Executive Summary

Q1 2025 delivered an across-the-board beat vs S&P Global consensus: adjusted EPS $1.49 vs $1.38; revenue $21.55B vs $21.00B; EBITDA ~$2.71B vs ~$2.59B. Results were slightly ahead of management’s expectations, with U.S. Domestic margin expansion and strong International ADV growth offset by mix and surcharge headwinds . Values in this sentence retrieved from S&P Global.*
U.S. Domestic operating profit rose 19.4% YoY to $1.01B and adjusted margin expanded 110 bps to 7.0% despite ADV declines; revenue per piece increased 4.5% (best in eight quarters) as UPS leaned into revenue quality .
International ADV grew 7.1% and revenue rose 2.7% YoY; margins dipped on mix shift to economy products, FX, and lower demand-related surcharges; Supply Chain Solutions revenue fell 14.8% primarily due to the Coyote divestiture .
Guidance: UPS reaffirmed full-year 2025 outlook (revenue ~$89B; adj. operating margin ~10.8%) and issued Q2 guidance (revenue ~$21B; consolidated operating margin ~9.3%); management highlighted tariff/de minimis uncertainty and second-quarter “chaos costs” from closing 7% of U.S. buildings as catalysts for near-term stock reaction .

What Went Well and What Went Wrong

What Went Well

U.S. Domestic margin/earnings inflection: “U.S. domestic segment increased operating profit by $164 million year-over-year and expanded operating margin by 110 basis points” .
Pricing power and revenue quality: Revenue per piece +4.5% YoY, best in eight quarters, driven by base rates, mix, and fuel; SMB share hit 31.2% of U.S. volume with 4% ADV growth .
Cost takeout momentum: “We are on track to achieve our 2025 cost reduction target of $3.5 billion” across variable, semi-variable, and fixed cost buckets (164 operational closures, 73 buildings by late June) .

What Went Wrong

Domestic volume softness: Total U.S. ADV -3.5%; Ground -2.5%; Air -9.6% (ex-Amazon, Air +6.2%); B2C -7% as managed Amazon glide-down and macro weighed on demand .
International margin pressure: Operating margin compressed to ~15% on mix shift to economy, lower surcharges, and weekend service investments; FX also pressured revenue per piece .
SCS margin headwind: Adjusted operating margin fell to 3.6% (down 320 bps) on USPS Mail Innovations rate pressure; revenue -14.8% primarily from the Coyote divestiture .

Financial Results

Consolidated Results (Actuals)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Billions)	$22.245*	$25.301	$21.546
GAAP Diluted EPS ($)	$1.76	$2.01	$1.40
Adjusted Diluted EPS ($)	$1.76	$2.75	$1.49
GAAP Operating Margin (%)	8.9%	11.6%	7.7%
Adjusted Operating Margin (%)	8.9%	12.3%	8.2%
Net Income ($USD Billions)	$1.539*	$1.721	$1.187

Note: * Values retrieved from S&P Global.

Cash Flow and Capex

Metric	Q3 2024	Q4 2024	Q1 2025
Cash from Operations ($USD Billions)	$1.498*	$3.316	$2.318
Capital Expenditure ($USD Billions)	$(0.843)*	$(1.035)	$(0.876)
Free Cash Flow ($USD Billions)	—	$2.280	$1.487

Note: * Values retrieved from S&P Global.

Segment Breakdown (Q1 2025 vs Q1 2024)

Segment	Revenue Q1 2024 ($MM)	Revenue Q1 2025 ($MM)	Op Profit Q1 2024 ($MM)	Op Profit Q1 2025 ($MM)	GAAP Op Margin Q1 2024	GAAP Op Margin Q1 2025
U.S. Domestic	$14,266	$14,460	$833	$979	5.8%	6.8%
International	$4,256	$4,373	$656	$641	15.4%	14.7%
Supply Chain Solutions	$3,184	$2,713	$124	$46	3.9%	1.7%

KPIs (Q1 2025 vs Q1 2024)

