UPS reported Q1 results ahead of expectations, with revenue $21.2B and operating margin 6.2%, but incurred ~$350M in short-term cost pressures from weather, aircraft leases, and the ground saver transition. Management reaffirmed full-year 2026 guidance of ~$89.7B revenue and 9.6% margin, emphasizing that the Amazon volume reduction and network reconfiguration are on track. The tone was confident on underlying trends but cautious on the Middle East fuel impact and tariff uncertainty. U.S. domestic revenue -2.3% vs 8% volume decline, showing RPP +6.5% from mix and pricing; margin 4% including 250bps headwind from temporary costs.
UPS reported Q1 results ahead of expectations, with revenue $21.2B and operating margin 6.2%, but incurred ~$350M in short-term cost pressures from weather, aircraft leases, and the ground saver transition. Management reaffirmed full-year 2026 guidance of ~$89.7B revenue and 9.6% margin, emphasizing that the Amazon volume reduction and network reconfiguration are on track. The tone was confident on underlying trends but cautious on the Middle East fuel impact and tariff uncertainty. U.S. domestic revenue -2.3% vs 8% volume decline, showing RPP +6.5% from mix and pricing; margin 4% including 250bps headwind from temporary costs.
Management expressed confidence in executing the network reconfiguration and achieving the $3 billion cost-out target, while acknowledging external risks like fuel and consumer confidence. Tone was steady and focused on the inflection point in the second half.
Reported gross margin was 15.84%, reinforcing the quarter's better-than-guided profitability.
Amazon volume reduced by 500,000 pieces per day. Management expressed confidence in executing the network reconfiguration and achieving the $3 billion cost-out target, while acknowledging external risks like fuel and consumer confidence. Tone was steady and focused on the…
Reported gross margin was 15.84%, reinforcing the quarter's better-than-guided profitability.
Amazon volume reduced by 500,000 pieces per day. Management expressed confidence in executing the network reconfiguration and achieving the $3 billion cost-out target, while acknowledging external risks like fuel and consumer confidence. Tone was steady and focused on the inflection point in the second half.
Management reaffirmed capital expenditure expectations at approximately $3 billion for 2026. No changes were discussed regarding supply constraints or data center investments.
Management expressed confidence in executing the network reconfiguration and achieving the $3 billion cost-out target, while acknowledging external risks like fuel and consumer confidence. Tone was steady and focused on the inflection point in the second half.
“We can't fly over the airspace. And because we can't fly over the airspace, that is putting cost into the network, because we want to continue to serve our customers.”
“The PULSA system tends to set the floor for the economy product, which is actually pretty good for the whole industry if they're raising prices.”
“We are making those applications started on April 20th... as soon as we get that money, we're going to remit it right back to our customer.”
“Things are starting to normalize. So that means the margin will get back up.”
“Our program was oversubscribed, so perhaps that's the basis for some of the articles. So we had more drivers applying than we could accept.”
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| Capex | FY2026 | $3B | $3B | GUIDED |
| Free cash flow | FY2026 | $5.5B | $5.5B | GUIDED |
| Op margin | FY2026 | 9.6% | 9.6% | GUIDED |
| Op marginUS_DOMESTIC | FY2026 Q2 | 7.5%–8.5% | 8% | GUIDED |
| Op marginINTERNATIONAL | FY2026 Q2 | 13%–14% | 13.5% | GUIDED |
| Op marginSUPPLY_CHAIN_SOLUTIONS | FY2026 Q2 | 9.5%–10.5% | 10% | GUIDED |
| Revenue | FY2026 | $89.7B | $89.7B | GUIDED |
2 of 3 · -2.0% average bias
USPS introduced a temporary surcharge on ground delivery, which UPS sees as setting a higher floor for economy parcel pricing, benefiting the industry. — A rising price floor for economy parcel delivery improves pricing power for all carriers, potentially lifting margins for UPS, FedEx, and Amazon's last-mile operations.
“In the first quarter, Amazon made up 8.8% of our total revenue. That's down from, gosh, it was north of 13% not very long ago.”
USPS introduced a temporary surcharge on ground delivery, which UPS sees as setting a higher floor for economy parcel pricing, benefiting the industry. — A rising price floor for economy parcel delivery improves pricing power for all carriers, potentially lifting margins for UPS, FedEx, and Amazon's last-mile operations.
Hey, good morning. Thanks for taking the questions. Maybe just two sort of quick follow-ups. Just on the mix shift, I understand the increasing percentage of Looks like B2B volume in Absolutes was down 5%. Don't know if you can provide some colors to why that occurred and what might be moving forward here. And then, Carol, just on the transition for the USPS, sounds like it's done. Maybe not everything went back to them in terms of final mile delivery. Can you give a little bit more color on that and also just how you expect to manage their own fuel surcharge, which was kind of a big headline. They never really had one in the past, so I don't know if that's something you can pass through…
So in the first quarter, we tendered about 977,000 ADV to the USPS, which is about 44% of our ground saver product. It was a ramp because we had to get work through dual labeling and some work that we had to do to transition. So it was a ramp up, really pleased with how we exited. And as we look to the second quarter, we'll be tendering around a million and a half, something like that. So that's moving the way we thought it would. In terms of their interesting surcharge that they put in, which appears to be a temporary surcharge, I'm not entirely sure. You know, it's not appropriate for us to talk about how we manage pricing by customer, but I will say the PULSA system tends to set the floor for the economy product, which is actually pretty good for the whole industry if they're raising prices.
UPS filed for tariff refunds of ~$500M but will pass proceeds directly to customers, so no profit impact.