 per diluted share) in 2026, of which $ 14 million related to impairment of property and equipment. The remaining costs were primarily related to severance, professional services, and incentive payments to our contracted service providers, and are included in Federal Express and Corporate, other, and eliminations. We incurred business optimization and realignment costs of $ 756 million ($ 577 million, net of tax, or $ 2.37 per diluted share) in 2025. These costs were primarily related to professional services and severance and are included in Federal Express and Corporate, other, and eliminations. We incurred costs associated with our business optimization and realignment activities of $ 582 million ($ 444 million, net of tax, or $ 1.77 per diluted share) in 2024. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express. Network 2.0 Network 2.0 is our multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada. Through Network 2.0, we continue to consolidate our sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network. We have implemented Network 2.0 optimization in approximately 410 locations in the U.S. and Canada as of May 31, 2026. Service providers will handle the pickup and delivery of Federal Express packages in some locations while employee couriers will handle others. We completed Canada’s implementation of Network 2.0 in the fourth quarter of fiscal year 2025 and expect to complete the U.S implementation by the end of calendar 2027. International operational transformation programs In January 2026, FedEx initiated operational transformation programs in certain international locations designed to modernize, streamline, and optimize international domestic operations. These transformation programs may reduce approximately 5,000 operational employees, as well as changing working locations and schedules for up to 800 operational employees and is expected to occur over approximately 18 months, subject to required consultation processes in accordance with local country regulations. We expect the combined pre-tax costs of severance benefits, legal and professional fees, and facilities-related exit costs to range from $ 225 million to $ 325 million, substantially all of which are cash expenditures. These charges are expected to be incurred through calendar year 2028 and will be recorded as business optimization expenses. In 2026, we incurred $ 147 million of costs related to these programs. The timing and amount of our business optimization expenses and the related cost savings associated with this operational transformation program are dependent on local country consultation processes, regulations and the negotiation of social plans, and may change as we revise and implement our plans. Europe workforce reduction plan Our workforce reduction plan in Europe to reduce structural costs, announced in June 2024, is now fully complete as of May 31, 2026. The plan occurred over an 18 -month period in accordance with local country processes and regulations and impacted approximately 1,400 employees across back-office and commercial functions. Savings from the plan are expected to be approximately $ 150 million on an annualized basis beginning in calendar 2026. Pre-tax costs for severance benefits and legal and professional fees related to the plan were recorded as business optimization expenses. In 2026 and 2025, we incurred $ 13 million and $ 235 million, respectively, of costs related to this plan. The identification of costs as business optimization and realignment-related expenditures is subject to our disclosure controls and procedures. SEPARATION AND OTHER COSTS. Our separation and other costs relate to the Spin-Off and fiscal year change, as noted above in the “ Description of B usiness Se gments and Fiscal Years section s of Note 1 .” See also Note 20 for further information. -83- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table below summarizes the changes to amounts accrued associated with separation and other costs during 2026 and 2025: 2026 2025 Separation and other costs accrued, beginning of period $ ( 15 ) $ — Expense incurred ( 777 ) ( 56 ) Amounts paid 529 41 Separation and other costs accrued, end of period $ ( 263 ) $ ( 15 ) Spin-Off We incurred costs related to the Spin-Off of $ 744 million ($ 589 million, net of tax, or $ 2.46 per diluted share) in 2026. These costs primarily consist of professional services and an employee incentive plan related to the Spin-Off. Separation costs of $ 738 million are included within “Separation and other costs,” and separation costs of $ 6 million are included within “Other, net” in the accompanying consolidated statements of income. These costs are included in FedEx Freight; Corporate, other, and eliminations; and Federal Express. In 2025, we incurred costs related to the Spin-Off of $ 56 million ($ 44 million, net of tax, or $ 0.18 per diluted share). Professional and legal fees of $ 38 million are included within “Separation and other costs,” and $ 18 million related to a debt exchange offer and consent solicitation transactions discussed in Note 6 are included within “Other, net” in the accompanying consolidated statements of income. These costs are included in Corporate, other, and eliminations. Costs included in “Separation and other costs” for 2025 were reclassified from “Other” to conform to the current period presentation. This change had no impact on total operating income or net income. Additionally, “Separation and other costs, net of payments” of $ 15 million were reclassified from “Changes in assets and liabilities: Accounts payable and other liabilities” in the consolidated statements of cash flows for 2025. We did not incur any Spin-Off costs in 2024. Fiscal year change We incurred costs related to the fiscal year change of $ 33 million ($ 26 million, net of tax, or $ 0.11 per diluted share) in 2026. These costs were primarily related to professional services and are included in the “Separation and other costs” caption of the accompanying consolidated statements of income. Costs associated with the fiscal year change are included in Federal Express and Corporate, other, and eliminations. We did not incur any costs related to the fiscal year change in 2025 or 2024. USE OF ESTIMATES . The preparation of our consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses, and the disclosure of contingent liabilities. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include self-insurance accruals, retirement plan obligations, long-term incentive accruals, tax liabilities, loss contingencies, litigation claims, impairment assessments on long-lived assets (including goodwill) that rely on projections of future cash flows, and purchase price allocations. NOTE 2: RECENT ACCOUNTING GUIDANCE New accounting rules and disclosure requirements can significantly affect our reported results and the comparability of our financial statements. We believe the following new accounting guidance is relevant to the readers of our financial statements. Recently Adopted Accounting Standards In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new requirements enhance detail regarding the amount of cash taxes paid and the reconciliation of our effective tax rate. We adopted this standard effective June 1, 2025 (fiscal 2026) on a prospective basis. See Note 1 1 for further discussion about income taxes. New Accounting Standards and Accounting Standards Not Yet Adopted In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), which establishes accounting requirements for environmental credits and environmental credit obligations (“ECOs”). The ASU introduces a comprehensive model that establishes recognition, measurement, presentation, and disclosure requirements for environmental credits and, when applicable, compliance obligations that may be settled by using environmental credits. The new accounting standard will be effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are assessing the effect of this update on our consolidated financial statements and related disclosures. -84- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the applicability of the interim reporting guidance, the types of interim reporting, and the form and content of interim financial statements in accordance with U.S. GAAP. Per the FASB, the amendment does not intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather provide clarity and improve navigability of the existing interim reporting requirements. The update will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. We are assessing the effect of this update on our consolidated financial statements and related disclosures. In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which simplifies the application of the current expected credit loss model for current accounts receivable and current contract assets under Accounting Standards Codification 606. The update will be effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted. We are assessing the effect of this update on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which expands disclosures about specific expense categories at interim and annual reporting periods. The update will be effective for annual periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. We are assessing the effect of this update on our consolidated financial statements and related disclosures. Other accounting pronouncements issued, but not effective until after May 31, 2026, are not expected to have a material impact on our consolidated financial statements, related disclosures, or internal controls. NOTE 3: CREDIT LOSSES We are exposed to credit losses primarily through our trade receivables. We assess ability to pay for certain customers by conducting a credit review, which considers the customer’s established credit rating and our assessment of creditworthiness. We determine the allowance for credit losses on accounts receivable using a combination of specific reserves for accounts that are deemed to exhibit credit loss indicators and general reserves that are determined using loss rates based on historical write-offs by geography and recent forecast information, including underlying economic expectations. During the year, changes in macroeconomic conditions, including the impact of tariffs, contributed to higher bad‑debt write‑offs compared to the prior year. These factors were considered in our assessment of expected credit losses and the determination of the allowance. We update our estimate of credit loss reserves monthly. Changes in the allowance for credit losses for the years ended May 31 were as follows: 2026 2025 Allowance, beginning of period $ 438 $ 436 Current period provision for expected credit losses 946 521 Write-offs charged against allowance ( 1,896 ) ( 1,422 ) Recoveries collected 1,022 903 Allowance, end of period $ 510 $ 438 -85- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4: GOODWILL AND OTHER INTANGIBLE ASSETS GOODWILL. The carrying amount of goodwill attributable to each reportable operating segment and changes therein are as follows (in millions): Federal Express Segment FedEx Freight Segment Corporate, Other, and Eliminations Total Goodwill at May 31, 2024 $ 5,769 $ 771 $ 1,961 $ 8,501 Accumulated impairment charges — ( 133 ) ( 1,945 ) ( 2,078 ) Balance as of May 31, 2024 5,769 638 16 6,423 Goodwill acquired (2) 38 — — 38 Other (1) 142 — — 142 Balance as of May 31, 2025 5,949 638 16 6,603 Goodwill acquired (2) 5 — — 5 Other (1) 125 — — 125 Balance as of May 31, 2026 6,079 638 16 6,733 Accumulated goodwill impairment charges as of May 31, 2026 $ — $ ( 133 ) $ ( 1,945 ) $ ( 2,078 ) (1) Primarily currency translation adjustments. (2) Goodwill acquired related to the acquisition of RouteSmart Technologies. We evaluated each of our reporting units during the fourth quarters of 2026 and 2025 and the estimated fair value of each of our reporting units exceeded their carrying values as of the end of 2026 and 2025; therefore, no impairment was recorded during any of the years presented. OTHER INTANGIBLE ASSETS . The summary of our intangible