KPI	Q1 2024	Q1 2025
Consolidated Volume (MM)	1,336	1,289
U.S. Domestic ADV (‘000)	18,075	17,443
International ADV (‘000)	3,124	3,346
U.S. Domestic Revenue per Piece ($)	12.50	13.06
U.S. Domestic Cost per Piece (GAAP, $)	11.78	12.22
Operating Days	63	62
On-time Delivery (Q1)	—	~97%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Consolidated Revenue	FY 2025	~$89.0B	No update; previously issued outlook maintained	Maintained
Adjusted Operating Margin	FY 2025	~10.8%	No update; previously issued outlook maintained	Maintained
Consolidated Revenue	Q2 2025	—	~$21.0B	New
Consolidated Operating Margin	Q2 2025	—	~9.3%	New
U.S. Domestic ADV	Q2 2025	—	Down ~9% YoY	New
U.S. Domestic Operating Margin	Q2 2025	—	+~30 bps YoY	New
International Revenue	Q2 2025	—	Down ~2% YoY; margin “mid-teens”	New
SCS Revenue	Q2 2025	—	Down by ~$500MM YoY; margin “high single digits”	New
Below-the-line expense	Q2 2025	—	~$160MM; tax rate 23.0–23.5%	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Tariffs/macro	“Slightly worse” macro; revenue quality focus; FX/surcharges impacts	FY25 guide excludes major tariff impacts; scenario planning	Announced tariffs and de minimis factored into Q2; uncertainty pressuring SMB demand	Uncertainty rising; demand shift across lanes
Amazon glide-down	Air volume decline concentrated; ongoing glide-down	Agreement to cut >50% by H2’26; margin uplift strategy	H1: -16% Amazon ADV; H2: -30% each quarter; cost-out aligned	Acceleration in H2’25
Network reconfiguration/automation	45 closures YTD; 11 buildings closed; automation to 63% volume	Plan to close up to 10% of buildings; 12% U.S. margin target by Q4’26	164 operational closures; 73 buildings by June; robotics/AI expansion to 400 facilities	Rapid execution; “chaos costs” near term
SurePost/Ground Saver	Matching algorithm; insourced half in Q4 peak	100% in-sourced 1/1; 9.9% GRI; reliability focus	Ground Saver launched; Ground Saver ADV -8.4% (intentional decline for yield)	Portfolio repositioning; yield > volume
SMB/returns	SMBs 29.4% of U.S. volume; retail store replenishment wins	SMB penetration 27.8% Q4; returns strength	SMBs 31.2% U.S.; returns +8.8% YoY; Happy Returns	SMB mix rising
Healthcare	$2.5B Q3 health care revenue; Frigo-Trans deal	Healthcare $10.5B FY; plan to $20B by 2026	Andlauer acquisition in Canada; health care growth across segments	Strategic build-out
International weekend service	Enhancements; Saturday delivery across Europe	Continued investments; margin benefit later	Weekend investments suppress Q1 margins; lapping later in year	Near-term drag, medium-term tailwind
USPS Air cargo	Fully onboarded by 10/1; expected attractive margins	Onboarded; Q4 margin separation clarified	No incremental Q1 domestic impact disclosed; SCS mail innovations cost pressure	Stable; mix shifts

Management Commentary

“The environment may be uncertain, but with our actions, we will emerge as an even stronger, more nimble UPS.” — CEO Carol Tomé .
“Our network reconfiguration and efficiency reimagine program is aligned… and is expected to remove $3.5 billion in expense this year.” — CFO Brian Dykes .
“SMBs… made up 31.2% of our total U.S. volume… global DAP revenue grew by 24% year-over-year.” — CEO Carol Tomé .
“International… operating margin in the first quarter was 15%.” — CFO Brian Dykes (adjusted) ; GAAP 14.7% .
“Our on-time delivery was almost 97% in the first quarter.” — CEO Carol Tomé .

