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UNITED PARCEL SERVICE INC (UPS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025: Revenue $21.221B, GAAP EPS $1.51 and adjusted EPS $1.55; GAAP operating margin 8.6% and adjusted operating margin 8.8% .
  • Mixed performance: U.S. Domestic revenue down 0.8% to $14.083B, International up 2.6% to $4.485B; Supply Chain Solutions down 18.3% to $2.653B on Coyote divestiture .
  • Management withdrew revenue/operating profit guidance given tariff uncertainty, but reaffirmed FY25 capex ~$3.5B, dividends ~$5.5B, tax rate ~23.5%, ~$3.5B expense reduction target, and completed ~$1.0B buybacks .
  • Key near-term swing factors: Amazon glide-down accelerates in H2 (target 30% YoY decline in Q3/Q4), Ground Saver delivery density miss ($85M incremental cost), and international mix shift away from China→U.S.; all flagged as reasons margins could be pressured in Q3 before benefits accrue in 2026 .

What Went Well and What Went Wrong

What Went Well

  • Revenue per piece rose 5.5% in U.S. Domestic (base rates, mix, fuel) while total expense was flat, supporting a 7.0% adjusted domestic margin .
  • International ADV increased 3.9% (export +6.1%), with agile network changes (100+ flight adjustments) and strong growth out of China to rest-of-world and Southeast Asia .
  • Healthcare logistics grew revenue 5.7%; UPS Digital (Roadie, Happy Returns) grew 26.4%, highlighting strategic portfolio strengths .
  • “We are proactively taking action to put our company on a much stronger footing… focused on serving our customers, growing in the more complex and economically attractive parts of the market” — CEO Carol Tomé .

What Went Wrong

  • U.S. Domestic ADV fell 7.3% YoY; attrition was lower than planned, delaying cost take-out and lifting near-term expense .
  • Ground Saver delivery density model did not hold; ~$85M incremental cost in Q2; USPS re-engagement underway to mitigate .
  • International margin compressed (15.2% adjusted) due to a 34.8% May/June decline on China→U.S., revenue-per-piece pressure, and lower demand-related surcharges; lap expected in Q4 .
  • Supply Chain Solutions revenue down 18.3% YoY largely from Coyote divestiture; segment adjusted margin 8.0% .

Financial Results

Consolidated results vs prior quarters and estimates

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$25.301 $21.546 $21.221
GAAP EPS ($)$2.01 $1.40 $1.51
Adjusted EPS ($)$2.75 $1.49 $1.55
Operating Margin (GAAP, %)11.6% 7.7% 8.6%
Operating Margin (Adj, %)12.3% 8.2% 8.8%
Consensus Revenue ($USD Billions)—$21.003*$20.854*
Consensus EPS ($)—$1.381*$1.566*

Values with asterisks retrieved from S&P Global.

Q2 2025 vs estimates: Revenue beat ($21.221B vs $20.854B, bold beat), EPS slight miss ($1.55 vs $1.566, bold miss).

  • Revenue: Beat (Actual $21.221B vs $20.854B*)
  • Adjusted EPS: Slight miss (Actual $1.55 vs $1.566*)
    Values with asterisks retrieved from S&P Global.

Segment breakdown (Q2 2024 vs Q2 2025)

SegmentQ2 2024 Revenue ($MM)Q2 2025 Revenue ($MM)Q2 2024 Adj Op Margin (%)Q2 2025 Adj Op Margin (%)
U.S. Domestic$14,201 $14,083 7.0% 7.0%
International$4,370 $4,485 18.9% 15.2%
Supply Chain Solutions$3,247 $2,653 7.5% 8.0%

KPIs and operating metrics

KPIQ2 2024Q2 2025
U.S. Domestic ADV (000s)17,864 16,553
International ADV (000s)3,069 3,188
U.S. Domestic RPP ($/piece)$12.35 $13.03
U.S. Domestic Cost per Piece (Adj, $)$11.48 $12.12
Free Cash Flow YTD ($MM)—$742

