UPS United Parcel Service 10-Q 2026-09-30 section summaries

UPS — Q3 and first nine months of 2026

Consolidated results

Q3 revenue grew 6.7%, but operating expenses rose 7.6%, so operating income declined 3.3% and net income fell 11.3%. For the first nine months, revenue increased 4.2% while expenses rose 6.9%; operating income declined 25.5% and net income fell 30.4%. Higher purchased transportation and fuel contributed to cost growth: 9M purchased transportation was $9.226B versus $7.715B and fuel was $4.324B versus $3.187B. Compensation and benefits were $36.006B versus $35.571B for 9M, although they declined in Q3 to $11.807B from $12.118B. Interest expense was $289M versus $291M in Q3 and $827M versus $751M for 9M.

Revenue categories

SCS growth accelerated: total SCS revenue rose 18.2% in Q3 versus 6.2% for 9M; Forwarding grew 17.5% versus 5.3% for 9M, and Logistics grew 17.2% versus 3.1%. Domestic Package Cargo and Other grew 19.7% in Q3 versus 7.1% for 9M; International Cargo and Other grew 18.3% versus 14.5%. International Package Domestic growth slowed to 1.4% in Q3 from 4.7% for 9M.

Cash flow and capital allocation

UPS made no common-stock repurchases in 9M 2026, versus $1.000B in the prior-year period. A $450M principal amount of company-issued notes was contributed to pension plans. Cash, cash equivalents and restricted cash ended the period at $6.837B, compared with $6.764B at the end of 9M 2025.

Balance sheet and debt

Tangible equity, calculated as total equity less goodwill and intangible assets, was $5.483B; controlling-interest equity was $14.994B. Intangible assets included capitalized software of $2.336B versus $2.217B and customer relationships of $1.029B versus $1.145B.

Total debt principal was $26.321B and carrying value was $26.078B. Finance lease obligations increased to $1.467B from $781M. Fair value of long-term debt, including current maturities but excluding leases, was $22.4B versus $22.8B. In Q3 UPS issued $1.0B of 4.85% fixed-rate notes due 2031 and $325M of floating-rate notes due 2076; $450M principal of the fixed-rate notes was contributed to pension plans. Nine new aircraft leases required parent guarantees of approximately $1.8B. No commercial paper or revolving-credit borrowings were outstanding, and UPS was in compliance with debt covenants. Its $1.0B revolving facility matures in November 2026 and its $2.0B facility in November 2029.

Restructuring, assets and significant risks

Network Reconfiguration and Efficiency Reimagined remain underway. UPS closed 47 leased or owned buildings in 9M, 46 permanently; planned volume reductions from its largest customer were completed in Q2, while Efficiency Reimagined is expected to continue through Q4 2027. Further plan changes or revised asset-life and salvage-value assumptions could accelerate depreciation or create additional early-retirement charges.

Goodwill declined partly because of a $182M impairment at Supply Chain Solutions’ Healthcare Logistics and Distribution (HLD) reporting unit and $65M of currency and other reductions. The impairment reflected higher discount rates and weaker European healthcare logistics performance; HLD had approximately $1.6B of goodwill at the July 1 test date. UPS cautioned that macroeconomic conditions, performance, forecasts, market factors and global trade policy could result in further impairments. Mail Innovations, with approximately $295M of goodwill, recovered more slowly than expected from purchased-transportation cost pressure but retained excess fair value over carrying value. No finite-lived intangible impairment was recorded in 9M 2026; 9M 2025 included $33M of charges ($25M after tax), primarily software related to an SCS divestiture. AHG acquisition purchase accounting, including tax positions, remained preliminary.

Asset-sale gains were $180M in Q3 versus $354M and $370M for 9M versus $436M. The 2026 gains primarily involved real estate and aircraft parts in U.S. Domestic Package. By contrast, 2025 sale-leaseback transactions produced $415M of proceeds and $330M of gains in Q3, and $465M of proceeds and $362M of gains for 9M; 2026 sale-leaseback activity was immaterial. No material PP&E impairment charges occurred in either 9M period.

Lease costs rose to $632M in Q3 from $611M and $2.084B for 9M from $1.757B. Another $1.5B of leases, primarily aircraft, had not commenced and were expected to begin from late 2026 through 2027.

Benefits, labor and other items

Employee benefit costs declined year over year. Q3 net periodic costs were $184M for U.S. pension plans versus $212M, $28M for U.S. postretirement medical versus $31M, and $3M for international pensions versus $6M. For 9M, the respective costs were $549M versus $657M, $84M versus $90M, and $11M versus $16M. UPS contributed $1.1B to company-sponsored pension plans and $229M to U.S. postretirement medical plans in 9M, including $450M principal of company-issued notes; no material additional contributions were expected for the rest of 2026.

The New England Teamsters and Trucking Industry Pension Fund withdrawal liability was $788M non-current and $10M current at September 30, compared with $795M and $9M at year-end; its estimated fair value was $589M versus $662M, with payments extending about 36 years. U.S. Teamsters agreements run through July 31, 2028, the Canadian agreement through July 31, 2030, and pilots’ negotiations are underway after their agreement became amendable September 1, 2025.

The allowance for credit losses rose to $242M from $180M; 9M credit-loss expense before recoveries was $296M versus $267M. Factoring-program receivables were $450M, leaving $410M of the $860M capacity available. Issued Class A and B shares totaled approximately 851M at September 30 (100M Class A; 751M Class B), versus 849M at December 31 (106M; 743M). 9M equity-classified stock compensation expense was $95M versus $41M. UPS granted 4.0M options in February 2026 with a $116.74 exercise price; 2026 LTIP performance targets include adjusted revenue growth and non-GAAP ROIC over three years, with payouts also subject to relative shareholder returns.

