UNITED PARCEL SERVICE INC

Previous wording

We continue to execute our Customer First, People Led and Innovation Driven strategy to grow in the most attractive parts of the market including healthcare, small and medium-sized businesses ("SMBs") and international. During the first quarter of 2026, we took several steps in furtherance of this strategy, including continued targeted volume reduction from our largest customer, the deliberate shift in our business to increase our focus on higher yielding volume and progress on previously announced initiatives related to workforce optimization and the outsourcing of last-mile delivery of a portion of our Ground Saver product to the United States Postal Service ("USPS"), as well as related network capacity actions. As previously disclosed, by June 2026 we expect to complete our targeted volume reduction from our largest customer by more than 50% from 2024 levels.

Current wording

During the second quarter of 2026, we took several steps in furtherance of our Customer First, People Led and Innovation Driven strategy to grow in the most attractive parts of the market including healthcare, small and medium-sized businesses ("SMBs") and international. This included completing the planned reduction of volume from our largest customer, as previously announced, in which we reduced their volume by more than 50% from 2024 levels. We also continued our focus on revenue quality and made progress on previously announced initiatives related to workforce optimization, network capacity actions and the outsourcing of last-mile delivery of a portion of our Ground Saver product to the United States Postal Service ("USPS").

Previous wording

We also continued to progress on our Network of the Future initiative, which is intended to enhance the efficiency of our U.S. Domestic Package network through automation and operational sort consolidation. Our related Network Reconfiguration initiative expanded our Network of the Future initiative, and has led, and could continue to lead, to further consolidations in facilities, vehicles, aircraft and workforce, as well as an end-to-end process redesign. We launched our Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. See Supplemental Information - Items Affecting Comparabilityfor additional discussion of this initiative.

Current wording

We also advanced our Network of the Future initiative, which is intended to enhance the efficiency of our U.S. Domestic Package network through automation and operational sort consolidation. Our related Network Reconfiguration initiative expanded our Network of the Future initiative, and has led, and will continue to lead, to further consolidations in facilities, vehicles, aircraft and workforce, as well as an end-to-end process redesign. We launched our Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration. As a part of these initiatives, in the first half of 2026, we closed 45 leased and owned buildings, 44 of which have been permanently closed, and recorded approximately $1.1 billion in separation costs related to our previously announced voluntary separation program, the Driver Choice Program. See Supplemental Information - Items Affecting Comparabilityfor additional discussion of this initiative.

Previous wording

In addition, we continued a number of initiatives supporting growth in healthcare and international markets. We advanced the integration of Andlauer Healthcare Group ("AHG") to further strengthen our healthcare logistics capabilities. Internationally, we invested in network enhancements, including expansion at our Incheon, South Korea hub, in Taiwan we opened our largest and most advanced logistics center in the region and in Europe we executed initiatives to improve ground speed, all of which are intended to support premium volume growth and revenue quality.

Current wording

In the first half of 2026, we also advanced a number of initiatives that drove growth in healthcare and international markets, including the integration of Andlauer Healthcare Group ("AHG"), which expanded our healthcare logistics network and capabilities, and investments in temperature-controlled cross-dock facilities. Internationally, we expanded our hub in Incheon, South Korea, opened a logistics center in Taiwan and implemented initiatives to improve ground transit times in Europe.

Previous wording

In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act. As of March 31, 2026, no amounts related to potential tariff refunds or amounts refundable to customers for tariffs previously paid have been recognized. We will continue to monitor and evaluate the financial statement impact of related developments. For additional information on tariffs, see note 10 to the unaudited, consolidated financial statements included in this report.

Current wording

In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). UPS has filed and received U.S. Customs and Border Protection ("CBP") approval for approximately $500 million of IEEPA tariffs paid for entries eligible for refund. For additional information on tariffs, see note 10 to the unaudited, consolidated financial statements included in this report.

Previous wording

Highlights of our consolidated results compared to our results for the three months ended March 31, 2025, which are discussed in more detail below, include:

Current wording

Highlights of our consolidated results compared to our results for the three and six months ended June 30, 2026 and 2025, which are discussed in more detail below, include:

Previous wording

•Revenue declined driven by the average daily volume declines described above and decreases in our Mail Innovations volume, partially offset by improved revenue quality and benefits from our focus on higher yielding volume and the impact of the AHG acquisition in the fourth quarter of 2025.

