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    UPS
    Earnings call· Jun 2026(Q2 FY26)

    UNITED PARCEL SERVICE Q2 FY26 earnings call UPS

    Jul 28, 2026 Source

    Executive summary

    United Parcel Service, Inc. Q2 FY26 — Amazon Glide Down Completed, Full-Year Outlook Raised

    UPS successfully completed its Amazon glide down and network reconfiguration, structurally resetting its U.S. business for improved operating leverage. The company delivered strong Q2 FY26 results, exceeding expectations, and raised its full-year outlook, driven by a strategic focus on premium volume from SMB, healthcare, and B2B customers, alongside significant investments in automation and technology like RFID and AI.

    Highlights

    5

    • Consolidated revenue increased 7.6% year-over-year to $22.8 billion.

    • Consolidated operating profit increased 12% year-over-year to $2.1 billion.

    • U.S. Domestic operating profit grew over 20% year-over-year to $1.2 billion.

    • SMB average daily volume (ADV) increased 4.3% year-over-year.

    • Full-year 2026 consolidated revenue outlook raised to approximately $91.2 billion.

    Concerns

    3

    • International operating profit decreased $59 million year-over-year to $623 million, impacted by fuel price volatility and Middle East conflict.

    • Total U.S. average daily volume was down 3.3% year-over-year.

    • International average daily volume declined 5.8% year-over-year, led by domestic declines in Europe.

    Guidance & targets

    21
    CategoryTargetConfidence
    Full Year 2026 Consolidated Revenue
    approximately $91.2 billion
    high materiality
    High
    Full Year 2026 Consolidated Operating Profit
    approximately $8.65 billion
    high materiality
    High
    Full Year 2026 Diluted Earnings Per Share
    approximately $7.22
    high materiality
    High
    Full Year 2026 U.S. Domestic Revenue
    approximately $60 billion, up 1% year-over-year
    medium materiality
    High
    Full Year 2026 U.S. Domestic Operating Margin
    approximately 7.5%
    medium materiality
    High
    Q3 2026 U.S. Domestic Average Daily Volume
    decline mid-single digits
    medium materiality
    High
    Q3 2026 U.S. Domestic Revenue
    approximately flat year-over-year
    medium materiality
    High
    Q3 2026 U.S. Domestic Operating Margin
    approximately 7%
    medium materiality
    High
    H2 2026 U.S. Domestic Operating Margin
    approximately 8.8%
    medium materiality
    High
    Full Year 2026 International Revenue Growth
    mid-single digits year-over-year
    medium materiality
    High
    Full Year 2026 International Operating Margin
    mid-teens
    medium materiality
    High
    Q3 2026 International Revenue Growth
    mid-single digits
    medium materiality
    High
    Q3 2026 International Operating Margin
    between 13% and 14%
    medium materiality
    High
    Full Year 2026 Supply Chain Solutions Revenue Growth
    high single digits
    medium materiality
    High
    Full Year 2026 Supply Chain Solutions Operating Margin
    between 10% and 11%
    medium materiality
    High
    Q3 2026 Supply Chain Solutions Revenue Growth
    low double digits year-over-year
    medium materiality
    High
    Q3 2026 Supply Chain Solutions Operating Margin
    between 10% and 11%
    medium materiality
    High
    Full Year 2026 Capital Expenditures
    about $3 billion
    medium materiality
    High
    Full Year 2026 Pension Contribution
    $1.3 billion
    medium materiality
    High
    Full Year 2026 Free Cash Flow
    approximately $5.5 billion
    high materiality
    High
    Full Year 2026 Dividends Paid
    around $5.4 billion
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    U.S. Domestic
    Completed Amazon glide down and related network reconfiguration. Strong base rate growth and increased productivity contributed to revenue per piece growing faster than cost per piece.
    Total U.S. average daily volume: down 3.3% versus last yearTotal air average daily volume: down 2.3% year-over-yearGround average daily volume: down 3.5% compared to Q2 2025SMB average daily volume: increased 4.3% year-over-yearSMBs made up 34.5% of total U.S. volume, an increase of 250 basis pointsB2B average daily volume: down 3.2% year-over-yearB2B represented 43.8% of total U.S. volumeRevenue per piece: increased 9.3% compared to last yearOperating margin: 8%Operating margin increase: 100 basis points compared to last yearOperating margin increase: 400 basis points from Q1 this yearRevenue per piece growth vs cost per piece growth: 130 basis points faster
    		$14.9 billion6%—$1.2 billion operating profit
    International
    Delivered strong top-line growth with all regions expanding, driven by strong revenue quality and geographic mix improvement. Operating profit was down due to fuel impact and Middle East conflict.
    Total international average daily volume: declined 5.8%Export average daily volume: decreased 4.2% year-over-yearChina-U.S. trade lane volume: returned to year-over-year growthAsia to Asia export volume: increased 13.6% compared to last yearRevenue per piece: increased 18.9% year-over-yearOperating margin: 12.4%Operating margin negative impact from fuel: 120 basis points year-over-year
    		$5 billion12.5%—$623 million operating profit
    Supply Chain Solutions
    Delivered strong operating profit growth driven by improvements across multiple business units, particularly forwarding and healthcare logistics.
    Forwarding revenue: increased 8.1% year-over-yearLogistics revenue: increased 4.3% year-over-yearUPS Digital revenue: growth of over 30% compared to Q2 2025Operating margin: 10.2%Operating margin increase: 220 basis points compared to last yearOperating margin expansion: third quarter in a row year-over-year
    		$2.9 billion$207 million increase—$291 million operating profit

