In the first three months of 2025, UPS had record-breaking $5.4 billion results. The company beat Wall Street projections, bringing in $21.5 billion in revenue—$480 million over what analysts expected. The business announced a surprise upbeat earnings report, but its stock was unable to sustain growth. Broader economic uncertainties weighed on investor sentiment.
UPS’ U.S. domestic revenue for the segment rose 1.7%, but adjusted for business days, UPS realized a 1.4% yield improvement. This growth was mostly powered by a remarkable 4.5% increase in revenue per piece. This growth comes in the context of some bad news about workforce cuts and ongoing crisis in its Supply Chain Solutions business. The company announced a $1.3 billion annualized cost structure that will result in an estimated 20,000 position layoffs, most of due to reduced dependency on Amazon as a customer.
The company still predicted a eye-popping $21 billion in revenue for Q2. They project a 9.3% operating margin. Taken together, these figures indicate reasons for cautious optimism as UPS continues to sail through an ever-changing economic environment.
Financial Performance Overview
UPS’s Q1 financial results painted a rosy picture of growth and a lot of it but significant challenges. The increase in the company’s adjusted operating margin of 20 basis points to 8.2% was a positive sign. At the same time, their adjusted operating margin is healthy at 15%. Total revenue was down just overall by less than 1% annually. That decline was countered by a 4% boost in adjusted earnings per share (EPS) from last year.
UPS consolidated operating profit and operating margin were above their expectations, UPS CEO Carol Tome said on the earnings call. She noted that diluted EPS came in a little over their expectations. This indicates that despite the significant headwinds that UPS battled, its efficiency centered operations continued to be a shining star.
Operating profit surged, up $164 million compared to last year. During that same time period, the operating margin grew by 110 basis points. This exemplary performance serves to illustrate UPS’s strong competency in managing adversity across the U.S. domestic market.
Challenges Ahead
Even with this positive earnings report, UPS is in a very tough position going forward that will likely drag down future performance. It was a precursor to the company’s 14.8% revenue decline overall in its largest segment, Supply Chain Solutions business. This sharp drop was due primarily to the sale of its Coyote subsidiary. This reduction is concerning and an indication of vulnerabilities to come in its overall supply chain management capabilities.
Tome knew the stakes and that’s before we even get into the trade war with China. UPS ranks this region as one of its top 10 most profitable international trade lanes. She acknowledged that these trade dynamics could continue to weigh on the company’s operating results in the near term.
National and global economic conditions remain uncertain. Nonetheless, UPS intends to adhere to its pre-recession 2025 guidance, provided the economy regains its footing once the new U.S. tariff landscape is settled.
“If the global economy stabilizes following the onset of the new US tariff regime, we will maintain our original 2025 guidance,” – Carol Tome.
Market Reaction
Following the release of its earnings report, UPS’s stock initially gained traction but quickly lost ground on Tuesday, reflecting investor apprehension regarding the company’s future prospects amid broader economic challenges.
Yet despite this operational track record, these mixed results continue to show the disconnect that exists between solid operational performance and the required market confidence. Now investors are calibrating UPS’s strategic decisions against potential headwinds from trade tensions and a shifting customer base.
The international segment of UPS proved the most stochastic, with revenue up 2.7%. It had an amazing 7.1% increase in average daily volume. This growth indicates that while some areas may be struggling, others are contributing positively to overall performance.