FedEx reported earnings this week and is a company worth watching because freight demand is a great proxy for economic activity.
Here’s Brie Carrere, EVP and Chief Customer Officer:
“I was concerned a quarter ago that maybe we would see some reduction in demand. That absolutely has not happened.”
Raj Subramaniam, President and CEO
“We are growing revenues in the most premium sectors of the global economy.”
Combined, these two quotes highlight what is going on in the global economy, and in the US in particular. Growth has been surprisingly resilient despite shocks like Trump’s tariffs and the Iran war. This is a very good point. Secondly, the top tier of the economy is performing very well. I would no longer call it a K-shaped economy because the bottom is not going down. It’s either going sideways or only slightly up.
I think this is a good baseline for investment right now and the sustainability of economies in Europe and elsewhere despite these shocks points to rising risks to growth.
“There is a little inventory buildup and restocking going on,” Carrère said.
Another line from them is that “We are seeing these initial time-critical shipments rapidly convert into large repeatable revenue streams,” which points to increased customer spending, business and confidence.
Finally, since AI is driving everything right now, the bottom line is that FedEx is also a beneficiary of the AI capex boom as Carey said:
“The AI and data center space is an emerging and fast-growing growth engine for us, delivering double-digit revenue growth.”
Carrera said.
This is a sign that AI capital spending is increasing. In the coming quarters, I expect there to be an intense focus on earnings from hyperscalers and chip names as that is the battleground right now, but there may be benefits to be gained from examining how spending is trickling through the economy.
