Overview 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"). 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 Comparability for additional discussion of this initiative. 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. We have two reportable segments: U.S. Domestic Package and International Package, which are together referred to as our global small package operations. Our remaining businesses are reported as Supply Chain Solutions ("SCS"). Our financial results for the three and six months ended June 30, 2026 reflected the impact of a complex macroeconomic environment, including evolving trade policies, higher fuel and network costs arising from the Middle East conflict, as well as the impact of our strategic actions described above. 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. 28 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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: Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Revenue (in millions) $ 22,834 $ 21,221 $ 1,613 7.6 % $ 44,036 $ 42,767 $ 1,269 3.0 % Operating Expenses (in millions) 21,904 19,399 2,505 12.9 % 41,839 39,279 2,560 6.5 % Operating Profit (in millions) $ 930 $ 1,822 $ (892) (49.0) % $ 2,197 $ 3,488 $ (1,291) (37.0) % Operating Margin 4.1 % 8.6 % 5.0 % 8.2 % Net Income (in millions) $ 604 $ 1,283 $ (679) (52.9) % $ 1,468 $ 2,470 $ (1,002) (40.6) % Basic Earnings Per Share $ 0.71 $ 1.51 $ (0.80) (53.0) % $ 1.73 $ 2.91 $ (1.18) (40.5) % Diluted Earnings Per Share $ 0.71 $ 1.51 $ (0.80) (53.0) % $ 1.73 $ 2.91 $ (1.18) (40.5) % Operating Days 64 64 126 126 Average Daily Package Volume (in thousands) 19,006 19,741 (3.7) % 19,093 20,257 (5.7) % Average Revenue Per Piece $ 15.96 $ 14.34 $ 1.62 11.3 % $ 15.65 $ 14.28 $ 1.37 9.6 % •All of our segments contributed to revenue growth during the quarter and year-to-date periods of 2026. •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. •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"). •Operating expenses increased during the quarter and year-to-date periods, primarily due to employee separation costs related to the Driver Choice Program and excess operational staffing in the first quarter of 2026 associated with outsourcing our Ground Saver product. Expenses also increased due to higher purchased transportation costs and higher costs for third-party aircraft, including lease expense incurred to address capacity constraints following the permanent grounding and retirement of our MD-11 fleet in the fourth quarter of 2025. Additionally, higher fuel costs and charter utilization expenses associated with network disruptions resulting from the Middle East conflict contributed to the increase. These increases were partially offset by benefits achieved as we executed our Network Reconfiguration and Efficiency Reimagined initiatives, as well as gains on sales of properties and aircraft parts. •As a result of the factors described above, consolidated operating profit and operating margin decreased $892 million for the quarter ($1.3 billion year to date), with operating margin decreasing 450 basis points to 4.1% (down 320 basis points to 5.0% year to date). •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: ◦Transformation strategy costs of $891 million, or $1.05 per diluted share, in the second quarter ($933 million, or $1.09 per diluted share, year to date), primarily from employee separation costs related to the Driver Choice Program. For additional information, see note 16 of the unaudited, consolidated financial statements. •We also returned $2.7 billion of cash to shareowners through dividends during the first half of 2026. For additional operational results for the quarter and year-to-date periods specific to our segments, refer to Results of Operations - Segment Review below. 29 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Supplemental Information - Items Affecting Comparability We supplement the reporting of our financial information determined under generally accepted accounting principles ("GAAP") with certain non-GAAP adjusted financial measures. Non-GAAP adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP adjusted financial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies. Non-GAAP adjusted amounts reflect the following (in millions): Three Months Ended June 30, Six Months Ended June 30, Non-GAAP Adjustments 2026 2025 2026 2025 Operating Expenses: Transformation Strategy Costs: Transformation 2.0 $ — $ (3) $ — $ 13 Fit to Serve — 9 — 28 Network Reconfiguration and Efficiency Reimagined 1,172 68 1,227 91 Total Transformation Strategy Costs 1,172 74 1,227 132 Net Loss (Gain) on Divestiture — (20) — 19 Total Non-GAAP Adjustments to Operating Expenses $ 1,172 $ 54 $ 1,227 $ 151 Three Months Ended June 30, Six Months Ended June 30, Non-GAAP Adjustments 2026 2025 2026 2025 Other Income and (Expense): Goodwill and Asset Impairment Charges $ — $ — $ — $ 19 Total Non-GAAP Adjustments to Other Income $ — $ — $ — $ 19 Total Non-GAAP Adjustments to Income Before Income Taxes $ 1,172 $ 54 $ 1,227 $ 170 Three Months Ended June 30, Six Months Ended June 30, Non-GAAP Adjustments 2026 2025 2026 2025 Income Tax (Benefit) Expense: Transformation Strategy Costs: Transformation 2.0 $ — $ (1) $ — $ 3 Fit to Serve — 2 — 6 Network Reconfiguration and Efficiency Reimagined 281 16 294 22 Total