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UNITED PARCEL SERVICE INC (UPS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $21.4B with GAAP operating margin 8.4% and adjusted operating margin 10.0%; adjusted EPS was $1.74, aided by a $0.30 EPS contribution from a $330M sale‑leaseback gain in Supply Chain Solutions .
  • The quarter delivered broad beats versus S&P Global consensus: revenue $21.4B vs $20.84B* and EPS $1.74 vs $1.30*, while EBITDA also exceeded estimates ($3.06B vs $2.47B*) [GetEstimates].
  • Management reinstated guidance: Q4 revenue ~$24.0B and adjusted operating margin ~11.0–11.5%; full‑year capex ~$3.5B, dividends ~$5.5B, tax rate ~23.75%, buybacks ~$1.0B completed .
  • Strategic execution continues: Amazon volume “glide down” (-21.2% y/y) and network reconfiguration cost-out on track (~$2.2B YTD; ~$3.5B for 2025), positioning for the “most efficient peak” with higher automation .

What Went Well and What Went Wrong

What Went Well

  • Adjusted operating margin expanded to 10.0% (from 8.8% in Q2 and 8.2% in Q1) as revenue quality improved; U.S. adjusted margin was 6.4% despite a 12.3% ADV decline .
  • International ADV +4.8% and revenue +5.9% y/y; management emphasized agility and technology-enabled customs brokerage (AI processing ~90% of cross-border transactions) .
  • Clear strategic messaging and peak readiness: “We are executing the most significant strategic shift in our company’s history… positioned to run the most efficient peak” (Carol Tomé) .

What Went Wrong

  • U.S. Domestic ADV -12.3% y/y (GroundSaver ADV -32.7%), driving cost-per-piece up 10.4% adjusted and density headwinds on residential last mile .
  • International operating margin declined to 14.8% (adjusted) from 18.0% a year ago on trade-lane mix (weaker China→U.S.; 27.1% ADV decline) and lower surcharges .
  • De minimis elimination created a direct demand/mix impact of ~$60M in Q3 and estimated $75–$100M in Q4, pressuring higher-margin lanes and forwarding rates .

Financial Results

Consolidated Summary (GAAP and Adjusted)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$21,546 $21,221 $21,415
Operating Margin (GAAP)7.7% 8.6% 8.4%
Operating Margin (Adjusted)8.2% 8.8% 10.0%
Diluted EPS (GAAP)$1.40 $1.51 $1.55
Diluted EPS (Adjusted)$1.49 $1.55 $1.74

Q3 2025 vs Prior Year and vs Estimates

MetricQ3 2024Q3 2025 ActualQ3 2025 Consensus*Delta vs Consensus
Revenue ($USD Millions)$22,245 $21,415 $20,839.6*+$575.4M*
Adj. Diluted EPS ($)$1.76 $1.74 $1.299*+$0.441*
EBITDA ($USD Millions)N/A$3,060.0*$2,471.9*+$588.1M*

Values marked with * retrieved from S&P Global (Capital IQ).

Segment Performance (Q3 2025 vs Q3 2024)

SegmentRevenue ($MM)Op Profit ($MM)Op Margin (GAAP)
U.S. Domestic (Q3’25)$14,220 $603 4.2%
U.S. Domestic (Q3’24)$14,597 $843 5.8%
International (Q3’25)$4,673 $676 14.5%
International (Q3’24)$4,411 $798 18.1%
Supply Chain Solutions (Q3’25)$2,522 $525 20.8%
Supply Chain Solutions (Q3’24)$3,237 $344 10.6%

Note: Adjusted Q3’25 segment op margins: U.S. 6.4%, International 14.8%, SCS 21.3% .

