UPS · Q3 2025 Earnings

Cautious

United Parcel Service

Reported October 28, 2025

30-second summary

UPS resumed forward guidance after Q2's withdrawal, framing Q4 FY2025 at ~$24B revenue and 11–11.5% consolidated operating margin (non-GAAP basis) — a posture change that reads as confidence in tariff visibility, not in volume. Underneath, Q3 revenue fell 3.7% YoY to $21.4B, consolidated operating margin was 8.4% GAAP / 10.0% non-GAAP, and reported non-GAAP EPS of $1.74 included $0.30 from a $330M pre-tax sale-leaseback gain that was not adjusted out (underlying adjusted EPS ~$1.44). Amazon volumes declined 21.2% (below the ~30% pace H2 was meant to hit), and management quietly withdrew both the $3.5B expense-reduction target and the ~30% Amazon ADV decline guide without replacement. A preliminary USPS deal for Ground Saver final-mile and a 225bps lift in the FY tax rate to 23.75% round out the changes.

Headline numbers

EPS

Q3 FY2025

$1.74

Revenue

Q3 FY2025

$21.41B

-3.7% YoY

Operating margin

Q3 FY2025

8.4%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$21.41B	-3.7%	$21.22B	+0.9%
EPS	$1.74	—	$1.55	+12.3%
Operating margin	8.4%	—	8.6%	-20bps

Guidance

Company breaks silence on forward guidance with Q4 FY2025 revenue of $24B and operating margin of 11–11.5%, after declining to provide forward guidance last quarter due to tariff uncertainty; raises FY2025 tax rate guidance by 225bps to 23.75% while withdrawing expense-reduction and Amazon decline targets.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

Metric	Period	Guide	YoY
Revenue	Q4 FY2025	approximately $24 billion	—
Operating Margin	Q4 FY2025	11% to 11.5%	—
Year-end cash position	FY 2025	around $5 billion	—
DAP revenue guidance	FY 2025	over $3.5 billion	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Tax rate	FY 2025	approximately 21.5%	approximately 23.75%	+225 basis points	Raised
Share repurchases	FY 2025	about $1 billion	Withdrawn — no replacement	—	Withdrawn
Expense reduction target	FY 2025	approximately $3.5 billion	Withdrawn — no replacement	—	Withdrawn
Amazon ADV decline	FY 2025	approximately 30% year over year	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Capital expenditures (approximately $3.5 billion), Dividend payout (around $5.5 billion)

Segment KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
U.S. Domestic Package	$14.22B	-2.6%
International Package	$4.673B	+5.9%
Supply Chain Solutions	$2.522B	-22.1%

Other KPIs

Q3 FY2025

Segment	Q3 FY2025
Consolidated Volume	1,243 million packages
Consolidated Average Daily Package Volume	19,419 thousand packages
Consolidated Average Revenue Per Piece	$14.82
U.S. Domestic Package Operating Margin (GAAP)	4.2%
U.S. Domestic Package Operating Margin (Non-GAAP)	6.4%
International Package Operating Margin (GAAP)	14.5%
Supply Chain Solutions Operating Margin (GAAP)	20.8%
U.S. Domestic Package Cost Per Piece (GAAP)	$12.92

Management tone

Customer optimization hangover → guidance withdrawn → guidance restored with carve-outs

Two quarters ago UPS was still telling investors the cost-out target was both quantified and on-track; last quarter management refused to put a number on the rest of the year; this quarter they put a Q4 number back on the table but quietly removed both the expense-reduction target and the Amazon ADV decline figure that anchored the prior narrative. Verbatim: "With the uncertainty around tariffs now somewhat resolved and clearer peak forecasts from our largest customers, we're in a stronger position to offer guidance than we were at the end of the second quarter." The shift signals improved external visibility, but the silent withdrawal of the two most-watched internal commitments — without explanation — is the more telling tell.

The Amazon glide-down language softened in a way that should not go unnoticed. Q2 framed the run-off as accelerating to ~30% YoY in H2; Q3 came in at 21.2%. Management's framing pivot was that the 21.2% is "on plan" because UPS is selectively growing returns and inbound while exiting outbound. Verbatim from the Evercore exchange: "volume we want" growing offsets "volume we don't want" declining. That may be true, but it is materially different from last quarter's quantified decline pace, and it means investors no longer have a fixed yardstick to measure execution against.

Ground Saver shifted from "failing product under repair" to "USPS partnership in late-stage negotiation." Last quarter, management disclosed an ~$85M algorithm-cost surprise and reframed Ground Saver as a complement; this quarter they confirmed "a preliminary understanding on revenue and rates with the United States Postal Service to support last mile delivery for our ground saver product" with benefits starting Q1 2026 (no Q4 contribution). This is the most concrete strategic news on the print: UPS is effectively conceding final-mile economics on the cheapest product to a partner with surplus capacity, rather than running it solo.