Transformation Strategy Costs 281 17 294 31 Net Loss (Gain) on Divestiture — (5) — 4 Reversal of Income Tax Valuation Allowance — 13 — 23 Total Non-GAAP Adjustments to Income Tax Expense $ 281 $ 25 $ 294 $ 58 Total Adjustments to Non-GAAP Net Income $ 891 $ 29 $ 933 $ 112 The income tax impacts of these items are calculated at the statutory tax rates applicable in each tax jurisdiction. We supplement the presentation of operating profit, operating margin, other income and (expense), income before income taxes, net income and earnings per share with non-GAAP financial measures that exclude the impact of the following: 30 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Transformation Strategy Costs 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. Various circumstances precipitated these initiatives, including identification and prioritization of certain investments, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations. Our transformation strategy has included the following initiatives: Transformation 2.0: We reduced spans and layers of management, reviewed and refined our business portfolio and invested in certain technologies to reduce costs, increase visibility and reduce reliance on legacy systems. Costs associated with Transformation 2.0 consisted primarily of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. This initiative was completed in 2025. Fit to Serve: We undertook our Fit to Serve initiative to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction, primarily within management. This initiative was completed in 2025. 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 launched our 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. 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. 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. 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. For more information regarding transformation strategy costs, see note 16 to the unaudited, consolidated financial statements. Goodwill and Asset Impairments We exclude the impact of goodwill and certain asset impairment charges. We do not consider these charges when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards. For more information regarding goodwill and asset impairment, see note 7 to the unaudited, consolidated financial statements. 31 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net Gains and Losses Related to Divestitures We exclude the impact of gains or losses related to the business divestitures. We do not consider these gains or losses to be a component of our ongoing operations, nor do we consider their impact when evaluating the operating performance of our business units, making decisions to allocate resources or in determining incentive compensation awards. Reversal of Income Tax Valuation Allowance 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. Non-GAAP Adjusted Cost per Piece 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. 32 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Segment Review The results and discussions that follow are reflective of how management monitors and evaluates the performance of our segments as defined in note 12 to the unaudited, consolidated financial statements. 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. 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. We test goodwill for impairment annually at July 1 and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Testing goodwill for impairment requires that we make a number of significant assumptions, including assumptions related to projections of future revenues, costs, capital expenditures, working capital, our cost of capital, long-term growth rates, market comparables and discount rates. We are also required to make assumptions relating to our overall business and operating strategy, and the regulatory and market environment. 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. Challenging macroeconomic and uncertain geopolitical conditions, actual reporting unit performance, revisions to our forecasts of future performance or other factors, including market comparables, may negatively impact certain estimates and assumptions that we use in determining our reporting units' fair values. Such impacts may be more pronounced for reporting units whose fair values do not significantly exceed their carrying values. These factors or a combination thereof could result in a non-cash impairment charge in one or more of our reporting units during a future period. 33 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS U.S. Domestic Package Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Average Daily Package Volume (in thousands): Next Day Air 1,411 1,429 (1.3) % 1,389 1,474 (5.8) % Deferred 792 825 (4.0) % 798 845 (5.6) % Ground 13,799 14,299 (3.5) % 13,833 14,672 (5.7) % Total Average Daily Package Volume 16,002 16,553 (3.3) % 16,020 16,991 (5.7) % Average Revenue Per Piece: Next Day Air $ 28.55 $ 25.07 $ 3.48 13.9 % $ 28.18 $ 25.06 $ 3.12 12.5 % Deferred 21.74 19.39 2.35 12.1 % 21.35 19.47 1.88 9.7 % Ground 12.35 11.46 0.89 7.8 % 12.25 11.46 0.79 6.9 % Total Average Revenue Per Piece $ 14.24 $ 13.03 $ 1.21 9.3 % $ 14.08 $ 13.04 $ 1.04 8.0 % Operating Days in Period 64 64 126 126 Revenue (in millions): Next Day Air $ 2,578 $ 2,293 $ 285 12.4 % $ 4,932 $ 4,654 $ 278 6.0 % Deferred 1,102 