Current wording

•Revenue increased in both the quarter and year-to-date periods due to higher fuel surcharge revenue, benefits from our focus on revenue quality and higher yielding volume, as well as the impact of the AHG acquisition in the fourth quarter of 2025, partially offset by lower revenue associated with average daily volume declines and decreases in our Mail Innovations volume.

Previous wording

•Average daily package volume in our global small package operations decreased driven primarily by continued progress of planned volume declines from our largest customer, revenue quality actions, including those affecting certain e-commerce customers, and the impact of 2025 trade policy changes.

Current wording

•Average daily package volume in our global small package operations decreased in both the quarter and year-to-date periods primarily due to planned reduction in volume from our largest customer, revenue quality actions, including those affecting certain e-commerce customers, and the impact of trade policy changes on certain international trade lanes. These declines were partially offset by continued growth from SMBs who leveraged our Digital Access Program ("DAP").

Previous wording

•We reported net income of $864 million and diluted earnings per share of $1.02. Non-GAAP adjusted diluted earnings per share were $1.07 after adjusting for the after-tax impacts of transformation strategy costs of $42 million, or $0.05 per diluted share.

Current wording

•We reported second quarter 2026 net income of $604 million and diluted earnings per share of $0.71 ($1.5 billion and $1.73 per diluted share, year to date). Non-GAAP adjusted diluted earnings per share for the second quarter of 2026 were $1.76 ($2.82 per diluted share, year to date) after adjusting for the after-tax impacts of:

Previous wording

For additional operational results for the quarter specific to our segments, refer to Results of Operations - Segment Review below.

Current wording

For additional operational results for the quarter and year-to-date periods specific to our segments, refer to Results of Operations - Segment Review below.

Previous wording

We exclude the impact of charges related to activities within our transformation strategy. Our transformation strategy activities have spanned several years and are designed to fundamentally change the spans and layers of our organization structure, processes, technologies and the composition of our business portfolio. Our transformation strategy has included initiatives within our Transformation 2.0, Fit to Serve, and Network Reconfigurationand Efficiency Reimagined programs.

Current wording

We exclude the impact of charges related to initiatives within our transformation strategy. Our transformation strategy initiatives have spanned several years and are designed to fundamentally change the spans and layers of our organization structure, processes, technologies and the composition of our business portfolio.

Previous wording

Network Reconfiguration and Efficiency Reimagined: Our Network of the Future initiative is intended to enhance the efficiency of our network through automation and operational sort consolidation in our U.S. Domestic Package network. In connection with our strategic execution of planned volume declines from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and has led, and could continue to lead to further reductions in our facilities, vehicles, aircraft and workforce, as well as an end-to-end process redesign. We launchedour

Current wording

Network Reconfiguration and Efficiency Reimagined: Our Network of the Future initiative is intended to enhance the efficiency of our network through automation and operational sort consolidation in our U.S. Domestic Package network. In connection with our strategic execution of planned volume declines from our largest customer, we began our Network Reconfiguration initiative, which is an expansion of Network of the Future and has led, and will continue to lead to further reductions in our facilities, vehicles, aircraft and workforce, as well as an end-to-end process redesign. We launchedour Efficiency Reimagined initiatives to undertake the end-to-end process redesign effort which will align our organizational processes to the network reconfiguration and enhance our business performance and profitability beyond ordinary ongoing efforts. Through these initiatives we have reduced our operational workforce and closed certain daily operations at leased and owned buildings. In the first half of 2026, we closed 45 leased and owned buildings, 44 of which have been permanently closed. In the first six months of 2026, we achieved approximately $1.2 billion of program benefits from these initiatives. We expect to achieve approximately $3 billion in full year 2026 benefits from these initiatives.

Previous wording

In connection with these Network Reconfigurationand Efficiency Reimagined programs, we expect non-GAAP adjusted operating expense to exclude between $1.3 and $1.5 billion in cost during 2026, primarily related to employee separation benefits and third-party consulting fees of which $1.2 billion will be related to the Driver Choice Program. As of March 31, 2026, we had incurred program costs to date of $599 million, including $55 million in 2026. These initiatives are expected to conclude by 2027.