International margin tone hardened in the opposite direction from US Domestic. Last quarter management characterized international margins as pressured but stable; this quarter the framing turned to "pressures from trade lane shifts, product trade down, and lower demand-related surcharges," with international operating profit down $101M YoY despite 5.9% revenue growth. The mix is degrading even as the top line holds.

Finally, tariff-driven customs complexity was reframed from cost burden to competitive moat. Verbatim: "We don't just move goods. We remove friction... due to the investments we've made in our brokerage business, we can absorb this complexity without adding cost." The technology stat — same-day clearance up from 21% (March) to 97% (recent week) on 112k packages/day — is real, but management did not quantify the revenue from clearance services, leaving the moat-versus-burden framing unfalsifiable for now.

Recurring themes management leaned on this quarter:

Amazon volume glide down acceleration and network reconfigurationRevenue quality improvement offsetting volume declines through pricing and mixTariff volatility and trade policy navigation as ongoing operational complexityAutomation and network efficiency as peak season enablerInternational margin pressure from trade lane dynamicsSMB growth and DAP expansion as diversification engine

Risks management surfaced:

Tariff policy uncertainty continuing to impact trade lanes and customer behaviorInternational margin erosion from trade lane shifts and product mix deteriorationGround Saver sustainability dependent on USPS rate negotiationsPeak season volume expectations subject to customer forecasting accuracySupply chain solutions softness in air and ocean forwarding from market rate declines

Q&A highlights

David Vernon · Bernstein

Asked about exit rate on cost per piece from Q3, whether it should accelerate into Q4, and requested specifics on USPS final mile partnership and its impact on cost per piece.

Management detailed the driver voluntary severance program ($175M cost, $179M annual payback, less than one year ROI) and announced a preliminary USPS agreement to leverage each carrier's strengths (USPS on final mile, UPS on middle mile). Confirmed best production metrics in 12-20 years from Network of the Future investments. Stated USPS details and 2026 margin impact will be provided by end of Q4, with benefits expected to start Q1 2025.

Driver VSP: $175M total cost with $179M annual payback (less than 1-year payback)Best inside operations production in 12 yearsBest preload production in 20 yearsUSPS preliminary agreement on volume and rates reached

Todd Wadewitz · UBS

Asked about SMB performance versus 2Q concerns regarding de minimis exemption impact, and how performance changed when elimination became global rather than China/Hong Kong only.

Management reported SMBs were down slightly year-over-year but gained share in both volume and value versus market. Highlighted massive operational pivot: packages requiring duties clearance jumped from 13,000/day (March) to 112,000/day (September, global elimination); cleared 90% same-day with technology (up from 21% in March). Quantified Q3 impact at $60M and estimated Q4 impact of $75-100M, driven by >20% decline in China-US trade lane. Emphasized helping SMBs through 61,000 customer conversations and 12 trade webinars.

SMB volume down slightly YoY but gained market shareDuties clearance: 13,000 packages/day (March) vs. 112,000/day (September)Technology-enabled same-day clearance: 21% (March) to 90% (September), now 97% in recent weekQ3 de minimis impact: ~$60M

Jonathan Chaplin · Evercore ISI

Asked for clarification on Amazon glide-down progress (21% vs. expected 30% by this point), exit rate in Q4, and whether cost alignment is on track ex-Amazon given headwinds from de minimis, SMB softness, and peak changes.

Management clarified Amazon volume decline of 21% is on plan because they're growing 'volume we want' (returns, inbound) while exiting 'volume we don't want' (outbound). Confirmed excellent cost management evidenced by volume down 12.3% YTD yet operating margin expanded. Highlighted Network of the Future productivity gains (inside ops best in 12 years, hub ops best in 20 years), 34,000 positions eliminated, buildings consolidated. Cited new hubs (Mesquite 48K/hour) as examples of efficiency.

Amazon volume down 21% (gliding as planned, with offset from growing desired volumes)YTD volume down 12.3% with operating margin expansion achieved34,000 positions eliminated across networkInside operations: best production in 12 years

Chris Weatherby · Wells Fargo

Asked about domestic margin trajectory and glide-down progress; requested forward guidance on 2026 domestic margins given RPP growth and mix/yield management impacts.

Management declined to provide 2026 guidance ahead of January call but outlined key drivers: three-quarters into six-quarter Amazon drawdown with sequential volume increase expected during peak, then continuation through H1 2026; Ground Saver strategic actions will yield benefits in H2 2026; Andalour acquisition closing November to accelerate healthcare strategy; focus on growing higher-margin segments. Emphasized revenue quality improvement and Amazon glide-down progress.

Three-quarters into six-quarter Amazon drawdown on trackPeak volume seasonality expected to increase sequentiallyGround Saver economic benefits expected H2 2026Andalour acquisition closing November 2024

Ken Hoekster · Bank of America

Asked about sequential domestic margin improvement of 300+ bps vs. typical run-rate and potential for accelerating cost-cutting benefits into Q4 and 2026; also asked for thoughts on Supreme Court tariff hearings and de minimis reversal potential.

