Why did GAAP EPS fall year over year, and how much of the quarter's result is one-time?

GAAP diluted EPS fell to $1.55 from $1.80. The quarter included $250M of after-tax transformation strategy costs (about $0.29/share) and an $86M tax valuation allowance reversal (about $0.10/share benefit). It also included a $330M pre-tax sale-leaseback gain (about $0.30/share) that boosted GAAP results. Excluding these items, non-GAAP adjusted EPS was $1.74, down slightly from $1.76.

Is the U.S. Domestic margin improvement sustainable given falling volume?

The margin gain came from cost reductions tied to the network reconfiguration, which cut about 34,000 operational positions and closed 93 buildings in the first nine months of 2025. Management expects $3.5B of year-over-year savings in 2025 from this program. Volume declines are expected to continue as UPS executes planned reductions from its largest customer, so the sustainability of margin gains depends on the company's ability to keep reducing costs in line with volume.

What is the outlook for the fourth quarter and full year 2025?

For Q4 2025, UPS expects revenue of about $24.0B and a non-GAAP adjusted operating margin of 11.0%-11.5%. For full-year 2025, it reaffirmed capex of about $3.5B, dividends of about $5.5B (subject to board approval), an effective tax rate of about 23.75%, and roughly $1.0B in share repurchases, which are complete. Pension contributions of $1.3B of the expected $1.4B have been made.

Is the dividend covered by free cash flow?

Not comfortably in 2025 so far. Nine-month free cash flow was $2.7B, versus dividend payments of $4.0B in the first nine months, with full-year dividends expected around $5.5B. The gap has been funded largely by new long-term borrowings, which rose to $4.15B in the first nine months, while total long-term debt increased to $23.9B from $19.4B at year-end 2024. Investors should watch whether free cash flow strengthens in Q4 and how the company funds dividends going forward.

How did the Coyote divestiture and the property sale-leaseback affect reported results?

The Coyote Logistics divestiture closed in 2024 and drove the 22.1% decline in Supply Chain Solutions revenue, which makes the segment's revenue trend hard to compare directly. The $330M pre-tax gain from the five-property sale-leaseback was recorded in Supply Chain Solutions and added about $0.30 to GAAP diluted EPS. Because this gain is included in GAAP results but not excluded from non-GAAP adjusted results in the reconciliation shown, investors should note it is a one-time item when assessing underlying earnings.

UPS 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 28, 2025. Cited figures are marked; the original filing is the authoritative source.

UPS reported third-quarter 2025 consolidated revenue of $21.4 billion^a, down 3.7% year over year, as an expected decline in U.S. Domestic volume (average daily package volume down 12.3%, largely from planned volume reductions from its largest customer) and the Q3 2024 divestiture of Coyote Logistics weighed on top line.

GAAP diluted EPS was $1.55^b, versus $1.80 a year ago, and non-GAAP adjusted diluted EPS was $1.74, down from $1.76. GAAP operating margin was 8.4% and non-GAAP adjusted operating margin was 10.0%, a 1.1-point improvement from 8.9% in the prior-year period on an adjusted basis. The quarter's GAAP results were helped by a $330 million pre-tax gain (about $0.30 per share) from a sale-leaseback of five properties, and were reduced by $250 million of after-tax transformation strategy costs, partially offset by an $86 million tax valuation allowance reversal.

Segment performance was mixed. U.S. Domestic revenue fell 2.6%^c and adjusted operating margin rose to 6.4%, supported by its network reconfiguration, which has cut about 34,000 operational positions and closed daily operations at 93 buildings year to date. International revenue grew 5.9% on a 4.8% increase in average daily volume, though adjusted operating margin slipped to 14.8%.

Supply Chain Solutions revenue fell 22.1% following the Coyote divestiture, but adjusted operating profit rose 97.1% to $536 million^d, with an adjusted margin of 21.3%. Looking ahead, management guided fourth-quarter 2025 revenue to about $24.0 billion and non-GAAP adjusted operating margin to 11.0%-11.5%. For full-year 2025, it reaffirmed capital expenditures of about $3.5 billion, dividends of about $5.5 billion (subject to board approval), an effective tax rate of about 23.75%, and roughly $1.0 billion in share repurchases, which are now complete.

