United Parcel Service recorded a significant decline in quarterly adjusted profit as it deliberately reduced lower-margin delivery work for a major customer in favor of more profitable, specialized shipments. For the three months ended March 31, the Atlanta-based carrier reported adjusted net income of $1.07 per share, compared with $1.49 per share in the prior-year quarter - a drop of 28% in adjusted profit.
Quarterly revenue at the world's largest parcel delivery firm declined 1.6% to $21.2 billion. In early trading, the stock slipped about 3% after the results were released.
The company said the reduction in volume tied to its largest customer reflects a strategic pivot toward higher-margin opportunities. Management is placing greater emphasis on shipments such as temperature-controlled healthcare deliveries and time-sensitive loads for data center clients, while dialing back on more margin-eroding doorstep deliveries.
UPS reiterated its full-year outlook, maintaining a forecast for a 1.2% rise in 2026 revenue and an adjusted operating margin of about 9.6%.
Industry peers are making similar moves. UPS and its rival FedEx are cutting costs, reducing exposure to low-margin last-mile work and increasing automation at sorting hubs to capture a larger share of specialized, higher-margin freight. These operational shifts are part of a broader effort to improve profitability by redirecting capacity toward temperature-controlled and time-critical goods.
At the same time, U.S. logistics firms have faced external pressure over the past year from changes in trade policy. One notable development has been the elimination of duty-free "de minimis" treatment for certain low-value e-commerce shipments, a change that has affected flows tied to China-linked discount marketplace sellers such as Shein and Temu. That policy change has weighed on shipment patterns and contributed to the challenging operating backdrop.
Taken together, UPS's first-quarter performance reflects both an intentional business-model shift toward higher-margin segments and an operating environment influenced by policy-driven changes in low-value cross-border e-commerce volumes.