United Parcel Service (NYSE:UPS) reported fourth-quarter 2025 results that management said exceeded internal expectations, citing “strong revenue quality, solid cost management, and overall great execution,” including an eighth consecutive year as the industry leader in on-time service during peak season.
On an adjusted basis, UPS posted fourth-quarter consolidated revenue of $24.5 billion, operating profit of $2.9 billion, and operating margin of 11.8%. Diluted earnings per share were $2.38. For the full year, UPS reported consolidated revenue of $88.7 billion, operating profit of $8.7 billion, and operating margin of 9.8%.
U.S. Domestic: Volume down, revenue per piece up
UPS’ U.S. domestic segment delivered fourth-quarter revenue of $16.8 billion, down 3.2% year-over-year, against an average daily volume (ADV) decline of 10.8%. Dykes said stronger revenue per piece growth “largely offset” the volume decline. Revenue per piece increased 8.3% year-over-year, which management called the strongest fourth-quarter growth rate in four years.
UPS attributed the revenue per piece increase to several factors, including base rates and package characteristics (+340 basis points), customer and product mix (+320 basis points), and fuel (+170 basis points). Dykes said volume declines were driven by the Amazon glide-down as well as deliberate efforts to remove lower-yielding e-commerce shipments from the network.
On costs, U.S. domestic expense was down 3.3% in the quarter as the company reduced hours and operational positions. However, cost per piece rose 8.9% year-over-year, largely due to costs associated with insourcing the company’s Ground Saver product and added air capacity costs after grounding the MD-11 fleet. The segment produced operating profit of $1.7 billion and an operating margin of 10.2%, a 10-basis-point improvement versus the prior-year quarter.
Management also highlighted mix changes in the quarter, including record small and medium-sized business (SMB) penetration in U.S. volume. SMB ADV was flat year-over-year, but SMBs represented 31.2% of total U.S. volume, up 340 basis points and described as the highest fourth-quarter SMB penetration in company history. B2B represented 37.5% of U.S. volume, up 220 basis points and the highest fourth-quarter B2B penetration in six years. B2C ADV declined 13.8% year-over-year.
International: Record fourth-quarter revenue, but profit pressured by trade shifts
UPS said International Small Package delivered record revenue in the fourth quarter, and its highest fourth-quarter revenue in four years. Segment revenue was $5.0 billion, up 2.5% year-over-year despite a 4.7% decline in international ADV. Export ADV declined 5.8% and domestic ADV declined 3.5%.
Profitability was pressured by changing trade lanes tied to trade policy developments, including changes to the de minimis exemption. International operating profit was $908 million, down $154 million year-over-year, with Dykes saying more than half of the decline was related to trade policy changes and a shift away from more profitable U.S. import lanes. International operating margin was 18% in the quarter.
In Q&A, Dykes said the company expected “extreme weakness” in international results in the first quarter of 2026 with gradual recovery through the year as comparisons ease. He described a mix headwind as growth shifts to lanes with lower profitability than the high-margin China-to-U.S. trade lanes. International President Kate Gutmann added that UPS has seen “double-digit growth” out of several Asian countries to destinations including Europe and India, reflecting prior investments in Asia diversification.
Supply Chain Solutions: Margin expansion as healthcare offsets softness
Supply Chain Solutions (SCS) posted fourth-quarter revenue of $2.7 billion, down $388 million year-over-year, which UPS attributed to softer demand and lower market rates in air and ocean forwarding, as well as a decline in Mail Innovations. Management said healthcare logistics partially offset those declines. SCS operating profit was $276 million and operating margin increased 100 basis points to 10.3%.
UPS Digital, which includes Roadie and Happy Returns, grew revenue 27% year-over-year in the fourth quarter, according to Dykes.
Strategic actions: Amazon glide-down, automation, Ground Saver and fleet changes
Tomé said 2025 included significant progress on reshaping UPS’ network and revenue mix. The company reached its 2025 volume reduction target, reducing Amazon volume by approximately 1 million pieces per day. UPS said it delivered $3.5 billion in savings from network reconfiguration and Efficiency Reimagined initiatives, closed 93 U.S. buildings, and deployed automation in 57 buildings. U.S. revenue per piece increased 7.1% year-over-year for the full year, and SMB penetration rose to 31.8% of total U.S. volume, which UPS said was driven by its Digital Access Program (DAP), which generated $4.1 billion in global revenue in 2025.
For 2026, UPS plans to glide down another 1 million pieces per day of Amazon volume and continue resizing the network. Dykes outlined cost actions tied to the 2026 glide-down:
- Reduce operational hours by approximately 25 million hours
- Reduce operational positions by up to 30,000 through attrition, with an expected second voluntary separation program for full-time drivers
- Close 24 buildings identified for the first half of 2026, with additional closures under evaluation
- Target $3 billion in savings related to the Amazon glide-down
UPS also discussed the Ground Saver product and a new arrangement with the U.S. Postal Service (USPS) for last-mile delivery. Tomé said the agreement is designed to improve economics while maintaining service expectations, with volume ramping over “the next several weeks and months.” Executives said UPS will use density-matching technology to determine whether packages are delivered by UPS or tendered to USPS.
On the air network, UPS accelerated retirement of its MD-11 fleet. Dykes said the company incurred about $50 million of incremental lease costs in the fourth quarter to replace capacity, and expects that amount to be about double in 2026, with about 90% of the impact in the first half. UPS expects delivery of 18 new Boeing 767 aircraft over the next 15 months, including 15 in 2026, and expects to step down leased aircraft as new planes enter service.
2026 outlook: “Bathtub” year with first-half pressure, second-half improvement
UPS guided to 2026 consolidated revenue of approximately $89.7 billion and consolidated operating margin of approximately 9.6%, with diluted EPS expected to be about flat versus 2025. Dykes noted that 2025 EPS included a $0.30 benefit from a sale-leaseback transaction, and said 2026 guidance does not reflect “any significant changes to the current tariff landscape.”
Management described 2026 as a transition year, particularly in the U.S. domestic segment. Tomé said U.S. revenue is expected to be “flattish” year-over-year, with first-half declines driven by the Amazon glide-down and a sequential improvement in the second half as glide-down actions conclude. She characterized the year as a “bathtub effect,” with “first half down, second half up,” and said June 2026 is expected to be an “inflection point.”
Dykes said U.S. domestic ADV is expected to be down mid-single digits in 2026 due to Amazon actions, offset by mid-single-digit revenue per piece growth. He also said first-quarter 2026 domestic operating margin is expected to be in the mid-single digits due to transition expenses tied to Ground Saver, timing of cost removals and a voluntary driver separation program, and aircraft lease expense. In the second half, he said UPS expects high single-digit operating profit growth and described exiting 2026 at a “healthy double-digit margin” entering 2027.
For the full year, UPS expects international revenue growth in the low single digits with operating margin in the mid-teens. Supply Chain Solutions revenue is expected to rise high-single digits, including revenue from the Andlauer acquisition, with operating margin in the low-double digits.
On cash and capital allocation, UPS reported generating $8.5 billion in cash from operations in 2025 and returning $6.4 billion to shareholders through dividends and repurchases. For 2026, UPS expects free cash flow of approximately $6.5 billion (including an annual pension contribution of $1.3 billion) and capital expenditures of about $3 billion before any voluntary separation program impact. The company said it plans to pay around $5.4 billion in dividends in 2026, subject to board approval.
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.
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