assets and related accumulated amortization at May 31, 2026 and 2025 is as follows (in millions): 2026 2025 Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Customer relationships $ 591 $ ( 505 ) $ 86 $ 580 $ ( 454 ) $ 126 Technology 132 ( 65 ) 67 132 ( 53 ) 79 Trademarks and other 1 ( 1 ) — 1 ( 1 ) — Total $ 724 $ ( 571 ) $ 153 $ 713 $ ( 508 ) $ 205 Amortization expense for intangible assets was $ 54 million in 2026, $ 48 million in 2025, and $ 47 million in 2024. Expected amortization expense for the next five years ending May 31 is as follows (in millions): 2027 $ 53 2028 51 2029 11 2030 10 2031 9 -86- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5: SELECTED CURRENT LIABILITIES The components of selected current liabilities at May 31 were as follows (in millions) 2026 2025 Accrued salaries and employee benefits Salaries $ 1,447 $ 1,083 Employee benefits, including variable compensation 1,559 796 Compensated absences 753 852 $ 3,759 $ 2,731 Accrued expenses Self-insurance accruals $ 1,969 $ 1,858 Taxes other than income taxes 392 372 Other 3,364 2,765 $ 5,725 $ 4,995 -87- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6: LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS The components of long-term debt (net of discounts and debt issuance costs), along with maturity dates for the years subsequent to May 31, 2026, are as follows (in millions): Fiscal Year of May 31, Interest Rate % Maturity 2026 2025 Senior secured debt: 1.875 2034 $ 679 $ 729 Senior unsecured debt: 3.25 2026 — 749 3.40 2028 499 498 4.20 - 4.30 2029 1,392 398 3.10 - 4.90 2030 2,340 1,738 2.40 - 4.65 2031 1,985 992 4.95 2033 693 — 4.90 2034 496 496 3.90 2035 495 495 5.25 2036 988 — 3.25 2041 740 740 3.875 - 4.10 2043 985 985 5.10 2044 742 742 4.10 2045 641 641 4.55 - 4.75 2046 2,463 2,462 4.40 2047 736 736 4.05 2048 987 986 4.95 2049 836 835 5.25 2050 1,226 1,225 4.50 2065 245 245 7.60 2098 237 237 Euro senior unsecured debt: 0.45 2026 — 569 1.625 2027 1,455 1,422 0.45 2029 695 679 1.30 2032 168 566 0.95 - 3.50 2033 1,328 734 4.125 2038 404 — Total senior unsecured debt 22,776 19,170 Finance lease obligations 1,514 680 24,969 20,579 Less current portion 1,676 1,428 $ 23,293 $ 19,151 Interest on our U.S. dollar fixed-rate notes is paid semi-annually. Interest on our euro fixed-rate notes is paid annually. The weighted-average interest rate on long-term debt was 3.8 % as of May 31, 2026. Long-term debt, including current maturities and exclusive of finance leases, had estimated fair values of $ 20.9 billion at May 31, 2026 and $ 17.2 billion at May 31, 2025. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly. We have a shelf registration statement filed with the SEC that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock and allows pass-through trusts formed by Federal Express to sell, in one or more future offerings, pass-through certificates. -88- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEDEX CORPORATION Long-Term Debt In connection with the Spin-Off, we redeemed in full the € 354.9 million aggregate principal amount of our 1.30 % senior notes due 2031 on May 28, 2026. The redemption was funded with available liquidity and resulted in the extinguishment of the notes. An immaterial loss on the extinguishment of debt was recorded in the period ended May 31, 2026. During the first quarter of 2026, we issued € 850 million of senior unsecured debt under our current shelf registration statement, comprised of € 500 million of 3.50 % fixed-rate notes due in July 2032 and € 350 million of 4.13 % fixed-rate notes due in July 2037. We used a portion of the net proceeds to repay the € 500 million aggregate principal amount outstanding of our 0.45 % notes due at maturity in August 2025. The remaining net proceeds may be used for general corporate purposes. On April 1, 2026, we repaid at maturity the $ 750 million principal amount of our 3.25 % senior notes due 2026 using available cash. No amounts remained outstanding under these notes as of May 31, 2026. The following table sets forth the future scheduled principal payments due for the next five years ending May 31 and thereafter on our long-term debt (in millions): Debt Principal 2027 $ 1,506 2028 552 2029 2,751 2030 1,802 2031 2,052 Thereafter 15,031 Subtotal 23,694 Discount and debt issuance costs ( 239 ) Total debt $ 23,455 Credit Agreements We have a $ 1.75 billion three-year credit agreement (the “Three-Year Credit Agreement”) and a $ 1.75 billion five-year credit agreement (the “Five-Year Credit Agreement” and together with the Three-Year Credit Agreement, the “Credit Agreements”). Each of the Credit Agreements has a $ 125 million letter of credit sublimit. The Credit Agreements are available to finance our operations and other cash flow needs. In addition, our Board of Directors has authorized up to $ 3.5 billion in commercial paper. Our commercial paper program is backed by unused commitments under the Credit Agreements, and borrowings under the program reduce the amount available to borrow under the Credit Agreements. We issued $ 750 million of commercial paper, which remained outstanding as of May 31, 2026, at a weighted-average interest rate of 4.19 %. No additional amounts were outstanding under the Credit Agreements, resulting in $ 2.8 billion remaining available as of May 31, 2026. During the second quarter of 2026, we amended the Credit Agreements with a syndicate of banks and other financial institutions to update certain provisions in anticipation of the Spin-Off and incorporate certain other customary changes. Among other changes, the amendments (i) released FedEx Freight from its guarantees under the Credit Agreements upon consummation of the Spin-Off and (ii) extended the expiration of the Three-Year Credit Agreement from March 2027 to March 2028 and the expiration of the Five-Year Credit Agreement from March 2029 to March 2030. The Credit Agreements contain a financial covenant requiring us to maintain a ratio of debt (excluding debt incurred by affiliates of FedEx Freight to finance distributions to FedEx and other transactions related to the Spin-Off and certain other customary items) to consolidated earnings (excluding noncash retirement plans MTM adjustments; noncash pension service costs; noncash asset impairment charges; and, subject to certain limitations, business optimization and restructuring expenses, pro forma cost savings and synergies associated with an acquisition, and transaction costs, fees, and expenses and synergies and cost savings related to the Spin-Off) before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) of not more than 3.5 to 1.0, calculated as of the last day of each fiscal quarter on a rolling four-quarters basis. The aggregate amount of adjustments for business optimization and restructuring expenses and pro forma cost savings and synergies associated with an acquisition may not exceed 10 % of adjusted EBITDA (calculated after giving effect to any such add-back and such cap and all other permitted add-backs and adjustments) in any period. Additionally, following the consummation of an acquisition for -89- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS which the aggregate cash consideration is at least $ 250 million, FedEx may elect to increase the ratio to 4.0 to 1.0 with respect to the last day of the fiscal quarter during which such acquisition is consummated and the last day of each of the immediately following three consecutive fiscal quarters, provided that there must be at least two consecutive fiscal quarters between such elections during which the ratio is 3.5 to 1.0. The ratio of our debt to adjusted EBITDA was 1.8 to 1.0 at May 31, 2026. The financial covenant discussed above is the only significant restrictive covenant in the Credit Agreements. The Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct of our business. We are in compliance with the financial covenant and all other covenants in the Credit Agreements and do not expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the financial covenant or any other covenants in the Credit Agreements, our access to financing could become limited. Our commercial paper program is backed by unused commitments under the Credit Agreements. FEDERAL EXPRESS. Long-Term Debt Federal Express has issued $ 970 million of Pass-Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of 1.875 % due in February 2034 utilizing pass-through trusts. The Certificates are secured by 19 Boeing aircraft with a net book value of $ 1.5 billion at May 31, 2026. The payment obligations of Federal Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FEDEX FREIGHT. Unsecured Notes On February 5, 2026, FedEx Freight Holding Company, Inc. (“FedEx Freight Holding”) issued $ 3.7 billion of senior unsecured debt in an unregistered offering, comprised of $ 1.0 billion of 4.30 % fixed-rate notes due in March 2029, $ 1.0 billion of 4.65 % fixed-rate notes due in March 2031, $ 700 million of 4.95 % fixed-rate notes due in March 2033, and $ 1.0 billion of 5.25 % fixed-rate notes due in March 2036 (together, the “FedEx Freight Notes”). FedEx Freight Holding has agreed to file with the SEC an exchange registration statement with respect to an exchange offer for the FedEx Freight Notes and the related guarantees or a shelf registration statement for the resale of the FedEx Freight Notes and the related guarantees. Credit Facilities On January 15, 2026, FedEx Freight Holding entered into (i) a five-year revolving credit facility in an aggregate committed amount of $ 1.2 billion (the “FedEx Freight Revolving Credit Facility”) and (ii) a three-year delayed draw term loan facility in the aggregate principal amount of $ 600 million (the “FedEx Freight Term Loan Facility” and together with the FedEx Freight Revolving Credit Facility, the “FedEx Freight Credit Agreements”). The availability of borrowings under the commitments in respect of the FedEx Freight Revolving Credit Facility was conditioned on the consummation of the Spin-Off. On May 27, 2026, FedEx Freight Holding drew down the full $ 600 million available under the FedEx Freight Term Loan Facility. In connection with the Spin-Off, FedEx Freight Holding paid a $ 4.1 billion cash dividend to FedEx, funded by the net proceeds of the FedEx Freight Notes and borrowings under the FedEx Freight Term Loan Facility, as consideration for FedEx’s contribution of assets to FedEx Freight Holding in connection with the Spin-Off. FedEx Freight Holding’s obligations under the FedEx Freight Notes and the FedEx Freight Credit Agreements were jointly and severally guaranteed by FedEx and FedEx Freight Holding until the consummation of the Spin-Off, at which point FedEx was released from such respective guarantees and such obligations were transferred in full to FedEx Freight Holding. Refer to Note 20 for additional information. -90- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7: LEASES The following table is a summary of the components of net lease cost for the period ended May 31 (in millions) 2026 2025 Operating lease cost $ 3,518 $ 3,421 Finance lease cost: Amortization of right-of-use assets 68 31 Interest on lease liabilities 36 17 Total finance lease cost 104 48 Short-term lease cost 499 484 Variable lease cost 1,925 1,840 Net lease cost $ 6,046 $ 5,793 Supplemental cash flow information related to leases for the period ended May 31 is as follows (in millions): 2026 2025 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating leases $ 3,511 $ 3,422 Operating cash flows paid for interest portion of finance leases 34 17 Financing cash flows paid for principal portion of finance leases 254 101 Right-of-use assets obtained in exchange for new operating lease liabilities 3,273 1,945 Right-of-use assets obtained in exchange for new finance lease liabilities 1,086 352 Supplemental balance sheet information related to leases as of May 31 is as follows (dollars in millions): 2026 2025 Operating leases: Operating lease right-of-use assets, net $ 16,822 $ 16,453 Current portion of operating lease liabilities $ 2,680 $ 2,565 Operating