Calendar note: UPS is scheduled to report before the U.S. market opens on Tuesday, July 28, 2026—which is today, not tomorrow. The earnings call is expected at 8:30 a.m. ET.
UPS enters 2Q26 at the most important point in its multi-quarter transformation. Management has deliberately reduced lower-return package volume—most notably Amazon and certain e-commerce flows—while restructuring the U.S. network, outsourcing part of Ground Saver’s last mile to USPS, reducing headcount, closing facilities, and shifting its mix toward SMB, B2B, healthcare, and other premium shipments.
The core question is no longer whether UPS can take costs out. It is whether the company can demonstrate that:
Management explicitly characterized 2026 as an inflection year, with the back half expected to look “considerably different” from the first half. That makes the reported 2Q result and, more importantly, commentary on July trends and the second half unusually consequential.
UPS did not provide EPS guidance for the quarter. The relevant scorecard is revenue, segment margins, cost-per-piece progression, and confirmation of the full-year outlook.
| Metric | 2Q26 company outlook | 2Q25 actual comparison |
|---|---|---|
| Consolidated revenue | Up low single digits YoY | $21.2B |
| U.S. Domestic revenue | Up low single digits YoY | $14.1B |
| U.S. Domestic operating margin | 7.5%–8.5% | 7.0% adjusted |
| International revenue | Up low single digits YoY | $4.5B |
| International operating margin | 13.0%–14.0% | 15.2% adjusted |
| Supply Chain Solutions revenue | Up low single digits YoY | $2.7B |
| Supply Chain Solutions operating margin | 9.5%–10.5% | 8.0% adjusted |
The implied consolidated revenue range is approximately $21.4B–$21.8B, assuming “low single digit” growth off 2Q25’s $21.2B base. The margin setup is more important than the revenue setup: a U.S. Domestic margin in the guided range would represent a major sequential step-up from 4.0% adjusted in 1Q26, although the year-over-year comparison is less clean given ongoing network actions and differing transformation costs.
UPS reported $350M of incremental temporary pressure in 1Q from weather and casualty costs, aircraft leasing after the MD-11 retirement, Ground Saver transition costs, and excess operational staffing. Management said these costs were “largely behind” the company entering 2Q.
The expected 2Q improvement rests on four operational changes:
This is why the U.S. margin guide of 7.5%–8.5% is the primary near-term test. A result below that range—or a result within the range but accompanied by weaker-than-expected July trends—would raise concern that the cost reset is taking longer or costing more than planned.
In 1Q, U.S. Domestic average daily volume fell 8.0%, but revenue declined only 2.3% because revenue per piece rose 6.5%. Management attributed that growth to:
The favorable mix reflects the intentional exit from lower-return volume and a greater emphasis on premium opportunities. SMB volume grew 1.6% in 1Q, SMB penetration reached a record 34.5% of U.S. volume, and B2B represented 45.2% of U.S. volume—the highest first-quarter mix level in six years.
For 2Q, investors should look for continued revenue-per-piece growth, but with an improving spread between revenue per piece and cost per piece. That spread, rather than headline volume, is the central economic measure of the turnaround.
The central debate is whether UPS can transition from a low-margin, underutilized network to a more profitable, lower-volume network.
Constructive outcome - Margin at or above the midpoint of the 7.5%–8.5% guide; - Cost per piece decelerates materially from the 9.5% adjusted increase in 1Q; - Management confirms that the Amazon glide-down, USPS transition, driver changes, and aircraft transition are largely complete; - Evidence that premium volume and pricing are replacing exited volume.
Concerning outcome - Margin near or below the low end of guidance; - Continued high cost-per-piece inflation; - New network-transition, labor, aircraft, or service-cost issues; - A cautious view on the pace of second-half cost savings.
UPS has targeted a 50–100 bp positive spread between revenue-per-piece and cost-per-piece growth by year-end. Commentary on whether it is on track for that exit-rate will matter more than a modest revenue beat or miss.
UPS expects roughly $3B of year-over-year savings in 2026 from Network Reconfiguration and Efficiency Reimagined initiatives. It reported approximately $600M of savings in 1Q and had closed 23 facilities during the quarter, with 27 additional closures planned for 2026, largely in 2Q.
Investors should ask:
A key nuance: UPS expects $1.3B–$1.5B of non-GAAP-excluded program costs during 2026, including about $1.2B tied to Driver Choice. Investors should distinguish between operational savings and the cash/GAAP costs required to obtain them.
At the end of 1Q, Amazon represented 8.8% of UPS revenue, down from more than 13% not long before. Management expected to complete a more-than-50% reduction in Amazon volume from 2024 levels by June 2026.
The key issue is not merely whether Amazon volume fell as planned; that was expected. The questions are:
Management previously indicated that revenue excluding Amazon should grow in every quarter during 2026. Confirmation of that statement would be a meaningful positive.
International remains the biggest external uncertainty. In 1Q, International revenue grew 3.8%, driven by 10.7% revenue-per-piece growth, but adjusted operating margin fell to 12.1% from 15.0% a year earlier. The decline reflected trade-policy disruption, weaker China-to-U.S. volumes, and higher network costs related to Middle East airspace constraints.
For 2Q, UPS guided to a 13%–14% International margin, below the 15.2% adjusted margin achieved in 2Q25.
Important indicators:
A better-than-guided International margin would materially improve confidence that 2026’s trade-lane shocks are moderating.
Supply Chain Solutions was the standout in 1Q: adjusted operating profit more than doubled to $206M, and adjusted margin expanded to 8.1%. For 2Q, UPS guided to an additional step-up to 9.5%–10.5%.
Healthcare is central. UPS generated its first $3B global healthcare revenue quarter in 1Q, and the 2025 acquisition of Andlauer Healthcare Group supports the company’s higher-margin, specialized logistics strategy.
Watch for:
UPS reaffirmed its 2026 outlook after 1Q:
A guidance raise is possible only if UPS has high confidence in the demand backdrop, fuel outlook, and pace of cost realization. Given the company’s exposure to consumer confidence, industrial activity, global trade, tariffs, and elevated fuel prices, a reaffirmation accompanied by clear evidence of a second-half margin ramp should still be viewed constructively.
Conversely, even a numerical reaffirmation could disappoint if management’s qualitative commentary signals that fuel, trade disruption, or weakening demand is limiting the intended second-half inflection.
UPS has two offsetting macro dynamics:
UPS closed at $112.98 on July 27, up roughly 9% from its April 28 post-1Q earnings close of $103.94. The recovery suggests investors are increasingly willing to underwrite the restructuring and second-half margin narrative, but it also raises the bar for execution.
The market is likely to reward evidence that the turnaround is becoming operationally visible—not just promised for later in the year.
UPS’s 2Q26 report is principally a margin-execution event. Revenue growth should be modest because the company is intentionally shrinking lower-return volume. The more important question is whether the completed Amazon reduction, USPS transition, driver actions, facility closures, and aircraft normalization produce the guided step-up in U.S. Domestic profitability.