United Parcel Service Inc. (NYSE: UPS posted second-quarter results Tuesday that beat revenue expectations but narrowly missed the consensus earnings estimate, as the shipping giant continues to navigate a complex global trade environment.

The Atlanta-based logistics giant posted adjusted earnings per share of $1.55, narrowly missing the consensus estimate of $1.57. Revenue was $21.2 billion, beating the expected $20.87 billion.

Operating profit for the quarter totaled $1.8 billion, or $1.9 billion on an adjusted basis. The adjusted consolidated operating margin rose to 8.8%, up from 8.2% in the first quarter.

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In the U.S. Domestic segment, revenue fell 0.8% year over year to $14.08 billion, driven by lower package volumes. The adjusted operating margin remained steady at 7% compared to last year’s quarter.

The International segment generated $4.49 billion in revenue, up 2.6% from a year ago, fueled by a 3.9% increase in average daily volume. However, the adjusted operating margin fell to 15.2%, down from 18.9% a year earlier.

Supply Chain Solutions revenue dropped 18.3% to $2.65 billion, mainly due to the prior-year divestiture of freight brokerage unit Coyote. Still, the segment’s adjusted operating margin improved to 8%, from 7.5% in the second quarter of 2024.

For the first half of 2025, UPS reported operating cash flow of $2.67 billion and free cash flow of $742 million.

The company reported a 6.1% increase in GAAP cost per piece to $12.18, or $12.12 on an adjusted basis, up 5.6% year over year. U.S. daily volume declined to 16.6 million packages.

“We are making meaningful progress on our strategic initiatives,” said CEO Carol Tomé, praising UPS employees for navigating a “dynamic and evolving trade environment.”

The company is undergoing a multi-year transformation effort to streamline its operations and cost structure. Transformation 2.0, Fit to Serve, and Network Reconfiguration programs include workforce reductions, technology upgrades, and facility closures. UPS expects to save $3.5 billion through these initiatives in 2025, with $400 million to $650 million in related expenses.

Key Takeaways From Earnings Call

During the earnings conference call, the CEO of UPS highlighted several key factors impacting the company’s performance. A significant point of discussion was the China to U.S. trade lane, which UPS is actively monitoring. The CEO noted that a year-over-year drop in average daily volume in this lane was directly attributed to the increased tariffs and the elimination of de minimis exceptions.

UPS CFO noted that U.S. trade policy changes during the quarter resulted in a 34.8% decline on the China to U.S. lane in May and June, a figure described as “higher than we expected.”

Furthermore, the CEO reportedly addressed the domestic U.S. market, stating that the U.S. small package market was unfavorably impacted by U.S. consumer sentiment that was near historic lows. This indicates a broader economic headwind affecting consumer spending and, consequently, package delivery volumes within the United States.

UPS said that its low-cost Ground Saver product experienced a significant year-over-year volume drop of 23%. This decline was partly attributed to fewer Amazon delivery reductions, suggesting a shift in Amazon’s delivery strategies impacting UPS’s Ground Saver service.

Regarding the ongoing relationship with Amazon, the CFO stated an expectation to accelerate the pace of Amazon volume decline to approximately 30% year-over-year in each of the third and fourth quarters.

Looking ahead, the CEO also commented on the upcoming peak season, noting that customers have not yet shared their peak season plans. This delay is likely due to uncertainty over U.S. trade policies.

Outlook

Due to ongoing macroeconomic uncertainty, UPS withheld revenue and profit guidance for 2025. However, the company reaffirmed key financial targets, including $3.5 billion in cost savings from its ongoing network reconfiguration and Efficiency Reimagined initiatives.

Capital expenditures remain projected at $3.5 billion, while dividend payments are expected to total $5.5 billion, subject to board approval. Share buybacks of $1 billion have already been completed.

Price Action: UPS shares are trading lower by 5% at $96.50 premarket at last check Tuesday.

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