    Operational metrics

    29
    Consolidated Operating Margin
    9.2%up 40 basis points year-over-year, up 300 basis points from Q1 FY26
    Q2 FY26

    Consolidated operating margin for the quarter.

    Diluted Earnings Per Share
    $1.76
    Q2 FY26

    Diluted earnings per share for the quarter.

    GAAP Transformation Charges
    $891 million
    Q2 FY26

    GAAP results included these after-tax transformation charges.

    Amazon Volume Elimination
    approximately 2 million
    past 18 months

    Volume eliminated as part of the Amazon glide down.

    Related Expense Removal
    approximately $4.5 billion
    through 2026

    Related expense removed as part of the network reconfiguration.

    Automated Volume Percentage
    68.5%up from 64% 1 year ago
    end of Q2 FY26

    Percentage of volume flowing through an automated building.

    Cost Per Piece Differential (Automated vs. Non-Automated)
    28% lower
    ongoing

    Cost per piece in automated buildings compared to non-automated buildings.

    Operational Positions Reduced
    nearly 30,000compared to H1 last year
    H1 FY26

    Reductions from the Driver Choice program and other initiatives.

    Total Operational Positions Reduced (associated with Amazon volume)
    nearly 78,000
    through 2026

    Total operational positions eliminated associated with the Amazon volume reduction.

    Buildings Closed
    45
    H1 FY26

    Buildings closed as part of network reconfiguration.

    Total Buildings to Close (associated with Amazon volume)
    nearly 150
    through 2026

    Total buildings to be closed associated with the Amazon volume reduction.

    Digital Access Program (DAP) Revenue
    $1.4 billionthird quarter in a row over $1 billion
    Q2 FY26

    Revenue generated from the Digital Access Program.

    B2B DAP Average Daily Volume Growth
    34%year-over-year
    Q2 FY26

    Growth in B2B e-commerce shippers using the DAP platform.

    Healthcare Revenue
    over $3 billionsecond consecutive quarter
    Q2 FY26

    Revenue generated from healthcare logistics solutions.

    Temperature-Controlled Cross-Dock Facilities Added
    27
    Q2 FY26

    Added to strengthen global cold chain capabilities.

    Specialists for Automotive and Industrial Manufacturing
    over 300
    Q2 FY26

    Dedicated team launched to support automotive and industrial manufacturing customers.

    China to U.S. Lane Volume Growth
    returned to year-over-year growthyear-over-year
    beginning in May

    Momentum seen on the China to U.S. trade lane.

    Cash Balance
    $4.7 billion
    end of Q2 FY26

    Cash on the balance sheet at quarter end.

    Dividends Paid
    $2.7 billion
    YTD FY26

    Dividends paid so far this year.

    Total Operational Hours Reduction
    50 million hours
    through 2025 and 2026

    Reduction in variable costs associated with the Amazon glide down.

    Benefits from Network Reconfiguration
    approximately $3 billion
    FY26

    Expected benefits from network reconfiguration and efficiency initiatives.

    Amazon Revenue % of Total
    9%down about 100 basis points from a year ago, down from over 13% during COVID year
    Q2 FY26

    Amazon's contribution to total revenue.

    RPP to CPP Spread Target
    50 to 100 basis point spread
    going forward

    Target spread between revenue per piece and cost per piece to drive margin accretion.

