United Parcel Service, Inc.

UPS reported consolidated revenue of $22.8 billion, up 7.6% year over year, operating profit of $2.1 billion, up 12%, and consolidated operating margin of 9.2%, up 40 basis points year over year and 300 basis points sequentially from Q1. Adjusted diluted EPS was $1.76; GAAP results included $891 million of after-tax transformation charges, or $1.05 per diluted share, mainly from employee separation costs tied to the Driver Choice program. By segment, U.S. Domestic revenue was $14.9 billion, up 6%, with operating profit up 21% to $1.2 billion and margin at 8%; International revenue was $5.0 billion, up 12.5%, with operating profit of $623 million; Supply Chain Solutions revenue was $2.9 billion, up $207 million, with operating profit of $291 million. For full-year 2026, UPS raised guidance to approximately $91.2 billion in revenue, approximately $8.65 billion in operating profit, and approximately $7.22 in diluted EPS. It also reiterated full-year capital expenditures of about $3 billion, pension contributions of $1.3 billion, free cash flow of about $5.5 billion, and dividends of about $5.4 billion.

Carol Tomé said the quarter validated the company’s multi-year reset of its U.S. business, emphasizing that UPS executed the Amazon glide-down “exactly as designed” while maintaining service. Her tone was confident and strategic, focusing on a leaner, more automated, more agile network that should create operating leverage as volume grows. She highlighted premium growth areas like SMB, health care, B2B, RFID-enabled visibility, and AI-powered network optimization as the next phase of the plan.

Brian Dykes emphasized that the quarter reflected both strong execution and some fuel volatility from the Middle East conflict, which lifted revenue and expense but had only a modest net effect on operating profit. He pointed to U.S. Domestic operating leverage, with revenue per piece up 9.3% and cost per piece growing more slowly, and said the network reset removed nearly 30,000 operational positions, closed 45 buildings in the first half, and remains on track to deliver about $3 billion in related benefits in 2026. He also cited year-to-date cash from operations of $3.1 billion, free cash flow of $1.6 billion, cash on hand of $4.7 billion, no commercial paper outstanding, and $2.7 billion in dividends paid year to date.

Analysts pressed on whether domestic margin improvement can continue, and management said automation coverage has risen to 68.5% of U.S. volume from 64% a year ago, with automated-building cost per piece about 28% lower than non-automated buildings. They also said the U.S. business should sustain a 50 to 100 basis point spread between revenue per piece and cost per piece, supporting margin accretion. Questions about competition from Amazon and FedEx drew a consistent answer: UPS said it is focusing on differentiated offerings like health care, RFID, DAP, and returns, and Carol Tomé said she was not aware of any volume lost to Amazon. On international, management said Asia-to-Asia and China-to-U.S. lanes are improving, while tariffs and Middle East disruption have pressured some lanes, especially Canada-to-U.S. and Europe exports.