United Parcel Service (UPS) Q2 FY26 earnings call: guidance and Q&A

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

How will UPS gain SMB and B2B share given competitors like FedEx are targeting the same segments?

UPS differentiates through enabling capabilities such as end-to-end healthcare solutions, RFID labeling (e.g., winning a high-end jeweler due to origin-to-destination visibility and security), and its returns approach (UPS Stores, Happy Returns). These capabilities are sticky and create strong customer relationships, helping to retain and attract new customers.

“Where we have RFID at the point of origin, we have seen no churn. That's a really powerful way to grow, but it doesn't stop with RFID.”

asked by Scott Group · answered by Carol Tomé

What are the expected cost per piece trends in H2 2026 and 2027, and how will mix impact revenue per piece?

Both RPP and CPP will see some moderation in H2 due to tougher year-ago pricing comps, but the 50-100 basis point RPP-CPP spread will be maintained. For 2027, the focus remains on this unit cost differential to drive operating leverage, with an expectation of base pricing plus 50-100 basis points of product mix benefit.

“The same dynamic happens in CPP, right? So as we brought down the cost of the network, we expect CPP to come down as well. So we'll maintain that kind of 50 to 100 basis point spread.”

asked by Thomas Wadewitz · answered by Brian Dykes

What is Amazon's revenue as a percentage of total, and how does the growth profile of remaining Amazon volume compare to other opportunities?

Amazon currently represents 9% of total revenue, down from over 13% during the COVID year and 10% a year ago. UPS's strategy is to optimize the volume received from Amazon across various modes, while focusing on growing other premium segments.

“As Amazon is and will continue to be an important customer to UPS as a percent of our total revenue, Amazon made up 9%.”

asked by Christian Wetherbee · answered by Carol Tomé

Is the network capacity rightsized for the demand outlook in H2 2026 and 2027, or is more adjustment needed?

Management believes the network capacity is in a very good place, optimized for anticipated delivery volume after the Amazon glide down. Automation (68% of volume through automated buildings) provides increased flexibility to scale throughput faster and smarter, adapting to demand fluctuations on a daily and weekly basis.

“I do think that with your question, the capacity is in a really good place, right? I mentioned some of the stats of the Amazon drawdown. This is what we've been targeting.”

asked by Jonathan Chappell · answered by Brian Dykes

How should investors get comfortable with the upcoming Teamsters contract renegotiation, given past challenges?

While the contract renewal is two years away, UPS is already renewing customer contracts that extend beyond 2028, indicating customer confidence in the company's ability to manage negotiations. The focus remains on continuing to drive the business and leveraging strong customer relationships and trust built over time.

“Well, you're right, the contract renewal is 2 years out. We are today renewing contracts with our customers that go long past 2028.”

asked by Ariel Rosa · answered by Carol Tomé

Will long-term capital expenditures settle at a structurally lower level than historical ranges of $4.5 billion to $5 billion?

Capital spend is expected to settle around 3.5% of revenue in the long term. This is structurally lower than past levels because the global network has largely been built out. However, UPS will continue to invest in growth opportunities, such as cold chain logistics and North American air freight, where strategic investments are warranted.

“About 3.5% of revenue, Jeff, I think it's about the right level to think about.”

asked by Jeffrey Kauffman · answered by Brian Dykes