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

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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, offering logistics, freight forwarding, and supply chain management services. Revenue comes primarily from domestic and international package delivery, as well as supply chain solutions for businesses. The company’s business segments include US Domestic, International, and Supply Chain Solutions, each contributing to overall performance.

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 and premium logistics services, while supply chain revenue declined due to market softness.

Gross Profit and Margins

• Gross Profit: $7.43B (34.6% gross margin)
  • Cost of Revenue: $14.07B (calculated as total revenue minus gross profit; +90.4% YoY reported, but this appears to be a data anomaly—actual cost of revenue is $14.07B)
  • UPS maintains robust margins due to its scalable logistics network and operational efficiencies.
• Most costs come from transportation, labor, fuel, and network infrastructure.

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 sales, general, and administrative costs such as marketing, IT, and corporate overhead
  • UPS continues to control costs and invest in network optimization while expanding international operations.

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, pricing power, and ongoing efficiency initiatives.

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What Drives UPS's Money Machine?

• US Domestic Package Delivery: 66%+ of revenue — core business, leveraging vast network and brand
• International Expansion: International segment grew 5.9% YoY, driven by e-commerce and cross-border shipping
• Supply Chain Solutions: Strategic investments in logistics technology and healthcare logistics, though segment declined 22.1% YoY
• Future growth areas: Healthcare logistics and digital supply chain platforms, though not yet profitable

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 and investments, 6.1% of revenue drops to the bottom line.

Key Takeaways

• UPS's money comes overwhelmingly from US domestic package delivery
• High gross and net margins illustrate the power of UPS's scalable logistics model
• Heavy investment in network optimization and international expansion, balanced by efficiency in operating costs
• Ongoing growth is driven by international shipping and premium logistics services

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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. International shipping 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 operating expenses, particularly Sales, General & Administrative (SG&A) costs, which reached $3.98B in Q3 2025 as UPS prioritizes network optimization and international expansion.

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

Supply Chain Solutions, despite generating $2.52B in revenue, posted a decline of 22.1% YoY. This is because UPS aggressively invests in logistics technology and healthcare logistics, believing these will drive long-term growth—even if the division is unprofitable 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.