Q&A Highlights

Cost-out cadence and Amazon glide-down: ~$500MM realized in Q1; H2 Amazon ADV ~-30%; efficiency reimagine ~$500MM in 2025 and ~$1B into 2026 .
Automation/AI: Targeting 400 partially/fully automated facilities; robotics in sort, label application, loading/unloading; confidence in reaching 12% U.S. margin by Q4’26 .
Tariffs/de minimis: SMBs disproportionately impacted; inventory drawdown and trade lane shifts (China→ROW; ROW→U.S.) expected; customs automation (global checkout with guaranteed landed cost) supports customer navigation .
International profitability: Mid-teens margin expected in Q2; China-U.S. (most profitable) decline offset by China→ROW and ROW→U.S. .
Capital allocation: Debt-to-EBITDA ~2.26x; 2025 dividends ~$5.5B, buybacks ~$1B; CapEx ~$3.5B with lower vehicles/aircraft needs post reconfiguration .

Estimates Context

Actual vs S&P Global consensus (last three quarters):

Metric	Q3 2024 Estimate	Q3 2024 Actual	Beat/Miss	Q4 2024 Estimate	Q4 2024 Actual	Beat/Miss	Q1 2025 Estimate	Q1 2025 Actual	Beat/Miss
Primary EPS ($)	1.6229	1.76	Beat	2.5322	2.75	Beat	1.3808	1.49	Beat
Revenue ($MM)	22,129.7	22,245.0	Beat	25,415.1	25,301.0	Miss	21,003.2	21,546.0	Beat
EBITDA ($MM)	2,708.3	2,956.0	Beat	3,814.0	2,979.0	Miss	2,586.1	2,705.0	Beat

Values retrieved from S&P Global.

Implications: Strong Q1 beat on EPS/revenue supports estimate stability near term, but Q2 guide (revenue ~$21B; margin ~9.3%) and tariff dynamics suggest potential downward revisions for SMB-exposed volumes and International surcharges .

Key Takeaways for Investors

Near-term: Expect Q2 margin expansion vs prior year but sequential margin compression vs Q4 on tariff uncertainty and reconfiguration “chaos costs”; watch management execution against building closures and Amazon H2 glide-down .
Pricing and mix: RPP tailwinds (base rates, SMB mix, Ground Saver yield actions) offset volume softness; sustained pricing discipline reduces risk of margin dilution .
Cost leverage runway: Network reconfiguration and Efficiency Reimagined ($3.5B 2025 cost-out) underpin medium-term margin expansion toward 12% U.S. by Q4’26 .
International resiliency: ADV growth and trade-lane diversification mitigate China-U.S. pressure; weekend investments a short-term drag but medium-term driver .
Healthcare strategy: Andlauer in Canada plus Frigo-Trans build cold-chain scale; healthcare seen as “recessionary-proof” growth vector .
Returns/SMB ecosystem: UPS Stores + Happy Returns deepen stickiness; returns volume +8.8% YoY, supporting B2B/B2C density .
Cash and capital: $1.49B Q1 FCF, ample liquidity; CapEx ~$3.5B with lower asset intensity post-reconfiguration; dividend and buyback remain intact .

Bolded surprises:

Beat: Q1 adjusted EPS $1.49 vs $1.38; revenue $21.55B vs $21.00B; EBITDA ~$2.71B vs ~$2.59B. Values retrieved from S&P Global.
Guidance: Q2 revenue ~ $21B and margin ~ 9.3% despite tariff headwinds and building closures .

Cross-references and reconciliation notes:

Non-GAAP adjustments include transformation costs, impairment charges, and partial reversal of a tax valuation allowance; adjusted operating margin 8.2% vs GAAP 7.7% .
SCS decline primarily reflects Coyote divestiture; USPS Mail Innovations rates pressured margins; management expects adjustments to address cost pressure .

Sources:

Q1 2025 8-K press release and exhibits .
Q1 2025 earnings call transcript and alternate transcript .
Q4 2024 press release and call for prior-quarter context .
Q3 2024 call for prior two quarters’ themes .

Disclaimer: Estimates and certain historical financial values marked with an asterisk (*) are retrieved from S&P Global.

UNITED PARCEL SERVICE INC (UPS)·Q1 2025 Earnings Summary