UPS Raises 2026 Outlook as Q3 Revenue Rises 6.7%

United Parcel Service (UPS) raised its full-year 2026 outlook after third-quarter revenue increased across all three of its business segments, supported by higher revenue per piece and growth in premium services. Consolidated revenue rose 6.7% year over year to $22.85 billion, although non-GAAP adjusted operating profit declined 3.7% to $2.05 billion and adjusted diluted earnings per share fell 2.9% to $1.69.

The company now expects full-year revenue of about $92.6 billion and non-GAAP adjusted operating profit of approximately $8.75 billion. It also projected adjusted diluted EPS of about $7.28 and free cash flow of roughly $6.1 billion, including payments for the Driver Choice Program.

Third-quarter comparisons were affected by a $330 million pre-tax sale-leaseback gain recorded in Supply Chain Solutions a year earlier, which contributed $0.30 to third-quarter 2025 EPS. UPS reported GAAP diluted EPS of $1.37 for the latest quarter, down from $1.55 a year earlier. The 2026 adjusted figure excluded transformation strategy costs, goodwill and asset impairments, and a gain on asset sales.

U.S. profitability improves as pricing offsets lower volume

U.S. Domestic revenue increased 4.5% to $14.87 billion, driven by a 6.1% rise in revenue per piece. UPS said about half of that increase came from base rates and improvements in customer mix, with higher fuel rates accounting for the remainder.

Overall average daily volume declined, reflecting actions taken earlier in the year to reduce certain volume. However, average daily volume from small and medium-sized businesses and certain enterprise customers increased by more than 200,000 pieces from the prior year. SMB volume rose 3.7%, and those customers accounted for a record 35.1% of total U.S. volume.

Ground volume from SMBs and selected enterprise customers increased 2.1%, while air volume from those groups was flat. UPS also said its business-to-business customer mix was becoming more diversified, with healthcare, high technology, manufacturing and automotive customers representing a larger share of U.S. volume.

U.S. Domestic non-GAAP adjusted operating profit rose 14.3% to $1.03 billion, while adjusted operating margin expanded 60 basis points to 7.0%. Adjusted operating expenses increased 3.9%, primarily because of fuel and purchased transportation costs, but revenue-per-piece growth exceeded cost-per-piece growth by 60 basis points.

International profit returns to year-over-year growth

International revenue advanced 7.1% to $5.01 billion. Revenue per piece increased 15%, with fuel accounting for about half of the gain. The company said fuel surcharges helped offset higher fuel expense and preserve operating profit.

The segment generated $746 million in non-GAAP adjusted operating profit, up 8% from $691 million. Adjusted operating margin edged up 10 basis points to 14.9%. UPS described the result as the International segment’s first year-over-year adjusted operating profit growth in six quarters.

Supply Chain Solutions revenue climbed 18.2% to $2.98 billion, but adjusted operating profit fell 48.9% to $274 million and margin contracted to 9.2% from 21.3%. The prior-year sale-leaseback gain was recorded in this segment.

Forwarding revenue increased 17.5%, reflecting higher international airfreight and ocean-freight rates, while ocean shipments also grew. Logistics revenue rose 17.2% as healthcare logistics growth more than offset a decline in Mail Innovations. Revenue from UPS Digital, including Roadie and Happy Returns, increased nearly 50%.

Network changes and fourth-quarter expectations

UPS said its network reconfiguration and Efficiency Reimagined initiatives generated approximately $1.8 billion of benefits during the first nine months of 2026. The company expects nearly $3 billion of benefits for the full year. It incurred $1.4 billion of related costs through September and expects to exclude between $1.4 billion and $1.6 billion of such costs from full-year non-GAAP adjusted operating expense, including $1.2 billion associated with the Driver Choice Program.

The planned reduction in volume from UPS’s largest customer was completed in the second quarter, but Efficiency Reimagined is expected to continue through the fourth quarter of 2027. UPS also introduced a new global operating model intended to standardize key processes, improve network efficiency and support premium growth in complex logistics.

For the fourth quarter, UPS expects consolidated revenue of approximately $25.7 billion and non-GAAP adjusted operating profit of about $3.3 billion. U.S. average daily volume is expected to rise roughly 25% sequentially from the third quarter as holiday shipments increase. Nearly 70% of packages are expected to move through automated processes, allowing the company to operate with fewer rented vehicles and leased aircraft.

UPS ended the first nine months with $6.0 billion of operating cash flow and $4.2 billion of free cash flow. Cash on the balance sheet totaled $6.8 billion, while dividends paid were $4.1 billion. Full-year plans include approximately $3.0 billion of capital spending, $1.3 billion of pension contributions and about $5.4 billion of dividends, subject to board approval.

The outlook remains subject to economic and trade-policy changes, tariffs, geopolitical uncertainty, competition, shifts in major customer relationships, labor disruptions, fuel and currency movements, cybersecurity incidents and the company’s ability to realize expected benefits from its network and transformation programs.