    Base Pricing Range
    250 to 350 basis points
    Q2 FY26

    Range for base pricing in the U.S. business.

    International Fuel Impact on Operating Margin
    120 basis pointyear-over-year negative impact
    Q2 FY26

    Negative impact on International operating margin due to fuel.

    Q3 2025 Diluted EPS Benefit from Sale-Leaseback
    $0.30
    Q3 FY25

    Benefit from sale-leaseback transactions in the prior year's third quarter.

    Capital Expenditures as % of Revenue
    3.5%
    long-term

    Expected long-term capital intensity.

    RFID-Enabled Customer Locations
    over 2.2 million
    Q2 FY26

    Volume covered by RFID-enabled capabilities at customer locations.

    Peak Season Volume Lift (Q3 to Q4)
    about 24%much like last year
    Q3 to Q4

    Expected sequential volume increase from Q3 to Q4 for peak season.

    Industry KPIs

    12
    MetricValueDetails
    Smb b2b mix34.5% (SMB), 43.8% (B2B)%
    Long term targets3.5%% of revenue
    Average daily volumedown 3.3% (Total U.S.), down 2.3% (Total Air), down 3.5% (Ground), increased 4.3% (SMB), down 3.2% (B2B), declined 5.8% (Total International), decreased 4.2% (Export International), increased 13.6% (Asia to Asia export)%
    Healthcare vertical mixover $3 billionUSD
    Network reconfiguration45 (buildings closed H1), nearly 150 (total buildings to close)buildings
    Revenue per piece yieldincreased 9.3% (U.S. Domestic), 18.9% (International)%
    Fuel surcharge mechanicscovered the increase
    Amazon customer concentration9%%
    Cost per piece rpp cpp spread130 basis points fasterbps
    Cost reduction program progressapproximately $4.5 billion (related expense removed), approximately $3 billion (related benefits)USD
    International trade lane trendsreturned to year-over-year growth (China-U.S. lane), increased 13.6% (Asia to Asia export)%
    Workforce structural cost itemsnearly 30,000 (operational positions), approximately 80% (Driver Choice participants)positions, %

    Product announcements

    5
    ProductTypeDetails
    RFID Sensing Technologyexpansion
    RFID Label Printerslaunch
    Temperature-Controlled Cross-Dock Facilitiesexpansion
    North American Air Freight Servicesexpansion
    Dedicated Team for Automotive and Industrial Manufacturinglaunch

    Deals & partnerships

    1
    AmazonCollaboration on Amazon glide down and network reconfiguration

    Partnership with Amazon to execute a deliberate structural reset of the U.S. business, including the elimination of lower-quality Amazon volume and network reconfiguration.

    Capital programs

    4
    Amazon Glide Down and Network Reconfigurationcompleted (glide down part), ongoing (network reconfiguration benefits)approximately $4.5 billion
    Start: 18 months ago

    Benefit: eliminated approximately 2 million pieces per day of lower-quality Amazon volume; removed approximately $4.5 billion of related expense; leaner, more automated, more agile network that will deliver operating leverage

    18 months ago, we announced our Amazon glide down and network reconfiguration plan. Today, I'm pleased to say we executed that plan exactly as designed while continuing to deliver the industry-leading service that sets UPS apart. We removed approximately $4.5 billion of related expense with more to come as we finish out 2026.

    RFID Sensing Technology Deploymentcompleted (U.S. deployment), underway (international)
    Start: a few years ago

    Benefit: move from a scanning-based network to a sensing network, eliminating hundreds of millions of manual scans every year; enhanced end-to-end visibility

    We've completed deployment of RFID sensing technology across all of our U.S. delivery facilities and packaged cars. And now we're moving internationally.

    Global Cold Chain Capabilities Expansioncompleted

    Benefit: added 27 temperature-controlled, cross-dock facilities; further strengthen our global cold chain capabilities

    to further strengthen our global cold chain capabilities, we have added [ 27 ] temperature-controlled, cross-dock facilities to our network.

    North American Air Freight Services Investmentannounced$50 million

    Benefit: expand North American air freight services between the U.S. and Mexico; support automotive and industrial customers

    We just announced that we invested $50 million and North American air freight to support automotive and industrial customers and their growth and some of the challenges that they're facing with given today's supply chain.

    Risks & headwinds

    4
    Fuel Price VolatilityQ2 FY26

    drove higher fuel revenue and corresponding fuel costs; 120 basis point year-over-year negative impact from fuel on International segment operating margin

    Mitigation: Our fuel surcharge mechanisms functioned as designed, covering the increase in fuel expense.