1,024 78 7.6 % 2,147 2,073 74 3.6 % Ground 10,908 10,484 424 4.0 % 21,346 21,193 153 0.7 % Cargo and Other 342 282 60 21.3 % 630 623 7 1.1 % Total Revenue $ 14,930 $ 14,083 $ 847 6.0 % $ 29,055 $ 28,543 $ 512 1.8 % Operating Expenses (in millions): Operating Expenses $ 14,914 $ 13,167 $ 1,747 13.3 % $ 28,524 $ 26,648 $ 1,876 7.0 % Non-GAAP Adjustments to Operating Expenses Transformation Strategy Costs (1,172) (66) (1,106) N/M (1,222) (98) (1,124) N/M Non-GAAP Adjusted Operating Expenses $ 13,742 $ 13,101 $ 641 4.9 % $ 27,302 $ 26,550 $ 752 2.8 % Operating Profit (in millions) and Operating Margin: Operating Profit $ 16 $ 916 $ (900) (98.3) % $ 531 $ 1,895 $ (1,364) (72.0) % Non-GAAP Adjusted Operating Profit $ 1,188 $ 982 $ 206 21.0 % $ 1,753 $ 1,993 $ (240) (12.0) % Operating Margin 0.1 % 6.5 % 1.8 % 6.6 % Non-GAAP Adjusted Operating Margin 8.0 % 7.0 % 6.0 % 7.0 % Revenue The change in revenue was due to the following: Volume Rates / Product Mix Fuel Surcharge Total Revenue Change Revenue Change Drivers: Second quarter 2026 vs. 2025 (3.3) % 5.2 % 4.1 % 6.0 % Year to date 2026 vs. 2025 (5.7) % 5.0 % 2.5 % 1.8 % 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. 34 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Volume 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"). 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. 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. 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. Revenue Per Piece 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. Fuel Surcharges 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. Operating Expenses 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 Reconfiguration and Efficiency Reimagined initiatives. The change in operating expenses included the following: •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. •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. •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. Our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs of $1.2 billion and $66 million in the second quarters of 2026 and 2025, respectively and $1.2 billion and $98 million in the 2026 and 2025 year-to-date periods, respectively. The transformation strategy costs in the second quarter of 2026 primarily reflect separation costs related to the Driver Choice Program. Transformation strategy costs during 2026 and 2025 periods relate to our Network 35 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. 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). 36 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS International Package Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Average Daily Package Volume (in thousands): Domestic 1,394 1,507 (7.5) % 1,432 1,541 (7.1) % Export 1,610 1,681 (4.2) % 1,641 1,725 (4.9) % Total Average Daily Package Volume 3,004 3,188 (5.8) % 3,073 3,266 (5.9) % Average Revenue Per Piece: Domestic $ 9.74 $ 8.61 $ 1.13 13.1 % $ 9.44 $ 8.25 $ 1.19 14.4 % Export 38.45 32.38 6.07 18.7 % 36.32 31.87 4.45 14.0 % Total Average Revenue Per Piece $ 25.13 $ 21.14 $ 3.99 18.9 % $ 23.80 $ 20.73 $ 3.07 14.8 % Operating Days in Period 64 64 126 126 Revenue (in millions): Domestic $ 869 $ 830 $ 39 4.7 % $ 1,704 $ 1,601 $ 103 6.4 % Export 3,962 3,484 478 13.7 % 7,510 6,928 582 8.4 % Cargo and Other 213 171 42 24.6 % 370 329 41 12.5 % Total Revenue $ 5,044 $ 4,485 $ 559 12.5 % $ 9,584 $ 8,858 $ 726 8.2 % Operating Expenses (in millions): Operating Expenses $ 4,421 $ 3,813 $ 608 15.9 % $ 8,414 $ 7,545 $ 869 11.5 % Non-GAAP Adjustments to Operating Expenses Transformation Strategy Costs — (10) 10 (100.0) % (4) (23) 19 (82.6) % Non-GAAP Adjusted Operating Expenses $ 4,421 $ 3,803 $ 618 16.3 % $ 8,410 $ 7,522 $ 888 11.8 % Operating Profit (in millions) and Operating Margin: Operating Profit $ 623 $ 672 $ (49) (7.3) % $ 1,170 $ 1,313 $ (143) (10.9) % Non-GAAP Adjusted Operating Profit $ 623 $ 682 $ (59) (8.7) % $ 1,174 $ 1,336 $ (162) (12.1) % Operating Margin 12.4 % 15.0 % 12.2 % 14.8 % Non-GAAP Adjusted Operating Margin 12.4 % 15.2 % 12.2 % 15.1 % Currency Benefit / (Cost) – (in millions)(1): Revenue $ 40 $ 196 Operating Expenses (37) (205) Operating Profit $ 3 $ (9) (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 Rates / Product Mix Fuel Surcharge Currency Total Revenue Change Revenue Change Drivers: Second quarter 2026 vs. 2025 (5.8) % 7.9 % 9.6 % 0.8 % 12.5 % Year to date 2026 vs. 2025 (5.9) % 6.8 % 5.1 % 2.2 % 8.2 % 37 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Volume 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"). Domestic average daily volume decreased 7.5% for the quarter (down 7.1% year to date) primarily driven by domestic standard product declines in EMEA and our revenue quality efforts. 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. Revenue Per Piece Revenue per piece increased 18.9% for the quarter (up 14.8% year to date), with increases in all regions due to improvement in geographic mix and shifts in trade lanes, particularly in Asia. The increases were primarily driven by our fuel surcharges and revenue quality actions. 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. Export revenue per piece increased 18.7% for the quarter (up 14.0% year to date) primarily driven by fuel surcharges and favorable customer and product mix shift. 