United Parcel Service (UPS) revenue in its fiscal Q1 2026 exceeded expectations for the third consecutive quarter despite declining in each of them.

CEO Carol Tome told analysts on UPS’ Q1 earnings call that the carrier has “comfortably” reached the home stretch of a plan it launched in 2025 to reconfigure its U.S. network. Part of that included targeting a 50% reduction in the volume UPS delivers for Amazon by June 2026.

Tome said the carrier’s actions have moved UPS toward a more profitable U.S. small-package business. It expects the second half of 2026 to be the inflection point, she said. Now, UPS’ top priority is to “move the right packages and the right mix of volume through our network.”

“The market has changed, and we’re adapting to it. We’re overturning the old industry assumption that scale alone drives profitability,” Tome told analysts. “Instead, we’re focused on premium segments like SMB, B2B and complex health care.”

And she said the strategy is working. UPS has seen improvements in its small- and medium-sized business (SMB) and business-to-business (B2B) volume in the past year. They represent a larger total share of UPS’ volume in the U.S.

The carrier’s digital access program (DAP) connects it to more than 8 million SMBs, according to Tome. In its fiscal Q1, UPS has driven more than $1.2 billion in revenue through the DAP. It also generated more than $1 billion in DAP revenue during its fiscal Q4.

UPS fulfills deliveries for online orders from more than 1,030 retailers in the Top 2000 Database. Those retailers combined for more than $826 billion in 2025 ecommerce sales, Digital Commerce 360 data shows. The database is Digital Commerce 360’s rankings and more of the largest online retailers in North America based on their annual ecommerce sales.

Operational changes at UPS in Q1

Tome said UPS has “further reduced non-lucrative Amazon volume.” UPS reduced that Amazon volume by an average of 500,000 pieces per day, she said. It also closed 23 additional buildings in the quarter. UPS has also “shifted a portion” of its Ground Saver volume back to the U.S. Postal Service (USPS) for last-mile delivery under a new agreement.

UPS has launched a buyout program for its drivers. Through it, UPS plans to cut 7,500 full-time driver positions.

In addition, UPS has scaled back the amount of aircraft it leases. It has retired its MD-11 fleet and has new Boeing 767 aircraft.

These decisions, plus the effects of fuel costs tied to the U.S. and Israel’s war on Iran, have factored into UPS expecting to achieve its financial targets for the year, according to Tome.

The war has impacted fuel prices globally. Because of supply chain disruptions resulting from the war, the price of a barrel of crude oil reached $112 in April. On Feb. 3, it was about $60, according to historical data from Trading Economics. As of April 29, it has gone down to about $108.

“As we look to the balance of the year, there are a few external factors that we are watching that could impact demand, especially higher fuel costs stemming from the conflict in the Middle East and U.S. consumer confidence, which is at historic lows,” Tome said. “But these external pressures won’t deter us.”

UPS revenue in Q1 2026

In its fiscal Q1 2026, which ended March 31, UPS revenue totaled $21.2 billion. That’s a decline from $21.5 billion the prior year.

The carrier marked a 6.0% consolidated operating margin in the quarter.

In the U.S., UPS revenue declined 2.3% to about $14.13 billion in Q1 2026, from $14.46 billion the year before. UPS international revenue increased to $4.54 billion in Q1 2026. That was up 3.8% from $4.27 billion a year ago.

UPS Digital, which includes Roadie and Happy Returns, generated 19.9% revenue growth year over year in Q1.

Meanwhile, revenue from UPS’ Supply Chain Solutions declined 6.5% in Q1 2026. That was a drop to about $2.54 billion from $2.71 billion the previous year.

Although overall revenue declined year over year in UPS’ Q1, revenue per piece grew 6.5%. Part of that growth in revenue per piece stemmed from changes to fuel prices, according to Brian Dykes, chief financial officer.

“The conflict in the Middle East in March drove an immediate spike in fuel costs,” Dykes told analysts. “Our fuel surcharges are linked to published fuel benchmarks and adjust with fuel prices on a weekly basis, and we expect these surcharges to provide coverage as fuel prices continue to fluctuate.”

Check back for more earnings reports. Here’s last quarter’s update on UPS sales and revenue.

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