Current wording

As a part of these initiatives, we expect non-GAAP adjusted operating expense to exclude between $1.3 and $1.5 billion in cost during the full year 2026, primarily related to employee separation costs and third-party consulting fees of which $1.1 billion is related to the Driver Choice Program. As of June 30, 2026, we had incurred costs to date of $1.8 billion, including $1.2 billion in 2026, as a part of these initiatives. These initiatives are expected to conclude by 2027.

Previous wording

We do not consider the related costs to be ordinary because each program involves separate and distinct activities that may span multiple periods and are not expected to drive incremental revenue, and because the scope of the programs exceeds that of routine, ongoing efforts to enhance profitability. These initiatives are in addition to ordinary, ongoing efforts to enhance our business performance.

Current wording

We do not consider the related costs to be ordinary because each program involves separate and distinct activities that span multiple periods, and such costs are not expected to drive incremental revenue. These initiatives exceed ordinary, ongoing efforts to enhance our business performance and profitability.

Previous wording

In addition, we have incurred and expect to continue to incur other costs and benefits associated with our Network Reconfiguration programs and anticipated lower volumes, including early asset retirement, lease related costs and gains from the sale of properties. It is our intention to exit or abandon leases, sell property and transfer or dispose of equipment associated with closed facilities. During the first quarter of 2026, we recorded $47 million in gains on sales of properties. We expect the costs and benefits associated with these actions may increase should we determine to close additional buildings.

Current wording

In addition, we have incurred and expect to continue to incur other costs and benefits associated with our Network Reconfiguration initiative and anticipated lower volumes, including early asset retirement, lease-related costs and gains from the sale of properties. It is our intention to exit or abandon leases, sell property and transfer or dispose of equipment associated with closed facilities. During the six months ended June 30, 2026, we recorded $60 million in gains on sales of properties related to this initiative. We expect the costs and benefits associated with these actions may increase should we determine to close additional buildings.

Previous wording

We previously recorded non-GAAP adjustments for transactions that resulted in capital loss deferred tax assets not expected to be realized. As a result of property sales during 2025, these capital losses were fully realized within the 2025 financial reporting period. We supplement our presentation with non-GAAP adjusted financial measures that exclude the impact of the reversals of the valuation allowances against these deferred tax assets as we believe such treatment is consistent with how the valuation allowance was initially established.

Current wording

We previously recorded non-GAAP adjustments for transactions that resulted in capital loss deferred tax assets not expected to be realized. As a result of property sales during 2025, these capital losses were fully realized within that year. We supplement our presentation with non-GAAP adjusted financial measures that exclude the impact of the reversals of the valuation allowances against these deferred tax assets as we believe such treatment is consistent with how the valuation allowance was initially established.

Previous wording

We evaluate the efficiency of our operations using various metrics, including non-GAAP adjusted cost per piece. Non-GAAP adjusted cost per piece is calculated as non-GAAP adjusted operating expenses in a period divided by total volume for that period. Because non-GAAP adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance.

Current wording

We evaluate the efficiency of our operations using various metrics, including non-GAAP adjusted cost per piece. Non-GAAP adjusted cost per piece in any period is calculated as non-GAAP adjusted operating expenses divided by total volume. Because non-GAAP adjusted operating expenses exclude costs or charges that we do not consider a part of underlying business performance when monitoring and evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards, we believe this is the appropriate metric on which to base reviews and evaluations of the efficiency of our operational performance.

Previous wording

Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. There were no significant changes to our allocation methodologies in the first quarter of 2026.

Current wording

Certain operating expenses are allocated between our reporting segments using activity-based costing methods. These activity-based costing methods require us to make estimates that impact the amount of each expense category that is attributed to each segment. Our allocation methodologies are refined periodically, or as necessary to reflect changes in our businesses. During the six months ended June 30, 2026, there were no significant changes to our allocation methodologies.

Previous wording

As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As of March 31, 2026, we had two aircraft temporarily idled for an average period of approximately seven months in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. We expect these aircraft to return to operational service during the fourth quarter of 2026. Following the permanent grounding and retirement of our MD‑11 fleet in the fourth quarter of 2025, we experienced increased third-party lease expense to address capacity constraints. During the first quarter of 2026, we took delivery of three Boeing 767-300 aircraft, which were accounted for as finance leases, and began to reduce the associated third-party expense.

