Wall Street had some pretty low expectations for United Parcel Service heading into the back half of last year. Honestly, if you follow the "Big Brown" machine, you've probably seen the headlines about volume wars with FedEx and the growing shadow of Amazon’s own delivery fleet. But the most recent UPS stock quarterly report basically flipped the script, proving that being "Customer First" isn't just a corporate slogan Carol Tomé likes to repeat—it's actually showing up in the margins.
Most people look at the revenue and see a slight dip or flat growth and assume the company is stalling. That's a mistake. In the third quarter of 2025, UPS posted consolidated revenue of $21.4 billion. Sure, that's down about 3.7% from the year prior, but the real story is in the adjusted earnings per share (EPS). They hit $1.74, which absolutely crushed the analyst consensus of $1.31.
That is a massive 33% surprise.
Why the Market is Misreading the Volume Drop
You've probably heard that UPS is losing volume. It's true. Consolidated volumes fell 9.8% in the third quarter of 2025. On paper, that sounds like a disaster. Who wants to invest in a delivery company that is delivering fewer packages?
But here’s the thing: UPS is doing this on purpose.
They are in the middle of a massive "glide down" with Amazon. Basically, they reached an agreement to lower Amazon's volume by more than 50% by the middle of 2026. Why? Because Amazon is a low-margin customer. They take up a lot of space on the trucks but don't pay much per box. By clearing out that low-rent volume, UPS is making room for the "good stuff"—specifically healthcare and Small and Medium-Sized Businesses (SMBs).
The Profitability Pivot
While volumes were down, the revenue per piece in the U.S. domestic segment actually jumped 9.8%. That’s a huge swing. It means they are charging more for the packages they do carry.
The strategy is simple: do less work for more money. It’s working. The U.S. operating margin expanded, and the company managed to rip $2.2 billion in expenses out of the system year-to-date. They are closing older, smaller buildings and funneling everything through massive, automated "super hubs."
The International Wildcard and Trade Shifts
International business is usually the crown jewel for UPS because the margins are juicier. In the latest UPS stock quarterly report, international revenue grew 5.9%, largely because of a 4.8% increase in average daily volume.
Carol Tomé recently pointed out that we are seeing the most profound shift in trade policy in a century. With new tariffs and the elimination of the de minimis exemption for U.S. imports, things are getting complicated. But for UPS, complexity is a product. When customs rules get harder, businesses need a broker. UPS saw a tenfold surge in daily customs entries recently.
They’ve started using "agentic AI" to handle over 90% of these cross-border transactions digitally. It’s a tech play hiding inside a trucking company.
Healthcare: The High-Stakes Growth Engine
If you want to know where the stock is going, look at the cold chain. UPS recently acquired Andlauer Healthcare Group for $1.6 billion. They aren't just moving boxes of shoes anymore; they are moving cancer tests, baby formula, and temperature-sensitive biologics. This isn't just about diversification—it's about "sticky" revenue. Once a hospital or pharma giant integrates with your logistics, they don't leave because of a 50-cent price hike.
The Dividend Dilemma: Is it Safe?
This is the question every retiree and income investor asks after every UPS stock quarterly report. UPS pays out a massive dividend—roughly $5.5 billion annually. With a current yield hovering around 6.5%, it’s tempting.
But there is a catch.
Wall Street analysts are forecasting free cash flow (FCF) of around $5.3 billion to $5.4 billion for 2026. If the math looks tight, it's because it is. They might need to dip into cash reserves or issue some debt to keep that dividend growing. However, management has been very clear: the dividend is a priority. They’ve already completed $1.0 billion in share repurchases for 2025, which shows they aren't exactly hurting for liquidity.
What’s Next for the Stock?
Looking ahead to the January 27, 2026 earnings call, expect a lot of talk about the "Peak Season." UPS is trying to run the most efficient holiday peak in its history. They expect Q4 2025 revenue to hit roughly $24 billion with operating margins between 11% and 11.5%.
Analysts are currently split. About 42% are sitting on a "Hold," while 32% say "Strong Buy." The bears are worried about the Amazon volume exit and potential labor cost increases from the Teamsters contract. The bulls are betting on the "Fit to Serve" transformation and the 2027 cost-savings targets.
Actionable Insights for Investors
If you're holding or considering UPS, keep your eyes on these three metrics in the next report:
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- SMB Volume Share: They want this at 40%. It’s currently around 32.8%. If this moves up, the stock likely follows.
- Revenue Per Piece: As long as this keeps rising, the "less is more" strategy is alive and well.
- Capital Expenditures: They’ve pegged this at $3.5 billion. If they start spending more on automation, it’s a sign they are doubling down on the "Network Reimagined" plan.
Basically, don't get spooked by the revenue dips. Look at the margins. If they can keep the U.S. domestic margin moving toward that double-digit goal despite lower volumes, the turnaround is real.
Next Steps for You:
Check the UPS Investor Relations site on January 27, 2026, for the Q4 full-year results. Pay close attention to the 2026 guidance—specifically if they confirm the $8.77 EPS target analysts are rooting for. If they guide lower, the dividend safety becomes the primary conversation.