UPS Q1 results mixed as transformation meets volatile market

UPS's Q1 earnings reveal a company in transition, grappling with the evolving landscapes of global trade and domestic parcel delivery. To address these challenges, UPS is emphasizing revenue management and diversification, but also cutting where it needs through job reductions and facility closures.

Key takeaways from Q1:

• Reduced parcel volume from Amazon, offset by improved revenue per piece, drove US Domestic revenues to $14.5 billion, alongside a robust 19.4% increase in operating profit.

• Investments in technology upgrades and expansion in healthcare logistics underscore UPS's strategic pivot toward higher-margin, value-added services.

• International segment adjustments reflect changing global trade patterns, with notable volume increases on non-China-to-US trade routes.

• Progress in domestic network optimisation means technological enhancements and reduced operational scale to boost efficiency.

US Domestic

In the US Domestic business, UPS intends to combat volume challenges by increasing revenue per package and moving away from low-margin Amazon volumes. This profitability-driven approach aligns closely with UPS's broader "Better, not Bigger" strategy, aiming for stability and improved margins rather than sheer volume growth. 

• Key Point: UPS is strategically optimizing domestic operations by emphasizing profitability and revenue quality over volume expansion.

Less network, more networked

The reality is that transformations are messy and there’s still pain to be felt in US Domestic, where downsizing means the loss of 20,000 jobs and closure of 74 operational sites.

On the other side, UPS is investing in technology at its super hubs to improve efficiency and optimize its delivery network, ensuring timely and cost-effective parcel delivery.

• Key point: In 2025, UPS is over-scale and under-focused. Now, the company is betting that it can streamline its way to better agility and resilience.

The Shift in Focus

The $1.6bn acquisition of Andlauer Healthcare Group is the latest move to tap into a growing market and higher margins. This strategic pivot is further evidenced by the opening of new healthcare facilities in Europe, another pillar in its plan to meet growing demand for specialized logistics solutions, and grow sector revenues to $20bn next year.

• Key point: UPS continues to strategically position itself in healthcare logistics. The need to offset vulnerabilities and strengthen overall business resilience is increasingly important as the defensibility of its (US) parcel business looks increasingly challenged.

Global Trade Evolution

In International, UPS saw volumes fall on the China-to-US trade lane, historically its most profitable. Like everyone in 2025, UPS needs to diversify its trade routes if it’s going to mitigate geopolitical risks and economic shifts, whether that means tariffs, the end of de minimis or all-out trade war. UPS grew non-US-China trade lanes in Q1, with European lanes taking a higher volume share.

• Key point: Diversification reduces exposure to the China-US trade rift. We’ll see whether UPS is focussed on Europe – how much is really up for grabs in an already crowded parcel market in a region with very real economic challenges? – or reacting opportunistically will be clearer in the coming quarters.

UPS's Better Not Bigger plans require it to show adaptability in a rapidly changing logistics landscape. Q1 tells how revenue management and strategic pricing have helped UPS increase revenue per package, even as average daily volumes declined. This approach is part of UPS's broader strategy to transition away from low-profit segments, such as Amazon deliveries, and enhance its B2B services, particularly in healthcare and with upgraded tech.