The United Parcel Service (UPS) revenue declined in its fiscal Q1, as war in Iran brought volatility to both fuel prices and supply chains.
UPS executives, on the carrier’s Q1 earnings call with analysts, discussed the impact of fuel costs on their business.
Ultimately, UPS revenue in its fiscal Q1 2026 declined to $21.2 billion from $21.5 billion the prior year. Its fiscal Q1 ended March 31, more than one month after the U.S. and Israel’s war against Iran began Feb. 28.
The war has impacted fuel prices globally. Because of supply chain disruptions resulting from the war, the price of a barrel of crude oil reached $112 in April. On Feb. 3, it was about $60, according to historical data from Trading Economics. As of April 28, it has gone down to about $100.
“This past quarter brought significant external challenges from volatile global markets to rising fuel costs,” Tome said.
However, Tome noted that UPS has now had three consecutive quarters of performance exceeding its expectations.
“As we look to the balance of the year, there are a few external factors that we are watching that could impact demand, especially higher fuel costs stemming from the conflict in the Middle East and U.S. consumer confidence, which is at historic lows,” Tome said. “But these external pressures won’t deter us.”
UPS fulfills deliveries for online orders from more than 1,030 retailers in the Top 2000 Database. Those retailers combined for more than $826 billion in 2025 ecommerce sales, Digital Commerce 360 data shows. The database is Digital Commerce 360’s rankings and more of the largest online retailers in North America based on their annual ecommerce sales.
Impact of fuel prices on UPS revenue in Q1
Although overall revenue declined year over year in UPS’ Q1, revenue per piece grew 6.5%. Part of that growth in revenue per piece stemmed from changes to fuel prices, according to Brian Dykes, chief financial officer.
Other factors for that growth included changes to base rates and package characteristics, he said. Dykes also noted that customer and product mix improvements increased revenue per piece.
The split:
- 3.4% from base rate improvement.
- 2% from mix improvement.
- 1.1% from fuel.
“The conflict in the Middle East in March drove an immediate spike in fuel costs,” Dykes told analysts. “Our fuel surcharges are linked to published fuel benchmarks and adjust with fuel prices on a weekly basis, and we expect these surcharges to provide coverage as fuel prices continue to fluctuate.”
Depending on how long the situation lasts, Dykes said, fuel could have a revenue impact. At the same time, there could also be a demand-related impact.
Tome also said that UPS’s first priority was to keep its employees in the Middle East safe. She noted that UPS has about 2,000 employees in the region.
“In the first quarter, the export and import revenue was about $130 million,” she said. “So it’s not a lot of exposure, but we can’t fly over the airspace. And because we can’t fly over the airspace, that is putting cost into the network.”
UPS outlook factoring in fuel for Q2
Dykes said UPS has reaffirmed its guidance for Q2. UPS is on track to generate revenue of about $89.7 billion in its full fiscal 2026, he said. Additionally, UPS expects Q2 revenue to be “up low single digits” with operating margin between 7.5% and 8.5%.
Dykes said that although the macroeconomic environment is different now compared to UPS’s expectations at the beginning of its fiscal year, the carrier has been “quick to adjust to changing conditions.”
“We are not updating for fuel at this point,” Dykes said. “Fuel didn’t have a material impact in the first quarter because really the ramp in prices happened late in the quarter, and as we’ve gone into April — look, fuel — we manage fuel through fuel surcharges.”
He noted that even though UPS has a large airline, it differs from passenger airlines, as does its industry. He said UPS’ fuel surcharge indexes protect the carrier from impact to profit.
“Now there could be revenue impact to that, but there will also be offsetting expense,” Dykes said. “What we don’t know is how long the high prices could persist. And then what happens, relative to oil prices and commodity prices around the world where we actually procure.”
Tome added that “it’s just too early in terms of the conflict” to know what to expect.”
“Clearly, there’s a benefit right now to the top line, not so much on the bottom line because we’re just covering our costs,” Tome said. “But it’s too early in the conflict to predict what fuel might mean for the rest of the year.”
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