Current wording

As a normal part of managing our air network, we routinely idle aircraft and engines temporarily for maintenance or to adjust network capacity. As of June 30, 2026, we had two aircraft temporarily idled for an average period of approximately six months in order to better match capacity with current demand. Temporarily idled assets are classified as held-and-used, and we continue to record depreciation expense for these assets. We expect these aircraft to return to operational service during the third and fourth quarters of 2026. Following the permanent grounding and retirement of our MD-11 fleet in the fourth quarter of 2025, we experienced increased third-party lease expense to address capacity constraints. During the six months ended June 30, 2026, we took delivery of five Boeing 767-300 aircraft, which were accounted for as finance leases, and began to reduce the associated third-party expense.

Previous wording

For each of our reporting units, we continue to monitor the impact of macroeconomic conditions and business performance on our estimates of fair value. During the three months ended March 31, 2026, none of our reporting units had indications that an impairment was more likely than not. As of our July 1, 2025 testing date, approximately $877 million and $738 million of our $4.8 billion consolidated goodwill balance was represented by our Global Freight Forwarding ("GFF") and Healthcare Logistics and Distribution ("HLD") reporting units, respectively, included in SCS. Based on our most recent annual impairment evaluation, both reporting units exhibited a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. An interim quantitative test for goodwill impairment performed in the fourth quarter of 2025 on the GFF reporting unit did not result in an impairment. For further discussion see note 7 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

For each of our reporting units, we continue to monitor the impact of macroeconomic conditions and business performance on our estimates of fair value. As of our July 1, 2025 testing date, approximately $877 million and $738 million of our $4.8 billion consolidated goodwill balance was represented by our Global Freight Forwarding ("GFF") and Healthcare Logistics and Distribution ("HLD") reporting units, respectively, included in SCS. Based on our most recent annual impairment evaluation, both reporting units exhibited a limited excess of fair value above carrying value and reflect a greater risk of an impairment occurring in future periods. An interim quantitative test for goodwill impairment performed in the fourth quarter of 2025 on the GFF reporting unit did not result in an impairment. At June 30, 2026, none of our reporting units had indications that an impairment was more likely than not. For further discussion see note 7 to the audited, consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

The growth in rates and product mix shown above includes contributions from our air cargo product, which is measured by dimensional weight rather than on a per piece basis and therefore does not impact the volume and revenue per piece discussions below.

Current wording

The growth in rates and product mix and fuel surcharge shown above includes contributions from our air cargo product, which is measured by dimensional weight rather than on a per piece basis and therefore does not impact the volume and revenue per piece discussions below.

Previous wording

Average daily volume decreased, driven by our continued execution of planned volume declines from our largest customer and deliberate actions to remove certain lower-yielding e-commerce volume, reflecting our ongoing revenue quality actions and challenging market conditions. These overall declines were partially offset by continued growth from SMBs who leveraged our Digital Access Program ("DAP").

Current wording

Average daily volume decreased for both the quarter and year-to-date periods, driven by planned volume reductions from our largest customer, which concluded during the quarter, as well as, actions taken on lower-yielding e-commerce volume. These overall declines were partially offset by continued growth from SMBs who leveraged our Digital Access Program ("DAP").

Previous wording

Residential ("business-to-consumer") and commercial ("business-to-business") volume declined. Business-to-consumer volume decreased 10.4%, due to the actions discussed above. Business-to-business volume decreased 5.1%, primarily driven by the retail sector.

Current wording

Residential ("business-to-consumer") and commercial ("business-to-business") volume declined. Business-to-consumer volume decreased 3.5% for the quarter (down 6.9% year to date) as a result of the planned volume declines discussed above. Business-to-business volume decreased 3.2% for the quarter (down 4.1% year to date) primarily driven by the retail sector, partially offset by continued growth in the technology sector.

Previous wording

Within our Air products, average daily volume decreased 9.0%, driven by the continued execution of planned volume declines from our largest customer, partially offset by growth in the healthcare sector.

Current wording

Within our air products, average daily volume decreased 2.3% for the quarter (down 5.7% year to date), driven by the continued execution of planned volume declines from our largest customer, partially offset by growth from SMB and healthcare customers.

