Imagine warehouses overflowing with packages, idle delivery trucks, and relentlessly rising operational costs. This isn’t a dystopian scenario but the reality confronting global logistics giant UPS. As e-commerce growth slows and trade policies shift, UPS’s profitability is under significant strain. How will this industry veteran adapt?
Revenue Decline and Profit Pressure
UPS’s Q3 2025 earnings report revealed a 3.7% year-over-year drop in total revenue to $21.4 billion. While earnings per share of $1.74 surpassed Wall Street expectations, they marked a 13.4% decline from the prior year. Operating profit fell 9.1% to $1.8 billion, sounding alarm bells for investors.
The U.S. domestic package segment saw revenue decrease 2.6% to $14.2 billion, with daily package volume plunging 12.3% to 16.1 million pieces—despite a 9.8% increase in revenue per piece to $13.47. International packages performed better, with revenue growing 5.9% to $4.6 billion and daily volume up 4.8% to 3.2 million pieces. However, supply chain solutions revenue collapsed 22.1% to $2.5 billion, primarily due to last year’s divestiture of Coyote Logistics.
Pricing Strategy and E-Commerce Restructuring
CEO Carol Tomé emphasized UPS’s focus on revenue-per-piece growth to offset volume declines during the earnings call. “Our pricing strategy is working,” she stated, noting the company is reducing reliance on Amazon and low-margin e-commerce shipments while adjusting networks for tariff changes.
International operations showed resilience through flexible capacity management, though high-margin export routes suffered from trade policy impacts. The Ground Saver service (formerly SurePost), which partners with USPS for final-mile delivery of non-urgent parcels, saw volume plummet 32.7% as UPS intentionally shed unprofitable e-commerce business.
The Amazon Factor and Network Optimization
UPS’s deliberate Amazon deceleration accelerated in Q3, with processed volumes dropping 21.2%—faster than H1’s 13% decline. The company shuttered 19 sorting facilities this quarter (93 year-to-date) and implemented voluntary retirement programs to cut costs. Negotiations with USPS continue to ensure Ground Saver service quality post-restructuring.
Peak Season Preparations
For the upcoming holiday season, UPS anticipates strong volume growth from its top 100 clients (accounting for ~80% of peak shipments), though domestic daily volumes will likely trail 2024 levels due to the Amazon pullback. The “Network of the Future” initiative aims to boost efficiency via automation—35 facilities now feature automated systems, enabling 66% of Q4 packages to flow through automated processes versus 63% last year.
Q4 Outlook and Segment Trends
UPS projects Q4 revenue near $24 billion with an 11%-11.5% operating margin. CFO Brian Dykes highlighted improving small/medium business (SMB) contributions—now representing 32.8% of U.S. domestic volume (+340bps YoY)—and strength in healthcare/automotive sectors. However, B2B volumes fell 4.8% amid retail/manufacturing softness, while B2C shipments cratered 17.6%.
Analyst Concerns
Vertical Research Partners’ Jeff Kauffman cautioned that accelerating revenue-per-piece growth may not sustainably offset domestic volume declines, urging tighter cost controls.
As UPS navigates this transitional phase, key questions remain: Can its pricing strategy maintain momentum? Will the e-commerce restructuring deliver intended results? The answers will determine whether this logistics icon can successfully adapt to the new market reality.