lease liabilities 14,549 14,272 Total operating lease liabilities $ 17,229 $ 16,837 Finance leases: Net property and equipment $ 1,609 $ 621 Current portion of long-term debt $ 170 $ 59 Long-term debt, less current portion 1,344 621 Total finance lease liabilities $ 1,514 $ 680 Weighted-average remaining lease term: Operating leases 9.2 9.7 Finance leases 10.2 19.6 Weighted-average discount rate: Operating leases 4.22 % 3.98 % Finance leases 4.06 % 3.90 % We utilize certain aircraft, land, facilities, retail locations, and equipment under finance and operating leases that expire at various dates through 2078. We leased less than 1 % of our total aircraft fleet under operating leases as of May 31, 2026 and less than 1 % as of May 31, 2025. A portion of our supplemental aircraft are leased by us under agreements that provide for cancellation upon 30 days’ notice. Our leased facilities include national, regional, and metropolitan sorting facilities; retail facilities; and administrative buildings. -91- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of future minimum lease payments under non-cancelable operating and finance leases with an initial or remaining term in excess of one year at May 31, 2026 is as follows (in millions): Aircraft and Related Equipment Facilities and Other Total Operating Leases Finance Leases Total Leases 2027 $ 130 $ 3,130 $ 3,260 $ 233 $ 3,493 2028 119 2,882 3,001 543 3,544 2029 112 2,469 2,581 218 2,799 2030 103 2,104 2,207 201 2,408 2031 103 1,733 1,836 110 1,946 Thereafter 296 7,845 8,141 609 8,750 Total lease payments 863 20,163 21,026 1,914 22,940 Less imputed interest ( 138 ) ( 3,659 ) ( 3,797 ) ( 400 ) ( 4,197 ) Present value of lease liability $ 725 $ 16,504 $ 17,229 $ 1,514 $ 18,743 While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations. As of May 31, 2026, FedEx has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability. These leases are generally for build-to-suit facilities and equipment and have undiscounted future payments of approximately $ 1.4 billion and will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from calendar years 2026 to 2028. Federal Express makes payments under certain leveraged operating leases that are sufficient to pay principal and interest on certain pass-through certificates. The pass-through certificates are not direct obligations of, or guaranteed by, FedEx or Federal Express. We are the lessee under certain leases covering a portion of our leased aircraft in which the lessors are trusts established specifically to purchase, finance, and lease these aircraft to us. These leasing entities are variable interest entities. We are not the primary beneficiary of the leasing entities, as the lease terms are at market at the inception of the lease and do not include a residual value guarantee, fixed-price purchase option, or similar feature that obligates us to absorb decreases in value or entitles us to participate in increases in the value of the aircraft. Therefore, we are not required to consolidate any of these entities as the primary beneficiary. Our maximum exposure under these leases is included in the summary of future minimum lease payments. NOTE 8: ACCUMULATED OTHER COMPREHENSIVE LOSS The following table provides changes in AOCL, net of tax, reported in the consolidated financial statements for the years ended May 31 (in millions; amounts in parentheses indicate debits to AOCL): 2026 2025 2024 Foreign currency translation loss: Balance at beginning of period $ ( 1,420 ) $ ( 1,422 ) $ ( 1,362 ) Translation adjustments 145 2 ( 60 ) Balance at end of period $ ( 1,275 ) $ ( 1,420 ) $ ( 1,422 ) Retirement plans adjustments: Balance at beginning of period $ 58 $ 63 $ 35 Prior service credit arising during period — — 36 Amortization of prior service credits ( 10 ) ( 5 ) ( 8 ) Balance at end of period 48 58 63 AOCL at end of period $ ( 1,227 ) $ ( 1,362 ) $ ( 1,359 ) NOTE 9: STOCK-BASED COMPENSATION Our total stock-based compensation expense for the years ended May 31 was as follows (in millions): 2026 2025 2024 Stock-based compensation expense $ 177 $ 154 $ 163 -92- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We have four types of equity-based compensation: stock options, restricted stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”). STOCK OPTIONS . Under the provisions of our incentive stock plan, key employees and non-employee directors may be granted options to purchase shares of our common stock at a price not less than its fair market value on the date of grant. Vesting requirements are determined at the discretion of the Compensation and Human Resources Committee of our Board of Directors. Option-vesting periods range from one to four years , with the majority of our options vesting ratably over four years . Compensation expense associated with these awards is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. RESTRICTED STOCK AND RSUs . Under the terms of our incentive stock plan, restricted shares of our common stock may be awarded to key employees and non-employee directors. Restrictions on shares of restricted stock expire ratably over a four-year period and restrictions on RSUs granted prior to June 2026 expire after one year (or the date of the next annual meeting of stockholders, if earlier). Restricted stock and RSUs are valued at the market price on the date of award. The terms of our restricted stock provide for continued vesting subsequent to the employee’s retirement (at or after age 55). Compensation expense associated with these awards is recognized on a straight-line basis over the shorter of the requisite service period or the stated vesting period. PSUs. Under the terms of our incentive stock plan, we granted 92,249 PSUs at target to key employees in September 2025.The PSUs had a grant-date fair value of $ 236.89 per share. The PSUs conditionally vest on December 31, 2028, subject to the achievement of specified performance objectives. The number of shares ultimately earned may range from zero to 150 % of the target number of PSUs granted, based on performance against goals tied to improvement in operating margin of Federal Express. ASSUMPTIONS . The key assumptions for the Black-Scholes valuation method include the expected life of the option, stock price volatility, a risk-free interest rate, and dividend yield. The following table includes the weighted-average Black-Scholes value per share of our stock option grants, the intrinsic value of options exercised (in millions), and the key weighted-average assumptions used in the valuation calculations for options granted during the years ended May 31, followed by a discussion of our methodology for developing each of the assumptions used in the valuation model: 2026 2025 2024 Weighted-average Black-Scholes value per share $ 82.66 $ 104.42 $ 79.48 Intrinsic value of options exercised $ 548 $ 263 $ 290 Black-Scholes assumptions: Expected lives 6.1 years 6.3 years 6.4 years Expected volatility 38 % 37 % 35 % Risk-free interest rate 4.12 % 4.59 % 3.94 % Dividend yield 2.45 % 1.84 % 2.03 % The expected life represents an estimate of the period of time options are expected to remain outstanding, and we examine actual stock option exercises to determine the expected life of the options. Options granted have a maximum term of 10 years. Expected volatilities are based on the actual changes in the market value of our stock and are calculated using daily market value changes from the date of grant over a past period equal to the expected life of the options. The risk-free interest rate is the U.S. Treasury Strip rate posted at the date of grant having a term equal to the expected life of the option. The expected dividend yield is the annual rate of dividends per share over the exercise price of the option. Estimates of expected forfeitures are based on historical data. -93- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information regarding stock option activity for the year ended May 31, 2026: Stock Options Shares Subject to Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) (1) Outstanding at June 1, 2025 11,712,352 $ 222.31 Granted 1,858,618 243.07 Exercised ( 4,824,124 ) 209.54 Forfeited or expired ( 333,980 ) 243.01 Outstanding at May 31, 2026 8,412,866 233.46 6.2 $ 1,500 Exercisable 4,871,197 220.65 4.6 931 Expected to vest 3,188,210 251.07 8.4 512 Available for future grants 9,581,694 (1) Only presented for options with market value at May 31, 2026 in excess of the exercise price of the option. The options granted during 2026 are primarily related to our principal annual stock option grant in June 2025. The following table summarizes information regarding vested and unvested restricted stock and RSUs for the year ended May 31, 2026: Restricted Stock and RSUs Shares/Units Weighted- Average Grant-Date Fair Value Unvested at June 1, 2025 306,279 $ 253.66 Granted 260,093 236.63 Vested ( 143,195 ) 247.96 Forfeited ( 2,839 ) 236.15 Unvested at May 31, 2026 420,338 247.03 Available for future grants 2,252,275 During the year ended May 31, 2025, there were 150,967 shares of restricted stock granted with a weighted-average fair value of $ 276.44 per share. During the year ended May 31, 2024, there were 169,371 shares of restricted stock granted with a weighted-average fair value of $ 239.33 per share. The total fair value of restricted stock vested during the years ended May 31, 2026, 2025, and 2024 was $ 35 million, $ 40 million, and $ 36 million, respectively. Stock option vesting during the years ended May 31 was as follows: Stock Options Vested during the year Fair value (in millions) 2026 1,594,620 $ 130 2025 1,896,584 116 2024 2,599,042 137 As of May 31, 2026, there was $ 246 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements. This compensation expense is expected to be recognized on a straight-line basis over the remaining weighted-average vesting period of approximately two years . Total shares outstanding or available for grant related to equity compensation at May 31, 2026 represented 8 % of the total outstanding common and equity compensation shares and equity compensation shares available for grant. -94- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10: COMPUTATION OF EARNINGS PER SHARE Basic earnings per share is calculated using the two-class method, which allocates all earnings (distributed and undistributed) to common stock and participating securities. FedEx grants restricted stock under its stock-based compensation programs; these shares receive nonforfeitable dividends during vesting, making them participating securities and a separate class in basic earnings per share. Diluted earnings per share reflects the potential impact of contingently issuable shares, including awards requiring future service. It is computed under both the two-class and treasury stock methods, with the more dilutive amount reported. For all periods shown, the two-class method produced the more dilutive result. The calculation of basic and diluted earnings per share for the years ended May 31 was as follows (in millions, except per share amounts): 2026 2025 2024 Numerator: Net earnings allocable to common shares (1) $ 4,426 $ 4,087 $ 4,325 Denominator: Weighted-average common shares for basic earnings per common share 237 241 248 Dilutive effect of stock options and RSUs 2 2 3 Weighted-average common shares for diluted earnings per common share 239 243 251 Basic earnings per common share $ 18.71 $ 16.96 $ 17.41 Diluted earnings per common share $ 18.55 $ 16.81 $ 17.21 Anti-dilutive options excluded from diluted earnings per common share 4 5 6 (1) Net earnings available to participating securities were $ 7 million in 2026, $ 5 million in 2025, and $ 6 million in 2024. NOTE 11: INCOME TAXES The components of the provision for income taxes for the years ended May 31 were as follows (in millions): 2026 2025 2024 Current provision Domestic: Federal $ 1,335 $ 891 $ 1,184 State and local 186 146 218 Foreign 384 359 265 $ 1,905 $ 1,396 $ 1,667 Deferred provision Domestic: Federal $ ( 534 ) $ ( 302 ) $ ( 82 ) State and local ( 2 ) 20 60 Foreign ( 9 ) 235 ( 140 ) ( 545 ) ( 47 ) ( 162 ) Total Provision $ 1,360 $ 1,349 $ 1,505 Income from operations before income taxes for the years ended May 31 were as follows (in millions): 2026 2025 2024 United States $ 4,287 $ 3,614 $ 5,289 Foreign 1,506 1,827 547 Total $ 5,793 $ 5,441 $ 5,836 -95- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash paid for income taxes, net of refunds for the year ended May 31, 2026 were as follows (in millions): 2026 Federal $ 1,370 State and local 140 Foreign 402 Total $ 1,912 A reconciliation of total income tax expense and the amount computed by applying the statutory federal income tax to income before income taxes for the years ended May 31 is as follows (dollars in millions): 2026 Amount Percent Statutory U.S. federal income tax rate $ 1,217 21.0 % State and local income taxes - net of federal benefit (1) 118 2.0 % Foreign tax effects Brazil Other 3 — % Valuation allowances ( 97 ) ( 1.6 ) % Other jurisdictions 120 2.0 % Effect of cross-border tax laws ( 1 ) — % Tax credits ( 47 ) ( 0.8 ) % Nontaxable or nondeductible items 14 0.3 % Changes in unrecognized tax benefits 45 0.8 % Other adjustments ( 12 ) ( 0.2 ) % Effective Tax Rate $ 1,360 23.5 % (1) State taxes in Tennessee, Alaska, California, Pennsylvania, Missouri, and Florida made up the majority (greater than 50 percent) of this category. 