News / FedEx ramps up its focus on healthcare to boost yields

FedEx has set up a dedicated unit to handle its healthcare traffic, hoping this will draw investors more than improved results.

When FedEx unveiled its results for the final quarter of its fiscal 2026, ending 31 May, the integrator’s top brass were happy to table results ahead of projections from Wall Street.

Revenues in the Q4 were up 12.5% year on year, to $25.01bn, compared with projections of $24.04bn, and full-year revenue reached $94.7bn, up from $87.9bn the previous fiscal year.

Moreover, average daily volume in the fourth quarter was up 2%, while revenue per package jumped 11%, validating management’s course of steering away from low-margin volume traffic to higher-yielding business – Ground Economy volume shrank about 5% in the quarter.

“The momentum you’re seeing across our business is proof that our strategy is working,” CEO Raj Subramaniam told analysts. “It’s translating to favourable financial outcomes, including very strong free cash flow and FY26 results that far exceeded our initial outlook.”

Still, investors were not impressed. Shares fell 6% after the earnings call and analysts pointed to the fact that the operating margin was down to 8.4% in the quarter, versus 9.1% a year earlier.

Investors might have been more pleased with the announcement during the investor call that FedEx had set up a dedicated organisation to cater for healthcare and pharmaceutical business.

According to chief customer officer Brie Carere, this will further strengthen FedEx’s ability to support complex, time-critical and highly regulated healthcare supply chains. FedEx Life Sciences marks another step in the company’s pursuit of the sector, part of the strategy to focus on high-yield traffic, and builds on a network of life science centres in Europe and Asia-Pacific.

In FY26 the integrator grew its revenue in this segment to nearly $10bn, up from $9bn in the previous fiscal year.

Meanwhile, rival UPS has also expanded in this segment. For the 2025 fiscal year it posted $11.2bn in healthcare revenues, compared with $10.5bn a year earlier. Management has set its sights on reaching $20bn in this arena.

The company announced one step in that direction this week with a $48m investment in its cold chain infrastructure supporting healthcare traffic. The money goes to 27 temperature-controlled cross-dock facilities in the US, Europe, Asia and the Americas.

According to UPS, these facilities comply with CEIV Pharma standards and are supported by a 24/7/365 control tower designed to monitor shipments and cope with disruptions.

“We’re seeing a growing mix of higher-value, temperature-sensitive, and time-critical healthcare products that require more precision and control across the supply chain,” said Kiel Harkness, VP of healthcare strategy

Dedicated air service appears to be another rising element in this equation. Last September, FedEx announced plans for a flight between Dublin and Indianapolis to move healthcare products and other high-value goods, claiming this would shorten transit times by a day.

In February, DHL unveiled a B777 freighter branded ‘DHL Health Logistics’ to mark management’s decision to move a greater portion of its healthcare traffic on dedicated freighters and reduce its reliance on commercial airlines. The 777F links Brussels and Cincinnati.

DHL signalled plans to field more such services, targeting dedicated routes in Europe, the Middle East, Asia, and Latin America to form a core element of the integrator’s Airfreight Cold Chain Network.

Among the countries earmarked for the expansion are India, Singapore, Japan, South Korea, Brazil, the US, Germany, and Ireland.

All three big integrators have strengthened their presence in the healthcare logistics sector in recent years with strategic acquisitions. In light of their increased focus on high-yield traffic, this trend is bound to continue – while B2C e-commerce is not likely to see much effort to up their profile.