UPS posts strong Q2 2026 results, raises full-year outlook

United Parcel Service or UPS delivered a solid second quarter for 2026, with growth across all three business segments and management raising its full-year guidance on the back of first-half momentum.

UPS reported consolidated revenue of $22.83 billion for the second quarter of 2026, up 7.6% year-over-year from $21.22 billion in the same quarter of 2025. Non-GAAP adjusted operating profit came in at $2.10 billion, a 12% increase over the $1.88 billion posted a year earlier, lifting the non-GAAP adjusted operating margin to 9.2%, a 40-basis point improvement.

On the bottom line, GAAP diluted EPS was $0.71, while non-GAAP adjusted diluted EPS rose to $1.76, up from $1.55 in the prior-year quarter, a $0.21 improvement. The gap between GAAP and adjusted EPS was driven primarily by $1.05 in transformation strategy costs, tied to the company's ongoing “network reconfiguration” and “efficiency reimagined” initiatives, including one-time payments for the driver choice programme.

UPS's “network of the future” initiative aims to boost efficiency in its US domestic package network through automation and sort consolidation. As part of managing planned volume declines from its largest customer, UPS launched “network reconfiguration”. This is an expansion of that initiative, which has driven, and will continue to drive, further cuts to facilities, vehicles, aircraft, and workforce, along with an end-to-end process redesign. “Efficiency reimagined” was introduced to carry out that redesign, aligning organisational processes with the network changes to improve performance and profitability beyond routine ongoing efforts.

CEO Carol Tome attributed the quarter's strength to broad-based contribution: "All three segments contributed to our strong second-quarter revenue performance," she said, highlighting that US domestic delivered operating profit growth of over 20% versus the prior year.

Segment performance
US domestic generated $14.93 billion in revenue, up 6% Y/Y, with non-GAAP adjusted operating profit climbing 21% to $1.19 billion and margin expanding 100 basis points to 8%. This is more than double the margin delivered in Q1 2026. The growth was driven by strong revenue-per-piece gains of 9.3% Y/Y, more than half of which came from healthy base rates and improved customer mix, with fuel contributing the remainder. Average daily volume declined 3.3% Y/Y to 16,002 thousand pieces, largely reflecting the planned Amazon volume glidedown, though total air ADV (average daily volume) actually rose 1.2% excluding Amazon. Small and Medium-sized Businesses (SMB) ADV grew 4.3% Y/Y, with SMB now representing 34.5% of total volume, up from 31.2% a year ago; growth came from nearly all industries, led by high-tech and healthcare.

International revenue rose 12.5% Y/Y to $5.04 billion, powered by an 18.9% jump in revenue per piece, over half of which came from fuel. However, non-GAAP adjusted operating profit fell 8.7% to $623 million, and margin contracted 280 basis points to 12.4%, partly due to a 120-basis point negative fuel impact. The company noted an improving geographic mix as trade lanes rebalanced, particularly in Asia, with the presentation flagging a return to year-over-year volume growth on the China-to-US lane after months of declines.

Supply chain solutions division of UPS posted its second consecutive quarter of strong profit growth, with revenue up 7.8% to $2.86 billion and non-GAAP adjusted operating profit surging 37.3% to $291 million, pushing margin up 220 basis points to 10.2%. Forwarding revenue rose 8.1% on higher international air freight rates, while logistics revenue grew 4.3%, driven by healthcare logistics strength that offset softness in mail innovations. UPS Digital, which includes Roadie and Happy Returns, delivered revenue growth of over 30% Y/Y.

Strategic priorities
UPS, in its earnings call presentation emphasized several growth initiatives: the Digital Access Programme (DAP) generated over $1 billion in revenue for a third straight quarter; healthcare logistics topped $3 billion in revenue for a second consecutive quarter, with 27 new temperature-controlled cross-dock facilities added to the network; and the industrial and automotive vertical saw expansion of US–Mexico North American air freight along with the launch of 300+ industrial supply chain specialists. UPS also detailed continued investment in RFID and AI, describing a shift "from a scanning to a sensing network" that eliminates hundreds of millions of manual scans annually, alongside international RFID expansion and full RFID enablement at the UPS Store.

Cash flow and balance sheet
For the first half of 2026, UPS generated $3.1 billion in cash from operations and $1.6 billion in free cash flow, the latter figure reflecting one-time Driver Choice Programme payments made in Q2. The company held $4.7 billion in cash with no outstanding commercial paper, and paid $2.7 billion in dividends year-to-date.

Raised full-year 2026 guidance
Citing strong first-half performance, UPS raised its full-year outlook to approximately $91.2 billion in revenue, $8.65 billion in non-GAAP adjusted operating profit, and $7.22 in non-GAAP adjusted diluted EPS. Full-year capital expenditures are guided at roughly $3 billion, with a $1.3 billion pension contribution and free cash flow (including Driver Choice Programme costs) of approximately $5.5 billion. Dividends, pending board approval, are expected at rouaghly $5.4 billion.

By segment, full-year guidance calls for US domestic revenue of about $60 billion at a 7.5% margin; international revenue up mid-single-digits with margin in the mid-teens; and supply chain solutions revenue up high-single-digits with margin of 10%–11%. For Q3 2026 specifically, US domestic revenue is expected roughly flat Y/Y at a 7% margin, before improving to 8.8% in the second half.