Expeditors International posts 51% EPS surge as Middle East conflict tightens global air cargo capacity

A tightening in global air cargo markets, driven partly by the ongoing conflict in the Middle East and its effect on passenger belly capacity, defined the freight forwarding cycle through the second quarter. Against that backdrop, Expeditors International of Washington (NYSE: EXPD) reported diluted earnings per share of $2.03 for the second quarter of 2026, a 51% increase year on year, as revenues rose 32% to $3.5 billion and operating income climbed 41% to $350 million.

Air freight: constrained capacity, AI-driven demand

The air freight picture was shaped by two distinct forces. Passenger flight reductions tied to the Middle East conflict cut belly cargo capacity on routes that some of the world's largest commercial air cargo operators rely upon, forcing freight onto a tighter supply of dedicated freighter space. Tonnage at Expeditors rose 14% year on year and 16% compared to the first quarter of 2026, with the strongest volumes on Asia-U.S. and Asia-Europe trade lanes, which the company said were relatively unaffected by the conflict.

AI hyperscalers contributed meaningfully to demand. The company noted that some hyperscalers required upper-deck access for server shipments, increasing preference for dedicated freighter capacity over belly space. E-commerce out of North Asia also climbed closer to levels seen before the U.S. government began restricting de minimis entries in the second quarter of 2025, adding further pressure to already constrained capacity.

Ocean and customs: first sequential volume gain since Q3 2025

Ocean container volumes were flat year on year but rose 7% compared to the first quarter of 2026, the first sequential increase since the third quarter of 2025. Carriers managed capacity carefully as demand firmed late in the quarter, pushing rates higher and improving profitability per container. The read-through for the broader ocean cycle is cautious: it may mark a flattening of the extended market downturn, though the company stopped short of calling a full turn.

Customs brokerage delivered double-digit revenue growth for a second consecutive quarter, a run that also extended to Transcon, Distribution, and Order Management. Tariff complexity tied to IEEPA-related filings drove a temporary surge in pricing, complementing growth from new customers and increased declarations from existing clients.

Technology restructuring and capital return

Senior Vice President and Chief Financial Officer David A. Hackett disclosed a $25 million pretax restructuring charge against the Global Technology team, partly offset by a $16 million gain on the sale of an underutilized property. The restructuring is expected to reduce annual costs by approximately $50 million, about 10% of total corporate overhead, with headcount reductions expected to be realized primarily in the third quarter. Operating efficiency reached 32.2% in the second quarter, inclusive of the charge.

Expeditors returned $461 million to shareholders through dividends and repurchases in the quarter and $748 million over the first half of 2026. The company plans an Investor Day on November 18, 2026, in New York City. Rising fuel costs, routing disruptions from the Middle East conflict, and the trajectory of cross-border e-commerce policy remain the variables most likely to shape results in the second half.

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