UPS — Q3 and first nine months of 2026

UPS grew Q3 revenue, but higher costs and weaker results in Supply Chain Solutions reduced profitability. Pricing, fuel surcharges, favorable mix and healthcare growth supported revenue, while planned customer-volume reductions, lower international volumes, trade-policy changes and operating disruption remained headwinds.

Consolidated results

Q3 revenue increased 6.7%, but operating profit declined 3.3% and margin narrowed to 7.6% from 8.4%. For 9M, revenue rose 4.2%, while operating profit fell 25.5% and margin declined to 5.9% from 8.2%. Adjusted diluted EPS was $1.69 for Q3 and $4.52 for 9M. The gap from GAAP results primarily reflects transformation costs and other specified items.

Segment performance — Q3

Domestic operating profit increased about 50%, though 9M profit fell 42.5% to $1.437B from $2.498B; 9M adjusted profit declined 3.8% to $2.787B from $2.898B. International Q3 operating profit rose 10.4%, but 9M profit decreased 3.7% to $1.916B from $1.989B. SCS’s Q3 revenue growth did not translate into profit: adjusted operating profit fell 48.9% to $274M from $536M. The prior-year comparison included a $330M real-estate sale-leaseback gain that did not recur.

SCS growth reflected higher forwarding rates and healthcare logistics, including AHG, acquired in Q4 2025; healthcare logistics revenue increased $224M in Q3 and $643M in 9M. 9M SCS revenue growth was partly offset by a $572M decline in Mail Innovations revenue. Domestic Cargo and Other revenue growth slowed from 19.7% in Q3 to 7.1% for 9M.

Operating metrics and cost drivers

Global volume declined 4.2%, while revenue per piece rose 7.7%. Domestic revenue growth benefited from higher rates, fuel surcharges and mix, including average net base and accessorial rate increases implemented through 2025. The planned reduction of UPS’s largest customer’s volume was completed in Q2, leaving that customer’s volume more than 50% below 2024 levels. SMB growth through the Digital Access Program partly offset declines. International weakness, particularly in EMEA, reflected geopolitical disruption, premium-sector revenue-quality actions and changing trade policies; Asia trade-lane demand provided some offset.

Consolidated operating expenses rose 7.6% in Q3 and 6.9% for 9M. Q3 purchased transportation increased 33.0% to $3.275B and fuel expense increased 44.2% to $1.544B. Higher USPS fees for outsourced Ground Saver, leased aircraft and charter use amid capacity and Middle East-related disruptions contributed to pressure. Compensation and benefits decreased 2.6% in Q3 to $11.807B, while facility and transportation costs increased $661M. Network savings and productivity improvements partly offset cost increases.

Transformation strategy costs were $171M in Q3 versus $302M in Q3 2025, but $1.398B for 9M versus $460M. Total 9M operating-expense adjustments were $1.537B versus $479M. Q3 also included a $182M goodwill impairment at the Healthcare Logistics and Distribution reporting unit in SCS and $43M of gains from sales of previously impaired aircraft parts. Consolidated goodwill was $5.8B, including approximately $1.6B related to HLD. Weaker European healthcare logistics performance and a higher cost of capital reduced HLD’s estimated fair value below carrying value.

UPS closed 47 buildings in the first nine months (46 permanently) under its network and efficiency programs, reporting about $1.8B of program benefits and expecting nearly $3B for FY 2026. It incurred $1.4B of initiative costs in 9M and $1.9B cumulatively, including approximately $1.2B of Driver Choice Program separation costs. Expected FY 2026 costs excluded from adjusted results were $1.4B–$1.6B. Efficiency Reimagined is expected to continue through Q4 2027.

Cash flow, investment and capital structure

Operating cash flow increased $838M, supported by accounts-payable timing, lower company-sponsored pension and postretirement contributions ($897M versus $1.338B), lower tax payments and tariff-refund cash flows; lower net income and receivables were offsets. The receivables factoring program involved $2.7B of receivables. Capital spending declined in part because of completed or nonrecurring prior-year projects, lower volume and aircraft delivered under finance leases. UPS expects approximately $3.0B of FY 2026 capex, about 80% for network enhancement and technology.

UPS paid $4.1B in dividends during 9M; no shares were repurchased, compared with $1.0B spent to repurchase 8.6M shares in 9M 2025. Cash and cash equivalents were $6.8B, including $2.3B held by foreign subsidiaries. UPS had no commercial paper outstanding and intended to repay $500M of fixed-rate notes maturing in 2026. It received approximately $500M of eligible administrative refunds after the Supreme Court invalidated certain IEEPA tariffs; about $270M not yet passed through to customers remained in other current liabilities. Management cited trade-policy changes, fuel prices, healthcare performance and network execution as continuing risks.

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

UPS reported no material changes in its market risks since the disclosures in Item 7A of its most recent Form 10-K. The section identifies no new or changed market-risk exposures or related metrics.

Management, including the Principal Executive Officer and Principal Financial and Accounting Officer, concluded that disclosure controls and procedures were effective as of September 30, 2026. No changes during the quarter ended September 30, 2026 materially affected, or were reasonably likely to materially affect, internal control over financial reporting. This section reported no financial metrics or material business developments.

Risk Factors

UPS reported no material changes to the risk factors described in its 2025 Form 10-K. The risks discussed there could materially affect the company’s business, financial condition, operating results, stock price, credit rating, or reputation. UPS also cautions that events, factors, or uncertainties not currently known or not presently considered material could likewise have a material adverse effect.