Management attributed Q4 margin upside to 42 new automation projects coming live by peak, lower variable capacity needs (fewer leased aircraft, rented vehicles, seasonal workers) from reduced water level in network, and holiday demand surcharges with good take rates. Confirmed peak shape expected to be similar to past 4 years with 20% sequential ADV step-up in US, 10% international. Declined to speculate on Supreme Court tariff outcome but stated they are monitoring closely.

42 new automation projects live by peak startExpected Q4 sequential ADV increase: ~20% US, ~10% internationalHoliday demand surcharges with good take rateReduced variable capacity (aircraft, vehicles, seasonal labor) from lower network utilization

Answers to last quarter's watch list

Whether forward guidance returns at Q3. Yes — UPS reinstated a Q4 revenue guide (~$24B) and operating margin guide (11–11.5%), reversing the Q2 withdrawal. Management cited tariff clarity and improved peak forecasts from major customers. However, the FY revenue and EPS range was not reissued, only Q4. Status: Resolved positively

Amazon glide-down execution at the ~30% YoY pace. Amazon volume declined 21.2% in Q3 — well short of the ~30% Q2 promised. Management reframed this as "on plan" via selective growth in returns/inbound offsetting outbound exits, but the original quantified target was quietly withdrawn from the Q4 outlook (now only "US peak ADV down YoY," magnitude unstated). Status: Resolved negatively

Driver buyout take-rate. Management disclosed the driver VSP at $175M total cost with $179M annual payback — a sub-1-year ROI but stopped short of disclosing participation numbers or per-head separation cost. Productivity metrics (best inside-ops in 12 years, hub-ops in 20 years) suggest the program is landing, but the take-rate question itself was not answered with a headcount or percentage. Status: Continue monitoring

GroundSaver recovery and any USPS partnership announcement. A preliminary USPS agreement on revenue and rates was reached, with USPS handling final mile and UPS handling middle mile. Benefits begin Q1 2026; no Q4 contribution. Final commercial details due by end of Q4. No repeat of the Q2 algorithm cost was disclosed. Status: Resolved positively

US Domestic operating margin trajectory. US Domestic GAAP margin came in at 4.2% (Non-GAAP 6.4%) — a sharp QoQ deterioration from Q2's 6.5% on a 1.0% sequential revenue decline. Cost per piece rose to $12.92 from $12.18. The implied Q4 consolidated margin of 11–11.5% requires a meaningful sequential US Domestic margin rebuild that management attributes to 42 new automation projects and lower variable capacity needs. The "path to double-digits exiting the year" looks tighter, not closer. Status: Resolved negatively

SMB volume. SMB volumes were down slightly YoY but gained share by volume and value, per Wadewitz exchange. No specific volume metric disclosed. The de minimis impact ($60M Q3, $75–100M Q4) and the 27.1% China-US lane decline give a sense of the headwind without quantifying the SMB customer-attrition risk flagged last quarter. Status: Continue monitoring

What to watch into next quarter

Whether the $3.5B FY expense-reduction target is reaffirmed at the January call or formally dropped. YTD reductions of $2.2B leave a $1.3B Q4 gap that wasn't bridged in commentary; silent withdrawal of a hard target is the most concerning data point on this print.

US Domestic GAAP operating margin recovery from 4.2%. The implied Q4 consolidated 11–11.5% guide requires US Domestic to step up sharply via automation and peak surcharges; a print in the high single digits would validate the cost-out story, mid-single digits would not.

USPS Ground Saver final terms by end of Q4. Management promised commercial structure and 2026 margin impact disclosure. Watch for whether UPS retains pricing power on Ground Saver or has effectively ceded the product's economics to USPS in exchange for service-level guarantees.

Q4 actual Amazon ADV decline versus the now-qualitative "down YoY" framing. If Q4 comes in materially shy of the ~30% pace originally guided, the six-quarter drawdown timeline (three quarters in) will need to be extended — which has direct cost-alignment implications for H1 2026.

Andlauer closing in early November and its contribution to the year-end $5B cash position. Healthcare logistics is the stated growth pillar; first integrated quarter visibility at Q4 will be the first proof point.

DAP revenue trajectory. New disclosure of >$3.5B for FY2025 establishes a baseline; whether DAP becomes a quarterly-disclosed metric and grows into a margin contributor will signal how seriously management treats it as a diversification engine.

Sources

UPS Q3 2025 press release and financial statements, SEC filing (https://www.sec.gov/Archives/edgar/data/1090727/000162828025046550/exhibit992-financialstatem.htm)
UPS Q3 2025 earnings call (management commentary and Q&A as captured in tone and Q&A extraction inputs)

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