United Parcel Service’s second quarter was marked by revenue growth and operating profit gains, but the market responded negatively as operating margins compressed significantly year over year. Management attributed the mixed results to the successful completion of its Amazon volume reduction and network reconfiguration, which eliminated lower-margin business and reset the cost structure. CEO Carol Tomé emphasized that automation and the shift to higher-value segments like small and medium-sized businesses (SMB) and healthcare logistics were key drivers of improved revenue per package and operating leverage, stating, “Incremental volume today carries materially better economics than before because of the structural changes we’ve made.”
Is now the time to buy UPS? Find out in our full research report (it’s free for active Edge members).
United Parcel Service (UPS) Q2 CY2026 Highlights:
- Revenue: $22.83 billion vs analyst estimates of $21.87 billion (7.6% year-on-year growth, 4.4% beat)
- Adjusted EPS: $1.76 vs analyst estimates of $1.66 (5.8% beat)
- The company lifted its revenue guidance for the full year to $91.2 billion at the midpoint from $89.7 billion, a 1.7% increase
- Adjusted EPS guidance for the full year is $7.22 at the midpoint, beating analyst estimates by 1.3%
- Operating Margin: 4.1%, down from 8.6% in the same quarter last year
- Market Capitalization: $90.84 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From United Parcel Service’s Q2 Earnings Call
- Jordan Alliger (Goldman Sachs) asked about long-term domestic margin targets post-Amazon drawdown. CEO Carol Tomé and CFO Brian Dykes explained that automation and network right-sizing should sustain a 50-100 basis point spread between revenue and costs per package, supporting margin accretion.
- Scott Group (Wolfe Research) inquired about competitive dynamics as both UPS and FedEx target premium SMB and B2B segments. Tomé stated that differentiated offerings like healthcare logistics and RFID-enabled visibility are helping UPS win and retain customers, despite intensifying competition.
- Thomas Wadewitz (UBS) questioned how product mix and automation will affect revenue and cost trends into 2027. Dykes replied that ongoing automation, pricing discipline, and mix improvements will help maintain unit cost advantages and operating leverage as Amazon volume is fully cycled out.
- Ken Hoexter (Bank of America) asked about international margin outlook and volume recovery, particularly with Asia trade lanes rebounding. Tomé and Dykes said international margins should improve as volumes recover, especially as the impact of tariffs and Middle East disruptions are managed.
- Ariel Rosa (Credit Suisse) raised concerns about labor negotiations with the Teamsters and the risk of disruption. Tomé assured that customer confidence remains high due to strong relationships, and management is focused on maintaining operational stability ahead of contract talks.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace at which automation and AI-driven efficiencies translate into improved margins, (2) whether healthcare and SMB segment growth continues to outpace declines in lower-margin business, and (3) signs of sustained recovery in international trade lanes, particularly Asia-to-U.S. volume. Execution in these areas, alongside any shifts in competitive dynamics or macroeconomic conditions, will be critical signposts for future performance.
United Parcel Service currently trades at $106.93, down from $112.95 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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