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
U.S. ADV (000s)17,443 16,553 16,150
International ADV (000s)3,346 3,188 3,269
Consolidated ADV (000s)20,789 19,741 19,419
U.S. Avg Rev/Piece ($)13.06 13.03 13.47
Intl Avg Rev/Piece ($)20.32 21.14 21.48
Consolidated Avg Rev/Piece ($)14.22 14.34 14.82
U.S. Cost/Piece (GAAP, $)12.22 12.18 12.92
U.S. Cost/Piece (Adj., $)12.19 12.12 12.63
Free Cash Flow (YTD, $MM)$1,487 (Q1) $742 (Q2) $2,744 (9M)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated RevenueQ4 2025Not provided (Q2) ~$24.0B Introduced
Adj. Operating MarginQ4 2025Not provided (Q2) ~11.0–11.5% Introduced
Effective Tax RateFY 2025~23.5% (Q2) ~23.75% (Q3) Raised
CapexFY 2025~$3.5B ~$3.5B Maintained
DividendsFY 2025~$5.5B ~$5.5B Maintained
Share RepurchasesFY 2025~$1.0B (completed) ~$1.0B (completed) Maintained
Pension ContributionsFY 2025~$1.4B ~$1.4B (>$1.3B made) Maintained
Dividend/ShareQ4 2025N/A$1.64 payable Dec 4, 2025 Event Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
AI/Tech in BrokerageTransformation and reconfiguration underway; customs expertise emphasized ~90% of cross-border entries processed digitally with AI; agentic AI integrated Accelerating tech adoption
Supply Chain & De MinimisEarly warnings on trade policy volatility; international ADV +7.1% (Q1), +3.9% (Q2) Global de minimis elimination shifts trade lanes; ~$60M impact Q3, $75–$100M est. Q4 Mixed: volume growth but margin mix pressure
Amazon Glide DownAnnounced reconfig; buildings to close; cost-out targets -21.2% y/y in Q3; glide down on schedule; cost buckets (variable/semi/fixed) progressing On plan
GroundSaver/Product MixTrimming lower-yield e-comm since Q1/Q2 GroundSaver ADV -32.7%; USPS preliminary agreement for final mile Shifting to higher-quality mix
Regional Trade FlowsIntl ADV growth; export strength in Q1/Q2 China→U.S. imports down 27.1% ADV; growth in Europe and Americas lanes U.S.-centric weakness, ROW strength
Healthcare LogisticsOngoing focus Strong revenue growth; completed Andlauer acquisition to expand capabilities Strategic expansion

Management Commentary

  • “We are executing the most significant strategic shift in our company’s history… positioned to run the most efficient peak… for the eighth consecutive year.” — CEO Carol Tomé .
  • “$0.30 of EPS came from a sale leaseback transaction… $330 million pretax gain on sale… we have not adjusted this gain on sale in our non-GAAP presentation.” — CFO Brian Dykes .
  • “Total Amazon volume was down 21.2%… we will remove approximately $3.5 billion in related costs this year… reduced expense by $2.2 billion so far.” — CFO Brian Dykes .
  • “We harness AI to digitally process over 90% of our cross-border transactions…” — CEO Carol Tomé .
  • “We have more than 8 million SMBs on DAP… $2.8B YTD global DAP revenue; expect >$3.5B full-year.” — CEO Carol Tomé .

Q&A Highlights

  • Domestic margins and cost per piece: Automation and driver buyout support Q4 savings; buyout cost $175M with ~$179M annual payback (<1 year) .
  • USPS final mile: Preliminary agreement to support GroundSaver and Mail Innovations; details expected by year-end; no Q4 benefit assumed .
  • De minimis impact: ~$60M Q3 and $75–$100M est. Q4; margin headwinds from lane mix shift (China→U.S. down 27.1% ADV) .
  • Revenue per piece outlook: Q4 rev/piece “a little above 6%,” supported by base rates, mix, and holiday surcharges .
  • Cost-out trajectory: ~195 operations reduced and 93 buildings closed YTD; further consolidation expected as glide down continues into 2026 .

Estimates Context

MetricQ3 2025 ActualQ3 2025 Consensus*# of Estimates*
Revenue ($USD Billions)$21.415 $20.84*21*
Adj. Primary EPS ($)$1.74 $1.299*25*
EBITDA ($USD Billions)$3.06*$2.47*N/A*
Q4 Revenue ($USD Billions)N/A$23.89*19*
Q4 Primary EPS ($)N/A$2.177*23*
Target Price (Consensus, $)N/A$103.62*N/A*

Values marked with * retrieved from S&P Global (Capital IQ).

Key Takeaways for Investors

  • Quality-over-quantity strategy is working: strong rev/piece growth and adjusted margin expansion despite significant ADV declines, supporting earnings resilience .
  • The sale‑leaseback gain ($330M; $0.30 EPS) was included in adjusted EPS; expect normalization in Q4 without repeating this tailwind .
  • International growth continues but margin recovery depends on trade-lane equilibrium; mid-to-high-teens margin is management’s target once flows settle .
  • Amazon glide down and network automation underpin ~$3.5B 2025 cost reductions; expect ongoing building consolidation and cost buckets progress into 2026 .
  • GroundSaver/USPS collaboration should mitigate residential last-mile density drag over 2026; watch for formal terms and timing .
  • Healthcare logistics is a structural growth vector; Andlauer strengthens cold chain and North American reach, supporting mix and margin over time .
  • Near term: Q4 guide provides clarity; holiday surcharges and automation should aid margins. Medium term: mix shift (SMB/B2B, healthcare, returns) and cost-out support thesis as trade policy stabilizes .