2025 2024 Taxes computed at federal statutory rate $ 1,143 $ 1,226 Increases (decreases) in income tax from: U.S. and foreign return-to-provision adjustments 5 11 State and local income taxes, net of federal benefit 137 177 Foreign operations 101 65 Non-deductible expenses 72 48 Uncertain tax positions ( 5 ) ( 21 ) Benefits from share-based payments ( 18 ) ( 26 ) Valuation allowance 21 59 Foreign tax rate enactments 6 — State deferred tax remeasurement — 54 Corporate structuring transactions ( 66 ) — Other, net ( 47 ) ( 88 ) Provision for income taxes $ 1,349 $ 1,505 Effective Tax Rate 24.8 % 25.8 % The 2026 tax provision includes an income tax benefit of approximately $ 100 million from the reduction of a Brazil valuation allowance on certain foreign tax loss carryforwards due to operational changes which impacted the determination of the realizability of the deferred tax asset in that jurisdiction. The 2025 tax provision includes an income tax benefit of $ 66 million from the write-off of U.S. deferred tax balances due to corporate structuring transactions. -96- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The 2024 tax provision includes an unfavorable income tax expense of $ 54 million from the remeasurement of U.S. state deferred tax balances to reflect aggregate temporary differences at the expected applicable tax rates after the merger of FedEx Ground Package System, Inc. (“FedEx Ground”) and FedEx Corporate Services, Inc. (“FedEx Services”) into Federal Express Corporation. We regularly assess the need for cash in the U.S., as well as in our foreign subsidiaries, and will occasionally repatriate back to the U.S. excess earnings above working capital needs that can be repatriated with an immaterial tax cost. We assert all other earnings, both historical and current in our foreign subsidiaries, are permanently reinvested and therefore no deferred taxes or withholding taxes have been provided, including deferred taxes on any additional outside basis difference (e.g., stock basis differences attributable to acquisition or other permanent differences). Determination of the amount of unrecognized deferred income tax liability related to any remaining undistributed foreign earnings and additional outside basis differences is not practicable. The significant components of deferred tax assets and liabilities as of May 31 were as follows (in millions): 2026 2025 Deferred Tax Assets Deferred Tax Liabilities Deferred Tax Assets Deferred Tax Liabilities Property, equipment, leases, and intangibles $ 4,555 $ 10,045 $ 4,515 $ 10,434 Employee benefits 862 424 725 291 Self-insurance accruals 1,367 — 1,247 — Other 637 56 591 42 Net operating loss/credit carryforwards 1,035 — 1,123 — Valuation allowances ( 438 ) — ( 523 ) — $ 8,018 $ 10,525 $ 7,678 $ 10,767 The net deferred tax liabilities as of May 31 have been classified in the balance sheets as follows (in millions): 2026 2025 Noncurrent deferred tax assets (1) $ 1,157 $ 1,116 Noncurrent deferred tax liabilities ( 3,664 ) ( 4,205 ) $ ( 2,507 ) $ ( 3,089 ) (1) Noncurrent deferred tax assets are included within “Other assets” in the accompanying consolidated balance sheets. We have approximately $ 3.0 billion of net operating loss carryovers in various foreign jurisdictions, $ 1.1 billion of state operating loss carryovers, and $ 130 million of U.S. federal operating loss and capital loss carryovers. The valuation allowances primarily represent amounts reserved for operating loss carryforwards, which expire over varying periods starting in the Transition Period. Therefore, we establish valuation allowances if it is more likely than not that deferred income tax assets will not be realized. The total change in the valuation allowance reflects certain balance sheet items. Income statement impacts are reflected in our effective tax rate reconciliation. The decrease in the valuation allowance during 2026 includes $ 100 million related to foreign tax loss carryforwards described above. We believe that we will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in the consolidated balance sheets. See Note 1 for more information on our policy for assessing the recoverability of deferred tax assets and valuation allowances. We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the IRS for the 2016 through 2021 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur. During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit sought to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $ 249 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. On February 13, 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. On June 4, 2025, the District Court validated the amount of refunds owed for 2018 and 2019, which includes the foreign tax credits previously denied. -97- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On August 1, 2025, the U.S. government filed a notice to appeal the decision to the U.S. Court of Appeals for the Sixth Circuit. The government submitted its opening brief on January 7, 2026, and FedEx filed its response on March 23, 2026. The government filed its reply brief on May 13, 2026. Oral arguments are scheduled for July 30, 2026. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended May 31 is as follows (in millions): 2026 2025 2024 Balance at beginning of year $ 155 $ 186 $ 212 Increases for tax positions taken in the current year 37 31 5 Increases for tax positions taken in prior years 22 33 4 Decreases for tax positions taken in prior years ( 23 ) ( 11 ) ( 3 ) Settlements ( 20 ) ( 87 ) ( 31 ) Changes due to currency translation 3 3 ( 1 ) Balance at end of year $ 174 $ 155 $ 186 Our liabilities recorded for uncertain tax positions include $ 161 million at May 31, 2026 and $ 149 million at May 31, 2025 associated with positions that, if favorably resolved, would provide a benefit to our income tax expense. We classify interest related to income tax liabilities as interest expense and, if applicable, penalties are recognized as a component of income tax expense. The balance of accrued interest and penalties was $ 48 million at May 31, 2026 and $ 35 million at May 31, 2025. It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of ongoing audits, appeals, or litigation in state, local, federal, and foreign tax jurisdictions, or from the resolution of various proceedings between U.S. and foreign tax authorities. It is reasonably possible that the amount of the benefit with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months. However, estimates of the amounts or ranges for individual matters where a material change is reasonably possible cannot be made. We believe we have recorded adequate amounts of tax reserves, including interest and penalties, for any adjustments that may occur. NOTE 12: RETIREMENT PLANS 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 accounting guidance related to postretirement benefits requires recognition in the balance sheet of the funded status of defined benefit pension and other postretirement benefit plans, and the recognition in either expense or accumulated other comprehensive income of unrecognized gains or losses and prior service costs or credits. We use MTM accounting for the recognition of our actuarial gains and losses related to our defined benefit pension and postretirement healthcare plans as described in Note 1 . The funded status is measured as the difference between the fair value of the plan’s assets and the PBO of the plan. A summary of our retirement plan costs for the years ended May 31 is as follows (in millions): 2026 2025 2024 Defined benefit pension plans $ 185 $ 278 $ 363 Defined contribution plans 1,264 1,144 968 Postretirement healthcare plans 90 87 85 Retirement plans MTM adjustments ( 647 ) ( 515 ) ( 561 ) $ 892 $ 994 $ 855 -98- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The components of the retirement plans MTM adjustments for the years ended May 31 are as follows (in millions): 2026 2025 2024 Actual versus expected return on assets $ ( 1,386 ) $ 75 $ ( 67 ) Discount rate change 462 ( 1,024 ) ( 1,139 ) Demographic experience: Current year actuarial loss 230 196 67 Change in future assumptions 64 247 577 Pension plan amendments, including curtailment gains ( 17 ) ( 9 ) 1 Total retirement plans MTM adjustments $ ( 647 ) $ ( 515 ) $ ( 561 ) 2026 Net of all fees and expenses, the actual rate of return on our U.S. Pension Plan assets was 12.40 %, which was higher than our expected rate of return of 7.00 %. Performance was driven by public equities, but all asset classes were additive. The weighted-average discount rate for all our pension and postretirement healthcare plans decreased from 5.87 % at May 31, 2025 to 5.72 % at May 31, 2026. The demographic experience in 2026 reflects an update to our short-term cash balance interest crediting assumption. 2025 Net of all fees and expenses, the actual rate of return on our U.S. Pension Plan assets was 6.50 %, which was lower than our expected rate of return of 6.75 %. Performance was driven by public equities and alternatives, offset by fixed-income gains due to higher interest rates. The weighted-average discount rate for all our pension and postretirement healthcare plans increased from 5.53 % at May 31, 2024 to 5.87 % at May 31, 2025. The demographic experience in 2025 reflects an update to our retirement rate assumption. 2024 Net of all fees and expenses, the actual rate of return on our U.S. Pension Plan assets was 6.80 %, which was higher than our expected rate of return of 6.50 %. Performance was driven by public equities and alternatives, offset by modest losses in fixed-income assets due to higher interest rates. The weighted-average discount rate for all our pension and postretirement healthcare plans increased from 5.17 % at May 31, 2023 to 5.53 % at May 31, 2024. The demographic experience in 2024 reflects an update to our retirement rate and short-term cash balance interest crediting assumption. PENSION PLANS . Our largest pension plan covers certain U.S. employees age 21 and over, with at least one year of service. Pension benefits for most employees are accrued under a cash balance formula we call the Portable Pension Account (“PPA”). Under the PPA, the retirement benefit is expressed as a dollar amount in a notional account that grows with annual credits based on pay, age and years of credited service, and interest on the notional account balance. The PPA benefit is payable as a lump sum or an annuity at retirement at the election of the employee. The plan interest credit rate varies from year to year based on a U.S. Treasury index. Prior to 2009, certain employees earned benefits using a traditional pension formula (based on average earnings and years of service). Benefits under this formula were capped on May 31, 2008 for most employees. We also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans covering certain of our international employees. The international defined benefit pension plans provide benefits primarily based on earnings and years of service and are funded in compliance with local laws and practices. In 2020, we announced the closing of our U.S.