How UPS (United Parcel Service) Makes Money in 2025: A Deep-Dive With Income Statement

Welcome to the Value Sense Blog, your resource for insights on the stock market! At Value Sense, we focus on intrinsic value tools and offer stock ideas with undervalued companies. Dive into our research products and learn more about our unique approach at valuesense.io

Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.

Understanding how a global logistics leader like UPS makes money is essential for investors and anyone interested in the business of transportation and supply chain solutions. In this post, we break down UPS's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick UPS Overview

UPS operates one of the world’s largest package delivery networks and provides supply chain management solutions. Revenue comes primarily from domestic and international package delivery services, as well as logistics and supply chain solutions for businesses. The company’s business segments include US Domestic Package, International Package, and Supply Chain Solutions, each contributing to a diversified revenue base.

Revenue Breakdown

• Total Revenue (Q3 2025): $21.5B (−3.5% YoY)
  • US Revenue: $14.2B (66.2% of total, −2.6% YoY)
  • International Revenue: $4.67B (21.8% of total, +5.9% YoY)
  • Supply Chain Solutions Revenue: $2.52B (11.7% of total, −22.1% YoY)
  • Other Revenue by Geography: $57M (0.3% of total)
  • Growth is powered by international expansion, while supply chain solutions faced headwinds.

Gross Profit and Margins

• Gross Profit: $7.43B (34.6% gross margin)
  • Cost of Revenue: $14.07B (calculated as $21.5B − $7.43B)
  • UPS maintains robust margins due to its scale, network efficiencies, and premium service offerings.
• Most costs come from transportation, labor, and fuel expenses required to operate its global delivery network.

Operating Income and Expenses

• Operating Income: $1.77B (−10.8% YoY, 8.2% margin)
• Operating Expenses: $3.98B (+130.2% YoY)
  • R&D: Not separately disclosed for Q3 2025
  • SG&A: $3.98B (+130.2% YoY, 18.5% of revenue) — Includes administrative, sales, and general corporate costs
  • UPS continues to invest in operational efficiency and technology while maintaining cost discipline.

Net Income

• Pre-Tax Income: $1.61B (−15.9% YoY, 7.5% margin)
• Income Tax: $296M (18.4% effective tax rate)
• Net Income: $1.31B (−14.8% YoY, 6.1% net margin)
• UPS converts a moderate portion of sales into profit due to its scale and operational efficiency, despite rising costs.

What Drives UPS's Money Machine?

• US Domestic Package: 66%+ of revenue, the core driver, leveraging a vast delivery network and e-commerce growth.
• International Expansion: International revenue grew 5.9% YoY, reflecting strong demand in cross-border e-commerce and global trade.
• Technology & Automation: Strategic investments in automation, route optimization, and digital customer solutions to boost efficiency and service quality.
• Supply Chain Solutions: While currently facing revenue pressure (−22.1% YoY), this segment positions UPS for long-term growth in logistics and healthcare supply chains.

Visualizing UPS's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant costs, 6.1% of revenue drops to the bottom line.

Key Takeaways

• UPS's money comes overwhelmingly from US domestic package delivery, with international and supply chain segments adding diversification.
• High gross and net margins illustrate the power of UPS’s scale and network efficiency.
• Heavy investment in technology and automation, balanced by efficiency in operating costs.
• Ongoing growth is driven by international expansion and e-commerce trends.

Explore More Investment Opportunities

For investors seeking undervalued companies with high fundamental quality, our analytics team provides curated stock lists:

📌 50 Undervalued Stocks (Best) overall value plays for 2025
📌 50 Undervalued Dividend Stocks (For income-focused investors)
📌 50 Undervalued Growth Stocks (High-growth potential with strong fundamentals)

🔍 Check out these stocks on the Value Sense platform for free!

FAQ About UPS's Income Statement

1. What is the main source of UPS's revenue in 2025?

UPS generates over 66% of its revenue from US Domestic Package delivery services. International package and supply chain solutions are also significant contributors.

2. How profitable is UPS in Q3 2025?

UPS reported net income of $1.31B in Q3 2025, with a net margin of approximately 6.1%, reflecting moderate profitability driven by scale and operational efficiency.

3. What are the largest expense categories for UPS?

The biggest expenses on UPS's income statement are cost of revenue (primarily transportation, labor, and fuel) and operating expenses, particularly Sales, General & Administrative (SG&A) costs, which reached $3.98B in Q3 2025 as UPS prioritizes operational efficiency and technology investments.

4. Why does Supply Chain Solutions operate at a loss?

Supply Chain Solutions, despite generating $2.52B in revenue, posted a significant YoY decline (−22.1%) in Q3 2025. This is because UPS continues to invest in logistics infrastructure and healthcare supply chain capabilities, believing these will drive long-term growth—even if the division is under pressure today.

5. How does UPS's effective tax rate compare to previous years?

UPS's effective tax rate in Q3 2025 was 18.4%, consistent with previous years. This moderate rate is primarily due to international structuring and tax benefits from operational investments.