UPS · Q2 2025 Earnings
CautiousUnited Parcel Service
Reported July 29, 2025
30-second summary
UPS pulled all forward revenue and EPS guidance, citing tariff uncertainty and unknown peak-season demand — a sharp posture shift from a company that normally guides. Underneath, the Amazon volume run-off is intentionally accelerating to ~30% YoY decline in H2 (vs. 13% in H1), GroundSaver was repositioned with a deliberate 23% volume cut, and a GroundSaver algorithm failure cost ~$85M in the quarter. Consolidated revenue fell 2.7% YoY to $21.2B, with Supply Chain Solutions down 18.3% reflecting the Coyote divestiture.
Headline numbers
EPS
Q2 FY2025
$1.55
Revenue
Q2 FY2025
$21.22B
-2.7% YoY
Operating margin
Q2 FY2025
8.6%
Key financials
Q2 FY2025| Metric | Q2 FY2025 | YoY |
|---|---|---|
| Revenue | $21.22B | -2.7% |
| EPS | $1.55 | — |
| Operating margin | 8.6% | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Segment KPIs
Q2 FY2025| Segment | Q2 FY2025 | YoY |
|---|---|---|
| U.S. Domestic Package | $14.083B | -0.8% |
| International Package | $4.485B | +2.6% |
| Supply Chain Solutions | $2.653B | -18.3% |
Other KPIs
Q2 FY2025| Segment | Q2 FY2025 |
|---|---|
| U.S. Domestic Package Operating Margin (GAAP) | 6.5% |
| International Package Operating Margin (GAAP) | 15.0% |
| Supply Chain Solutions Operating Margin (GAAP) | 8.8% |
| Consolidated Volume | 1,263 million packages |
| Average Revenue Per Piece (Consolidated) | $14.34 |
| U.S. Domestic Package ARPP | $13.03 |
| International Package ARPP | $21.14 |
| U.S. Domestic Cost Per Piece (GAAP) | $12.18 |
Management tone
UPS came into the call materially more defensive than the typical quarterly posture. The most consequential shift was the wholesale withdrawal of forward guidance — not a tweak, not a wider range, but an explicit removal. Management framed it as: "This remains a very unsettling time. Changes in trade policy have not been cemented, and the impact on customer demand and the overall economy is unknown." For a $90B-market-cap industrial that has historically guided each quarter, refusing to put a number on the rest of the year signals real concern about both demand visibility (SMB tariff pass-through) and peak-season scale ("customers not yet submitting peak plans").
Second, GroundSaver was repositioned mid-strategy. Management now describes it as a complement, not a standalone product: "For UPS, we believe GroundSaver should be a product that complements an array of products used by our customers, and not be a product just by itself." This reframing arrives alongside a 23% volume decline and an $85M unexpected cost from a density-algorithm failure. The combination — strategic reframing plus an operational miss in the same quarter — reads as management getting ahead of a product that isn't working as designed.
Third, the Amazon glide-down language hardened. H1 ran at 13% YoY decline; H2 guides to ~30%. Management volunteered that attrition is running slower than planned ("From a staffing perspective, our attrition rate was lower than we anticipated, which resulted in higher expense than we planned") and rolled out a voluntary buyout package for full-time drivers — 84-85% of whom sit at the top of the pay scale with 25-40 years of service. The cost-out playbook now depends on a behavioral response (driver take-rate on buyouts) that management hasn't yet sized.
Fourth, the China lane discussion shifted from "managing through tariffs" to "trade lanes have already moved." Management pointed to 100+ ad hoc air network adjustments in Q2, expansion of the Hong Kong air hub, and a new Philippines air hub — framed as harvesting prior investment rather than reacting. That part of the call was the most confident; the rest was not.
Recurring themes management leaned on this quarter:
Risks management surfaced:
Q&A highlights
Justine Weiss · Bernstein
Is the lack of guidance a sign that things are worse, or is it about uncertainty? How confident is management that cost cuts will be enough to exit with domestic margins at double digits?
Management cited extreme uncertainty from tariffs (August 1st implementation unknown, China agreement expires August 12th), July volume being potentially skewed by Amazon Prime Day and pre-tariff inventory builds, and peak season plans not yet received. They declined to provide guidance but expect clarity by end of Q3. On margins, they expressed confidence in $3.5B cost reductions but acknowledged lower-than-expected attrition, GroundSaver algorithm failures, and risks to SMB volume from potential 55% cost increases due to tariffs.