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 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. Operating Expenses 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. 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. 38 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SCS Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Revenue (in millions): Forwarding $ 791 $ 732 $ 59 8.1 % $ 1,447 $ 1,458 $ (11) (0.8) % Logistics 1,540 1,476 64 4.3 % 2,949 3,048 (99) (3.2) % Other SCS 529 445 84 18.9 % 1,001 860 141 16.4 % Total Revenue $ 2,860 $ 2,653 $ 207 7.8 % $ 5,397 $ 5,366 $ 31 0.6 % Operating Expenses (in millions): Operating Expenses $ 2,569 $ 2,419 $ 150 6.2 % $ 4,901 $ 5,086 $ (185) (3.6) % Non-GAAP Adjustments to Operating Expenses Transformation Strategy Costs — 2 (2) (100.0) % (1) (11) 10 (90.9) % Net (Loss) Gain on Divestiture — 20 (20) (100.0) % — (19) 19 (100.0) % Non-GAAP Adjusted Operating Expenses $ 2,569 $ 2,441 $ 128 5.2 % $ 4,900 $ 5,056 $ (156) (3.1) % Operating Profit (in millions) and Operating Margin: Operating Profit $ 291 $ 234 $ 57 24.4 % $ 496 $ 280 $ 216 77.1 % Non-GAAP Adjusted Operating Profit $ 291 $ 212 $ 79 37.3 % $ 497 $ 310 $ 187 60.3 % Operating Margin 10.2 % 8.8 % 9.2 % 5.2 % Non-GAAP Adjusted Operating Margin 10.2 % 8.0 % 9.2 % 5.8 % Currency Benefit / (Cost) – (in millions)(1): Revenue $ 45 $ 80 Operating Expenses (44) (78) Operating Profit $ 1 $ 2 (1) Amount represents the change in currency translation compared to the prior year. Revenue 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. Within our Forwarding businesses, revenue increased $59 million for the quarter driven by higher international airfreight rates. For the year-to-date period, Forwarding revenue decreased by $11 million. Within our Logistics businesses, revenue increased $64 million for the quarter (down $99 million year to date). This was primarily due to an increase of $232 million for the quarter (up $420 million year to date) from our healthcare logistics business as a result of our fourth quarter 2025 acquisition of AHG, as well as higher volume driven by additional healthcare logistics customer demand. These increases were offset by a decline in Mail Innovations of $186 million for the quarter (down $563 million year to date). 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. Operating Expenses Total operating expenses increased for the quarter primarily due to the acquisition of AHG and higher volume from healthcare logistics customer demand, partially offset by the impact of the decline in Mail Innovations volume. On a year-to-date basis, operating expenses decreased due to the impact of Mail Innovations volume declines, partially offset by increases in healthcare logistics expenses from the acquisition of AHG and volume increases from customer demand. 39 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs of $0 and $2 million in the second quarters of 2026 and 2025, respectively, and $1 and $11 million in the 2026 and 2025 year-to-date periods, respectively. In 2025, non-GAAP adjusted operating expense for the quarter and year-to-date periods excluded the impact of a divestiture of a business within SCS. Transformation strategy costs in SCS during the periods presented related to our Transformation 2.0, Fit to Serve, and Network Reconfiguration and Efficiency Reimagined programs. Within Transformation 2.0, we incurred costs related to financial system investments in 2025. Within Fit to Serve, we incurred severance costs in 2025. Within Network Reconfiguration and Efficiency Reimagined, we incurred costs related to end-to-end process redesign in both the 2026 and 2025 periods. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP adjusted financial measures. 40 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Consolidated Operating Expenses The following table sets forth our consolidated operating expense for the three and six months ended June 30, 2026 and 2025, respectively (in millions): Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Operating Expenses (in millions): Compensation and benefits $ 12,654 $ 11,626 $ 1,028 8.8 % $ 24,199 $ 23,453 $ 746 3.2 % Transformation Strategy Costs (1,117) (50) (1,067) (1,148) (74) (1,074) Non-GAAP Adjusted Compensation and Benefits $ 11,537 $ 11,576 $ (39) (0.3) % $ 23,051 $ 23,379 $ (328) (1.4) % Repairs and maintenance $ 789 $ 755 $ 34 4.5 % $ 1,581 $ 1,487 $ 94 6.3 % Depreciation and amortization 980 936 44 4.7 % 1,965 1,848 117 6.3 % Purchased transportation 3,187 2,522 665 26.4 % 5,951 5,252 699 13.3 % Fuel 1,697 1,058 639 60.4 % 2,780 2,116 664 31.4 % Other occupancy 557 544 13 2.4 % 1,231 1,151 80 7.0 % Other expenses 2,040 1,958 82 4.2 % 4,132 3,972 160 4.0 % Total Other Expenses 9,250 7,773 1,477 19.0 % 17,640 15,826 1,814 11.5 % Transformation Strategy Costs (55) (24) (31) 129.2 % (79) (58) (21) 36.2 % Net (Loss) Gain on Divestiture — 20 (20) (100.0) % — (19) 19 (100.0) % Non-GAAP Adjusted Total Other Expenses $ 9,195 $ 7,769 $ 1,426 18.4 % $ 17,561 $ 15,749 $ 1,812 11.5 % Total Operating Expenses $ 21,904 $ 19,399 $ 2,505 12.9 % $ 41,839 $ 39,279 $ 2,560 6.5 % Non-GAAP Adjusted Total Operating Expenses $ 20,732 $ 19,345 $ 1,387 7.2 % $ 40,612 $ 39,128 $ 1,484 3.8 % Currency (Benefit) / Cost - (in millions)(1) $ 81 $ 283 (1) Amount represents the change in currency translation compared to the prior year. Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ 2026 2025 $ Non-GAAP Adjustments to Operating Expenses (in millions): Transformation Strategy Costs: Compensation $ — $ 4 $ (4) $ — $ 7 $ (7) Benefits 1,117 46 1,071 1,148 67 1,081 Other expenses 55 24 31 79 58 21 Total Transformation Strategy Costs $ 1,172 $ 74 $ 1,098 $ 1,227 $ 132 $ 1,095 Other expenses: Net Loss (Gain) on Divestiture — (20) 20 — 19 (19) Total Non-GAAP Adjustments to Operating Expenses $ 1,172 $ 54 $ 1,118 $ 1,227 $ 151 $ 1,076 41 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Compensation and Benefits Compensation expense increased $64 million for the quarter (down $183 million year to date). The principal factors contributing to the changes were: •Management compensation costs increased $188 million for the quarter (up $145 million year to date), primarily due to an increase in incentive compensation, partially offset by lower overall headcount as we continue to execute our transformation strategy. For additional information on our transformation strategy, see note 16 to the unaudited, consolidated financial statements. •Direct labor costs decreased $98 million for the quarter (down $308 million year to date). The impact of volume declines as well as a decline in total stops from outsourcing our Ground Saver product decreased direct labor costs by $267 million for the quarter (down $690 million year to date). These decreases were partially offset by an increase of $129 million for the quarter (up $415 million year to date) in wage rate growth driven by increased seniority and contractual wage rate increases, and excess operational staffing in the first quarter of 2026 associated with outsourcing our Ground Saver product. Benefits costs increased $965 million for the quarter (up $930 million year to date). Employee benefits increased $987 million for the quarter (up $999 million year to date) primarily from separation costs associated with the Driver Choice Program. Multiemployer pension and other postretirement benefits costs, paid time off, payroll taxes, health and welfare and other costs decreased $38 million for the quarter (down $152 million year to date) primarily due to headcount reductions. Workers' compensation expense increased $16 million for the quarter (up $83 million year to date) due to an increase in current year claim costs and less favorable development in prior year claims, partially offset by a reduction in overall hours worked. Non-GAAP adjusted operating expenses for the quarter and year-to-date periods of both 2026 and 2025 exclude the impact of costs incurred under our Transformation 2.0, Fit to Serve and Network Reconfiguration and Efficiency Reimagined initiatives, and primarily consisted of employee benefits expense and related payroll tax expense. Compensation and benefits expenses under these initiatives were $1.1 billion and $50 million in the second quarters of 2026 and 2025, respectively, and $1.1 billion and $74 million in the 2026 and 2025 year to date periods, respectively. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures. Repairs and Maintenance Repairs and maintenance costs increased in both the quarter and year-to-date periods due to an increase in aircraft maintenance costs and higher routine repair expenses for buildings and facilities. Depreciation and Amortization Depreciation and amortization expense increased in both the quarter and year-to-date periods due to capital asset additions and building closures associated with our transformation initiatives, as well as additional amortization related to software investments and the acquisition of AHG in the fourth quarter of 2025. Purchased Transportation Third-party transportation expense charged to us by air, ocean and ground carriers increased $665 million for the quarter (up $699 million year to date). The changes were primarily driven by: •Ground transportation expense increased $362 million for the quarter (up $338 million year to date) primarily due to an increase in fees paid to the USPS associated with outsourcing our Ground Saver product and increases in expense related to our digital businesses due to overall growth, partially offset by the impact of the decline in volume in Mail Innovations. •Air carrier expense increased $175 million for the quarter (up $253 million year to date) from additional leased aircraft expense to address temporary capacity constraints resulting from fourth quarter 2025 aircraft retirements and additional charter utilization associated with network disruptions from the Middle East conflict. 