United Parcel Service parcel volumes fell in the second quarter as the company completed its phaseout of low-margin Amazon business, but revenue per piece and profits rose on stronger pricing, efficiency gains and a continued focus on premium shipments amid ongoing economic volatility.

The integrated parcel and logistics company on Tuesday reported revenue of $22.8 billion, up 7.6% year over year. Adjusted operating profit increased 12% to $2.1 billion, or $1.76 per share, modestly ahead of analyst expectations. Management also raised full-year guidance, lifting its revenue outlook 2% to $91.2 billion and increasing adjusted operating profit guidance 0.5% to $8.6 billion.

UPS (NYSE: UPS) has worked with Amazon over the past 18 months to remove unprofitable shipments from its network. Those shipments accounted for half the volume tendered by the retail marketplace, UPS’s largest customer. In total, the company eliminated 2 million pieces per day of Amazon volume and $4.5 billion in related expenses.

That drawdown, combined with slower overall parcel demand, led UPS to begin a network reconfiguration intended to align capacity with market demand and improve utilization across a system built for much higher e-commerce volumes. The initiative has included closing 150 parcel sort facilities, eliminating 30,000 positions and 50 million labor hours, and adding technology to improve throughput at existing distribution stations.

CFO Brian Dykes said on a conference call with analysts that UPS closed 45 buildings in the first half of 2025, with several more closures planned in the second half. By the end of June, 68.5% of U.S. volume flowed through an automated facility, compared with 64% a year earlier. UPS said the cost per piece in an automated handling facility is about 28% lower than at a conventional facility with mechanical systems.

“That gives us confidence in the productivity that we should continue to deliver going forward,” Dykes said.

Management previously identified 51 facility closures for this year.

Amazon now accounts for about 9% of UPS revenue, down one percentage point from last year and down from 13% during the Covid e-commerce boom. UPS said it now aims to optimize the remaining Amazon volume across its air and ground network.

“This reconfiguration was never the destination. It was the foundation. We now have a leaner, more automated, more agile network that will deliver operating leverage as volume grows. And importantly, incremental volume today carries materially better economics than before because of the structural changes we’ve made,” CEO Carol Tomé said.

UPS shares fell 6.5% to $105.53 at the close, reflecting investor concern about the company’s below-consensus second-half guidance heading into peak season, lower domestic margins than in the second quarter and larger-than-expected volume losses. The stock later turned slightly positive in after-hours trading.

Analysts said long-term risks to the stock include growing competition from Amazon and other last-mile couriers, the possibility that Amazon could pull remaining volumes, and a coming negotiation with the Teamsters union over a new contract for 2028.

UPS Supply Chain Solutions posted a 7.8% increase in revenue to $2.86 billion, underscoring the company’s continued role in contract logistics as rival FedEx prepares to sell its supply chain unit to Ceva Logistics.

Results were weighed down by an $891 million charge tied to employee separation costs from a voluntary program that encouraged 7,500 drivers to leave the company as part of its network streamlining effort. About 80% of participating drivers left in the second quarter.

Stronger pricing reflected a combination of higher base rates and broad use of fees and surcharges. The TD/Cowen Freight Index said fuel surcharges, higher billed weight per parcel and other fees lifted prices for ground and expedited shippers at FedEx and UPS during the quarter. UPS officials said higher fuel costs offset most of the revenue benefit from fuel surcharges, with international margins more affected because more air volume flies longer distances and fuel represents a larger share of the cost base.

Domestic package revenue rose 6%, driven by a 9.3% increase in revenue per piece, while volume declined 3.3%. Adjusting for the exit from Amazon and other low-yield delivery accounts, average daily volume actually increased in the quarter.

International

International package revenue increased 12.5%, with revenue per piece rising 19% even as volume fell 5.8%. International operating profit, however, fell 7.2% to $623 million because of higher fuel costs and added expenses related to rerouting the air network to avoid the Middle East conflict zone, including the use of third-party cargo airlines with existing permissions to fly to new destinations in the region.