-based defined benefit pension plans to new non-union employees hired on or after January 1, 2020. We introduced an all-401(k) plan retirement benefit structure for eligible employees with a higher company match of up to 8 % across all U.S.-based operating companies in 2022. During calendar 2021, current eligible employees under the PPA pension formula were given a one-time option to continue to be eligible for pension compensation credits under the existing PPA formula and remain in the existing 401(k) plan with its company match of up to 3.5 %, or to cease receiving compensation credits under the PPA and move to the new 401(k) plan with the higher match of up to 8 %. Changes to the new 401(k) plan structure became effective January 1, 2022. See Note 1 for additional information on potential amendments to our pension plan offered to Federal Express pilots. In connection with the Spin-Off, and effective June 1, 2026, all eligible Freight employees transitioned to a newly established, dedicated pension plan. Refer to Note 20 for additional information. POSTRETIREMENT HEALTHCARE PLANS. Certain of our subsidiaries offer medical, dental, and vision coverage to eligible U.S. retirees and their eligible dependents and a small number of international employees. U.S. employees covered by the principal plan become eligible for these benefits at age 55 and older, if they have permanent, continuous service of at least 10 years after attainment of age 45 if hired prior to January 1, 1988, or at least 20 years after attainment of age 35 if hired on or after January 1, 1988. -99- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The U.S. postretirement healthcare benefit is a lump-sum benefit in a notional retiree health reimbursement account (“HRA”) for eligible participants. The HRA is available to reimburse a participant for qualifying healthcare premium costs and limits our liability to the HRA account balance. The amount of the credit is based on age at retirement. Retiree health coverage was closed to most new employees hired on or after January 1, 2018. PENSION PLAN ASSUMPTIONS . The accounting for pension and postretirement healthcare plans includes numerous assumptions, such as: discount rates; expected long-term investment returns on plan assets; future salary increases; employee turnover; mortality; and retirement ages. Weighted-average actuarial assumptions used to determine the benefit obligations and net periodic benefit cost of our plans are as follows: U.S. Pension Plans International Pension Plans Postretirement Healthcare Plans 2026 2025 2024 2026 2025 2024 2026 2025 2024 Discount rate used to determine benefit obligation 5.76 % 5.94 % 5.58 % 4.88 % 4.40 % 4.29 % 5.47 % 5.60 % 5.63 % Discount rate used to determine net periodic benefit cost 5.94 5.58 5.20 4.40 4.29 4.21 5.60 5.63 5.37 Rate of increase in future compensation levels used to determine benefit obligation 5.46 5.36 5.29 3.35 3.11 3.06 — — — Rate of increase in future compensation levels used to determine net periodic benefit cost 5.36 5.29 5.13 3.11 3.06 3.04 — — — Expected long-term rate of return on assets 7.00 6.75 6.50 4.07 3.59 3.55 — — — Interest crediting rate used to determine benefit obligation 4.07 4.10 4.32 2.70 2.30 2.90 — — — Interest crediting rate used to determine net periodic benefit cost 4.10 4.32 4.23 2.30 2.90 2.40 — — — Our U.S. Pension Plan assets are invested primarily in publicly tradable securities, and our pension plans hold only a minimal investment in FedEx common stock that is entirely at the discretion of third-party pension fund investment managers. As part of our strategy to manage pension costs and funded status volatility, we follow a liability-driven investment strategy to better align plan assets with liabilities. Establishing the expected future rate of investment return on our pension assets is a judgmental matter, which we review on an annual basis and revise as appropriate. Management considers the following factors in determining this assumption: • the duration of our pension plan liabilities, which drives the investment strategy we can employ with our pension plan assets; • the types of investment classes in which we invest our pension plan assets and the expected compound geometric return we can reasonably expect those investment classes to earn over time, net of all fees and expenses; and • the investment returns we can reasonably expect our investment management program to achieve in excess of the returns we could expect if investments were made strictly in indexed funds. For consolidated pension expense, we assumed a 7.00 % expected long-term rate of return on our U.S. Pension Plan assets in 2026, 6.75 % in 2025, and 6.50 % in 2024. The historical annual return on our U.S. Pension Plan assets, calculated on a compound geometric basis, was 6.50 %, net of all fees and expenses, for the 15-year period ended May 31, 2026. The investment strategy for our U.S. Pension Plan assets is to utilize a diversified mix of public equities, fixed-income, and alternative investments to earn a long-term investment return that meets our pension plan obligations. Our largest asset classes are Corporate Fixed Income Securities and Government Fixed Income Securities (which are largely benchmarked against the Bloomberg Barclays Long Government, Bloomberg Barclays Long Corporate, or the Bloomberg Barclays 20+ STRIPS indices), and U.S. and non-U.S. Equities (which are mainly benchmarked to the S&P 500 Index and MSCI indices). Accordingly, we do not have any significant concentrations of risk. Active management strategies are utilized within the plan in an effort to realize investment returns in excess of market indices. Our investment strategy also includes the limited use of derivative financial instruments on a discretionary basis to improve investment returns and manage portfolio risk. -100- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a description of the valuation methodologies used for investments measured at fair value: • Cash and cash equivalents. Level 1 investments include cash, cash equivalents, and foreign currency valued using exchange rates. Level 2 investments include short-term investment funds, which are collective funds priced at a constant value by the administrator of the funds. • Domestic, international, and global equities. Level 1 investments are valued at the closing price or last trade reported on the major market on which the individual securities are traded. • Fixed income. We determine the fair value of Level 2 corporate bonds, U.S. and non-U.S. government securities, and other fixed-income securities by using bid evaluation pricing models or quoted prices of securities with similar characteristics. • Alternative Investments. The valuation of Level 3 investments requires significant judgment due to the absence of quoted market prices, the inherent lack of liquidity, and the long-term nature of such assets. Investments in private equity, debt, real estate, hedge funds, and other private investments are valued at estimated fair value based on quarterly financial information received from the investment advisor and/or general partner. These estimates incorporate factors such as contributions and distributions, market transactions, market comparables, and performance multiples. The fair values of investments by level and asset category and the weighted-average asset allocations for our U.S. Pension Plans and our most significant international pension plan at the measurement date are presented in the following tables (in millions): Plan Assets at Measurement Date 2026 Asset Class (U.S. Plan) Fair Value Actual % Target Range % (1) Quoted Prices in Active Markets Level 1 Other Observable Inputs Level 2 Unobservable Inputs Level 3 Cash and cash equivalents $ 696 2 % 0 - 5 % $ 26 $ 670 $ — Equities 30 - 35 U.S. large cap equity (2) 4,149 15 1,556 — — International equities (2) 2,908 10 1,717 — — Global equities (2) 1,745 6 — — — U.S. SMID cap equity 528 2 517 11 — Fixed-income securities 40 - 60 Corporate 7,013 25 — 7,013 — Government (2) 4,327 15 — 2,240 — Mortgage-backed and other (2) 1,691 6 — 230 — Alternative investments (2) 5,170 18 20 - 30 — 3 1,142 Other 226 1 ( 34 ) 260 — Total U.S. plan assets $ 28,453 100 % $ 3,782 $ 10,427 $ 1,142 Asset Class (International Plan) Cash and cash equivalents $ 14 4 % $ 14 $ — $ — Fixed-income securities Corporate (2) 118 34 — — — Government (2) 179 52 121 — — Other (2) 33 10 — — — Total international plan assets $ 344 100 % $ 135 $ — $ — (1) Target ranges have not been provided for international plan assets as they are managed at an individual country level. (2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy but are included in the total. -101- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Plan Assets at Measurement Date 2025 Asset Class (U.S. Plan) Fair Value Actual % Target Range % (1) Quoted Prices in Active Markets Level 1 Other Observable Inputs Level 2 Unobservable Inputs Level 3 Cash and cash equivalents $ 641 2 % 0 - 5 % $ 34 $ 607 $ — Equities 25 - 40 U.S. large cap equity (2) 3,804 14 1,678 — — International equities (2) 2,869 11 1,994 — — Global equities (2) 1,224 5 — — — U.S. SMID cap equity 671 2 662 9 — Fixed-income securities 40 - 60 Corporate 6,625 25 — 6,625 — Government (2) 4,142 16 — 2,277 — Mortgage-backed and other (2) 1,648 6 — 229 — Alternative investments (2) 4,972 19 15 - 25 — — 1,083 Other 5 — ( 16 ) 21 — Total U.S. plan assets $ 26,601 100 % $ 4,352 $ 9,768 $ 1,083 Asset Class (International Plan) Cash and cash equivalents $ 12 3 % $ 12 $ — $ — Fixed-income securities Corporate (2) 118 34 — — — Government (2) 184 53 141 — — Other (2) 35 10 — — — Total international plan assets $ 349 100 % $ 153 $ — $ — (1) Target ranges have not been provided for international plan assets as they are managed at an individual country level. (2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy but are included in the total. The change in fair value of Level 3 assets that use significant unobservable inputs is shown in the table below (in millions): U.S. Pension Plans 2026 2025 Balance at beginning of year $ 1,083 $ 1,075 Actual return on plan assets: Assets held during current year 11 ( 63 ) Assets sold during the year 100 75 Purchases, sales, and settlements, net ( 52 ) ( 4 ) Balance at end of year $ 1,142 $ 1,083 -102- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tables provide a reconciliation of the changes in the pension and postretirement healthcare plans’ benefit obligations and fair value of assets over the two-year period ended May 31, 2026 and a statement of the funded status as of May 31, 2026 and 2025 (in millions): U.S. Pension Plans International Pension Plans Postretirement Healthcare Plans 2026 2025 2026 2025 2026 2025 Accumulated Benefit Obligation (“ABO”) $ 26,491 $ 25,501 $ 931 $ 938 Changes in PBO and Accumulated Postretirement Benefit Obligation (“APBO”) PBO/APBO at the beginning of year $ 25,975 $ 26,284 $ 1,073 $ 1,018 $ 1,195 $ 1,162 Service cost 446 499 40 38 27 26 Interest cost 1,514 1,447 48 43 66 65 Actuarial (gain) loss 811 ( 581 ) ( 31 ) ( 4 ) ( 23 ) 2 Benefits paid ( 1,684 ) ( 1,674 ) ( 34 ) ( 39 ) ( 69 ) ( 62 ) Settlements — — ( 35 ) ( 20 ) — — Other — — ( 28 ) 37 4 2 PBO/APBO at the end of year $ 27,062 $ 25,975 $ 1,033 $ 1,073 $ 1,200 $ 1,195 Change in Plan Assets Fair value of plan assets at the beginning of year 26,601 25,797 644 602 — — Actual return on plan assets 3,220 1,661 20 6 — — Company contributions 316 817 60 64 65 59 Benefits paid ( 1,684 ) ( 1,674 ) ( 34 ) ( 39 ) ( 69 ) ( 62 ) Settlements — — ( 35 ) ( 22 ) — — Other — — 5 33 4 3 Fair value of plan assets at the end of year 