42 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS •Third-party fuel surcharge expense increased $86 million for the quarter (up $80 million year to date) primarily due to fuel surcharges charged to us as a result of the Middle East conflict. Fuel Expense Fuel expense increased $639 million for the quarter (up $664 million year to date) mainly attributable to higher prices for jet fuel, diesel and gasoline due to the Middle East conflict, partially offset by the impact of lower volumes. Other Occupancy Other occupancy expense increased $13 million for the quarter (up $80 million year to date) primarily due to new lease expenses, including leases acquired in the AHG acquisition, an increase in the number and costs of weather-related events, and an increase in property taxes. Other Expenses Other expenses increased $82 million for the quarter (up $160 million year to date). The increase was primarily driven by growth in DAP, which increased expenses by $53 million for the quarter (up $92 million year to date). Technology expense increased $42 million for the quarter (up $69 million year to date) due to additional software costs and application fees. Third-party consulting expense increased $36 million for the quarter (up $10 million year to date) in support of Efficiency Reimagined. Credit losses was relatively flat for the quarter and up $25 million year to date as a result of changes in the composition of our accounts receivable. These increases were partially offset by higher gains on sales of properties and aircraft parts of $52 million for the quarter (up $104 million year to date). In 2026, non-GAAP adjusted operating expenses exclude transformation strategy costs, consisting of fees paid to outside professional service providers. In 2025, non-GAAP adjusted operating expenses exclude the divestiture of a business within SCS and transformation strategy costs for fees paid to outside professional service providers. We expect to incur additional other expenses under our Network Reconfiguration and Efficiency Reimagined programs during the remainder of 2026. See Supplemental Information - Items Affecting Comparability for additional discussion on the types, amounts and timing thereof. 43 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Other Income (Expense) The following table sets forth investment income and other and interest expense for the three and six months ended June 30, 2026 and 2025, respectively (in millions): Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Investment Income and Other $ 103 $ 78 $ 25 32.1 % $ 226 $ 157 $ 69 43.9 % Goodwill and Asset Impairment Charges — — — — % — 19 (19) (100.0) % Non-GAAP Adjusted Investment Income and Other 103 78 25 32.1 % 226 176 50 28.4 % Interest Expense (272) (238) (34) 14.3 % (538) (460) (78) 17.0 % Total Other Income (Expense) $ (169) $ (160) $ (9) 5.6 % $ (312) $ (303) $ (9) 3.0 % Non-GAAP Adjusted Total Other Income (Expense) $ (169) $ (160) $ (9) 5.6 % $ (312) $ (284) $ (28) 9.9 % Investment Income and Other Investment income and other increased $25 million for the quarter ($69 million year to date), primarily driven by higher pension income, partially offset by lower interest rates and fees associated with our accounts receivable factoring program. Pension income increased due to higher expected returns on pension assets, partially offset by increased interest cost related to overall plan growth and changes in demographic assumptions. For additional information on our factoring program, see note 3 to the unaudited, consolidated financial statements. For the 2025 year-to-date period, investment income and other included a $19 million asset impairment charge related to an equity method investment. Excluding the impact of this impairment, non-GAAP adjusted investment income and other increased by $50 million. Interest Expense Interest expense increased $34 million for the quarter ($78 million year to date), primarily due to higher average outstanding debt balances and higher interest cost on finance leases. Income Tax Expense The following table sets forth our income tax expense and effective tax rate for the three and six months ended June 30, 2026 and 2025, respectively (in millions): Three Months Ended June 30, Change Six Months Ended June 30, Change 2026 2025 $ % 2026 2025 $ % Income Tax Expense $ 157 $ 379 $ (222) (58.6) % $ 417 $ 715 $ (298) (41.7) % Income Tax Impact of: Transformation Strategy Costs 281 17 264 294 31 263 848.4 % Net Loss (Gain) on Divestiture — (5) 5 (100.0) % — 4 (4) (100.0) % Reversal of Income Tax Valuation Allowance — 13 (13) (100.0) % — 23 (23) (100.0) % Non-GAAP Adjusted Income Tax Expense $ 438 $ 404 $ 34 8.4 % $ 711 $ 773 $ (62) (8.0) % Effective Tax Rate 20.6 % 22.8 % 22.1 % 22.4 % Non-GAAP Adjusted Effective Tax Rate 22.7 % 23.5 % 22.8 % 23.0 % For additional information on our income tax expense and effective tax rate, see note 15 to the unaudited, consolidated financial statements. 44 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources We deploy a disciplined and balanced approach to capital allocation, including returns to shareowners through dividends and share repurchases. As of June 30, 2026, we had $4.7 billion in cash, cash equivalents and marketable securities. We believe that these positions, expected cash from operations, access to commercial paper programs and capital markets and other available liquidity options will be adequate to fund our material short- and long-term cash requirements, including our business operations, planned capital expenditures, pension contributions, transformation strategy costs, including voluntary separation programs, debt obligations and shareowner returns. We regularly evaluate opportunities to optimize our capital structure, including through issuances of debt to refinance existing debt and to fund operations. Cash Flows From Operating Activities The following is a summary of the significant sources (uses) of cash from operating activities (in millions): Six Months Ended June 30, 2026 2025 Net income $ 1,468 $ 2,470 Non-cash operating