Guidance Changes

MetricPeriodPrevious Guidance (Jan 30, 2025)Current (Jul 29, 2025)Change
Consolidated RevenueFY 2025~$89.0B Not providing Withdrawn
Operating MarginFY 2025~10.8% Not providing Withdrawn
Capital ExpendituresFY 2025~$3.5B ~$3.5B (confirmed) Maintained
DividendsFY 2025~$5.5B (subject to Board) ~$5.5B (confirmed; subject to Board) Maintained
Share RepurchasesFY 2025~$1.0B ~$1.0B (completed) Completed
Effective Tax RateFY 2025~23.5% ~23.5% (confirmed) Maintained
Expense ReductionsFY 2025~$3.5B from reconfiguration/efficiency ~$3.5B (on track) Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Network reconfiguration/automation63% of U.S. volume via automated hubs; plan to close up to 10% of buildings; target U.S. margin ≥12% by Q4’26 73 building closures by end of June; $3.5B 2025 cost-out target; 64% automated volume 74 buildings closed; 155 operations closed; semi-variable reductions (~9,500 positions) Accelerating closures and automation
Amazon glide-downAgreement in principle for >50% reduction by H2’26; 2025 domestic margin expansion planned H1 ADV decline ~16% planned; H2 decline ~30%; reconfig aligns costs H1 Amazon ADV down 13%; H2 pace to ~30%/qtr; Q3/Q4 incremental -500K pieces/day Glide-down on track; bigger step in H2
Tariffs/supply chain shiftsExpect offsets from China→RoW and RoW→U.S.; weekend services investment in Europe Mode shifts to ocean; China+1 diversification; brokerage tech enables guaranteed landed cost China→U.S. down 34.8% (May/Jun); China→RoW +20%+; agility via >100 flight changes; lapping demand surcharges in Q4 Ongoing; mix shift away from China→U.S.
Ground Saver productUSPS insourcing planned; premium segment wins in Q4 Replaced SurePost with Ground Saver; initial ADV decline intentional; pricing for yield Delivery density shortfall; ~$85M cost hit; USPS re-engagement to remedy Near-term cost pressure, fix in-progress
Healthcare logisticsCold chain expansion; Frigo-Trans closed Andlauer acquisition announced; healthcare revenue growing Healthcare a key growth driver across segments; radiopharma leadership Structural growth focus
Digital/returnsRFID/sensing network roll-out; Smart facilities DAP revenue +24%; returns capabilities highlighted UPS Digital +26.4%; Happy Returns; boxless/label-less, RFID advantages Strengthening ecosystem

Management Commentary

  • Strategic actions: “We are proactively taking action to put our company on a much stronger footing… focused on… economically attractive parts of the market” (Carol Tomé) .
  • International agility: “We made over 100 adjustments to add or cancel flights… as customers responded to changing tariffs” (CFO Brian Dykes) .
  • Healthcare focus: “We are laser-focused on becoming the number one complex healthcare logistics provider” (Carol Tomé) .
  • Cost program: “We remain on track to achieve our 2025 expense reduction target of about $3.5 billion” (CFO Brian Dykes) .

Q&A Highlights

  • Guidance stance: Management withdrew guidance given a wide scenario range tied to tariff timing, consumer demand, and peak visibility; aims to provide Q4 guidance after Q3 .
  • Domestic margin trajectory: Double-digit domestic exit margin now “uncertain,” with clarity expected after Q3; Q3 margins could be more pressured than typical seasonality .
  • Ground Saver cost issue: Delivery density model miss led to ~$85M cost; multiple solutions underway including USPS discussions .
  • Attrition and cost take-out: Lower-than-expected attrition slowed semi-variable cost reduction; voluntary driver separation part of $3.5B savings plan .
  • China→U.S. lane impact: 34.8% decline in May/June; offset by China→RoW growth and capacity moves (Hong Kong expansion, new Philippines hub) .

Estimates Context

  • Q2 2025 results vs consensus: Revenue beat ($21.221B vs $20.854B*), adjusted EPS slight miss ($1.55 vs $1.566*).
  • Q1 2025: Revenue above consensus ($21.546B vs $21.003B*), adjusted EPS above ($1.49 vs $1.381*).
    Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term margin pressure risk in Q3 from Ground Saver costs and attrition timing; expect clarity and potential guidance return after Q3 as tariff and peak plans firm .
  • H2 catalyst: Amazon glide-down accelerates to ~30% YoY declines in Q3/Q4; cost take-out should ramp with additional building/operation closures and driver program uptake .
  • International: Mix shift away from China→U.S. and fewer surcharges weigh margins near term; lapping surcharges in Q4 should help; network agility supports export growth .
  • Structural growth platforms: Healthcare logistics and digital returns continue to outgrow; sustaining premium product wins and pricing discipline underpin revenue-per-piece gains .
  • Capital and shareholder returns reaffirmed: Capex ~$3.5B, dividends ~$5.5B, ETR ~23.5%; buybacks completed; FCF YTD $742M supports dividend confidence .
  • Watch USPS partnership resolution on Ground Saver and tariff policy decisions (Aug threshold events) as key stock narrative drivers .

Additional References

  • Q2 earnings press release and 8-K (Item 2.02) provide full reconciliations and segment schedules .
  • Q1 2025 8-K and call: prior-quarter baselines and guidance framework .
  • Q4 2024 8-K and call: initial 2025 guidance, strategic actions announced .
  • Q2 2025 earnings call transcript: detailed commentary on tariffs, Ground Saver, attrition, and cost programs .
  • Q2 press release of upcoming results (schedule) .