Ben Moore · Citigroup
When will China-to-US parcel lane cost shifts fully lap? Does Southeast Asia infrastructure have sufficient excess capacity, or are additional investments needed?
Management highlighted successful trade lane diversification through integrated global network. They noted over 100 ad hoc air network adjustments in Q2 and emphasized they had already invested in Asia diversity strategy over several years. Rather than incurring costs, they are reallocating resources. China-to-rest-of-world up 20%+, Southeast Asia (Malaysia, Vietnam) growing 20%+, India doubled. New investments include Hong Kong air hub expansion and new air hub in Philippines, positioned for shifting trade lanes (49 of 80 largest trade lanes have Asian country on one end; 22 have Asian countries on both ends).
Rob Salmonon · Wells Fargo
How did international package margins trend in Q2 given larger-than-expected declines on China-US and what are expectations for Q3?
Management stated international margins were relatively flat Q2 to expected Q3, despite significant trade lane volatility. They emphasized the international/air team made over 100 ad hoc network adjustments, which created some frictional costs. As tariff and peak certainty improves in Q3, they expect to harden capacity on lanes and drive margins back up. Revenue per piece declined due to less surcharge demand, which will lap in Q4.
Robbie Shanker · Morgan Stanley
What is not going as planned with the Amazon glide down? Is it just attrition rate timing or something else different?
Management clarified that the Amazon glide down volume is tracking as expected (Q1: 600k pieces/day, Q2: 400k pieces/day; lighter than modeled but intentional as they retained better-than-expected volume). The sole issue is attrition rate timing: expected it sooner, but it's coming later. Facility closures were back-loaded in Q2. Attrition will still occur as expected over time (single digits month 1, 25% by month 3). Offering voluntary buyout package to full-time drivers (84-85% at top of pay scale with 25-40 years service). Despite attrition modeling being off, they still expect to hit $3.5B cost takeout target and margins will normalize.
Ken Hoekster · Bank of America
On ground margins: (1) Is the Amazon glide down volume still on track despite lower attrition rates? (2) On GroundSaver, are you surprised by costs? How confident are you in double-digit margin targets?
On Amazon: Volume glide down is actually better than modeled (lighter decline due to retained higher-quality volume), so pacing is fine despite attrition being slower. Attrition will still occur over time as buildings close. On GroundSaver: Delivery density algorithm did not hold, resulting in ~$85M unexpected costs in Q2. Management is making operational changes and has re-engaged with USPS, which has new leadership and excess capacity. They are exploring options but outcome is uncertain. Distinguished GroundSaver (insourced former SurePost) from air cargo business with USPS, which is performing well.
What to watch into next quarter
Whether forward guidance returns at Q3. Management said they expect more certainty by end of Q3. Reissuance of an FY range would be a meaningful positive signal; another withdrawal would confirm that the demand picture is structurally cloudier than tariffs alone explain.
Amazon glide-down execution at the ~30% YoY pace. Q3 ADV needs to step down ~500k pieces from Q2. If volume drops faster than facility closures and headcount, US Domestic cost per piece (currently $12.18 vs. $13.03 ARPP) gaps the wrong way.
Driver buyout take-rate. With 84-85% of full-time drivers at top scale, the per-head cost of accelerated separation is high, but the per-head cost savings are also high. A disclosed take-rate or charge in Q3 will reveal whether the $3.5B expense-reduction target is realistic on the original timeline.
GroundSaver recovery and any USPS partnership announcement. A Q2 algorithm failure that cost $85M is recoverable; a repeat in Q3 would call into question UPS's ability to operate the product at all. Watch for any concrete commercial structure with USPS.
US Domestic operating margin trajectory. 6.5% in Q2; management still implies a path to "double digits" exiting the year. The gap is wide and depends on cost-out cadence outrunning the Amazon revenue decline.
SMB volume. Flat YoY in Q2, with explicit risk that tariff pass-through pushes small customers to cheaper alternatives. Watch for any disclosed SMB volume metric or commentary on customer attrition.
Sources
- UPS Q2 2025 press release and financial statements, SEC filing exhibit 99.2 (https://www.sec.gov/Archives/edgar/data/1090727/000109072725000061/exhibit992-financialstatem.htm)
- UPS Q2 2025 earnings call commentary (management remarks and Q&A as captured in tone and Q&A extraction)
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