FedEx executives used Citi’s TMT conference to lay out how artificial intelligence, data and the company’s Network 2.0 integration are cutting costs and pushing the logistics giant deeper into supply-chain technology.
President and CEO Raj Subramaniam said FedEx remains on track for its calendar 2029 targets of modest revenue growth, double-digit earnings growth and $6 billion in free cash flow. He described the company as “well on our way” toward those objectives.
The cost-cutting program behind Network 2.0
FedEx began a structural cost-reduction program in 2022 and has removed billions from its cost structure. The company has previously cited $4 billion in savings from its DRIVE program and another $2 billion tied to Network 2.0.
A central piece is combining the formerly separate U.S. Express and Ground networks. Subramaniam called it one of the largest industrial transformations in recent history. FedEx was about 42% complete at its last earnings call, expects to hit 62% by year-end and remains on track to finish next year.
The company runs 700 aircraft, 200,000 trucks and 5,000 facilities, generating roughly 2 petabytes of data daily while moving about $2 trillion of commerce annually.
“Well on our way.”
Where AI is actually saving money
Vishal Talwar, FedEx’s executive vice president and chief digital and information officer, said AI is still in its early stages for logistics. The company is using it internally for efficiency and externally to differentiate services.
AI has cut aircraft-maintenance research time from 30 minutes to three minutes, an approximately 90% improvement. Delivery windows have narrowed from four hours to two. Computer vision now identifies non-standard packages, recovering surcharge revenue worth more than tens of millions of dollars annually.
Subramaniam noted small gains matter in an “inventory in motion” network. At the Memphis hub, improving flight arrival time by eight minutes was a meaningful win.
Supply-chain services beyond shipping
FedEx sees a bigger opportunity in supply-chain inefficiency, which Subramaniam estimated at $1.9 trillion globally. Customers in healthcare, automotive, aerospace, data centers and high technology want visibility across sourcing, manufacturing and logistics.
FedEx offers SenseAware for monitoring high-value shipments and Surround for package-location visibility. Talwar said 40% of FedEx healthcare customers use one of the two. In healthcare, FedEx is connecting medical-device manufacturers with hospital systems to spot demand signals earlier.
DataWorks, formed roughly four or five years ago, is building businesses around proprietary data and supply-chain orchestration. Its platform covers inventory flow, supplier insights, demand management, forecasting and yard management. FedEx has partnered with Dun & Bradstreet on a Retail Momentum Index and recently announced a DataWorks relationship with the U.S. Army.
Robots in Hagerstown
Physical automation remains a focus. Subramaniam said truck loading and unloading are hard to automate because packages vary in size, shape and weight. FedEx expects to deploy robots for those tasks in Hagerstown, Maryland, before December.
The company is also working with Aurora on automation efforts.
The through-line is that FedEx is no longer just moving parcels. It is selling the data and orchestration around them, while using AI to squeeze cost and time out of its own network.
The numbers
- FedEx targets: modest revenue growth, double-digit earnings growth, $6B free cash flow by calendar 2029
- Network integration: 42% complete, 62% expected by year-end, finish next year
- AI cuts maintenance research from 30 to 3 minutes (~90%)
- Delivery window: 4 hours down to 2 hours
- Surcharge recovery: more than tens of millions annually
- Global supply-chain inefficiency: $1.9 trillion
- Healthcare customers using SenseAware or Surround: 40%
- Robots in Hagerstown: expected before December
Source: finance.yahoo.com
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