Previous wording

Ground average daily volume decreased 7.9%, driven primarily by the business-to-consumer volume reductions discussed above.

Current wording

Ground average daily volume decreased 3.5% for the quarter (down 5.7% year to date), driven primarily by the residential and commercial volume reductions discussed above.

Previous wording

Revenue per piece increased 6.5%, driven by an average 5.9% net increase in base and accessorial rates implemented throughout 2025, favorable customer and product mix and higher fuel surcharges.

Current wording

Revenue per piece increased 9.3% for the quarter (up 8.0% year to date), driven by an average 5.9% net increase in base and accessorial rates implemented throughout 2025, higher fuel surcharges and favorable customer mix.

Previous wording

We apply a fuel surcharge on our domestic air and ground services that adjusts weekly and is intended to mitigate the impact of fuel price volatility. Our air fuel surcharge is based on the U.S. Department of Energy's ("DOE") Gulf Coast spot price for a gallon of kerosene-type fuel, and our ground fuel surcharge is based on the DOE's On-Highway Diesel Fuel price. During the first quarter of 2026, the conflict in the Middle East resulted in higher fuel costs and higher fuel surcharge rates. Fuel surcharge revenue increased $146 million for the quarter primarily as a result of higher fuel surcharge rates, partially offset by the impact of lower volume.

Current wording

We apply a fuel surcharge on our domestic air and ground services that adjusts weekly and is designed to help offset fluctuations in fuel costs resulting from fuel price volatility. Our air fuel surcharge is based on the U.S. Department of Energy's ("DOE") Gulf Coast spot price for a gallon of kerosene-type fuel, and our ground fuel surcharge is based on the DOE's On-Highway Diesel Fuel price. Fuel surcharge revenue increased approximately $575 million for the quarter (up approximately $721 million year to date) primarily as a result of higher fuel costs and surcharge rates due to the Middle East conflict, partially offset by the impact of lower volume.

Previous wording

Operating expenses increased, primarily due to higher facility and transportation and other expenses, partially offset by cost reductions from execution of our Network Reconfiguration and Efficiency Reimagined initiatives primarily within compensation and benefits.

Current wording

Operating expenses increased for both the quarter and year-to-date periods as a result of second quarter separation costs associated with the Driver Choice Program within compensation and benefits, higher facility and transportation expenses and higher fuel costs. These increases were partially offset by cost reductions from the execution of our Network Reconfigurationand Efficiency Reimagined initiatives.

Previous wording

•Compensation and benefits expense decreased $392 million, driven by reductions in headcount as we executed our Network Reconfiguration and Efficiency Reimagined initiatives, fewer labor hours resulting from fewer stops associated with the outsourcing of our Ground Saver product and lower volume as described above. Lower pension and health and welfare costs within our U.S. union workforce also contributed to the decrease, partially offset by increases in transition costs and excess operational staffing associated with outsourcing our Ground Saver product, increases in contractual wage rates and higher workers' compensation expense due to less favorable development in prior year claims.

Current wording

•Compensation and benefits expense increased $864 million for the quarter (up $472 million year to date), driven by second quarter separation costs related to the Driver Choice Program of $1.1 billion, contractual wage rate increases, and higher workers' compensation expense. Year-to-date results were also impacted by excess operational staffing in the first quarter of 2026 associated with outsourcing our Ground Saver product. These increases were partially offset by reduced headcount as we executed our Network Reconfiguration and Efficiency Reimagined initiatives, fewer labor hours resulting from the outsourcing of our Ground Saver product, lower volume and lower pension and health and welfare costs within our U.S. union workforce.

Previous wording

•Facility and transportation related costs increased $341 million, primarily due to higher fees paid to the USPS associated with outsourcing our Ground Saver product, increased expense related to routine repairs and maintenance and higher weather-related costs.

Current wording

•Facility and transportation related costs increased $602 million for the quarter (up $1.1 billion year to date), primarily due to higher fees paid to the USPS associated with outsourcing our Ground Saver product.

Previous wording

•Other expenses increased $180 million, driven primarily by higher third-party lease expense to address capacity constraints resulting from fourth quarter 2025 aircraft retirements, partially offset by gains on sales of properties.