activities (1) 2,791 2,527 Pension and postretirement medical benefit plan contributions (company-sponsored plans) (581) (921) Income tax receivables and payables (441) (565) Changes in working capital and other non-current assets and liabilities (153) (833) Other operating activities (1) (12) Net cash from operating activities $ 3,083 $ 2,666 (1) Represents depreciation and amortization, gains and losses on derivative transactions and foreign currency exchange, disposal of assets and businesses, deferred income taxes, allowances for expected credit losses, amortization of operating lease assets, pension and postretirement medical benefit plan (income) expense, stock compensation expense, changes in casualty self-insurance reserves, goodwill and other asset impairment charges and other non-cash items. Net cash from operating activities increased $417 million during the six months ended June 30, 2026, primarily due to: •Approximately $200 million related to the timing of pass-through IEEPA tariff refunds received from CBP in 2026 that are payable to customers. See note 10 to the unaudited, consolidated financial statements for additional information. •Lower income tax payments, primarily due to a 2024 tax payment deferred into 2025 resulting from Hurricane Helene relief that did not recur in 2026. •Lower contributions to our company-sponsored, defined benefit pension and postretirement medical plans. These increases were partially offset by: • A reduction in net income during the period. • An increase in accounts receivable from changes in collection of aged receivables, including $2.0 billion from our accounts receivable factoring program. As of June 30, 2026, approximately $2.0 billion of our total worldwide holdings of cash, cash equivalents and marketable securities were held by foreign subsidiaries. The amount of cash, cash equivalents and marketable securities held by our U.S. and foreign subsidiaries fluctuates throughout the year due to a variety of factors, including the timing of cash receipts, strategic operating needs and disbursements in the normal course of business. Cash provided by operating activities in the U.S. continues to be our primary source of funds to finance our business operations and planned capital expenditures, pension contributions, transformation strategy costs, debt obligations and shareowner returns. All cash, cash equivalents and marketable securities held by foreign subsidiaries are generally available for distribution to the U.S. without any U.S. federal income taxes. Any such distributions may be subject to foreign withholding and U.S. state taxes. When amounts earned by foreign subsidiaries are expected to be indefinitely reinvested, no accrual for taxes is provided. 45 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Investing Activities Our primary (uses) sources of cash from investing activities were as follows (in millions): Six Months Ended June 30, 2026 2025 Net cash used in investing activities $ (1,510) $ (2,278) Capital Expenditures: Buildings, facilities and plant equipment $ (1,246) $ (1,147) Information technology (428) (539) Aircraft and parts (37) (120) Vehicles (13) (193) Total capital expenditures $ (1,724) $ (1,999) Capital expenditures as a % of revenue 3.9 % 4.7 % Other Investing Activities: Proceeds from disposal of businesses, property, plant and equipment $ 198 $ 91 Acquisitions, net of cash acquired $ — $ (479) Other investing activities $ 16 $ 109 For the six months ended June 30, 2026, total capital expenditures decreased, primarily driven by reduced spending on vehicles due to lower package volume and a focus on routine replacements for vehicles at the end of their useful lives, decreased aircraft expenditures due to aircraft deliveries under finance lease arrangements and lower technology infrastructure spending as a result of project completion and non-recurring prior year investments. These decreases were partially offset by increased spending on buildings, facilities and plant equipment associated with our Network of the Future and other operational efficiency initiatives. In the six months ended June 30, 2026, we did not complete any acquisitions. In the six months ended June 30, 2025, cash paid for acquisitions was $479 million and was related to the acquisition of Frigo-Trans and Biotech & Pharma Logistics ("Frigo-Trans") and reacquired development area rights for The UPS Store. We have commitments for the purchase of equipment, real estate and vehicles to provide for the replacement and enhancement of existing capacity and targeted growth. These investments also provide for maintenance of buildings, facilities and equipment. Our 2026 investment program anticipates investments in technology initiatives and enhanced network capabilities. We currently expect our capital expenditures will be approximately $3.0 billion for all of 2026, of which approximately 80% will be allocated to network enhancement projects and other technology initiatives. We regularly evaluate opportunities for cost effective financing of assets in order to reduce our capital spending. Future capital spending will depend on a variety of factors, including economic and industry conditions, and financing alternatives. 