US Domestic Package revenue increased 4.5% to $14.87B, supported by a 6.1% rise in revenue per package. Adjusted operating profit improved to $1.03B from $905M, even as average daily shipments declined to 15.62M from 16.15M.
International revenue grew 7.1% to $5.01B, helped by a 15% increase in revenue per package. The division generated $746M in adjusted operating profit.
Supply Chain Solutions recorded the strongest revenue growth, climbing 18.2% to $2.98B. Demand for forwarding, logistics, and healthcare services helped drive the increase.
However, adjusted operating profit fell to $274M from $536M. The year-earlier period benefited from a $330M sale-leaseback gain, while the latest quarter included a $182M goodwill impairment.
Cost cuts are doing the work
UPS continues to reshape its delivery network, focusing on automation, lower operating costs, and more profitable shipments.
The company generated $1.8B in benefits from its transformation initiatives during the first nine months of 2026. Management expects those savings to approach $3B for the full year.
UPS expects $1.4B to $1.6B in related costs that are excluded from adjusted results, including approximately $1.2B tied to its Driver Choice Program.
The company also completed planned shipping volume reductions with Amazon, its largest customer, during the second quarter.
Meanwhile, its Efficiency Reimagined program will continue through late 2027 as UPS works toward a smaller and more automated network.
The dividend remains in focus
Cash flow is improving, giving UPS more room to support its dividend. Free cash flow reached $4.22B during the first nine months of 2026, up from $2.74B a year earlier. Lower capital spending, which declined to $2.22B from $2.97B, helped drive the improvement.
UPS now expects adjusted free cash flow of approximately $6.1B for the full year, compared with planned dividend payments of roughly $5.4B, subject to board approval.
The company also expects to spend $3B on capital investments and contribute $1.3B to its pension plans.
Still, the dividend leaves limited room for disappointment. UPS has a payout ratio near 94% of earnings and a dividend yield of roughly 6.4%, while dividend growth has averaged just 2.6% over the past three years.
CEO Carol Tomé said the company is entering the holiday season with its most automated and efficient network yet.
The fourth quarter will put that claim to the test. UPS expects adjusted operating profit of roughly $3.3B, making the holiday shipping season important for meeting its cash flow targets.
For investors, the earnings beat and higher guidance are encouraging. But the bigger question is whether UPS can keep generating enough cash to support its dividend while spending heavily on its restructuring.