Current wording

•Other expenses increased $205 million for the quarter (up $202 million year to date), driven primarily by higher fuel costs and third-party lease expense to address capacity constraints resulting from fourth quarter 2025 aircraft retirements, partially offset by gains on sales of properties and aircraft parts.

Previous wording

Our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs of $50 and $32 million in the first quarters of 2026 and 2025, respectively. Transformation strategy costs during both periods related to our Network Reconfiguration and Efficiency Reimagined programs. Costs in the 2025 period also included costs related to our Transformation 2.0 and Fit to Serve programs. These primarily consisted of compensation and benefits costs, as well as 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.

Current wording

Reconfiguration and Efficiency Reimagined programs. Costs in the 2025 period also included costs related to our Transformation 2.0 and Fit to Serve programs. These primarily consisted of compensation and benefits costs, as well as 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.

Previous wording

Cost per piece increased 9.7% during the first quarter of 2026 primarily driven by higher fees paid to the USPS and transition costs and excess operational staffing associated with outsourcing our Ground Saver product to the USPS, higher third‑party lease expense to address capacity constraints resulting from aircraft retirements, higher weather-related costs, contractual wage rate increases and lower average daily volume. Non-GAAP adjusted cost per piece increased 9.5%.

Current wording

Cost per piece increased 16.8% during the second quarter of 2026 (up 13.3% year to date) primarily driven by separation costs related to the Driver Choice Program, higher fees paid to the USPS associated with outsourcing our Ground Saver product, higher fuel costs, contractual wage rate increases and lower average daily volume and stops, partially offset by increased productivity and operational efficiencies from our network reconfiguration efforts. Non-GAAP adjusted cost per piece increased 8.0% (up 8.7% year to date).

Previous wording

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.

Current wording

Average daily volume decreased for both domestic and export products for the quarter and year-to-date periods, primarily in Europe, the Middle East and Africa ("EMEA").

Previous wording

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.

Current wording

Export average daily volume decreased 4.2% for the quarter (down 4.9% year to date) led by declines in EMEA intra-regional movements due to our revenue quality efforts, and in U.S. destination lanes resulting from trade policy changes, including de minimis exclusions. Total U.S. import average daily volume decreased led by average daily volume declines from EMEA global trade policy changes, including de minimis exclusions. The decline was partially offset by higher demand on the Asia to U.S. trade lane, led by China outbound volume, as we lapped the elimination of the de minimis in May 2026.

Previous wording

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

Current wording

Domestic revenue per piece increased 13.1% for the quarter (up 14.4% year to date) primarily driven by fuel surcharges and shifts in customer mix, mainly in EMEA and Canada.

Previous wording

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.

Current wording

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 quarter and year-to-date period, fuel surcharge revenue increased $429 million for the quarter (up $452 million year to date) primarily due to the Middle East conflict. Most of our fuel surcharges adjust with fuel prices on a weekly basis and are intended to mitigate the impact of fuel price volatility.

Previous wording

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.

Current wording

Operating expenses increased $608 million for the quarter (up $869 million year to date), including unfavorable currency movement. Integrated air and ground network costs increased $482 million (up $602 million year to date) as we continued to align our global network in response to the Middle East conflict. These cost increases were primarily due to increased fuel and charter utilization expenses associated with network disruptions, along with aircraft maintenance.

Previous wording

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.

Current wording

Our non-GAAP adjusted operating expenses exclude the impact of $0 and $10 million of transformation strategy costs in the second quarters of 2026 and 2025, respectively, and $4 and $23 million in the 2026 and 2025 year-to-date periods, respectively. Transformation strategy costs during 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, which 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.

Previous wording

Total revenue decreased for the quarter primarily due to a decline in Forwarding and Logistics revenue, partially offset by increases in revenue from our other SCS businesses.

Current wording

Revenue increased for the quarter from our Forwarding, Logistics and other SCS businesses. Revenue increased for the year-to-date period primarily due to an increase in revenue from our other SCS businesses, partially offset by declines in Forwarding and Logistics.

Previous wording

Revenue from our other businesses within SCS increased $57 million for the quarter, primarily driven by volume growth in both Roadie and Happy Returns within our digital businesses.

Current wording

Revenue from our other businesses within SCS increased $84 million for the quarter (up $141 million year to date), primarily driven by growth within our digital businesses.