UPS Posts Q2 Revenue Beat

Key Points

• GAAP revenue of $21.2 billion in Q2 2025 exceeded analyst expectations by 1.66%, but Non-GAAP diluted earnings per share of $1.55 in Q2 2025 missed by 0.64%.

• Average daily package volume in U.S. Domestic fell 7.3%, raising U.S. Domestic cost per piece.

• Non-GAAP free cash flow for the first six months of 2025 reached $742 million while Dividend payments are expected to be around $5.5 billion for the full year 2025, subject to Board approval.

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United Parcel Service (NYSE:UPS), a global logistics provider best known for its extensive package delivery network, reported its second quarter 2025 results on July 29, 2025. The main headline was that GAAP revenue for Q2 2025 was $21.2 billion, surpassing analyst expectations by about $345 million. However, non-GAAP adjusted diluted EPS of $1.55 missed the $1.56 consensus estimate by just one cent. The company faced ongoing cost pressures as average daily volumes dropped, especially in the U.S. Domestic business. Although revenues outpaced forecasts, higher costs per package and shifting trade flows meant the period was marked by only modest operating margin performance. Overall, the quarter highlighted the company's progress on network transformation, but also its ongoing challenge to realize full benefits from its restructuring as global trade conditions remain uncertain.

Source: Analyst estimates for the quarter provided by FactSet.

Business Overview and Strategic Priorities

United Parcel Service operates one of the world’s largest integrated logistics and delivery networks. It provides package transportation, supply chain solutions, and specialized logistics services to customers in more than 200 countries and territories.

The company's recent focus has centered on optimizing its global smart logistics network, moving away from lower-margin volume, and growing business in higher-yielding segments. Recent initiatives include substantial network restructuring, investing in automation, and expanding its reach in healthcare logistics. It has also targeted labor cost reductions and compliance with evolving trade and environmental regulations. Key factors for its success include managing network efficiency, controlling costs, maintaining labor stability, and adapting to global trade shifts.

Quarter in Review: Financial and Operational Highlights

The quarter’s most notable development was GAAP revenue surpassing analyst expectations, despite non-GAAP EPS came in marginally below consensus. GAAP revenue was $21.2 billion. Non-GAAP diluted EPS of $1.55 missed by one cent and decreased 13.4% from Q2 2024.

The U.S. Domestic segment, the company’s largest business, posted GAAP revenue of $14,083 million, slightly under its prior year result of $14,201 million. The main story here was a 0.8% revenue decline in the U.S. Domestic segment, accompanied by a pronounced drop in average daily U.S. Domestic package volume -- falling by about 7% to 16.6 million packages per day. Higher revenue per package and increased air cargo activity could not offset these volume losses and a 5.6% jump in non-GAAP adjusted cost per package. The company noted that “the expected decline in volume, partially offset by increases in air cargo and revenue per piece,” was behind the segment’s overall trend. Margins in this area held steady from last year.

The International segment showed a different pattern: revenue increased 2.6% year over year, with average daily volume rising 3.9%. The company attributed this growth to improvements in trade outside the key China-to-U.S. corridor, as exports from other Asian countries and Europe to the rest of the world grew. However, profit in this segment was sharply lower, falling 17.2% on a non-GAAP adjusted basis, as profitability was hurt by mix shifts toward lower-margin products, investments in expanding weekend delivery in Europe, and lower surcharges. Management commented that these pressures are temporary and expect margins to improve as the company laps current investments and global trade flows re-stabilize.

The Supply Chain Solutions business, which covers freight forwarding and specialized logistics, saw revenue decline by 18.3%, mainly reflecting the divestiture of Coyote, a freight brokerage unit, in the third quarter of the prior year. Excluding this event, underlying performance was relatively stable, with adjusted margins improving slightly, but headline numbers were distorted by the one-time Coyote divestiture.

A key operational milestone this quarter was the closure of 74 facilities as part of an ongoing network reconfiguration. This is part of a plan to remove $3.5 billion in expenses in 2025, with management noting only a portion of the cost savings have been realized so far -- about $500 million to date. The company is also on track to reduce its workforce by approximately 20,000 positions. Automation continues to play an increasing role, with management describing efforts to upgrade buildings with robotics and streamline package sorting. The deployment of its new "Ground Saver" domestic economy shipping product, which replaces "SurePost," aimed to improve reliability and control. Management signaled that the endgame is a more flexible, streamlined delivery network.

The period also saw disruption for many small and medium-sized business customers following new U.S. tariffs on Chinese goods -- at 145% -- and the removal of certain duty exemptions, as announced to take effect starting May 2, 2025. Company leaders noted that the uncertainty has weighed on domestic volumes, since many smaller businesses import heavily from China. Trade flows shifted as a result, with China-to-U.S. volumes down nearly 25%, although “China-to-rest-of-world” trade lanes increased sharply and international export growth from countries like South Korea reached double digits.

On the capital allocation front, the company completed $1 billion in share repurchases and is maintaining a solid balance sheet, with net debt at 2.26 times earnings before interest, tax, depreciation, and amortization (EBITDA). Planned capital spending for FY2025 is $3.5 billion, and $1.4 billion in pension contributions is being funded for 2025, with $921 million already contributed to date. Management reiterated its commitment to a $5.5 billion full-year dividend for 2025, subject to Board approval. There was no report of a change in the quarterly dividend this period.

A Look Ahead: Guidance and Ongoing Watch Items

Management did not provide detailed forward guidance for revenue or profit, citing continued uncertainty around U.S. and international trade policy, customer supply chains, and tariff-related risks. However, it reaffirmed 2025 financial targets in areas it can control, including the $3.5 billion cost-reduction goal for FY2025, ongoing network rationalization, and planned capital expenditures.

For the remainder of the year, several key items will shape the company's financial performance. The realization of additional cost savings from the $3.5 billion 2025 target is expected to be back-half weighted, meaning greater efficiencies could appear later in 2025 as more restructuring actions and automation ramp up and building closures progress. The company faces persistent headwinds -- rising costs per package and soft or unstable volumes in the U.S. Meanwhile, international profit margins could recover if investments in service and diverse trade flows start to pay off. Company leadership highlighted its intention to keep reallocating resources to faster-growing and higher-yield markets. Watch for further updates on tariffs, network optimization impact, and any material changes to its dividend policy or capital return plans.

UPS pays a dividend. The company has reaffirmed its $5.5 billion dividend payment target for 2025, with no announced changes to the quarterly payout this period.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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