Global Shipping Slowdown Anything but Smooth Sailing for FedEx

It’s been a bumpy ride for transportation and logistics company FedEx. For decades, the shipper has been a bellwether of global commerce, its earnings serving as a barometer for supply chain health and business confidence.

But on Thursday (March 20), for a third consecutive quarter, FedEx cut its full-year and revenue outlook.

“Our revised earnings outlook reflects continued weakness and uncertainty in the U.S. industrial economy, which is constraining demand for our business-to-business services,” said John Dietrich, FedEx Corp. executive vice president and chief financial officer, on Thursday’s third quarter earnings call. “Despite this uncertainty, I’m confident we are well positioned to execute on our transformation initiatives and create stockholder value.”

A big factor influencing FedEx’s revised outlook is the termination of its contract with U.S. Postal Service, which concluded last year. This contract had been a substantial source of revenue for FedEx, and its loss has presented challenges in replacing the business volume it provided.

“The FedEx team delivered improved profitability, while navigating a very challenging operating environment, including a compressed peak season and severe weather events. I am proud of the team for executing on our transformation efforts while strengthening our value proposition and improving the customer experience,” said Raj Subramaniam, FedEx president and CEO.

Executives also stressed to investors that a global economic slowdown has dented consumer demand, leading to lower shipment volumes. With central banks maintaining high interest rates to combat inflation, businesses and consumers alike have pulled back on spending, leading to headwinds in the broader logistics sector.

The company’s share price was down by about 5% in after-hours trading.

Read more: FedEx Tamps Down 2025 Outlook Despite Digital Transformation Efforts

Numbers Behind the Story

FedEx reported quarterly revenues of $22.7 billion, a 3.8% decline year over year (YoY) from $23.6 billion. The company’s net income stood at $771 million, a noticeable YoY drop from $892 million. These figures paint a picture of a company facing challenges on multiple fronts — most notably, declining shipment volumes and increasing expenses.

Breaking it down by segment, FedEx Express, the company’s largest revenue driver, experienced a 4% decline, settling at $10.5 billion. Meanwhile, FedEx Ground saw a 3% dip to $7.8 billion, primarily due to a slowdown in eCommerce growth, which had been a major tailwind in previous years. The Freight division remained relatively stable, with revenue hovering around $2.2 billion. While the company remains a dominant force in logistics, these figures highlight a potential inflection point.

Regulatory changes are another force shaping the company’s trajectory. Stringent environmental regulations, particularly in Europe and North America, are forcing FedEx to rethink its fleet strategy.

The transition toward more sustainable logistics practices, while necessary, comes with significant capital expenditures. The company’s commitment to carbon neutrality by 2040 signals a long-term investment in sustainability, but the short-term financial strain cannot be ignored.

Adding to this challenge, fuel costs remain a volatile variable. While FedEx has implemented fuel surcharges to offset some of the financial strain, the unpredictability of global energy markets continues to pose a risk.

Read more: FedEx Divests FedEx Freight and Shifts Gears to DRIVE Program

Shifting Competition

The logistics sector has undergone seismic shifts in recent years. Amazon’s growing in-house logistics capabilities continue to pose a direct threat to FedEx’s eCommerce shipping business. Simultaneously, nimble regional players and technology-driven logistics startups are capturing market share by offering more flexible, data-driven solutions.

To maintain its competitive edge, FedEx is doubling down on technology investments. AI-powered logistics optimization, predictive analytics, and enhanced route planning are central to the company’s strategy for improving efficiency. Additionally, FedEx’s investment in autonomous delivery and electric vehicle fleets aligns with broader industry trends toward automation and sustainability.

One particularly intriguing move is FedEx’s increasing collaboration with retailers to provide end-to-end supply chain solutions. By offering integrated logistics services, FedEx aims to position itself as a strategic partner rather than just a shipping provider. This shift echoes trends in other industries, where vertical integration is becoming a key differentiator.