28,453 26,601 660 644 — — Funded Status of the Plans $ 1,391 $ 626 $ ( 373 ) $ ( 429 ) $ ( 1,200 ) $ ( 1,195 ) Amount Recognized in the Balance Sheet at May 31: Noncurrent asset $ 1,479 $ 746 $ 74 $ 88 $ — $ — Current pension, and other benefit obligations ( 12 ) ( 33 ) ( 24 ) ( 25 ) ( 78 ) ( 79 ) Noncurrent pension, and other benefit obligations ( 76 ) ( 87 ) ( 423 ) ( 492 ) ( 1,122 ) ( 1,116 ) Net amount recognized $ 1,391 $ 626 $ ( 373 ) $ ( 429 ) $ ( 1,200 ) $ ( 1,195 ) Amounts Recognized in AOCL and not yet reflected in Net Periodic Benefit Cost: Prior service cost (credit) $ ( 24 ) $ ( 32 ) $ 2 $ 3 $ ( 35 ) $ ( 39 ) Our pension plans included the following components at May 31 (in millions): PBO Fair Value of Plan Assets Funded Status 2026 Qualified $ 26,974 $ 28,453 $ 1,479 Nonqualified 88 — ( 88 ) International Plans 1,033 660 ( 373 ) Total $ 28,095 $ 29,113 $ 1,018 2025 Qualified $ 25,855 $ 26,601 $ 746 Nonqualified 120 — ( 120 ) International Plans 1,073 644 ( 429 ) Total $ 27,048 $ 27,245 $ 197 -103- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table above provides the PBO, fair value of plan assets, and funded status of our pension plans on an aggregated basis. The following tables present our plans on a disaggregated basis to show those plans (as a group) whose assets did not exceed their liabilities. The fair value of plan assets for pension plans with a PBO or ABO in excess of plan assets at May 31 were as follows (in millions): PBO Exceeds the Fair Value of Plan Assets 2026 2025 U.S. Pension Benefits Fair value of plan assets $ — $ — PBO ( 88 ) ( 120 ) Net funded status $ ( 88 ) $ ( 120 ) International Pension Benefits Fair value of plan assets $ 264 $ 268 PBO ( 712 ) ( 784 ) Net funded status $ ( 448 ) $ ( 516 ) ABO Exceeds the Fair Value of Plan Assets 2026 2025 U.S. Pension Benefits ABO (1) $ ( 77 ) $ ( 115 ) Fair value of plan assets — — PBO ( 88 ) ( 120 ) Net funded status $ ( 88 ) $ ( 120 ) International Pension Benefits ABO (1) $ ( 463 ) $ ( 627 ) Fair value of plan assets 112 242 PBO ( 553 ) ( 757 ) Net funded status $ ( 441 ) $ ( 515 ) (1) ABO not used in determination of funded status. Contributions to our qualified U.S. Pension Plans for the years ended May 31 were as follows (in millions): 2026 2025 Required $ — $ — Voluntary 275 800 $ 275 $ 800 During the next 12 months, no pension contributions are required for our U.S. Pension Plan, as it is fully funded under the Employee Retirement Income Security Act. However, we expect to make voluntary contributions of up to $ 700 million to the plan during the next 12 months. -104- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net periodic benefit (income) cost for the years ended May 31 were as follows (in millions): U.S. Pension Plans International Pension Plans Postretirement Healthcare Plans 2026 2025 2024 2026 2025 2024 2026 2025 2024 Service cost $ 446 $ 499 $ 544 $ 40 $ 38 $ 38 $ 27 $ 26 $ 27 Interest cost 1,514 1,447 1,362 48 43 42 66 65 61 Expected return on plan assets ( 1,829 ) ( 1,721 ) ( 1,598 ) ( 26 ) ( 21 ) ( 18 ) — — — Amortization of prior service credit ( 8 ) ( 8 ) ( 7 ) — 1 — ( 3 ) ( 4 ) ( 3 ) Actuarial losses (gains) and other ( 581 ) ( 521 ) ( 590 ) ( 42 ) 4 13 ( 24 ) 2 16 Net periodic benefit (income) cost $ ( 458 ) $ ( 304 ) $ ( 289 ) $ 20 $ 65 $ 75 $ 66 $ 89 $ 101 Amounts recognized in other comprehensive loss were primarily related to amortization of prior service cost in our U.S. Pension Plans of $ 8 million in 2026 and $ 8 million in 2025 ($ 6 million, net of tax, in 2026 and $ 6 million, net of tax, in 2025). Benefit payments, which reflect expected future service, are expected to be paid as follows for the years ending May 31 (in millions): U.S. Pension Plan International Pension Plans Postretirement Healthcare Plans 2027 $ 1,931 $ 40 $ 78 2028 1,946 62 88 2029 1,954 74 98 2030 1,948 81 109 2031 1,999 88 120 2032-2036 10,507 462 666 These estimates are based on assumptions about future events. Actual benefit payments may vary significantly from these estimates. Future medical benefit claims costs are estimated to increase at an annual rate of 8.30 % during the fiscal year 2027, decreasing to an annual growth rate of 4.00 % in 2050 and thereafter. NOTE 13: BUSINESS SEGMENTS AND DISAGGREGATED REVENUE As a result of the Spin-Off, effective June 1, 2026, FedEx will no longer consolidate FedEx Freight, and FedEx Freight is no longer a reportable segment. Following the Spin-Off, we realigned our internal reporting and management structure, resulting in the identification of two new reportable segments: Express U.S. Domestic and Express International. These changes had no impact on our consolidated results of operations or financial position. Refer to Note 20 for additional information. Prior to the Spin-Off, Federal Express and FedEx Freight represented our major service lines and constituted our reportable segments. Our Chief Executive Officer is our chief operating decision maker (“CODM”). The CODM is responsible for our operating strategy, growth, and profitability and reviews financial information for our two reportable segments. The CODM uses operating income as the primary measure of segment performance because it reflects the underlying business performance and provides the CODM with a basis for making resource allocation decisions. Operating income is defined as income before other income (expense), interest expense and income tax expense. Our CODM also utilizes operating income in the annual budget and monthly forecasting process and considers forecast-to-actual variances on a monthly basis when making resource allocation decisions. Our CODM regularly reviews significant expense details, which include salaries and employee benefits, purchased transportation, rentals and landing fees, depreciation and amortization, fuel, maintenance and repairs, separation and other costs, business optimization costs, and other operating expenses. These expense categories are included within operating expenses in the accompanying consolidated statements of income and are used by the CODM in assessing performance and allocating resources. The Federal Express segment operates combined sales, marketing, administrative, and information-technology functions in shared service operations for U.S. customers of our major business units and certain back-office support to FedEx Freight and our other operating segments which allows us to obtain synergies from the combination of these functions. We allocate the net operating costs of these services to reflect the full cost of operating our businesses in the results of those segments. We review and evaluate the performance of FedEx Freight and our other operating segments based on operating income inclusive of these allocations. -105- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Operating expenses for our FedEx Freight segment included allocations of these services from the Federal Express segment. These allocations also included charges and credits for administrative services provided between operating companies. The allocations of net operating costs are based on metrics such as relative revenue or estimated services provided. We believe these allocations approximated the net cost of providing these functions. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses. Corporate, Other, and Eliminations Corporate, other, and eliminations includes corporate headquarters costs for executive officers and certain legal and finance functions, certain other costs and credits not attributed to our core business, and certain costs associated with developing integrated business solutions through our FedEx Dataworks, Inc. (“FedEx Dataworks”) operating segment. FedEx Dataworks is focused on creating new digital revenue streams using proven FedEx intelligence to digitize supply chains and create new opportunities for our customers and team members. Also included in Corporate, other, and eliminations are the FedEx Office and Print Services, Inc. (“FedEx Office”) operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics operating segment, which provides integrated supply chain management solutions, specialty transportation, customs brokerage, and global ocean and air freight forwarding. The results of Corporate, other, and eliminations are not allocated to the other business segments. Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material. The following table presents segment information for the years ended May 31, 2026, May 31, 2025, and May 31, 2024 (in millions): 2026 2025 2024 Federal Express segment: Revenue $ 82,273 $ 75,304 $ 74,663 Operating expenses: Salaries and employee benefits 27,465 25,091 24,606 Purchased transportation 21,812 19,974 19,330 Rentals and landing fees 4,153 3,939 3,863 Depreciation and amortization 3,799 3,722 3,754 Fuel 3,565 3,316 4,137 Maintenance and repairs 2,906 2,799 2,848 Asset impairment charges 23 21 157 Separation and other costs 92 — — Business optimization costs 303 384 251 Intercompany allocations (charges) ( 853 ) ( 791 ) ( 684 ) Other 13,096 11,964 11,582 Total operating expenses 76,361 70,419 69,844 Operating income $ 5,912 $ 4,885 $ 4,819 -106- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2026 2025 2024 FedEx Freight segment: Revenue $ 8,795 $ 8,892 $ 9,429 Operating expenses: Salaries and employee benefits 3,991 3,865 3,923 Purchased transportation 807 807 877 Rentals 301 287 280 Depreciation and amortization 450 416 404 Fuel 485 457 571 Maintenance and repairs 314 332 330 Separation and other costs 492 — — Intercompany allocations (charges) 561 573 543 Other 778 666 680 Total operating expenses 8,179 7,403 7,608 Operating income $ 616 $ 1,489 $ 1,821 2026 2025 2024 Reconciliation of segment revenue: Total Federal Express and FedEx Freight revenue $ 91,068 $ 84,196 $ 84,092 Other revenues (1) 3,652 3,730 3,601 Total consolidated revenue $ 94,720 $ 87,926 $ 87,693 Reconciliation of segment operating income to income before income taxes: Total Federal Express and FedEx Freight operating income $ 6,528 $ 6,374 $ 6,640 Other operating loss (1) ( 1,065 ) ( 1,157 ) ( 1,081 ) Operating income 5,463 5,217 5,559 Interest, net ( 533 ) ( 426 ) ( 375 ) Other retirement plans, net 885 713 722 Other, net (2) ( 22 ) ( 63 ) ( 70 ) Total other (expense) income 330 224 277 Income before income taxes $ 5,793 $ 5,441 $ 5,836 (1) Revenue and operating loss from segments below the quantitative thresholds are attributable to operating segments contained within “Corporate, other, and eliminations.” These operating segments include FedEx Corporate, FedEx Office, FedEx Logistics, and FedEx Dataworks. (2) Includes costs related to the Spin-Off of $ 6 million and $ 18 million for the years ended May 31, 2026 and 2025, respectively, included in “Corporate, other, and eliminations.” The following table provides a reconciliation of segment assets to consolidated financial statement totals (in millions) for the years as of May 31: Federal Express Segment FedEx Freight Segment Corporate, other, and eliminations Consolidated Total Segment assets 2026 (1) $ 84,047 $ 6,873 $ 8,017 $ 98,937 2025 74,154 12,899 574 87,627 2024 73,259 11,615 2,133 87,007 (1) In connection with the Spin-Off, FedEx Freight settled an intercompany balance of $ 7.9 billion with Federal Express, impacting segment assets for both segments. In addition, segment assets for “Corporate, other, and eliminations” reflects the $ 4.1 billion dividend from FedEx Freight Holding to FedEx, funded through the FedEx Freight Notes and borrowings under the FedEx Freight Term Loan Facility, received as consideration for FedEx’s contribution of assets to FedEx Freight Holding in connection with the Spin-Off, as well as an increase in additional $ 2.5 billion increase in cash and cash equivalents driven by overall growth in the business, increases in pension funded status and other changes in working capital accounts. -107- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table provides a reconciliation of reportable segment capital expenditures to consolidated totals for the years ended