46 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cash Flows From Financing Activities Our primary (uses) sources of cash from financing activities were as follows (in millions, except per share data): Six Months Ended June 30, 2026 2025 Net cash used in financing activities $ (2,757) $ (519) Share Repurchases: Cash paid to repurchase shares(1) $ — $ (1,000) Number of shares repurchased — (8.6) Shares outstanding at period end 851 848 Dividends: Dividends declared per share $ 3.28 $ 3.28 Cash paid for dividends $ (2,708) $ (2,697) Borrowings and Other Financing Activities: Net borrowings (repayments) of debt principal $ (85) $ 3,091 Other financing activities(2) $ 36 $ 87 Capitalization: Total debt outstanding at period end $ 24,484 $ 24,740 Total shareowners' equity at period end 15,099 15,777 Total capitalization $ 39,583 $ 40,517 (1) For additional information on our share repurchase activities, see note 11 to the unaudited, consolidated financial statements. (2) Includes issuances of common stock. We did not repurchase any shares under our stock repurchase program during the six months ended June 30, 2026. The declaration of dividends is subject to the discretion of the Board and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other relevant factors. We paid a quarterly cash dividend of $1.64 per share in each of the first and second quarters of both 2026 and 2025. There were no issuances of debt during the six months ended June 30, 2026. Repayments of debt during the six months ended June 30, 2026 consisted of $85 million of senior notes and finance lease obligations. Issuances of debt during the six months ended June 30, 2025 consisted of fixed-rate and floating-rate senior notes of varying maturities totaling $4.2 billion. Repayments of debt during the six months ended June 30, 2025 consisted of $1.1 billion of senior notes and finance lease obligations. The amount of commercial paper outstanding fluctuates based on daily liquidity needs. As of June 30, 2026, we had no outstanding balances under our U.S. or European commercial paper programs. The average balance outstanding of commercial paper during the six months ended June 30, 2026 and 2025 was $54 and $95 million, respectively, and the average interest rates were 3.48% and 4.01%, respectively. The amount of commercial paper outstanding under these programs in the remainder of 2026 is expected to fluctuate. As of June 30, 2026, we had $500 million of fixed-rate senior notes currently outstanding that mature in 2026. We intend to repay or refinance these amounts when due. We consider the overall fixed and floating interest rate mix of our portfolio and the related overall cost of borrowing when planning for future issuances and non-scheduled repayments of debt. Cash flows from other financing activities included cash proceeds of $50 million related to collections from customers on accounts receivable that had been factored in 2026. This reflected $109 million of obligations related to factored receivables that were not remitted to third-party purchasers as of June 30, 2026, partially offset by $59 million repaid from prior-period balances. This program was not in place in the 2025 periods. At June 30, 2026, we had parent company guarantees of approximately $1.8 billion related to aircraft leases. For additional information on guarantees, see note 9 to the unaudited, consolidated financial statements. 47 Table of Contents UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except as disclosed above and in our Annual Report on Form 10-K for the year ended December 31, 2025, we do not have off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity. Sources of Credit See note 9 to the unaudited, consolidated financial statements for a discussion of our available credit and the financial covenants that we are subject to as part of our credit agreements. Contractual Commitments Purchase commitments that are legally binding represent contractual agreements for certain capital expenditures, including contracts for facility construction projects, aircraft and vehicles. In addition to purchase commitments, we have other contractual obligations related to equipment rental, software licensing, service and commodity contracts. See Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2025 for more information. For additional information on 2026 debt issuances and repayments, see note 9 to the unaudited, consolidated financial statements. Legal Proceedings and Contingencies See note 10 to the unaudited, consolidated financial statements for a discussion of judicial proceedings and other matters arising from the conduct of our business activities. Collective Bargaining Agreements Status of Collective Bargaining Agreements See note 6 to the unaudited, consolidated financial statements for a discussion of the status of our collective bargaining agreements. Multiemployer Benefit Plans See note 6 to the unaudited, consolidated financial statements for a discussion of our participation in multiemployer benefit plans. Recent Accounting Pronouncements Adoption of New Accounting Standards See note 2 to the unaudited, consolidated financial statements for a discussion of recently adopted accounting standards. Accounting Standards Issued But Not Yet Effective See note 2 to the unaudited, consolidated financial statements for a discussion of accounting standards issued, but not yet effective. 48 Table of Contents