UPS forecasts surprise rise in annual revenue as shift to higher-value shipments pays off
UPS beat holiday-quarter estimates and forecast higher 2026 revenue, after reducing low-margin Amazon deliveries and focusing on higher-value shipments.
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By Torontoer Staff
United Parcel Service reported stronger-than-expected holiday-quarter results and surprised the market with a forecast for higher annual revenue as a strategy to prioritise higher-margin shipments begins to boost returns.
The company said revenue for 2026 should reach US$89.7-billion, above last year’s US$88.7-billion and analysts’ average estimate of US$87.94-billion, according to LSEG data.
Holiday quarter beat expectations
UPS reported fourth-quarter consolidated revenue of US$24.5-billion, beating estimates of US$24.0-billion. Adjusted earnings were US$2.38 per share for the quarter ended December 31, above the US$2.20 analysts expected.
The company’s U.S. domestic revenue per piece rose 8.3 per cent despite lower volumes, while international revenue per piece increased 7.1 per cent. Those gains reflect a deliberate move toward higher-value, higher-margin shipments.
The Amazon glide-down and strategic pivot
In January 2024 UPS announced it would accelerate plans to reduce millions of low-profit deliveries for Amazon, calling that business 'extraordinarily dilutive' to margins. The change reduced volume but improved per-piece revenue.
Looking ahead, upon completion of the Amazon glide-down, 2026 will be an inflection point in the execution of our strategy to deliver growth and sustained margin expansion.
Carol Tome, UPS CEO
Investors reacted positively. UPS shares rose about 3.7 per cent in premarket trading, while rival FedEx gained roughly 1 per cent.
Fleet write-off and the Louisville crash
UPS recorded a non-cash, after-tax charge of US$137-million related to writing off its MD-11 fleet. The retirement followed the November crash of an MD-11 cargo jet at Louisville International Airport, which killed 15 people, including three crew members.
The company said it completed the retirement of the MD-11 fleet in the fourth quarter. The charge is non-cash, but the crash has prompted renewed scrutiny of safety and fleet decisions.
Outlook and margins
UPS projected adjusted operating margin of 9.6 per cent for 2026. Management framed 2026 as an inflection point for sustained margin expansion as the business finishes shrinking low-margin volume and rebuilds profitability after the end of U.S. duty-free, 'de minimis' low-value e-commerce shipments.
- 2026 revenue forecast: US$89.7-billion
- 2025 reported revenue: US$88.7-billion
- Q4 revenue: US$24.5-billion, above estimates
- Adjusted Q4 EPS: US$2.38, above estimates
- MD-11 write-off: US$137-million, non-cash after-tax charge
What this means for shippers and investors
For shippers, the shift toward higher-value shipments suggests UPS will continue to prioritise customers and parcel types that support better margins, even if that reduces low-margin volume. For investors, the company’s guidance and improved per-piece pricing offer a clearer path to sustained margin improvement.
Analysts will watch execution closely. The company needs to complete the Amazon glide-down while maintaining service levels, and it must manage safety and fleet costs in the aftermath of the Louisville accident.
UPS’s holiday-quarter performance shows pricing power can offset weaker volumes, but the company’s ability to translate that into long-term growth and margin expansion will depend on execution across operations, customer mix, and fleet management.
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