May 31 (in millions): Federal Express Segment FedEx Freight Segment Other Consolidated Total 2026 $ 3,349 $ 379 $ 81 $ 3,809 2025 3,505 437 113 4,055 2024 4,591 461 124 5,176 The following table presents revenue by service type and geographic information for the years ended or as of May 31 (in millions): 2026 2025 2024 REVENUE BY SERVICE TYPE Federal Express segment: Package: U.S. priority revenue $ 11,603 $ 10,520 $ 10,543 U.S. deferred revenue 5,700 5,007 4,926 U.S. ground revenue 37,335 33,887 32,981 Total U.S. domestic package revenue 54,638 49,414 48,450 International priority 9,639 8,737 9,454 International economy 5,925 5,861 4,653 Total international export package revenue 15,564 14,598 14,107 International domestic (1) 4,725 4,495 4,659 Total package revenue 74,927 68,507 67,216 Freight: U.S. 1,252 1,536 2,391 International priority 2,560 2,320 2,205 International economy 2,244 1,975 1,874 Total freight revenue 6,056 5,831 6,470 Other 1,290 966 977 Total Federal Express segment 82,273 75,304 74,663 FedEx Freight segment 8,795 8,892 9,429 Other and eliminations (2) 3,652 3,730 3,601 $ 94,720 $ 87,926 $ 87,693 GEOGRAPHICAL INFORMATION (3) Revenue: U.S. $ 67,944 $ 62,916 $ 63,531 International: Federal Express segment 25,480 23,720 23,136 FedEx Freight segment 243 247 266 Other 1,053 1,043 760 Total international revenue 26,776 25,010 24,162 $ 94,720 $ 87,926 $ 87,693 Noncurrent assets: U.S. $ 58,134 $ 57,040 $ 56,822 International 12,900 12,201 11,978 $ 71,034 $ 69,241 $ 68,800 (1) International domestic revenue relates to our intra-country operations. (2) Includes the FedEx Office, FedEx Logistics, and FedEx Dataworks operating segments. (3) International revenue includes shipments that either originate in or are destined to locations outside the United States, which could include U.S. payors. Noncurrent assets include property and equipment, operating lease right-of-use assets, goodwill, and other long-term assets. Our flight equipment is registered in the U.S. and is included as U.S. assets; however, many of our aircraft operate internationally. -108- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14: DERIVATIVE FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVE OF USING DERIVATIVES. We enter into derivative financial instruments to reduce the effects of volatility in foreign currency exchange exposure or interest rates on operating results and cash flows. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of cash receipts and cash payments principally related to our investments and debts. Certain of our foreign operations expose us to fluctuations of foreign exchange rates. These fluctuations may impact the value of our cash receipts and payments in terms of our functional currency. Certain of our debts expose us to fluctuations of interest rates, these fluctuations may impact our future cashflows. NET INVESTMENT HEDGES . We are exposed to fluctuations in foreign exchange rates on investments we hold in foreign entities. We use debt denominated in foreign currency and fixed-to-fixed cross-currency swaps to hedge our exposure to changes in foreign exchange rates on certain of our foreign investments. Cross-currency swaps involve the receipt of functional-currency-fixed rate amounts from a counterparty in exchange for us making foreign-currency-fixed rate payments over the life of the agreement. Cross-currency swaps also involve final exchanges of the functional-currency principal amounts for the foreign-currency principal amounts between us and the counterparty. For debt and foreign currency derivatives designated as net investment hedges, the gain or loss on the derivative is reported in AOCL as part of the cumulative translation adjustment. Amounts are reclassified out of AOCL into earnings when the hedged net investment is either sold or substantially liquidated. As of May 31, 2026 and 2025, we had € 518 million and € 506 million, respectively, of debt designated to reduce the volatility of the U.S. dollar value of a portion of our net investment in a euro-denominated consolidated subsidiary. During 2026 and 2025, we had certain foreign currency derivatives to hedge our net investments in foreign operations. The following foreign currency derivatives were outstanding as of May 31, 2026 and 2025 (notional amounts in millions): 2026 2025 Derivatives designated as net investment hedges Number of Instruments Notional Sold Notional Purchased Number of Instruments Notional Sold Notional Purchased Cross-currency swaps 4 € ( 949 ) $ 1,000 4 € ( 949 ) $ 1,000 OTHER HEDGES . We are exposed to fluctuations in interest rate risks on the fair value of our debt. We are exposed to fluctuation in foreign exchange rates due to our international operations. We may enter into derivatives contracts to mitigate these risks. For derivatives not designated in hedging relationships, the changes in fair value are recognized immediately in Other, net. During 2026 we entered into certain interest rate derivatives to hedge our interest rate risk on debt. During 2026 and 2025 we entered into certain foreign exchange contracts to hedge our foreign exchange exposures in the balance sheet. The following interest rate derivatives and foreign exchange contracts were outstanding as of May 31, 2026 and 2025 (notional amounts in millions): 2026 2025 Derivatives not designated in a hedging relationship Underlying Notional Underlying Notional Interest rate swaps $ 2,300 $ — Foreign exchange contracts 1,753 1,118 -109- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the fair value of our derivatives, including their classification on the consolidated balance sheet, as of May 31, 2026 and 2025 (in millions): Balance Sheet Location 2026 2025 Asset Derivatives Cross-currency swaps Prepaid expenses and other $ 12 $ 13 Interest rate swaps Prepaid expenses and other 4 — Foreign exchange contracts Prepaid expenses and other 9 — Liability Derivatives Cross-currency swaps Other liabilities $ 115 $ 108 Interest rate swaps Accrued expenses 1 — Foreign exchange contracts Accrued expenses 3 2 The estimated fair values were determined using pricing models that rely on market-based inputs such as foreign currency exchange rates and yield curves and are classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the derivative financial instruments, either directly or indirectly. Our cross-currency swaps and interest rate swaps contain an element of risk that counterparties may be unable to meet the terms of the agreements. We seek to minimize such risk exposures for these instruments by limiting the counterparties to banks and financial institutions that meet established credit guidelines. Our counterparties to the swaps all have an investment grade rating. To keep our exposure minimal, we monitor our counterparties’ credit worthiness on a regular basis, reviewing amongst others Standard & Poor’s rating and credit default swap spreads. We recognized losses of $ 9 million, $ 86 million, and $ 6 million in AOCL related to our cross-currency swaps for the periods ended May 31, 2026, 2025 and 2024. Losses recognized in AOCL related to our debt designated as a net investment hedge, which excludes any adjustments for the impact of deferred income taxes, was immaterial for the periods ended May 31, 2026, 2025, and 2024. Amounts recorded to “Other, net” related to our interest rate swaps and foreign exchange contracts for the periods ended May 31, 2026, 2025 and 2024 were immaterial. As of May 31, 2026 and 2025, we had not posted any collateral related to our derivatives. No amounts have been reclassified out of AOCL during 2026 or 2025 for our net investment hedges. As of May 31, 2026 and 2025, our net investment hedges remained effective. NOTE 15: SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest expense and income taxes for the years ended May 31 was as follows (in millions): 2026 2025 2024 Cash payments for: Interest (net of capitalized interest) $ 881 $ 814 $ 744 Income taxes $ 1,972 $ 1,285 $ 1,555 Income tax refunds received ( 60 ) ( 35 ) ( 122 ) Cash tax payments, net $ 1,912 $ 1,250 $ 1,433 Noncash investing and financing activities for the years ended May 31 were as follows (in millions): 2026 2025 2024 Shares of common stock issued from treasury stock for acquisition $ — $ 90 $ — NOTE 16: GUARANTEES AND INDEMNIFICATIONS In conjunction with certain transactions, primarily the lease, sale, or purchase of real estate, operating assets, or services in the ordinary course of business and in connection with business sales and acquisitions, we may provide routine guarantees or indemnifications (e.g., environmental, fuel, tax, and intellectual property infringement), the terms of which range in duration, and often they are not limited and have no specified maximum obligation. The overall maximum potential amount of the obligation under -110- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS such guarantees and indemnifications cannot be reasonably estimated. Historically, we have not been required to make significant payments under our guarantee or indemnification obligations and no material amounts have been recognized in our financial statements for the underlying fair value of these obligations. NOTE 17: COMMITMENTS Annual purchase commitments under various contracts as of May 31, 2026 were as follows (in millions): Aircraft and Aircraft Related Other (1) Total 2027 $ 919 $ 1,629 $ 2,548 2028 1,031 1,311 2,342 2029 443 1,288 1,731 2030 383 931 1,314 2031 308 705 1,013 Thereafter 1,664 110 1,774 Total $ 4,748 $ 5,974 $ 10,722 (1) Primarily information technology and advertising contracts. The amounts reflected in the table above for purchase commitments represent noncancellable agreements to purchase goods or services. Open purchase orders that are cancellable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above. We have several aircraft modernization programs led by the purchase of Boeing 777 Freighter (“B777F”) aircraft. These aircraft are significantly more fuel-efficient per unit than the aircraft types previously utilized, and these future expenditures are necessary to achieve significant long-term operational savings and to replace older aircraft. Our ability to delay the timing of these aircraft-related expenditures is limited without incurring significant costs to modify existing purchase agreements. As of May 31, 2026, we had $ 727 million in deposits and progress payments on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in “Other assets” in our accompanying consolidated balance sheets. Aircraft and aircraft-related contracts are subject to price escalations. The following table is a summary of the key aircraft we were committed to purchase as of May 31, 2026, with the year of expected delivery: Cessna SkyCourier 408 ATR 72-600F B777F Total 2027 9 5 5 19 2028 2 4 5 11 2029 — 4 — 4 2030 — 2 — 2 Total 11 15 10 36 NOTE 18: INVESTMENTS EQUITY SECURITIES. Equity securities are included within “Other assets” in the accompanying consolidated balance sheets. The summary of our investments in equity securities at May 31, 2026 and 2025 is as follows (in millions): 2026 2025 Equity securities with readily determinable fair values $ 102 $ 91 Equity securities without readily determinable fair values - NAV practical expedient 60 51 Equity securities without readily determinable fair values - measurement alternative 402 364 Total equity securities $ 564 $ 506 Equity securities with a readily determinable fair value are Level 1 investments that are valued at the closing price or last trade reported on the major market on which the individual securities are traded. For equity securities without readily determinable fair values that qualify for the NAV practical expedient, we have elected to apply the NAV practical expedient to estimate fair value. We apply the measurement alternative for all other equity securities without readily determinable fair values, where adjustments to cost -111- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS are made for observable price changes and any impairments. For equity securities