    Middle East ConflictQ2 FY26

    drove an outsized increase in both revenue and expense; added block hours and lease aircraft costs due to inability to fly into the region

    Mitigation: Redirected the network to manage disruptions.

    Tariffsongoing

    impacted volume in certain areas, specifically Canada to the United States

    Mitigation: Working through the tariff noise.

    Teamsters Contract Renegotiation2 years out (from call date)

    potential future cost increases

    Mitigation: Renewing customer contracts that extend beyond 2028, focusing on continuing to drive the business and leveraging strong customer relationships.

    What to watch in Q3 FY26

    5

    U.S. Domestic Operating Margin

    Q3 FY26, H2 FY26
    Current8% (Q2 FY26)
    Targetapproximately 7% (Q3 FY26), approximately 8.8% (H2 FY26)

    Why it matters

    Verifies the expected sequential moderation and subsequent reacceleration of domestic profitability post-Amazon glide down, crucial for the overall margin expansion thesis.

    Looking at the third quarter, we expect average daily volume to decline mid-single digits, reflecting a seasonal decline as well as the impact of this year's Amazon glide down, which completed in June. We expect revenue to be approximately flat year-over-year and a third quarter operating margin of approximately [ 7% ]. Lastly, in the back half of the year, we expect the U.S. domestic operating margin of approximately 8.8%.

    Q&A highlights

    7

    What is the confidence level in the structural change on domestic margin and the longer-term target?

    Management expressed high confidence due to increased automation (68.5% volume through automated buildings, 28% lower cost per piece) and significant network rightsizing efforts (2 million pieces/day Amazon volume removed, 78,000 positions, 150 buildings eliminated). They expect a 50-100 basis point spread between revenue per piece (RPP) and cost per piece (CPP) to drive margin accretion.

    “We know that the cost per piece in the automated building is about 28% lower than nonautomated building. So that gives us confidence in the productivity that we should continue to deliver going forward.”

    asked by Jordan Alliger · answered by Carol Tomé

    2 min read5 chapters

    Detailed Narrative

    01

    Amazon Glide Down & Network Reconfiguration

    UPS successfully completed its 18-month Amazon glide down and network reconfiguration plan, eliminating approximately 2 million pieces per day of lower-quality Amazon volume. This initiative removed about $4.5 billion in related expenses, with more expected by year-end 2026. The structural reset has resulted in a leaner, more automated, and agile U.S. network, positioned to deliver operating leverage as volume grows, with incremental volume now carrying materially better economics.

    02

    Technology & Automation Investments

    The company is making significant investments in RFID and AI to drive efficiencies and enhance customer experience. RFID sensing technology deployment is complete across all U.S. delivery facilities and package cars, moving internationally, transforming the network from scanning-based to sensing and eliminating hundreds of millions of manual scans. AI leverages this data with a digital twin of the network to optimize planning, routing, and execution in near real-time, improving reliability and end-to-end visibility.

    03

    Strategic Volume Focus & Differentiation

    UPS is now fully focused on capturing premium volume from SMB, healthcare, and B2B customers, prioritizing revenue quality and margin expansion. This strategy is supported by differentiating capabilities such as end-to-end cold chain logistics solutions, RFID labeling for enhanced visibility, and comprehensive returns services including UPS Stores and Box-free label-free returns with Happy Returns. The Digital Access Program (DAP) generated $1.4 billion in Q2 revenue, marking the third consecutive quarter over $1 billion.

    04

    Healthcare Logistics Expansion

    Healthcare revenue exceeded $3 billion for the second consecutive quarter, reinforcing UPS's position as a leading provider of complex healthcare logistics. To further strengthen its global cold chain capabilities, UPS added 27 temperature-controlled, cross-dock facilities. These facilities are designed for fast, precise transfers of complex healthcare products, ensuring strict temperature control and end-to-end visibility with proprietary assets.

    05

    International Trade Lane Dynamics

    The international segment showed momentum with the China-to-U.S. trade lane returning to year-over-year growth in May, and Asia-to-Asia export volume increasing 13.6% due to regional investments. However, tariffs continue to impact volume in certain areas, such as Canada-to-U.S., and disruptions in the Middle East have affected European exports. The company is actively managing through these trade lane shifts and focusing on revenue quality in its international business.

    AI-generated summary of the company’s earnings call. Not investment advice.