UNITED PARCEL SERVICE INC

International Package

(1)Net of currency hedging; amount represents the change in currency translation compared to the prior year.

Revenue

The change in revenue was due to the following:

Volume

Average daily volume decreased for both domestic and export products, primarily in Europe, the Middle East and Africa ("EMEA"), reflecting our revenue quality efforts and global trade policy changes in 2025, including de minimis exclusions.

Domestic average daily volume decreased 6.6% primarily driven by business-to-consumer retail volume declines in EMEA, reflecting our revenue quality efforts, partially offset by growth in domestic standard products in Canada from healthcare and professional services customers.

Export average daily volume decreased 5.5% led by declines on the U.S. destination lanes resulting from trade policy changes, including de minimis exclusions. Total U.S. imports decreased led by average daily volume declines from EMEA and China. Despite the overall declines in the U.S. inbound lanes, we experienced growth in Asia to the rest of the world volumes as trade lanes shifted to these regions.

Revenue Per Piece

Revenue per piece increased 10.7%, led by increases in EMEA and the Americas. The increase was primarily driven by our revenue quality efforts, favorable shifts in customer mix to technology customers and favorable currency movements. Segment revenues were negatively impacted by declines on the China-to-U.S. trade lane as a result of the trade policy changes in 2025, including de minimis exclusions.

Domestic revenue per piece increased 15.9% primarily driven by shifts in customer mix, mainly in EMEA.

Export revenue per piece increased 9.1% primarily as a result of favorable shift in product mix in Canada, EMEA and U.S exports.

Fuel Surcharges

The fuel surcharge we apply to international air services originating inside or outside the U.S. is largely indexed to the DOE's Gulf Coast spot price for a gallon of kerosene-type jet fuel. The fuel surcharges for ground services originating outside the U.S. are indexed to fuel prices in the region or country where the shipment originates. During the first quarter of 2026, the conflict in the Middle East resulted in higher fuel costs and fuel surcharge rates. Most of our fuel surcharges adjust with fuel prices on a weekly basis and are intended to mitigate the impact of fuel price volatility.

Operating expenses increased $261 million for the quarter, including unfavorable currency movement. Integrated air and ground network costs increased $120 million as we continued to align our global network with shifting volume patterns. These cost increases were primarily due to increased aircraft maintenance, compensation and benefits, aircraft lease expense and charter utilization expenses associated with network disruptions due to the Middle East conflict. Pickup and delivery expenses increased by $76 million mainly due to unfavorable currency movements.

Non-GAAP adjusted operating expenses excluded the impact of transformation strategy costs, which were $4 and $13 million in the first quarters of 2026 and 2025, respectively. Transformation strategy costs during both the 2026 and 2025 periods relate to our Network Reconfiguration and Efficiency Reimagined programs. The costs in the 2025 periods also include costs related to our Transformation 2.0 and Fit to Serve programs and primarily consisted of compensation and benefits costs and fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of transformation strategy costs excluded from our non-GAAP financial measures.

As a result of the factors described above, operating profit decreased $94 million, with operating margin decreasing 270 basis points to 12.0%. Non-GAAP adjusted operating profit decreased $103 million and non-GAAP adjusted operating margin decreased 290 basis points to 12.1%.