where the measurement alternative is applied, annual and cumulative amounts of impairments, downward adjustments, and upward adjustments were immaterial for 2026 and 2025. Unrealized gains and (losses) recognized during the reporting period on all equity securities held at May 31, 2026, 2025, and 2024 were $ 35 million, ($ 6 ) million, and $ 14 million, respectively. DEBT SECURITIES. The carrying values of our investments in debt securities are classified as available-for-sale and reported at their estimated fair values within “Prepaid expenses and other” in the accompanying consolidated balance sheets. The summary of our investments in debt securities at May 31, 2026 and 2025 is as follows (in millions): 2026 2025 Gross Unrealized Amount in AOCL Gross Unrealized Amount in AOCL Amortized Cost Gains Losses Estimated Fair Value Amortized Cost Gains Losses Estimated Fair Value Fixed-income securities $ 236 $ — $ — $ 236 $ 69 $ 1 $ — $ 70 Debt securities are classified as Level 2 within the fair value hierarchy. Realized gains and losses were immaterial for 2026, 2025 and 2024. NOTE 19: CONTINGENCIES Litigation Matters. FedEx and its subsidiaries are subject to various legal proceedings and claims, including lawsuits alleging that Federal Express should be treated as the employer or joint employer of drivers employed by service providers engaged by Federal Express, lawsuits containing various class-action allegations of wage-and-hour violations in which plaintiffs claim, among other things, that they were forced to work “off the clock,” were not paid overtime, or were not provided work breaks or other benefits, and lawsuits alleging that FedEx and its subsidiaries are responsible for third-party losses related to vehicle accidents that could exceed our insurance coverage for such losses. In the opinion of management, the aggregate liability, if any, with respect to these actions will not have a material adverse effect on our financial position, results of operations, or cash flows. On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). On February 23, 2026, FedEx filed a lawsuit in the U.S. Court of International Trade against the U.S. Customs and Border Protection (“CBP”), the CBP commissioner, and the United States of America seeking a full refund of all IEEPA tariffs that FedEx has paid to the United States. On April 20, 2026, FedEx began filing refund claims through the CBP’s Consolidated Administration and Processing of Entries (“CAPE”) system. FedEx has received cash refunds of approximately $ 800 million as of May 31, 2026. FedEx recognizes amounts associated with these claims when cash is received or when realization is otherwise considered probable and estimable. To the extent customers have previously paid amounts associated with these tariffs, FedEx plans to remit corresponding refunds as soon as practicable. Accordingly, FedEx has recorded $ 749 million as of May 31, 2026 within current liabilities representing estimated customer refund obligations for cash refunds received. Additionally, fourteen nationwide class action lawsuits seeking refunds of IEEPA tariffs from FedEx were filed in U.S. district courts in various states. Thirteen of those lawsuits were consolidated into a single case pending in Tennessee federal court. The remaining lawsuit is pending in the Court of International Trade. The financial impact of these events is uncertain, as it is unclear to what extent duties will be refunded by CBP, what processes will govern such refunds in upcoming CAPE phases, or if we can fully collect related accounts receivable. We are evaluating the impact of these developments on our business and financial statements. No adjustments have been recorded in the accompanying consolidated financial statements as we cannot reasonably estimate the financial impact; however, it is reasonably possible that it could be material. Environmental Matters. SEC regulations require us to disclose certain information about proceedings arising under federal, state, or local environmental provisions involving a governmental authority as a party if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to the SEC regulations, FedEx uses a threshold of $ 1 million or more for purposes of determining whether disclosure of any such proceedings is required. Applying this threshold, there are no environmental matters required to be disclosed for this period. NOTE 20: SUBSEQUENT EVENTS SPIN-OFF. On June 1, 2026 (the “Distribution Date”), we completed the previously announced Spin-Off of the FedEx Freight business. The transaction was implemented through the distribution of shares of FedEx Freight Holding to holders of FedEx common stock and was structured as a tax-free Spin-Off for U.S. federal income tax purposes. -112- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On the Distribution Date, each holder of record of FedEx common stock received one share of FedEx Freight Holding common stock for every two shares of FedEx common stock held. In the aggregate, we distributed 80.1 % of the outstanding shares of FedEx Freight Holding common stock on a pro rata basis to our stockholders of record as of the close of business on May 15, 2026. Following the completion of the Spin-Off, FedEx Freight Holding is an independent public company trading under the symbol “FDXF” on the New York Stock Exchange, and its financial results will no longer be consolidated in our financial statements beginning on the Distribution Date. Following the Spin-Off, the results and assets and liabilities of FedEx Freight will be reported as discontinued operations and excluded from both continuing operations and segment results for all reporting periods, including comparable historical periods. We retained an ownership interest of 19.9 % in FedEx Freight Holding common stock following the distribution, which will be accounted for as an equity security. The investment will be measured at fair value, with changes in fair value recognized in earnings in each reporting period. We expect to fully monetize our remaining stake in FedEx Freight Holding within 24 months of the Distribution Date, subject to market conditions. Financing. In connection with the Spin-Off, we received a $ 4.1 billion cash dividend from FedEx Freight Holding funded by its $ 3.7 billion of senior notes offering completed in February 2026 and additional borrowings under a delayed draw term loan facility. Upon completion of the Spin-Off, FedEx was released from its guarantee of these notes pursuant to the applicable guarantee agreement. The notes remain the obligation of FedEx Freight Holding and are guaranteed by certain of its subsidiaries, including FedEx Custom Critical. FedEx Freight Holding has agreed to file with the SEC an exchange registration statement with respect to an exchange offer for the notes and related guarantees or a shelf registration statement for the resale of the notes and the related guarantees. In July 2026, FedEx utilized the $ 4.1 billion dividend received from FedEx Freight Holding, together with cash on hand, to repurchase approximately $ 4.9 billion aggregate principal amount of its outstanding debt securities. These transactions occurred after the balance sheet date and, accordingly, have not been reflected in the accompanying consolidated financial statements. Retirement Plans. In connection with the Spin-Off described above and as a result of the legal split of certain plans as set forth in Note 12 , an immaterial amount of net liabilities associated with FedEx's retirement plans, including a portion of the defined benefit pension plans, were transferred to FedEx Freight Holding. The legal split and transfer of the plans and the related liabilities and obligations to FedEx Freight Holding will impact our assumptions and projections used to determine the funding and costs of FedEx’s remaining plans. Other Spin-Off Related Agreements. Also in connection with the Spin-Off, FedEx entered into various agreements to effect the Spin-Off and provide a framework for the relationship between FedEx and FedEx Freight Holding, including a separation and distribution agreement, a tax matters agreement, a transition services agreement, an employee matters agreement, an intellectual property cross-license agreement, a trademark license agreement, and a stockholder and registration rights agreement. OTHER EVENTS Fiscal Year End Change. On January 27, 2025, our Board of Directors approved a change in our fiscal year end from May 31 to December 31. The fiscal year change became effective June 1, 2026. We will file a Transition Report on Form 10-K for the seven-month transition period from June 1, 2026 through December 31, 2026. The reporting periods and applicable reports preceding and following the effective date of the fiscal year change will be as follows: Fiscal Period Reporting Period Report to be Filed Fiscal year 2026 June 1, 2025 to May 31, 2026 Annual Report on Form 10-K Third quarter of calendar year 2026 July 1, 2026 to September 30, 2026 Quarterly Report on Form 10-Q (1) Transition Period June 1, 2026 to December 31, 2026 Transition Report on Form 10-KT (1) This report will also include discrete financial information for the one-month periods ending June 30, 2026 and 2025 . Collective Bargaining Agreement. On June 9, 2026, based on a majority pilot vote, Federal Express pilots ratified a new collective bargaining agreement with ALPA. This agreement marks a pivotal step forward, uniting our team behind a shared strategy for success as we continue to modernize our global operations and transform the business. The agreement includes new work rule changes, pay rate increases, and pension plan modifications, including an initial pay rate increase of 40 %. The agreement also includes a provision for a one-time payment of $ 625 million upon ratification, which is expected to be paid in the September 2026 quarter. As of May 31, 2026, this amount was accrued and is included within “Accrued salaries and employee benefits” in the accompanying consolidated balance sheets. -113- FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IEEPA Tariff Refunds. Subsequent to May 31, 2026, we have continued to submit refund claims with the CBP through the CAPE system and we have received material refunds related to these claims, which we plan to remit to customers as soon as practicable. Amounts received as of July 20, 2026 had an immaterial impact on our operating results. See Note 19 for further information related to these refunds. Treasury Shares. As of May 31, 2026, $ 1.3 billion remained available to use for repurchases under the 2024 program. In June 2026, we repurchased $ 0.3 billion of our common stock through open market transactions and executed an ASR to repurchase $ 1.0 billion of our common stock with a completion date by the end of September 2026. There are no amounts remaining available to be used for repurchases under the 2024 program. On July 20, 2026, our Board of Directors authorized a new stock repurchase program for additional repurchases of up to $ 5.0 billion of FedEx common stock (“2026 program”). Under the 2026 program, shares may be repurchased from time to time in the open market or in privately negotiated transactions. The timing and volume of repurchases are at the discretion of management, based on the capital needs of the business, the market price of FedEx common stock, and general market conditions. No time limits were set for the completion of the program; however, we may decide to suspend or discontinue the program at any time. Sale of Supply Chain. On July 1, 2026, FedEx announced that it would sell its FedEx Supply Chain business to CMA CGM Group for $ 1.4 billion as part of a strategic portfolio streamlining effort. The transaction is expected to close in the second half of calendar year 2026. Upon completion of the sale, FedEx will no longer consolidate FedEx Supply Chain and FedEx Supply Chain will no longer be included in “Corporate, other, and eliminations” in our segment reporting. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.