The decline in international volume was led by domestic declines in Europe, while cross-border volumes fell 4.2% year over year. On a more positive note, volume increased on the China-U.S. trade lane as the effects of last year’s U.S. cancellation of duty-free access for de minimis e-commerce shipments reset the market, Dykes said.

Earlier this month, UPS opened a new operations center in Kaohsiung to support growing demand for premium international logistics services in southern Taiwan. The facility doubles the size and package processing capacity of UPS operations there and gives customers in Gangshan Industrial Park, Gangshan Beizhou Industrial Park, Nanzi Technology Park and Renwu Industrial Park — where semiconductor and technology manufacturers are concentrated — better access to UPS’s end-to-end global logistics network. According to a company news release, the site also extends pickup cutoff times for exports to the United States by up to three hours.

In March, UPS opened its largest logistics center in Asia Pacific in Taiwan, featuring advanced automation technology and storage and warehouse management systems.

Go premium

UPS, like FedEx, is ceding ground in last-mile delivery for large e-commerce retailers in favor of premium segments that require more complex logistics and offer higher yields, including small and medium-sized businesses, healthcare, industrial and automotive customers. In the second quarter, business-to-business volume represented 44% of total U.S. volume.

Executives said a key to retaining and winning higher-margin customers is developing capabilities that allow UPS to provide differentiated service rather than competing on price.

Small-business package volume grew 4.3% during the quarter, and the Digital Access Program generated $1.4 billion in global revenue, marking the third consecutive quarter above $1 billion. The DAP is a partnership between UPS and shipping platforms such as Shopify and EasyPost that extends UPS’s discounted enterprise-level rates, usually reserved for high-volume shippers, to businesses of any size without complex contracts or large monthly commitments.

Healthcare logistics revenue exceeded $3 billion for the second straight quarter, putting the annualized run rate at $12 billion. FedEx, by comparison, reported about $10 billion in revenue from healthcare-related services for the fiscal year ended May 31. Over the past two years, UPS invested $48 million to open 27 refrigerated truck cross-dock facilities around the world to meet rising demand from pharmaceutical companies, medical labs and biotech companies for temperature-controlled transport and storage of sensitive products.

Management said its continued investment in radio frequency identification and artificial intelligence technology will support future growth and help attract new customers by allowing UPS to analyze sensor data and map it against digital twins of vehicles, aircraft, facilities and package flow. That, executives said, will let managers quickly adapt to weather delays, revised volume forecasts and other changing conditions.

In April, UPS said it had completed installation of RFID sensors on every package van after rolling them out in last-mile terminals and UPS Store locations, making it the first major logistics provider to deploy RFID technology at scale across an integrated network. The company said then that it would begin outfitting regional sortation hubs with the tracking system, which eliminates the need for workers to use handheld scanners to capture package movements.

Tomé said UPS is now rolling out RFID to international facilities and enabling customers with RFID printers to print RFID labels.

“We believe RFID is the most significant package visibility advancement in a decade,” she said.

Tomé also described how UPS won a high-end retailer from a competitor because of its ability to provide RFID labeling at origin.

“Why? Because at the previous carrier’s location, they had to have security guards watch every scan occur as packages were being loaded onto the package carrier vehicle. At our location, we don’t need security guards any longer. And we have visibility from the point of origin to the point of destination. That allowed us to win that high end jeweler,” she said.

Other capabilities that help UPS stand out include cold chain logistics, time-definite delivery and returns management through subsidiary Happy Returns and the UPS Stores, Tomé added, while downplaying any threat from Amazon’s recent expansion into third-party, end-to-end logistics services.

“If we do a side by side comparison, where they have strengths would be on lightweight short-zone urban delivery. Where we have strengths is every other place. We’re going to lean into the parts of the market capabilities that we will do better than anybody else,” she said.

Segment outlook

Management expects full-year U.S. domestic operating margin to reach 8.8%, reflecting margin improvement in the second half. International revenue is expected to grow in the mid-single digits year over year, with operating margin in the mid-teens. Supply Chain Solutions is projected to deliver low-double-digit revenue growth with operating margin of about 10.5%.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

Write to Eric Kulisch at [email protected].

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