Management also said it expects $3.5 billion in year-over-year cost savings in 2025 from its network reconfiguration. Interest expense rose 26.5% to $291 million in the quarter, and nine-month free cash flow fell to $2.7 billion from $4.0 billion, a key watch item for investors given the dividend commitment.

02—Key points

Key Highlights

Consolidated revenue of $21.4B, down 3.7% YoY, driven by a 9.8% decline in consolidated volume and the Coyote divestiture.
GAAP diluted EPS of $1.55 (vs. $1.80 in 3Q 2024); non-GAAP adjusted diluted EPS of $1.74 (vs. $1.76), with the GAAP figure lifted by a $330M pre-tax sale-leaseback gain (~$0.30/share).
Non-GAAP adjusted operating margin of 10.0%, up from 8.9% a year earlier; GAAP operating margin was 8.4%.
U.S. Domestic adjusted operating margin rose to 6.4% despite revenue down 2.6% and average daily volume down 12.3%, reflecting network reconfiguration savings.
Supply Chain Solutions adjusted operating profit up 97.1% to $536M, with a 21.3% adjusted margin, though revenue fell 22.1%.
Q4 2025 guidance: revenue of ~$24.0B and non-GAAP adjusted operating margin of 11.0%-11.5%.
Nine-month free cash flow of $2.7B, down from $4.0B, against ~$5.5B of expected 2025 dividend payments and $3.5B of expected capex.

03—Questions

Frequently Asked Questions

Why did GAAP EPS fall year over year, and how much of the quarter's result is one-time?
GAAP diluted EPS fell to $1.55 from $1.80. The quarter included $250M of after-tax transformation strategy costs (about $0.29/share) and an $86M tax valuation allowance reversal (about $0.10/share benefit). It also included a $330M pre-tax sale-leaseback gain (about $0.30/share) that boosted GAAP results. Excluding these items, non-GAAP adjusted EPS was $1.74, down slightly from $1.76.
Is the U.S. Domestic margin improvement sustainable given falling volume?
The margin gain came from cost reductions tied to the network reconfiguration, which cut about 34,000 operational positions and closed 93 buildings in the first nine months of 2025. Management expects $3.5B of year-over-year savings in 2025 from this program. Volume declines are expected to continue as UPS executes planned reductions from its largest customer, so the sustainability of margin gains depends on the company's ability to keep reducing costs in line with volume.
What is the outlook for the fourth quarter and full year 2025?
For Q4 2025, UPS expects revenue of about $24.0B and a non-GAAP adjusted operating margin of 11.0%-11.5%. For full-year 2025, it reaffirmed capex of about $3.5B, dividends of about $5.5B (subject to board approval), an effective tax rate of about 23.75%, and roughly $1.0B in share repurchases, which are complete. Pension contributions of $1.3B of the expected $1.4B have been made.
Is the dividend covered by free cash flow?
Not comfortably in 2025 so far. Nine-month free cash flow was $2.7B, versus dividend payments of $4.0B in the first nine months, with full-year dividends expected around $5.5B. The gap has been funded largely by new long-term borrowings, which rose to $4.15B in the first nine months, while total long-term debt increased to $23.9B from $19.4B at year-end 2024. Investors should watch whether free cash flow strengthens in Q4 and how the company funds dividends going forward.
How did the Coyote divestiture and the property sale-leaseback affect reported results?
The Coyote Logistics divestiture closed in 2024 and drove the 22.1% decline in Supply Chain Solutions revenue, which makes the segment's revenue trend hard to compare directly. The $330M pre-tax gain from the five-property sale-leaseback was recorded in Supply Chain Solutions and added about $0.30 to GAAP diluted EPS. Because this gain is included in GAAP results but not excluded from non-GAAP adjusted results in the reconciliation shown, investors should note it is a one-time item when assessing underlying earnings.

04—Continue

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