United Parcel Service (NYSE:UPS) raised its full-year 2026 outlook after reporting second-quarter revenue and operating-profit growth, citing the completion of its planned reduction of lower-yielding Amazon volume, network reconfiguration efforts and gains in higher-value shipping segments.
UPS reported second-quarter consolidated revenue of $22.8 billion, up 7.6% from a year earlier, while adjusted operating profit rose 12% to $2.1 billion. Adjusted operating margin increased 40 basis points year over year to 9.2%, and diluted earnings per share were $1.76. The company said GAAP results included $891 million, or $1.05 per diluted share, in after-tax transformation charges, primarily related to employee separation costs from its Driver Choice Program.
“We now have a leaner, more automated, more agile network that will deliver operating leverage as volume grows,” Tomé said. “Incremental volume today carries materially better economics than before because of the structural changes we’ve made.”
U.S. Domestic Margin Expands
UPS’s U.S. Domestic segment generated $14.9 billion in revenue, up 6% from the prior-year quarter. Average daily volume fell 3.3%, reflecting the planned Amazon volume reduction, but revenue per piece increased 9.3%. More than half of the revenue-per-piece increase came from base-rate gains and customer mix improvements, with fuel accounting for the remainder, CFO Brian Dykes said.
U.S. Domestic operating profit rose 21% to $1.2 billion, while the segment’s operating margin increased 100 basis points to 8%. Dykes said the company’s revenue per piece grew 130 basis points faster than cost per piece, aided by productivity gains in its reconfigured network.
UPS said it expects to maintain a 50- to 100-basis-point spread between revenue per piece and cost per piece as it pursues margin expansion. Dykes said the company is targeting base-price growth in a range of roughly 250 to 350 basis points, supplemented by gains from customer mix.
The company’s small and medium-sized business average daily volume rose 4.3% year over year, with growth across nearly all sectors and particularly strong demand from high-tech and healthcare customers. SMB shipments represented 34.5% of total U.S. volume, up 250 basis points from the prior year. UPS said B2B average daily volume declined 3.2%, though that represented a 190-basis-point improvement in the rate of decline compared with the first quarter.
Automation, RFID and Premium Services
Tomé highlighted UPS’s investment in radio-frequency identification technology and artificial intelligence as key elements of its growth strategy. By the end of the second quarter, 68.5% of U.S. volume was moving through automated buildings, compared with 64% a year earlier. UPS said cost per piece in an automated building is about 28% lower than in a non-automated building.
The company has deployed RFID sensing technology across U.S. delivery facilities and package cars, and all packages shipped through its 5,500 UPS Store locations are RFID-enabled. Tomé said the system is intended to reduce manual scans, improve package visibility and help the company make near-real-time network decisions through an AI-powered digital model of its operations.
UPS also continued to emphasize growth in its Digital Access Program, healthcare logistics and industrial services. Global Digital Access Program revenue totaled $1.4 billion during the quarter, marking the third straight quarter above $1 billion. B2B Digital Access Program average daily volume rose 34% year over year.
Healthcare revenue exceeded $3 billion for the second consecutive quarter. The company added 27 temperature-controlled cross-dock facilities to support cold-chain shipments, and Tomé said UPS’s ownership of assets throughout the healthcare supply chain differentiates it from competitors. Kate Gutmann, executive vice president and president of International, Healthcare and Supply Chain Solutions, said cold-chain revenue was growing at a double-digit rate.
International Profit Declines Despite Revenue Growth
The International segment reported revenue of $5 billion, up 12.5% year over year, driven by an 18.9% increase in revenue per piece. However, operating profit declined $59 million to $623 million, and operating margin fell to 12.4%.
Dykes said higher fuel costs had a greater margin impact internationally because of the segment’s air-heavy operations and longer flight distances. UPS also incurred costs related to rerouting aircraft and using leased aircraft amid conflict in the Middle East.
International average daily volume fell 5.8%, including declines in European domestic activity. Export volume declined 4.2%, though UPS returned to year-over-year growth on the China-to-U.S. lane beginning in May as it lapped the prior-year elimination of the de minimis exemption for Chinese imports. Asia-to-Asia export volume rose 13.6% following investments in the region.
Supply Chain Solutions revenue increased $207 million from a year earlier to $2.9 billion. The segment’s operating profit rose $79 million to $291 million, with margin expanding 220 basis points to 10.2%. UPS said forwarding revenue rose 8.1%, logistics revenue increased 4.3%, and UPS Digital revenue grew more than 30%.
Outlook Raised for 2026
UPS raised its 2026 consolidated revenue outlook to approximately $91.2 billion and increased its operating-profit expectation to about $8.65 billion. The company now expects diluted earnings per share of approximately $7.22.
- U.S. Domestic revenue is expected to total about $60 billion, with a full-year operating margin of roughly 7.5%.
- International revenue is projected to grow in the mid-single digits, with an operating margin in the mid-teens.
- Supply Chain Solutions revenue is expected to grow in the high single digits, with a 10% to 11% operating margin.
- Capital expenditures are expected to be about $3 billion, while free cash flow is projected at approximately $5.5 billion.
UPS expects third-quarter U.S. average daily volume to decline in the mid-single digits, reflecting seasonal trends and the completed Amazon reduction. The company expects U.S. Domestic revenue to be approximately flat in the third quarter, with a margin near 7%, before forecasting improved margin performance in the fourth quarter.
Amazon represented 9% of UPS revenue in the second quarter, down about 100 basis points from a year earlier, Tomé said. The company said it will continue to work with Amazon to optimize the volume handled through its network while focusing its own growth efforts on higher-value segments including SMB, healthcare and B2B customers.
About United Parcel Service (NYSE:UPS)
United Parcel Service (NYSE: UPS) is a global package delivery and supply chain management company that provides a broad range of transportation, logistics and e-commerce services. Its core business centers on small-package delivery and last-mile distribution for business and individual customers, supported by a network of ground transportation, air cargo operations (UPS Airlines) and sorting facilities. In addition to parcel delivery, UPS offers freight transportation, contract logistics, warehousing, customs brokerage and reverse-logistics solutions designed to support domestic and international commerce.
The company traces its roots to 1907 when it began as a small messenger service in the United States and later evolved into the United Parcel Service.
